1. South Indian Bank:

This banking stock surged by 8.3% on January 18, as its net profit grew by 197.2% YoY to Rs 305.4 crore in Q3FY24. Its revenue also increased by 15% YoY to Rs 2,184.1 crore during the quarter, helping the company appear in a screener of stocks with rising revenue for the past four quarters (QoQ). This led to net profit and revenue beating Trendlyne’s Forecaster estimates by 7.6% and 24%, respectively. The stock has also risen by 18.8% over the past week, featuring in a screener of stocks with high volume and high gain.

The revenue boost was on the back of improvement in the treasury, corporate and retail banking segments. However, the bank’s net interest margin (NIM) declined by 33 bps YoY due to higher cost of funds. This rise in cost was driven by loan growth (up 11% YoY) outpacing the 9% increase in deposits. The bank was also hit by a 201 bps YoY decline in the CASA ratio. 

The company’s Director and CEO, PR Seshadri, said, “Our cost of funds continues to rise as deposits are repricing, bringing cost of deposits to 5.2%, up from 4.3% in Q3FY23.” 

Post results, Anand Rathi maintains its ‘Buy’ rating on the stock with a target price of Rs 39 per share. This indicates a potential upside of 12.2%. The brokerage is optimistic about the bank’s profitability prospects, citing reduced stress from the legacy book. It expects the company’s net profit to grow at a CAGR of 18.9% over FY23-26.

2. Steel Strips Wheels:

This auto parts and equipment firm rose 5.8% on Friday following its Q3FY24 results announcement. Its net profit has increased by 35.8% YoY to Rs 60 crore and revenue grew by 18.3% YoY. The net profit beat estimates by 25%, aided by lower taxes. The company appears in a screener of stocks with increasing quarterly profits for the past four quarters. According to Trendlyne’s Technicals, the stock has risen by 5.8% in the past month.

The firm’s revenue growth was driven by higher volumes and realizations, with strong domestic automotive sales contributing to this increase. Currently SSWL has a 45% market share in passenger vehicles and 30% in the two-wheeler segment, 

Steel Strips Wheels has a big capacity boost coming. It expects a capacity increase of 64.1% by Q4FY25, following its recent acquisition of AMW Autocomponent, an auto-component manufacturer. With rising domestic demand, growing exports, and a shift towards premium alloy wheels, the company forecasts a 10% CAGR in wheel sales in FY24-26.

The management maintains its FY24 sales volume growth guidance at 15% YoY, with revenue projected to grow by 23.4% YoY, driven by increased volumes. EBITDA margins are expected to increase, owing to the increasing share of premium alloy wheels. Aluminum knuckles launched in September 2023 are expected to contribute 6% of revenue by Q4FY24. Demand from the US and Europe contributed 15% of revenue in 9MFY24, as existing customers are shifting away from China. Exports are predicted to generate around Rs 600 crore in revenue in FY24. 

Axis Direct notes that the AMW plant acquisition, a growing alloy wheels order book, product diversification, and 2W motor hub-wheels expansion position the company well to meet increasing demand, especially from the US and Europe. The brokerage maintains a ‘Buy’ rating on the stock.

3. UltraTech Cement:

This cement and cement products company has risen by 19.7% in the past quarter. In Q3FY24, it reported an 8% YoY increase in revenue to Rs 16,740 crore and a 68% YoY increase in net profit to Rs 1,777 crore, marginally surpassing Trendlyne Forecaster estimates. UltraTech posted a moderate volume growth of 6% YoY at 237.3 million tonnes per annum (MTPA), impacted by elections in four major states and fiscal challenges in Bihar and West Bengal. 

The volume growth in Q3FY24 was supported by a 2% QoQ hike in cement prices.  According to Crisil, cement prices are expected to increase by 1-3% in FY25 to Rs 400-405 per bag on the back of government initiatives in the affordable housing segment. During the earnings call, the management guided capacity utilization to increase to 80-85% in Q4FY24 from 77% in Q3FY24 due to an uptick in cement demand.

In Q3, UltraTech’s fuel cost declined by 19% YoY on a tonne basis, owing to an 8.4% drop in Brent crude prices in 2023 and a 25% reduction in the consumption price of petcoke. With fuel costs accounting for around 25-30% of total expenses for cement firms, UltraTech expects a further 7-8% decrease in fuel costs over the next six months. The firm also appears in a screener of companies benefiting from low crude oil prices.

The firm expanded into the Jharkhand market in Q3 by acquiring the 0.5 MTPA grinding assets of Burnpur Cement. Its current capacity stands at around 130 MTPA and the management aims to increase this to 200 MTPA by 2028 through an investment of 13,000 crore. It also revised its capex guidance to Rs 9,000 crore per annum each for FY24 and FY25, up from Rs 7,000 crore. Axis Securities maintains its ‘buy’ rating on the stock and expects the firm’s profit to grow at a CAGR of 31% over FY23-26.

4. Mahanagar Gas:

This utilities company hit its all-time high of Rs 1,387 on Tuesday and has risen by 9.4% in the past week, after announcing its Q3FY24 results. Its net profit for the quarter has increased by 84.3% YoY to Rs 317.2 crore, despite a 5.3% YoY fall in revenue to Rs 1,771.8 crore. It beat Trendlyne Forecaster’s net profit estimate by 8.4%. Profit and EBITDA increased due to a 25.6% YoY drop in raw materials cost.

The company’s EBITDA margins improved by 13.1% points YoY, despite reducing the selling price of CNG by Rs 3/kg during the quarter. The increase in price realisation was helped by a 22.5% decrease in input CNG prices, while the selling price saw only a marginal decline. 

Going forward, a fall in cheap government-administered (APM) gas supply will lead to increased use of HPHT gas (which has low margins), potentially moderating margins. The company appears in a screener for stocks with improving cash flow for the past two years.

Mahanagar Gas announced an interim dividend of Rs 12 per equity share for FY24 and set the record date as February 5, 2024.

Vahan data from December 2023 shows a 25% YoY increase in CNG vehicle registrations. The company is poised to benefit from the government's aim to raise the share of natural gas in the energy mix from 6% to 15% by 2030. The firm’s offer of free fuel cards worth Rs 20,000-5,00,000 for new or retrofitted CNG vehicles may have helped drive Q3 conversions. An uptick in CNG vehicle registrations is also expected to benefit the company in the coming quarters.

HDFC Securities reiterates its ‘Buy’ call on Mahanagar Gas on the back of its attractive valuation. The analysts estimate volumes at 3.6 million metric standard cubic meters per day for FY24 and expect volume growth of 8.9% CAGR over FY24-26.

5. Tata Elxsi:

This IT software & services company fell 5.2% on January 24 as its Q3FY24 net profit missed Trendlyne’s Forecaster estimates by 1.1%. In addition, its EBITDA margin contracted by 40 bps QoQ to 29.5% during the quarter due to increased employee benefit expenses and other costs.  However, Tata Elxsi’s Q3FY24 net profit grew by 3.2% QoQ to Rs 206.4 crore on account of a deferred tax credit of Rs 4.4 crore. 

The company’s revenue has increased by 3.7% QoQ due to growth in the EPD (Embedded Product Design) segment, which accounts for 85% of total revenue). This segment consists of transportation, media & communication, and healthcare verticals. 

During the quarter, the revenue of Tata Elxsi’s transportation vertical (which contributes around 37% of total revenue) grew 2.7% QoQ due to deal wins. The healthcare vertical (which accounts for around 14% of total revenue) increased by 4.6% QoQ. According to  Manoj Raghavan, CEO and MD, “Our healthcare business is on track to achieve about 20% of the overall revenues of the company by 2026.” Meanwhile, the media & communication vertical’s revenue growth remained muted at 0.6% QoQ. 

Morgan Stanley maintains its ‘Underweight’ rating on Tata Elxsi with a target price of Rs 7,500. According to the brokerage, the company’s Q3 performance fell short of its expectations, particularly in the EPD segment. The EPD segment’s media & communication vertical faces challenges due to lower discretionary spending from clients, and cost pressures. 

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