This industrial gases producer touched an all-time high of Rs 6,165 on Wednesday after receiving a Letter of Acceptance (LoA) from Indian Oil Corporation (IOCL), for an order for the installation, operation, and maintenance of an air separation unit at IOCL’s Refinery in Panipat for 20 years.
Linde India has risen by 27.4% over the past month and made it to a screener of companies with strong momentum. The company, during its annual general meeting, stated that the industrial gases market is poised for robust growth of around 9% in the near term. It anticipates an increase in demand for gas and improved opportunities from the steel sector, driven by consolidation, and productivity increases. The company’s positive outlook is also supported by the healthcare sector’s growth prospects. Linde India foresees robust growth in SPC (special purpose chemicals) products, while also expecting an uptick in nitrogen opportunities.
The company released its Q1FY24 results earlier this month. Its net profit has dropped by 41.9% to Rs 99.9 crore due to increasing costs of raw materials, power and fuel, and other expenses. However, its revenue improved by 23% to Rs 721.1 crore, led by strong performance in the gases, related products, and project engineering segments.
Linde India ranks high on Trendlyne’s checklist with a score of 69.9%. It is currently trading in the ‘Strong Sell’ zone, based on the time spent below its current PE, suggesting expensive valuations.
2. GMR Airports Infrastructure:
This airport development company rose by over 9.4% on Thursday. The stock touched a 52 week high of Rs 66.8 in intraday trade today. It has also surged by 15.9% over the past week till Friday. The firm shows up in a screener for stocks trading above their short, medium and long-term moving averages. This upswing in share price comes on the back of increased passenger traffic in its airports. In Q1FY24, the company’s revenue jumped by 40.2% YoY to Rs 2,017.6 crore, beating Trendlyne Forecaster’s revenue estimates by 1.1%. Additionally, its net loss narrowed to Rs 29.8 crore from Q1FY23’s Rs 137 crore, aided by a one-time gain of Rs 76.1 crore from asset sales.
GMR Airports Infra has benefitted from the rise in air travel demand in India, as it currently operates international airports in Delhi, Hyderabad, and Goa. In Q1FY24, the passenger traffic at Delhi and Hyderabad international airports grew by 18% and 24% YoY respectively. The management expects the positive momentum in traffic to continue, fueling growth. The addition of new routes and increased airline capacity are expected to boost air traffic.
To meet the growing demand, the company has been expanding its terminals in Delhi and Hyderabad with a capex of Rs 17,000 crore. This will increase the terminal capacity in Delhi by 51.5% to 100 million passengers (pax) and in Hyderabad by 183.3% to 34 million pax by the end of FY24.
ICICI Securities believes that the merger of GMR Airports with GMR Airports Infrastructure will simplify the firm’s corporate structure and lead to substantial value creation for its shareholders. The company received approval for the merger from the Competition Commission of India in Q3FY23.
3. Lemon Tree Hotels:
This hotel company has risen by 10.9% over the past week to its all-time high of Rs 111.2 per share. This boost follows the announcement of the company signing license agreements for two properties in Bhubaneswar and Kasauli. This rise helps it to appear in a screener of stocks with prices above short, medium and long-term moving averages. The properties are expected to be operational by FY25 and FY26, respectively.
Lemon Tree Hotels posted its Q1FY24 results on August 11, with a 69.4% YoY increase in net profit to Rs 23.5 crore. Its revenue has also improved by 15.7% YoY to Rs 222.2 crore, aided by growth in gross average room rate (ARR), revenue per available room (RevPAR), and occupancy. However, its revenue and net profit missed Trendlyne’s forecaster estimates by 3.1% and 12.6%, respectively.
Its margins contracted by 834 bps QoQ on account of higher advertising expenses and employee costs due to new hotel openings. Lemon Tree has planned a capex of Rs 40 crore for FY24 to revamp its budget hotels, which is expected to impact EBITDA margins by 200-250 bps.
Speaking about the results, the company’s Chairman and Managing Director said, “Growth in the coming quarters will be from two new hotels opening in October 2023. Also, our asset-light model will help accelerate growth in our managed and franchised portfolio.”
IDBI Capital maintains its ‘Buy’ call on Lemon Tree Hotels, with a target price of Rs 110 per share. The brokerage believes that the company will benefit from increased demand in leisure travel, corporate travel, and meetings, conferences and exhibitions (MICE). The demand-supply mismatch in the near-term also seems favourable for overall earnings growth of the industry. It expects the company’s revenue to grow at a CAGR of 33.2% over FY22-25.
4. Bharat Forge:
This industrial products manufacturer has risen by 6.8% in the past week and hit an all-time high of Rs 1,052.1 on Thursday. The price rise comes as the company’s defence arm, Kalyani Strategic Systems, won an export order worth 93.9 million euros (approx Rs 850 crore) to supply components and armoured vehicle chassis.
In Q1FY24, Bharat Forge’s net profit grew by 25.9% YoY to Rs 223.4 crore, beating Trendlyne Forecaster’s estimate by 7.9%. It’s revenue also increased by 36.7% YoY, beating the estimate by 20.1%. The revenue growth was led by defence and passenger vehicle component exports. The company’s foreign subsidiaries have particularly excelled in revenue growth, driven by the aerospace segment. Orders from the US for class 8 trucks are also seeing good traction. Its EBITDA margin has fallen marginally by 20 bps YoY due to an increase in raw material expenses. The company also appears in a screener for stocks with increasing revenue for the past four quarters.
Bharat Forge's current order pipeline stands at Rs 2,200-2,300 crore, scheduled to be executed over the next 18 months. Defence and aerospace orders worth around Rs 1,700 crore and Rs 500 crore, respectively, are expected by the end of FY25.
Motilal Oswal reiterates its ‘Buy’ call on Bharat Forge and estimates a revenue and profit CAGR of 13% and 85% respectively over FY24-25 The expected surge in the order book and an upswing in exports are projected to drive revenue growth. The brokerage maintains its stance on the back of executions of the orders in the coming quarters.
5. KEI Industries:
This electrical equipment stock has risen by 8.6% in the past week, according to Trendlyne Technicals. KEI Industries is among India’s top three wire and cable manufacturers, with a product portfolio ranging from housing wires to Extra High Voltage (EHV) cables. KEI derives 63% of its revenue from cables, 6% from EPC, and 31% from wires.
The stock has declined by 6.5% after announcing its Q1FY24 results. KEI Industries reported a revenue growth of 13.9% and a profit growth of 17% YoY. The jump in revenue was led by a 22% increase in cable business volume. KEI reported an EBITDA margin expansion of 5 bps YoY – the muted margin growth was on account of higher expenditure on IPL advertisements, and capacity constraints. The firm's strategy to diversify itself into the retail business has resulted in the retail segment contributing 44% of the revenue, with the housing wires segment driving retail sales. KEI’s current order book stands at Rs 3,567 crore. It shows up in a screener for companies that are efficiently managing assets to generate profits.
KEI saw a capacity crunch in Q1FY24, impacting cable manufacturing volumes. This has resulted in KEI running at full capacity and achieving only 22% volume growth in cables, as compared to its peers, Polycab India (42%) and Havells India (24%). However, the brownfield expansion of cable manufacturing is set to be completed in Q2FY24, which should address the capacity issues.
Anil Gupta, the Managing Director of KEI Industries, has provided a guidance of 17% revenue growth for FY24, with EBITDA margins maintained at current levels of 11%. KEI has also planned a capex outlay of Rs 1,000 crore over the next three years for its capacity expansion. The stock is in the ‘Sell’ zone, according to the time spent below its current PE.
BOB Capital sees growth traction in its export orders and cable business. The improvement in working capital is margin accretive. Due to the recent stock price appreciation and its capacity constraints, the stock has been downgraded from ‘Buy’ to ‘Hold’.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
