Five Interesting Stocks Today

This NBFC touched its 52-week high of Rs 8,192 per share and closed 4.1% higher on Friday, a day after announcing its Q2FY24 business update. The company’s board of directors approved the raising of Rs 8,800 crore through qualified institutional placement (QIP) on Thursday, subject to approval from shareholders. Funds from the QIP will be used to reduce the company’s cost of capital and increase its AUM growth, and is a response to rising competition in the sector.

The stock has risen by 11.2% over the past month, outperforming the Nifty 50 index by 10.8 percentage points. This helped the company appear in a screener of stocks with high momentum scores.

The NBFC’s assets under management (AUM) improved by 33% YoY to Rs 2.9 lakh crore for the quarter, aided by increased deposits and new loans. This growth beat Jefferies’ estimates by 300 bps. The company’s customer franchise increased by 3.6 million YoY to 76.6 million, and remains on track to achieve its guidance for 12-13 million growth in users during FY24. Trendlyne’s Forecaster predicts revenue growth of 26.8% YoY in Q2 and 24.8% YoY in FY24.

Post the business update, BOB Capital Markets maintains its ‘Buy’ rating on the stock with a target price of Rs 9,105 per share. This indicates a potential upside of 16%. The brokerage believes that the company’s strong AUM growth, diverse product mix and efficient execution will help it keep up with competitors and improve its asset quality. It expects the company’s net interest income to grow at a CAGR of 20% over FY22-25.

2. Kaynes Technology India:

This electronics manufacturing services (EMS) company has risen 13.6% over the past week till Friday, riding on the back of a healthy business outlook. The Indian EMS industry is expected to benefit from the global shift in supply chains, positioning Kaynes to profit from its presence across various industrial segments. The company provides manufacturing services to firms in the automotive, railways, aerospace, defence, medical and information technology sectors.

As the company mostly caters to other industrial businesses, its primary exposure is to the business-to-business (B2B) segment. According to reports, Morgan Stanley expects EMS companies with high B2B exposure to outperform their peers due to reduced competition and higher margins. It adds that this will enable companies to spend more on research & development and increase the scope for backward integration.

The management states that the firm has a low customer concentration, with the top five clients making up 44% of the total revenue. Kaynes also added one large multinational client in Q1FY24.

Trendlyne's Forecaster estimates the firm’s revenue to surge by 33.5% QoQ and 99% YoY to Rs 396.7 crore in Q2FY24. It shows up in a screener for companies with net cash flows improving over the past two years.

With ambitions to foray into semiconductor manufacturing, Kaynes signed an MoU with the Karnataka Government on August 24. The agreement involves an investment of Rs 3,750 crore to set up a Semiconductor Assembly and Testing (OSAT) facility and a Printed Circuit Board (PCB) manufacturing plant. The management plans to start production in both plants by the end of 2024 and expects the benefit to flow in from H2FY25.

3. South Indian Bank:

This bank’s stock price fell by 1.5% on Thursday, following its business update. The decline was likely due to the rising cost of funds for the bank, due to a falling CASA (current account savings account) ratio and slowing credit growth. The stock had jumped by 11.2% over the past month, according to Trendlyne’s Technicals. The company was also recently in the news for the appointment of P R Seshadri as its new CEO & MD following RBI’s approval.

SIB’s provisional Q2FY24 update has recorded a 10.3% YoY surge in gross advances to Rs 74,975 crore. Similarly, total deposits climbed by 9.8% YoY. By the end of Q2FY24, CASA deposits stood at Rs 31,162 crore. The bank's credit growth in FY24-25E is expected to be around 12-13%. Moves to stabilise the liability mix, adjust interest rates on 65% of deposits, launch new retail products, and improve yields are expected to boost profits by 10-20 basis points. The stock appears in a screener of companies with high interest payments compared to earnings.

The management expects net interest margins to rise by 20 bps to 3.5% by Q4FY24, partly from growth in high-yielding loans. The bank also aims for a 1% return on assets (RoA) by the end of FY24.

ICICI Securities says that the qualification of the new MD & CEO will be critical to the stock’s rerating. They see RBI’s approval for the appointment of P R Seshadri as a key positive for the bank. According to the brokerage, he played a crucial role in improving risk management at Karur Vysya Bank and achieving credit growth despite profitability pressures from rising NPAs. The broker maintains a ‘Buy’ rating on the stock.

4. TVS Motor:

This two/three-wheeler manufacturer has fallen by 2.3% since announcing its September business update on Tuesday. The decline is on account of lower quarterly three-wheeler wholesales, which contracted by 15.7% YoY in Q2FY24.

In September 2023, the company’s total wholesales rose by 6% YoY to 4 lakh units, and its electric vehicle (EV) wholesales surged 4X YoY to 20,356 units. TVS has also been seeing an increase in exports, registering an 8% growth in September despite a high base.

Taking note of the healthy response to EVs, TVS Motor launched its second electric scooter, TVS-X, for Rs 2.5 lakh. The recent launch of Apache RTR 310, priced at Rs 2.4-2.6 lakh, also indicates the company’s interest in catering to the premium lifestyle segment market. The company aims to gain market share by introducing multiple products in numerous segments. It is also expected to launch electric three-wheelers in the coming quarters, and has started exporting EVs to Nepal with plans to expand to other markets.

In Q1FY24, the automobile manufacturer’s net profit grew by 42.2% YoY to Rs 434.3 crore, beating Trendlyne Forecaster’s estimate by 6.9%. Its revenue also increased by 24.4% YoY. Even though TVS’ EBITDA margin has been in the range of 10% for the past eight quarters, the management hopes to improve it further through a better product mix, price hikes, and a focus on premiumization. The company features in a screener for stocks with improving cash flow and good durability.

Sharekhan maintains a ‘Buy’ call on TVS on the back of new launches and a gradual revival in export volumes. Analysts expect a healthy festive season and believe that the company will see robust traction in volumes, backed by its product portfolio.

5. Marico

This FMCG company has fallen by over 5.9% since the announcement of its business update on Thursday. Marico reported a low single-digit YoY volume growth in Q2FY24. It’s domestic volumes grew by 3% YoY in Q1FY24. The company attributed weak rural demand as the reason for this muted volume growth. Parachute Coconut Oil and Saffola Edible Oils’ volumes (contributing to around 37% and 31% of the total revenue) also grew in the low-single digits.

Marico highlighted that its consolidated revenue has moderated during the quarter due to price corrections in its key domestic portfolio. In Q1FY24, the company’s revenue dropped by 2.1% YoY to Rs 2,523 crore, driven by price cuts taken in its Saffola Edible Oils segment. According to Trendlyne’s Forecaster, its revenue is expected to grow 3.4% YoY in Q2FY24. The company is set to declare its Q2 results on October 30.

The FMCG company’s management said that the recent surge in food prices and below-normal rainfall in some regions have dampened rural demand. According to Saugata Gupta, the MD and CEO of the firm, “Factors such as retail inflation dropping to sub-5% levels, late pickup in monsoons, hike in kharif crop MSPs (minimum support price) and higher government spending give us hope for a gradual recovery in rural sentiment”. He added that Marico targets a volume growth of around 8% in the medium term.

The company’s share price touched a new 52-week high on Tuesday after ICICI Securities upgraded its rating to ‘Buy’ and raised the target price to Rs 670. The brokerage is optimistic about the company's efforts to accelerate expansion while maintaining its market share. As a result, Marico features in a screener of stocks where brokers have upgraded recommendations or target prices in the past three months.

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