1. Escorts Kubota:
This commercial vehicles company has risen by 21.6% over the past month, on the back of reports that the government is planning a production-linked incentive (PLI) scheme for the railway industry. The capex for the PLI scheme is expected to be around Rs 800-1,200 crore over the next three years. The scheme aims to increase domestic manufacturing of wheels, brakes and transmission systems for Linke Hofmann Busch (LHB) and Vande Bharat train sets.
Escorts Kubota’s order book in the railway segment stands at Rs 950 crore as of Q1FY24 and contributes to 10% of the company’s overall revenue. The management is also focusing on expansion and diversification of the product lines in this segment. It expects an increase in orders due to the PLI scheme, and this has helped the company appear in a screener of stocks that are up by more than 20% over the past month.
Axis Securities maintains its ‘Buy’ rating on the stock with an upgraded target price of Rs 2,900 per share. The brokerage believes that the introduction of new products, higher revenue from spare parts and exports will aid double-digit growth in the company’s revenue. It also expects the company’s EBITDA margins from all the segments to expand on the back of operating leverage and improvement in the product mix. The brokerage expects its revenue to grow at a CAGR of 12.4% over FY23-26.
2. KEC International:
This power transmission equipment manufacturer hit its all-time high of Rs 747.7 on Wednesday after announcing multiple order wins during the week. The company won orders worth Rs 1,021 crore on Tuesday, including the construction of a data centre in Western India, the establishment of a manufacturing facility for an FMCG company, transmission and distribution projects from India and the Americas, and overseas order for the supply of cables. It also landed a Rs 1,145 crore order on Wednesday for the design, supply and installation of an overhead transmission line in Saudi Arabia.
KEC International has risen by 7.6% over the past month, outperforming the benchmark index. This surge followed a 36.5% YoY increase in its Q1FY24 profit to Rs 42.3 crore (beating Trendlyne Forecaster’s estimate by 9.9%). Its revenue also grew by 27.9% YoY on the back of a 71% YoY growth in the transmission and distribution (T&D) segment and a 60% YoY rise in the civil segment. The company also appears in a screener for stocks with improving cash flow.
Vimal Kejriwal, the Managing Director of KEC, said, “Our year-to-date order intake has surpassed Rs 7,500 crore, a robust growth of 30% YoY.” The total order book currently stands at more than Rs 35,000 crore. Management expects to secure orders worth Rs 25,000 crore during FY24. The sector is also likely to benefit from increased government capex spending and a revival in private capital spending. With improving T&D execution and a healthy order book, Geojit BNP Paribas remains positive on KEC International on a long-term basis.
3. Larsen and Toubro:
This construction and engineering firm has risen by 9.4% over the past month, following its announcement of an increased buyback price and an order win worth $3.9 billion from Saudi Aramco.
The company rose 1.7% on Tuesday after it announced an increase in its buyback price to Rs 3,200 from Rs 3,000. At the same time, it reduced the number of shares for the buyback to 3.1 crore from the earlier 3.3 crore. The buyback is set to start on September 18. Due to the recent rise in its share price, the firm features in a screener of stocks trading above their short, medium and long-term moving averages.
The company’s order win from Saudi Aramco is for the second phase expansion of the Jafurah Unconventional Gas Field in Saudi Arabia. ICICI Securities projects that L&T could achieve over 20% YoY increase in order inflow in Q2, excluding services, with this order win. Although the company has given an order inflow growth guidance of 15% YoY in FY24, the brokerage believes that this figure is understated. Accordingly, it has upgraded the stock to ‘Buy’ from ‘Add’ and revised the target price to Rs 3,141.
On Thursday, L&T also announced a partnership with BAE Systems Inc. to introduce the BvS10, an Articulated All-Terrain Vehicle (AATV), to the Indian market as part of the ‘Make in India’ programme.
4. Praj Industries
This industrial machinery manufacturer rose by 14.4% over the week ending Friday, hitting a 52-week high of Rs 609.8. It started rising following the launch of the Global Biofuel Alliance (GBA) by Indian Prime Minister Narendra Modi at the G20 Summit on September 11.
GBA aims to accelerate the global shift towards biofuels and reduce dependence on fossil fuels.
The street expects Praj to benefit from this as it has a 50-55% market share in the domestic ethanol plant sector. Additionally, it has been expanding its global footprint, with its international order inflow now 35% of total orders in Q1FY24. This is a significant increase from 19% in Q1FY23.
The Indian government has reiterated its target to blend 20% ethanol with petrol by 2025, a jump from the current 11.5%. Praj Industries is well-placed to capitalise on the Centre’s push to increase biofuel usage. On July 6, the company agreed to form a joint venture with Indian Oil Corp to strengthen biofuel capacities in India.
As of Q1FY24, the firm’s order book stands at Rs 3,780 crore, of which the bio-energy segment accounts for 78%, followed by engineering at 17% and hi-purity at 5%. The company has also begun to gain traction in the compressed biogas (CBG) market, securing orders for five CBG plants worth Rs 500 crore in total.
Prabhudas Lilladher is optimistic about the firm’s long-term growth prospects and expects its margins to remain healthy due to a pickup in export orders and normalising commodity prices. According to Trendlyne’s Forecaster, the stock holds a consensus recommendation of ‘Strong Buy’ from six analysts.
5. Narayana Hrudayalaya:
This healthcare facilities stock has outperformed the Nifty Healthcare index by 9.6% over the past month, rising 9.8% in just the past week, according to Trendlyne’s Technicals. This surge comes as the company announces its entry into the health insurance segment. The firm expects approval from the Insurance Regulatory and Development Authority of India (IRDAI) by the end of 2023. Narayana Hrudayalaya also plans to open clinics and pharmacies across India to increase its revenue sources. According to Vice-Chairman Viren Shetty, this “expansion into health insurance, clinics and pharmacies will integrate its hospital chains end-to-end and improve profitability”.
The firm reported a 19.4% revenue growth in Q1FY24, backed by improved surgical volumes and higher revenue per patient. Hospitals in the Bangalore region clocked 22% revenue growth YoY, followed by Mysore-Shivamogga hospitals at 16%. Its Cayman Islands facility registered a 32% YoY growth amid increased volumes in its newly opened oncology block. EBITDA margins also improved by 470 bps YoY due to better price realisation per bed.
The company has a capex plan of Rs 1,110 crore for FY24, mainly for assets with a lower turnaround time like diagnostics, clinics, and enhanced bed capacity. The stock shows up in a screener for companies with high TTM EPS growth
Geojit BNP Paribas upgrades its rating for the company to 'Accumulate' from 'Hold', citing the firm’s focus on revenue growth through capacity expansion and the margin-accretive revenue growth from its Cayman Islands operations.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
