1. Aster DM Healthcare:
This healthcare facilities company has risen by 6.7% over the past week, touching its all-time high of Rs 478.3 per share on Thursday. The company announced its Q3FY24 results on February 8, with its net profit growing by 28.6% YoY to Rs 179.2 crore due to expanding EBITDA margin from cost optimisation efforts. This marks a turnaround, as the stock's net profit had been falling YoY for the last five quarters. Its revenue also increased by 16.2% YoY to Rs 3,710.6 crore. This rise in net profit and revenue helped the company beat its Forecaster estimates by 157.5% and 4.4% respectively.
The revenue growth came from improvements in the hospitals, clinics and retail pharmacies (including optical) segments. The hospitals segment, which contributes to 57.3% of the company’s total revenue, saw a 17.7% YoY growth, owing to an increase in the number of beds in India and the GCC.
Aster’s board approved the sale of its Gulf business, Aster DM Healthcare FZC, to Alpha GCC Holdings for $1 billion (approximately Rs 8,330.1 crore) on November 28, 2023. Commenting on this in the company’s earnings call, Alisha Moopen, Deputy Managing Director, said, “After closing the deal, we plan to distribute 70% to 80% of the upfront consideration of $903 million as dividends to shareholders. This dividend is expected to be within the range of Rs 110-120 per share.”
The remaining portion of the sale will be used for expansion into North India. The company aims to add 1,700 beds to bring the total capacity to 6,600 by FY27.
2. PI Industries:
This agrochemicals company has risen by 5.5% over the past week following its results. Its Q3 net profit increased by 27.5% YoY to Rs 448.6 crore, beating Trendlyne’s Forecaster estimates by 22.9%. This was driven by a favourable product mix and a deferred tax credit of Rs 20.4 crore. Its revenue was up 17.6% YoY, driven by growth in its CSM (custom synthesis business) and pharma segments. Due to the rise in share price, PI Industries features in a screener of companies with prices above their short, medium, and long-term moving averages.
During the quarter, the CSM segment’s revenue (which accounts for around 93% of its total revenue) increased to Rs 1,770.2 crore (up 9.7% YoY). The segment's export revenue also rose 13% YoY, led by volume growth and new product launches. However, the domestic business saw a 6% YoY decline due to the delayed and erratic monsoon.
Meanwhile, the firm’s pharma business revenue climbed to Rs 127.3 crore, accounting for around 7% of total revenue, up from 3% in Q2. PI Industries entered the pharma segment in Q1 through acquisitions in the API (active pharmaceutical ingredients) and CDMO (contract development and manufacturing organisation) spaces. According to Mayank Singhal, Vice-Chairman & Managing Director, “In the coming 4-5 years, we expect 20-25% of revenue to come from the non-agchem space, which includes pharma and non-agchem CSM exports.”
For FY24, the management has maintained its revenue growth guidance of 18-20% YoY. It also plans to add 4-5 products per year. Following the company’s results, Motilal Oswal maintains its ‘Buy’ rating with a target price of 4,350. The brokerage is optimistic about PI Industries’ long-term growth, driven by its product launches and a strong order book.
3. Tata Power:
This electrical utility firm has fallen 7.6% over the past week after reporting tepid earnings. Its revenue increased by 3% YoY to Rs 14,841 crore, while its net profit rose by 2.2% YoY to Rs 1,076 crore. The firm’s Q3 profit was driven by higher realizations in the transmission and distribution business and better capacity utilization at the Mundra thermal power plant. The stock has delivered 45.2% returns in the past quarter and 83.3% in the past year.
The Indian government's recent initiative to launch a rooftop solar scheme for one crore houses is good news for Tata Power’s new solar module manufacturing unit, which has 4.2 GW capacity and is expected to be operational by Q4FY24. IIFL Securities notes that renewable energy capacity additions are likely to pick up, supported by multi-year low solar module prices and the government’s push for rooftop solar installations, in which the firm has a 17% market share.
Clean energy constituted 39% of Tata Power's total installed capacity of 14,453 MW in Q3FY24, and the firm aims to produce around 70% of its capacity from renewable sources by 2030. This is in line with the government's aim to boost renewable power generation.
IIFL Securities predicts that the firm’s debt-to-equity ratio may inch up to 1.5x (currently 1x) due to new capacity additions, and expects its borrowing costs to be competitive at 7.8-8%, given the Tata Group parentage. Morgan Stanley has upgraded Indian power utility companies to ‘Overweight’, expecting the country’s energy security to require a capex of over Rs 4,500 crore in the next decade.
4. Birla Corp:
This cement products manufacturer has risen by 15% following its Q3FY24 earnings announcement, reaching a 52-week high of Rs 1,770 on February 9. In Q3FY24, it reported a net profit of Rs 109.1 crore, as against a loss of Rs 49.9 crore in Q3FY23. It beat Trendlyne Forecaster’s net profit estimate by 4.7%. The firm’s revenue grew by 15% YoY to Rs 2,328.3 crore. It achieved 85% capacity utilisation during the quarter, up from 74% last year.
Birla reported a 13% YoY volume growth due to increased real estate and infrastructure activity. Additionally, the Mukutban plant, launched in Q4FY22, has now reached 60% capacity utilisation, contributing to the overall increase. However, unseasonal rains in Uttar Pradesh, Madhya Pradesh, Rajasthan and Maharashtra affected volumes.
Managing Director and Chief Executive Officer Sandip Ghose says that Mukutban has significantly boosted the company’s profitability, and is expected to increase its capacity going ahead. They are also counting on the plant to give better access to untapped markets in Western India. The company aims to increase its production capacity to 30 mtpa by 2030 from the current 20 mtpa.
EBITDA margin improved by 9.2% points YoY to 16.4%, with EBITDA/tonne rising 132% YoY to Rs 901. The margin improvement was led by better realization and lower operating expenses. Chief Financial Officer Aditya Saraogi says, “We are maintaining our EBITDA per tonne guidance of around Rs 850 for FY24.” Input cost fell by Rs 140/MT, owing to efficient raw material sourcing. The firm also improved its fuel mix by leveraging renewable sources and waste heat recovery systems.
ICICI Direct recommends a ‘Buy’ for Birla Corp, forecasting significant improvements in margins and profitability over FY24-26. The brokerage estimates the firm’s PAT to grow at a 174% CAGR over the same period, driven by EBITDA expansion. Margins are expected to increase by 300 bps by FY26 from FY24 levels. The company appears in a screener for stocks with recommendations or target price upgrades by brokers in the past three months.
5. Zydus Lifesciences:
This pharma company hit its all-time high of Rs 893.8 on Friday, with a 10.3% rise in the past week. This rise was driven by a 26.8% YoY growth in its Q3FY24 net profit, beating Trendlyne’s Forecaster estimate by 14.5%. Its revenue also increased by 3.2% YoY. Additionally, the company announced a share buyback worth Rs 600 crore, representing 0.59% of total shares at Rs 1,005 per share, with the record date set for February 23, 2024. Zydus Lifesciences appears in a screener for stocks with high EPS growth in the past twelve months.
Zydus’s EBITDA margin improved by 408 bps YoY to 24%, led by a better product mix and higher price realization. A reduction in raw material costs further helped the bottom line. The growth was driven by a 16% rise in the Indian formulations business, which constitutes 29% of its total revenue. The European and emerging markets business, contributing 11% to its total revenue, also grew 30.5%.
Zydus acquired UK-based LiqMeds in Q3FY24 for 68 million euros (approx. Rs 690 crore), aiming to boost its oral liquids portfolio in the UK and other international markets. LiqMeds is a major player in the global oral liquid products market, offering a portfolio of 100+ products.
However, US formulation sales, constituting 43% of the top line, declined by 4.2% due to lower-than-expected sales of Revlimid and a planned inventory reduction. The management expects a rebound in US sales in Q4FY24, led by price stabilization and the launch of new products like Zituvio and Metformin IR. Zydus is poised for expansion in the next 3-5 years, with the launch of vaccines and biosimilars for emerging markets including India, and complex generics for the US.
HDFC Securities maintains its ‘Buy’ call on Zydus Lifesciences as they expect steady growth in the US and India to improve margins in FY25-26 due to its R&D assets such as injectables, biosimilars and new chemical entities. With a target price of Rs 920, the stock has a potential upside of 4.3%.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
