1. L&T Finance Holdings Limited: This holding company has outperformed the Nifty Financial Services index by 21% in the past month. The stock rose 82% in the past year, according to Trendlyne’s Technicals. The stock’s growth was backed by the firm’s ability to decrease its wholesale book concentration. The wholesale book has dropped from 42% of the loan book in FY22 to 25% by the end of FY23. The growth has primarily come from rural finance, particularly tractor loans. 

The finance firm plans to expand its loan book from Rs 18,693 crore currently to Rs 25,000 crore in the next two years. To manage the risk involved in rural finance, the firm has set a limit of Rs 15 crore per branch, and follows the RBI’s income assessment norms to analyze customer risk profile.

In urban finance, L&T focuses on two-wheeler loans with an interest rate range of 15-22%. Nearly 70% of its customers are salaried individuals. The firm has also ventured into mortgage lending, which has given a return on assets of 1.5%. This is expected to rise to 2% as the mortgage loan book expands.

L&T reported a net interest margin of 7.6% in Q4FY23, an expansion of 100 bps YoY.  The gross NPA has increased by 60 bps to 4.7%, while the net NPA declined by 50 bps to 1.5% due to higher provisioning. The stock shows up in a screener for companies with high TTM EPS growth

ICICI Securities says that the firm’s focus on increasing the retail loan book to 90% of the AUM by the end of FY24 should help in valuation rerating. The firm’s improving financial ratios like RoA, GNPA, NIM and RoE are expected to enhance operational performance. The brokerage maintains a ‘Buy’ rating on the company.

2. Shyam Metalics & Energy: This iron & steel manufacturing company touched its 52-week high of Rs 373.95 on Wednesday and has risen by 18.2% over the past month. This uptrend comes on the back of the company’s production capacity expansions and growing share of its value-added products. Its margins are also expected to expand as thermal coal and iron ore costs are declining. In an interview, Vice-Chairman & MD Brij Bhushan Agarwal said he is optimistic about the company’s prospects for the next two years on the back of the rising share of value-added products and timely execution of projects.

The firm shows up in a screener for stocks with improving cash flows from operations over the past two years. According to Trendlyne’s Forecaster, the company’s annual revenue and net profit are expected to rise by 28% YoY and 43.8% YoY respectively. 

Last week, the company announced a capacity expansion of its captive power plant by 90 MW to 357 MW. This allows the company to meet 80% of its energy requirements internally, resulting in lower input costs. The company has also more than doubled its sponge iron capacity to 2.7 MTPA to meet rising demand. Agarwal says,  “The addition to our captive power plant gives us a significant boost with reliable and low-cost power, and puts us in an even better position to supply sponge iron, which continues to see improving demand.”

ICICI Securities remains positive about the stock’s prospects due to an expansion in production capacity, volume growth in value-added products and declining input costs. It expects profitability to improve from Q2FY24 onwards, led by lower iron ore & thermal coal prices and higher realisations from value-added products. The consensus recommendation from three analysts on the firm is a ‘Strong Buy’.

3. Bharti Airtel: This telecom service provider is currently trading near its all-time high. The rise follows the announcement of a strategic partnership between Airtel Business and Matter Motor Works, an EV manufacturing startup. Airtel will provide advanced automotive-grade E-Sims for all bikes produced by Matter Motor Works, allowing real-time tracking, security, and performance monitoring of these vehicles.
   
   Bharti Airtel’s share rose 2.3% on June 27 after it announced that Airtel Business’s Chief Executive Officer Ajay Chitkara has resigned, effective from August 2023. The resignation came as t, Airtel Business announced that it will be split into three verticals: global business, domestic business and Nxtra Data Centers. In Q4FY23, Airtel Business’s revenue grew 14.4% and gross margin expanded by 225 bps YoY. The margin expansion was on account of a drop in spectrum charges.

According to TRAI’s data released on June 28, Airtel’s wireline subscriber base increased by 1.4% MoM in April 2023, while the wireless subscriber base increased marginally by 0.02%. The company currently holds 28.7%, 24.7% and 32.5% market share in broadband, wireline, and wireless subscribers, respectively.

The company’s average revenue per user (ARPU) increased by 8.4% YoY to Rs 193, beating Reliance Jio’s ARPU of Rs 178.8 (up 6.7% YoY). The company also features in a screener for stocks near their 52-week highs with significant volumes.

Geojit BNP Paribas says that ARPU growth will be aided by higher data consumption and increased tariff plans. Also, the expansion into new business verticals like digital business, and cost optimisation measures will help in increasing the bottom line. Bharti Airtel has a consensus recommendation of ‘Buy’ from 29 analysts, of which 19 are ‘Strong Buy’, six ‘Buy’, one ‘Hold’ and three ‘Sell’. 

4. Tata Motors: This commercial vehicles manufacturer rose by 3.9% in intra-day trade and touched its 52-week high of Rs 590 on Wednesday. This price rise is a result of SEBI’s approval of the IPO for its subsidiary, Tata Technologies. The subsidiary offers engineering, research, and development services in the automotive, aerospace and software sectors. Tata Motors currently holds a 74.8% stake in Tata Tech and plans to pare its stake by 26.8% to generate funds for debt reduction. This is in line with the automotive giant’s goal of becoming debt-free by FY25 achieved through the sale of its non-core assets and generating healthy cash flows. 

Another factor aiding the positive sentiment surrounding the stock is CLSA keeping its ‘Buy’ rating and raising its target price to Rs 690 from Rs 624, citing rising margins from JLR and stable domestic demand for commercial vehicles. Motilal Oswal chose Tata Motors as its top pick in the automotive sector as it believes the company is well-positioned to benefit from rising commercial vehicle demand. The consensus recommendation from 31 analysts on the stock is ‘Buy’. The firm also shows up in a screener for stocks with brokers upgrading recommendations or target prices over the past three months. 

Although the street remains optimistic about the company’s future growth, the automaker’s monthly wholesales fell 1.6% YoY in May. This was due to a 12% YoY decline in commercial vehicle sales, while passenger vehicle and electric vehicle wholesales grew.

The management expects a double-digit EBITDA margin in its PV & CV segments in the medium term, led by easing supply-side issues, declining raw material costs and moderating discounts. 

5. V-Guard Industries Limited: This electrical equipment firm is seeing an uptick in demand for stabilizers and inverters. Sales of high-margin products like television and refrigerator inverters are higher during the June-December cycle. However, higher inflation and high-interest rates have slowed down the consumer durable segment, especially for premium goods. The firm has also seen a moderation in southern markets.  To increase penetration in the non-southern regions, V-Guard plans to add 4,000 retailers to its existing network of 50,000 retail outlets. V-Guard Industries’ fan business faces saw increased competition from non-rated operators due to higher inventory build-up. According to Trendlyne Technicals, the stock has increased by 7.9% in the past week.

The firm plans to increase its revenue by spending 3% (2% in FY23) of the sales on advertising and plans to add more products to its portfolio to boost sales. In line with that, V-Guard acquired Sunflame in FY23 to venture into the kitchen appliances market. Sunflame is expected to contribute Rs 400– 425 crores to revenues in FY24. The decrease in raw material prices and liquidation of high-cost inventory will aid margins in FY24.The firm plans a capex of Rs 100 crore to boost  working capital and improve operating efficiency. The firm shows up in a screener for stocks with strong momentum with prices above short, medium and long-term moving averages.

ICICI Securities says improved recovery in consumer durable segments, led by the acquisition of Sunflame, dealer expansion, and higher marketing spending, will aid the top line. The softening of raw material costs will help margin expansion. The brokerage maintains a ‘Buy’ rating on the stock

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