1. Hindustan Aeronautics (HAL): This defence company has risen 21.5% over the past week till Friday, marking an uptrend for six consecutive sessions. The company also shows up in a screener for stocks with strong momentum. This follows reports of an upcoming agreement between HAL and General Electric to co-produce the new F414-INS6 jet engine in India, which will be used in the Tejas Mark-2 fighter jet. 

According to reports, a similar deal was proposed between the two companies in 2012, but it failed to materialise as the Indian government was not satisfied with the level of transfer of technology (ToT) being offered. However, this time, the ToT and the use of local components are expected to cross 60%, as per ICICI Securities.

In Q4FY23, HAL’s standalone revenue grew 8.1% YoY, while its net profit fell by 8.4% YoY to Rs 2,841.3 crore. However, it beat Trendlyne Forecaster’s revenue and net profit estimates by 3.5% and 32% respectively.  

The company’s order book at the end of FY23 stood at Rs 81,800 crore, including manufacturing orders worth Rs 60,500 crore. For FY24, the management maintains its revenue guidance of 8-9%, while Forecaster estimates the firm’s standalone revenue to grow by 6.8%. The management expects double-digit revenue growth in FY25, driven by its manufacturing segment and the execution of aircraft and fighter jet orders. 

ICICI Direct foresees growth driven by the manufacturing and repair segments from FY25 onwards. The firm also expects to bag an order worth Rs 12,000 crore from the Indian Air Force for the production of 12 Sukhoi-30 MKI fighter jets in FY25. From FY26 onwards, HAL expects revenue growth to stabilise at 12-13%. The consensus recommendation from eight analysts on the company is ‘Buy’.  

2. Mazagon Dock Shipbuilders: This shipping company touched its all-time high of Rs 1,079.3 per share on Thursday following the signing of a memorandum of understanding (MoU) with ThyssenKrupp Marine Systems. The MoU, valued at $5.2 billion, is for the construction of six submarines for the Indian Navy. The stock has risen 30.1% over the past month, helping it appear in a screener of stocks that have risen more than 20% during the same period. As per the MoU, ThyssenKrupp will provide engineering and design expertise, while Mazagon will undertake the construction and delivery of the submarines. 

This recent rise in stock price is also supported by its Q4FY23 net profit and revenue, which exceeded Trendlyne’s Forecaster estimates by 42.2% and 17.9% respectively. This helped the company feature in a screener of stocks with increasing revenue every quarter for the past two quarters. 

The company’s order book is also on an uptrend and stands at Rs 38,755 crore as of Q4FY23. The management expects the revenue to improve by 8-10% in FY24, and they have submitted bids for construction projects of vessels worth Rs 3,000 crore for the Indian coast guard and Rs 1,000 crore from international clients. 

However, ICICI Securities has maintained a ‘Sell’ rating on the stock with an unchanged target price of Rs 600. This indicates a potential downside of 42%. The brokerage believes that the company’s lack of order visibility to offset its strong revenue growth estimates calls for an unfavourable risk-reward at the current market price. However, market sentiment for defence stocks has been positive over the past week on the back of talks between India and the US regarding the co-production of jet engines, long-range artillery, and infantry vehicles.

3. Suzlon Energy: This heavy electric equipment company has risen 25.6% in the past week till Friday, outperforming the Nifty 500 by 24.6%. This is despite a 7% decline on Thursday after rising for three consecutive sessions. The sharp variation in price and volume has led to Suzlon being placed under the Additional Surveillance Measure (ASM Stage 1) by the BSE. 

The recent share price appreciation could be attributed to its strong Q4FY23 results and large new orders. In Q4, the company posted a net profit of Rs 279.9 crore, compared to a net loss of Rs 204.3 crore in Q4FY22. The energy provider has also reduced its net debt by 80% YoY to Rs 1,800 crore and is trying to monetize its non-core assets to further reduce the debt.

In the post-results earnings call, JP Chalasani, the Group CEO, stated that the company's cumulative orders of 1,542 MW (as on May 30, 2023) are the highest since 2019. Suzlon Energy’s robust order book is driven by its new turbine named S144, which delivers 40-43% higher energy generation compared to the earlier S120. 

The firm ranks medium on Trendlyne’s Checklist score and is in the PE Buy Zone as its current PE is lower than its historical PE ratios. 

4. Ajanta Pharma: This pharmaceutical firm derives 72% of its revenue from branded generics. The stock rose 9.8% last week and touched a 52-week high, backed by a turnaround in performance. The firm’s Q4FY23 earnings have shown a revenue growth of 1.9% and EBIDTA margin contraction of 681 bps YoY. The slowdown in emerging markets like Asia and Africa drove the firm's muted performance. Factors such as strikes in France, supply chain issues, lack of funds in non-profit institutions, forex losses, and higher employee costs have impacted the top line.  However, the US and India segments reported a 17% YoY increase, with the US growth being driven by stabilised prices of branded drugs and moderation in freight costs.

As raw material costs  ease, the management expects gross margins for FY24 to expand to 74-75% from the current level of 72%. They also anticipate the EBITDA to return to historical levels of 24% from the current 17%. The increase in freight costs had a significant impact of almost 200 bps in FY23. Normalization of freight costs, moderation in drug prices in the US, and lower  employee and input costs are expected to drive margin expansion in FY24. The firm is optimistic about achieving a 13-15% growth in its branded generics business. The stock shows up in a screener for stocks with prices above short, medium and long-term moving averages.

The firm has a capex outlay plan of Rs 200 crore for FY25, compared to Rs 160 crore in FY23. It also has plans to launch five products and submit 6-8 abbreviated new drug applications (ANDA) in FY24.  

Motilal Oswal says that with headwinds of FY23 easing out for Ajanta Pharma, the firm is likely to see 10.4% and 18.1% growth in revenue and profits respectively. The brokerage maintains its ‘Buy’ rating on the company.

5. Torrent Power: This electric utility service provider has been on the rise for five consecutive days, with its  stock price increasing by 23.3% since the beginning of June. As a result, the company features in a screener for stocks that have gained more than 20% in one month. The price surge comes after the company’s impressive financial performance in Q4FY23, reporting a net profit of Rs 449.1 crore compared to a loss of Rs 488 crore in Q4FY22. Its revenue also grew by 59.7% YoY to Rs 6,133.7 crore. It shows up in a screener for stocks with growth in quarterly net profit and increasing profit margin. 

Samir Mehta, Chairman of Torrent Power, says that the company has successfully integrated five acquisitions and licensed distribution businesses in Daman & Diu and Dadra Nagar Haveli. According to the management, the rise in revenue can be attributed to consistent performance in the distribution business, achieved by reducing losses, meeting the growing electricity demand, and improved operations in the Union Territory.

Geojit Financial Services has given an ‘Accumulate’ rating to Torrent Power on the back of increased productivity in distribution businesses and its ambition to boost the top line. The brokerage expects a 28% rise in renewable capacity and projects an ROE of 16% in FY25.

Torrent Power also hit its all-time high of Rs 748.9 on Thursday. The stock price surged on Wednesday and Thursday as the company signed a memorandum of understanding with the Government of Maharashtra for the development of three pumped storage hydro projects of 5,700 MW capacity. The projects are expected to require an investment of about Rs 27,000 crore. 

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.