1. TVS Motor: This auto manufacturer hit its all-time high of Rs 1,384 this week following the announcement that its TVS Motor (Singapore) arm has acquired an additional 25% stake in Swiss E-Mobility Group (Holding) AG (SEMG). The total cost of the acquisition comes to around Rs 180 crore (517.36 Swiss francs per share for 38,217 equity shares).

SEMG is an electronic bike platform that sells its own branded e-bikes. To improve its presence in the electronic vehicle (EV) market, TVS Motor had previously purchased a 75% stake in SEMG in January 2022. With the recent acquisition, TVS now owns 100% of SEMG, turning it into a wholly owned step-down subsidiary. 

According to a business update, TVS Motor’s May 2023 wholesales of EV TVS iQube electric stand at 17,953 units (up almost 7x YoY) and 97 thousand units (up almost 10x) in FY23. The management says, “TVS iQube has a healthy booking pipeline of over 30,000 units and we are confident of continued improvement of supplies in the coming months.” According to reports, TVS held a market share of 13.8% among the top 20 EV two-wheeler manufacturers in April 2023.

Axis Direct is optimistic about TVS Motor and has increased its target price to Rs 1,450 due to its promising future EV plans, among other reasons. The company also appears in a screener for stocks with broker price upgrades in the past month. According to the brokerage, TVS will be launching EVs in different customer segments in the next three quarters.

2. APL Apollo Tubes: This iron & steel products manufacturer rose by 8% over the past week till Friday, driven by the street’s optimistic outlook on the business. The company is expected to be a major beneficiary of the Centre’s increased focus on infrastructure spending, with rising demand for structural steel products across sectors. The company’s current PE ratio is 57.3, while its forward PE is 41.5. 

Motilal Oswal believes that the company is well-positioned to capitalise on the growing demand, thanks to its market leadership, product portfolio and extensive distribution networks. It expects the firm to gain market share in the coming quarters. According to Trendlyne’s Forecaster, the consensus recommendation on the stock from 13 analysts is ‘Buy’. The stock also shows up in a screener for companies with broker target price revisions and recommendation upgrades over the past three months. 

The management aims to increase its sales volumes to 5 million tonnes in FY26, up from 2.28 million tonnes in FY23. It plans to achieve this capacity expansion through organic means, and become debt-free by the end of FY24. In an interview, Deepak Goyal, CFO of the company, said that 75% of the 5 million tonnes sales volume target will consist of high-margin value-added products. Given the improving product mix, the company expects its EBITDA per tonne to rise from Rs 4,481 in FY23 to Rs 5,000 by FY24 and exceed Rs 6,000 by FY25.

3. Tata Communications: This telecom services company has risen by 15.5% over the past week till Friday, and shows up in a screener for stocks that have grown by more than 20% over the past month. The positive sentiment towards the stock rose after the firm’s Institutional Investors & Analysts Day 2023, held on June 7. 

The management has announced that it aims to double its data revenue to Rs 28,000 crore by FY27, driven by a projected annual growth rate of 35% in its digital services segment. The company expects this  growth to be led by the revenue contribution from million-dollar accounts rising from 35% to over 50%, and a higher share of digital platform services in total revenue, anticipated to rise from 32% to over 50% in FY27. 

The company is also gaining traction in international markets on the back of its increased manpower and successful execution of projects. The management is making strategic acquisitions to improve its presence in international markets. The company’s subsidiary, Tata Communications (Netherlands), completed the acquisition of the US-based video production and distribution company, Switch Enterprises, for $58.8 million (around Rs 486 crore) in an all-cash deal on May 1. This acquisition is expected to enhance Tata Communications’ live production capabilities, while providing Switch’s customer base with global reach.

With these plans in motion, the management anticipates a surge in revenue from international markets in the coming quarters and it maintains an EBITDA margin guidance of 23-25% over the next three years. ICICI Securities remains bullish about the firm’s future plans, given its robust order wins and international business growth.

4. One97 Communications Ltd (PayTM): This software and services firm has seen its stock price rise by 15.9% in the past week, reaching its 52-week high, according to Trendlyne’s Technicals. The company  is involved in payment services and loan disbursement. It reported narrowed losses of Rs 170 crore in Q4FY23, compared to Rs 760 crore in Q4FY22. With 52% YoY growth, the company's revenue from operations reached Rs 23,350 crore, driven by higher gross merchandise value and increased loan disbursements. The margin growth was led by an increase in payment processing charges and a cut down on promotional cash-back incentives. The number of merchants paying for device subscriptions increased by 17% QoQ to 6.8 million in Q4FY23, and grew to 7.5 million in May 2023. The firm plans to add 1 million subscription-based devices per quarter.

Paytm has partnered with SBI cards and NPCI to launch credit cards, adding another revenue stream to the firm. Paytm’s expected credit loss for postpaid service declined from 1.2% in Q3FY23 to 0.9% in Q4FY23. The management has guided net payments margins to remain around 8 bps of the gross merchandise value. Paytm’s CEO Vijay Shekhar Sharma has stated that the firm’s top priority is to achieve positive free cash flow in the near term. The CEO is also bullish on artificial general intelligence to enhance business efficiency, although he has yet to give details on AI implementation.

According to ICICI Securities, Paytm is projected to increase its revenue by 32% CAGR and net payment margins by 27% CAGR between FY23-25. The growth in revenue will be driven by increased loan disbursements and higher cloud and commerce revenue. The brokerage has estimated adjusted EBITDA to turn positive (Rs 8,376 crore) in FY24 and maintains a ‘Buy’ rating with a target price of Rs 1,055. 

5. KEC International: This heavy electric equipment company rose over 2% on Wednesday and hit an all-time high of Rs 586.2 after winning new orders worth Rs 1,373 crore across various businesses. The company’s railway business, which contributes 21% to the total revenue, has won an order for signalling and telecommunication, for an automatic block signalling (ABS) system, while its Transmission & Distribution (T&D) business bagged an order for the supply of towers in India and the USA, among others. 

According to the management, the company’s expansion into the ABS segment aligns with the Centre’s focus on increasing the capacity, speed and safety of the Indian Railway network.

Prabhudas Lilladher and Nomura are optimistic about the company’s long-term growth prospects due to its strong order book and healthy execution. In FY23, KEC’s order inflow went up 30% to Rs 22,378 crore, while its order book stood at Rs 30,553 crore. However, Sharekhan has downgraded its rating on the stock to ‘Hold’ from ‘Buy’, with a target price of Rs 555, as it expects limited gains from the current valuations. According to the brokerage, the company’s margins were below its estimates in H2FY23. 

The consensus recommendation on the company from 22 analysts is ‘Buy’, with 12 suggesting a ‘Strong Buy’ and five recommending a ‘Buy’. However, KEC International is currently in the ‘Strong Sell’ zone due to its current PE being significantly higher than its historical PE ratios. 

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