1. JSW Steel:

This metals and mining firm has been in the news after its CEO Jayant Acharya announced plans to expand its capacity from 28.5 million tonnes (MT) to 50 MT in the next seven years. This jump will incur an expense of around Rs 1 lakh crore. The stock rose to its 52-week high of Rs 895.8 on Thursday after the news broke. According to Trendlyne’s Technicals, the stock has gained 12.5% in the past month.

In November, JSW Steel reported a 7% YoY steel production increase in India. The firm also achieved 90% capacity utilization for the month. The rise in production is linked to the booming realty sector and higher government spending ahead of the election year, which have improved volume offtake.

However, the arrival of large quantities of cheaper Chinese steel on Indian shores has brought down steel prices by 4.6% over the past three months. In response, JSW has boosted its revenue share from value-added products, which contributed nearly 60% of its Q2FY24 revenue. The firm shows up in a screener for stocks with increasing net profit and profit margin.

The recent hike in coking coal prices to above $300 per tonne is likely to pressure JSW Steel’s margins further. Import expenses for Australian coking coal have risen by $25-50 per tonne in the past three months. The company is now exploring cheaper alternatives like Russian coal.

ICICI Securities says that JSW Steel’s massive capex outlay in an uncertain demand environment poses a huge risk and might balloon its debt. Also, the constant threat of cheaper Chinese imports could keep margins under pressure. However, the recent uptick in domestic demand and a better product mix should support profitability in the near term. The brokerage maintains a ‘Hold’ rating on the stock. 

2. Bharat Electronics:

This defence company touched an all-time high of Rs 185.2 today. This was after it secured an order worth Rs 678 crore from the UP government to develop the UP Dial 112 project. In addition, on December 22, it received orders worth Rs 2,673 crore from Goa Shipyard and Garden Reach Shipbuilders & Engineers for the supply of sensors. 

So far in FY24, BEL has accumulated orders worth Rs 26,613 crore, surpassing the management’s guidance of Rs 20,000 crore. This has resulted in a 30% increase in the company's stock price over the past month. It also features in a screener of stocks with prices above their short, medium and long-term moving averages.

ICICI Securities expects BEL to win more orders in the defence space before March 2024, potentially raising the order inflow to Rs 30,000 crore in FY24. The brokerage maintains its ‘Buy’ rating with a target price of Rs 203. 

Bhanu Prakash Srivastava, Chairman and Managing Director of BEL, said “Our FY24 margin guidance (21-23%) and revenue growth guidance of 15% are intact, and we will be able to maintain that.” According to Trendlyne’s Forecaster, the company’s revenue is expected to grow by 17.2% in FY24. With a strong order pipeline in place, the focus now falls on the execution of projects. 

3. Larsen & Toubro:

This construction and engineering company has risen by 15.6% in the past month, reaching an all-time high of Rs 3,559.9 on Thursday. It has also secured multiple new orders –. Its construction arm won a Rs 5,000-10,000 crore order to establish renewable energy generation, power utilities and water systems in Saudi Arabia. It also bagged orders worth Rs 2,500-5,000 crore for its power transmission and distribution business to develop substations and overhead transmission lines in the Middle East. The company completed the acquisition of the entire shareholding of Sapura Nautical Power (JV Partner) in L&T Sapura Offshore on December 27, 2023.

L&T’s tender prospects for H2FY24 stand at Rs 8.8 lakh crore, across sectors like infrastructure, hydrocarbon and power. The order book, as of Q2FY24, stands at a record high of Rs 4.5 lakh crore (up by 21% YoY). Of this, domestic orders account for 65% and the rest are international. While the majority of the orders came from energy projects (Rs 40,100 crore), Rs 2,800 crore were from infrastructure. 

In Q2FY24, L&T’s profit increased by 44.6% YoY to Rs 3,222.6 crore, while its revenue grew by 19.9% YoY. It beat Trendlyne Forecaster’s net profit estimate by 16.1%, with its revenue aligning closely with projections. It features in a screener of stocks effectively using their capital to generate profit (improving RoCE over the past two years).

ICICI Securities maintains its ‘Buy’ call on Larsen & Toubro on the back of its robust order book, which the brokerage believes provides strong execution visibility. According to Trendlyne Forecaster, the company has a consensus recommendation of ‘Buy’ from 32 analysts, with 24 giving a ‘Strong Buy’ and 6 recommending a ‘Buy’.

4. Laurus Labs: 

This pharma firm has risen by 16% in the past month, outperforming the pharmaceuticals & biotech sector by 9.3%. The company appears in a screener of stocks with strong momentum. The rise follows the management’s optimistic projections regarding the firm’s capacity expansion plans, and its focus on reducing dependence on the antiretroviral (ARV) business. Laurus Labs holds an equity stake of 40% in ImmunoAct, a cell and gene therapy firm. ImmunoAct recently received approval for India’s first Chimeric antigen receptor (CAR) T-cell therapy, a significant development in cancer treatment.

Laurus Labs is working to reduce its reliance on the ARV business while increasing focus on active pharmaceutical ingredients (API), finished dosage forms (FDF), contract development & manufacturing organizations (CDMO), and biologics segments. The management expects growth in non-ARV, FDFs, and APIs to come via new approvals and contracts. It has guided a 31% CAGR in FDFs and a 20% CAGR in the biologics segment for FY24-26. 

However, the CDMO synthesis business, which has a revenue share of 19.7%, is slowing due to ongoing R&D projects and delayed sales. In H1FY24, the company’s revenue declined by 23% YoY due to the CMDO slowdown. 

The company hopes to boost profitability in the short term by focusing on high-margin non-ARV businesses. Laurus’ shift to higher-value segments has involved an investment of Rs 2,600 crore over the past three years. 

KR Choksey is positive about Laurus Labs on the back of its transformation to a more diversified play, from a pure ARV-focused company. The brokerage expects the company’s revenue to grow at a CAGR of 11.6% in FY24-26 and maintains an ‘Accumulate’ rating on the stock. 

5. Kansai Nerolac Paints: 

This furniture, furnishing, and paints firm rose 3.8% on December 27, following the news of a land sale in Mumbai for Rs 726 crore. At a strategy session conclave on December 10, the firm announced new investment plans in marketing and network distribution, along with the addition of high-margin products in automotive and decorative paints. According to Trendlyne’s Technicals, the company has risen by 3.2% in the past month. It appears in a screener of stocks nearing their 52-week highs with significant volumes.

The company’s 11 new paint products have contributed to a margin expansion of 150 bps. It also aims to expand its network to another 75 towns. Growth is expected in the auto and powder segments, driven by higher sales during the festive season. The construction chemicals sector, currently accounting for 5% of the total business, is also expected to double in size within the next 2-3 years.

Despite subdued rural demand in Q2FY24, the management is optimistic about rising paint consumption in Q3FY24 due to festivities and the harvesting season. Kansai Nerolac’s lower pricing is expected to help it gain market share in the price-sensitive rural market. The company is expanding its presence in weaker geographies, particularly in the South and West regions, by adding more dealers and distribution centres. It is also running campaigns via influencers to announce its presence in these regions.

In Q2FY24, the company’s gross margin improved by 678 bps YoY to 35.6%, thanks to declining crude oil and titanium dioxide prices. However, increased promotional activities and staff costs limited EBITDA to 14%, a margin growth of 364 bps YoY. The company is expected to see further margin improvements in H2FY24, driven by higher demand for premium decorative paints and favourable oil prices. 

Prabhudas Liladher notes the company’s focus on technological advances in auto paints (including EVs), and its B2B expansion to 75 cities. KPIL's aggressive expansion plans and an uptick in rural demand are expected to help its top line. The broker maintains an ‘Accumulate’ 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.