1. Uno Minda:
This auto parts manufacturer hit a new 52-week high of Rs 1,065 on Friday after rising 11.9% in the past week. The rise follows the company’s signing of a licensing agreement with the Chinese firm Suzhou Inovance Automotive, to produce EV powertrain components for passenger vehicles (PV) and commercial vehicles (CV) in India. The Chinese firm is a fixed supplier of powertrains and auto components to major PV & CV manufacturers in China.
Group CFO Sunil Bohra said, “This deal could make us the frontrunner in the four-wheeler EV space, just as we have been in the two-wheeler and three-wheeler EV space.” They have indicated plans to strengthen the partnership by transitioning it into a joint venture.
In Q4FY24, Uno Minda reported an operating revenue growth of 30.8% YoY, surpassing Trendlyne’s Forecaster estimates by 4.1%. Its net profit rose by 58.3% YoY to Rs 289 crore, beating estimates by 22.7%. The profit surge was driven by customers pre-purchasing vehicles on big year-end discounts, ahead of the expiration of the FAME II subsidy on 4W electric vehicles.
Uno Minda’s net debt as of Q4 increased by 22.2% YoY to Rs 1,318 crore, due to expansion capex and land purchases in Pune and Hosur for Rs 220 crore. The company plans to invest Rs 850 crore in capex and Rs 350 crore in maintenance capex in FY25. CFO Sunil Bohra said, “In the long-term, the company is poised to grow 1.5 times the industry growth rate, with even higher growth in the near term.”
Axis Direct maintains a ‘Buy’ rating on Uno Minda as its Q4 financials exceeded their estimates on all fronts. The brokerage expects growth momentum to continue over the medium term, driven by positive signals from 2W rural demand, new launches in the PV segment, and a recovery in the export market, which contributed 14% to total revenue in Q4.
2. Suzlon Energy:
This heavy electrical equipment company touched its all-time high of Rs 52.1 on June 4 after Morgan Stanley initiated coverage with an ‘Overweight’ rating and a target price of Rs 58.5, an upside of 17.2%. The brokerage believes that the company is poised to benefit from India's renewable energy transition. This is the highest target in the consensus – the average target from analysts on Suzlon Energy according to Trendlyne’s Forecaster is Rs. 56.
Suzlon Energy has risen by 9.9% over the past week, driven by recent order wins in its wind energy business. Due to the rise in share price, it features in a screener of companies with strong momentum. On May 31, it won an order from Oyster Green Hybrid One to develop an 81.9 MW wind energy project. In May, the company received an order to supply 175 wind turbines, totaling 551.3 MW, for Aditya Birla Group's sites in Rajasthan and Gujarat. Suzlon also won an order to supply 134 wind turbines for a 402 MW project by Juniper Green Energy in Rajasthan.
The company is primarily engaged in the wind turbine generator (WTG) business but also provides end-to-end solutions in wind-solar hybrid power projects. In Q4FY24, Suzlon’s net profit declined 9.2% YoY to Rs 254.1 crore due to higher employee benefits and other expenses. However, revenue was up 29.6% YoY, led by growth in the wind turbine generator segment. The WTG segment (which contributes 62% to the revenue) grew by 37.1% YoY during the quarter.
As of March 31, 2024, Suzlon’s order book stands at 3.3GW, with over 83% of orders from its newly launched 3.xMW S144 series. According to Himanshu Mody, group CFO of Suzlon Energy, “With an order book of 3.3GW, the company has the potential to generate Rs 19,986 crore in revenue over the next two years”. Suzlon’s TTM revenue stands at Rs 6,529.1 crore, up 9.4% YoY.
After a slowdown from April 2016 to March 2023, India's wind energy sector is seeing a recovery in demand, driven by rising evening power needs, a shift towards wind-focused renewable tenders, and higher industrial demand. This presents significant opportunities for domestic players like Suzlon Energy.
3. Jyothy Labs:
This personal products company rose by 8.4% over the past week. It announced its Q4FY24 results on May 15, and missed Trendlyne Forecaster estimates for revenue by 1.6% and net profit by 8.8% due to increase in competitive intensity and a 10% YoY decline in the household insecticides segment.
The company’ net profit improved by 32.4% YoY to Rs 78.2 crore on the back of decline in inventory costs. Revenue growth was mainly driven by an improvement in fabric care segment revenue. The stock shows up in a screener for stocks with annual profit growth higher than sector profit growth.
The company's fabric care segment, which accounts for 43% of sales, grew its revenue by 10% in the quarter by addressing detergent product gaps in its economy and premium ranges. It has secured a 20% market share in Kerala with this strategy, and aims to replicate this effort in West Bengal. The company is promoting Henko, its largest premium detergent brand, and Is introducing Rs 10 low unit packs (LUPs) under the Henko brand.
The company says it is implementing strategic changes to boost its FMCG market share. One initiative was the "moped" model, where salespersons use mopeds to directly service wholesale outlets. This has led to a 6% increase in LUP sales for the Dishwash segment in Q4FY24 and 8.3% in FY24. The overall dishwashing segment saw a revenue rise of 5.9% with EBIT margins rising to 19% from an average of 13-14% in previous quarters.
Sanjay Agarwal, Chief Financial Officer of the company said: ”Commodity prices have been volatile. Our target is to have our EBITDA in the range of 16-17% for the full year. ” He added “We are increasing our advertising spend because we know we have a good product on the liquid side. ” Ad spending (% of sales) by the company has considerably increased from an average of roughly 6.9% of sales between FY21-23 to 8.3% of sales in FY24.
HDFC Securities analysts consider the stock as “Sarva Gunn Sampann” – an all-season winner – and has initiated Jyothy Labs with a “Buy” rating and a target price of Rs 575. The brokerage guides a revenue/EBITDA/PAT CAGR of 12/16/17% over FY25-27, the second highest in its coverage of consumer staple companies.
4. Vedanta:
This aluminium & aluminium products company rose by 3.2% in the last two sessions after the State Bank of India reportedly approved its demerger plan separating its existing businesses into six independent entities. The majority of lenders have agreed, with approval pending from a few. The company’s stock price has increased by 12.2% over the past month, despite the plunge in markets on Tuesday due to the BJP falling short of a single party majority in the Lok Sabha elections. The company features in a screener of stocks outperforming their industries in the last month.
Vedanta had previously approved the demerger of its metals, power, aluminium, and oil and gas businesses in September 2023. The demerger will form six separate listed entities, Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta. The company’s debt will be distributed across the six companies in the ratio of the assets allocated to each. Analysts at Motilal Oswal said, “The demerger is expected to simplify the corporate structure, enhance risk mitigation, and improve transparency and autonomy.”
Earlier, on April 25, the company posted a 27.4% YoY decrease in net profit to Rs 2,275 crore in Q4FY24. It still beat Trendlyne’s Forecaster profit estimates by 13.8% but revenue fell by 6.1% YoY to Rs 34,937 crore, missing estimates by 5.6%. Revenue declined on the back of a reduction in sales of aluminium and zinc due to a fall in production of zinc due to difficulties in mining, as well as lower zinc and lead grades.
Post results, Arun Misra, Executive Director of the company, said, “We continue to see an increase in demand in double digits across our portfolio, especially in domestic markets and in aluminium, where the likely growth may cross 15%. We are also planning to focus on cost optimisation and expect to optimise cost across our portfolio by 10-20%.”
Geojit BNP Paribas has upgraded the stock to a ‘Hold’ rating from ‘Sell’. The brokerage rerates Vedanta on the back of its aluminium and zinc’s cost of production (CoP) falling for the seven and five consecutive quarters, respectively, and an improvement in EBITDA margins. It expects the company’s revenue to grow at a CAGR of 4% over FY25-27.
5. Ashok Leyland:
This commercial vehicles manufacturer rose by 15.2% in the past month and hit an all-time high on Monday after announcing a 12% YoY growth in its May 2024 wholesales to 14,682 units, led by a 14% growth in total domestic medium and heavy commercial vehicles (MHCV).
In Q4FY24, the company’s profit improved by 13.3% YoY to Rs 853.4 crore while revenue grew by 2.9% YoY. It beat Trendlyne Forecaster’s net profit estimate by 25.9%. Revenue growth was marginal due to muted sales in FY24. However, the company’s EBITDA margin expanded 310 bps YoY due to lower raw material costs and softening commodity costs. Speaking about growth, Executive Chairman Dheeraj Hinduja says, “FY24 has been a year of record cost savings for us. Our raw material cost as a percentage of revenue fell by 4.3% YoY. Another factor for profitability was impressive growth in our high-margin business in spare parts, defense and power solutions.”
He added, “Going forward, our objective is to retain our EBITDA margin in the current range (12-16%).” The company is targeting a 35% market share in the medium term in the MHCV segment (currently 31.5%), and a 25% market share in the small commercial vehicles segment (currently 20%). The management is confident about the company’s financial health due to replacement demand and the government's vehicle scrappage policy. It expects replacement demand to get stronger with time, as 70% of vehicles are BS-IV and will eventually get replaced with the latest technology vehicles.
Ashok Leyland is showcasing a lineup of electric vehicle (EV) vehicles in Q4FY24 including buses, tractors and LCVs, and plans to launch 16 new models in FY25. It has invested around Rs 1,500 crore in its arms Switch Mobility (electric buses and vans manufacture) and OHM Global Mobility (electric mobility solutions provider). Switch India has turned EBITDA positive in Q4 and currently has an order book of 1,300 e-buses, to be supplied to Delhi and Bangalore. For FY25, the company has planned an overall capex of Rs 500-700 crore.
Bob Capital Markets retains its ‘Buy’ call on Ashok Leyland and estimates its EBITDA and profit to grow at 12.6% and 14.7% CAGR over FY25-FY26. The brokerage believes the firm will beat industry growth in commercial vehicles and maintain its leadership in buses. The company appears in a screener for stocks with increasing shareholding by foreign investors and/or institutions.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
