1. Indian Renewable Energy Development Agency (IREDA):
This financial institution rose by 7.3% over the past week after its Rs 1,500 crore bond issue was oversubscribed 2.7X. In April this year, the company was granted “Navratna” status by the Department of Public Enterprises (DPE).
IREDA delivered a good result in FY24 – the company’s net profit increased by 44.8% YoY to Rs 1,252.2 crore on the back of falling expenses, while its revenue increased by 42.9% YoY. The stock shows up in a screener for stocks with consistent high returns over five years in Nifty500.
IREDA is India’s largest renewable energy financing NBFC. In FY24, the company’s assets under management (AUM) stood at Rs 58,775 crore. During its recent annual general meeting (AGM), the Chairman and Managing Director PK Das noted that the company's net worth was Rs 8,559 crore, with strong growth. The total loans sanctioned rose by 14.6% YoY to Rs 37,354 crore, and disbursements rose by 15.9% to Rs 25,089 crore in FY24. The management is targeting an AUM of Rs 3.5 lakh crore by FY30 to attain “Maharatna” status.
India’s power demand has been increasing steadily, and is expected to grow at a CAGR of 4.8% in FY25-27 with peak demand touching 277 GW in FY27. Renewable sources currently contribute ~40% (172 GW) of India's installed power generation capacity of 428 GW. Analysts note that the government’s FY30 target of 500 GW in renewable energy power generation needs an investment of over Rs 24 trillion, creating a vast opportunity for IREDA.
ICICI Direct has a “Buy” rating on IREDA with a target price of Rs 250. The brokerage remains positive on long term growth prospects, which it expects will drive long term growth in AUM. The brokerage notes that, given the firm’s focus on financing the renewable energy sector, business growth is expected to remain healthy at ~25-30% CAGR, with market share expected at ~29% in FY25-30.
2. Manappuram Finance:
This non-banking finance company surged to a new 52-week high of Rs 214 on Thursday and rose 7.8% in the past week. This rise came after CLSA reiterated its bullish stance on the firm’s gold loan business, which has seen strong traction since March after the central bank barred IIFL Finance from disbursing gold loans. Manappuram as a result, is benefiting from the acquisition of new customers being turned away by its competitors.
MD and CEO, V.P. Nandakumar says, “Demand for gold loans has surged this year, driven by middle-income groups requiring funds post-pandemic.” He highlights that the average ticket size is around Rs 73,000 and the average life of the loan is three months. The customers are mostly from the upper middle class and lower middle class.
Manappuram has been diversifying into non-gold segments to mitigate the cyclicality of gold loans. This strategy has contributed to a consolidated AUM growth of 19% YoY in FY24. However, net NPA worsened, rising by 40 bps to 1.3% during the same period, primarily due to collection issues in its microfinance business in Punjab and Rajasthan, states that have seen rural distress in the past year.
In April this year, Manappuram’s subsidiary Asirvad Micro Finance got SEBI approval to raise funds through an IPO. The company plans to raise Rs 1,500 crore via a fresh issue of equity shares and has no offer-for-sale component. Nandakumar expects the IPO to open in the next few months.
Axis Securities maintains a ‘Buy’ call on Manappuram Finance as it expects no impact of RBI regulations on its gold loan disbursals. The brokerage expects the company to deliver AUM and net interest income growth at a CAGR of 19% and 17% respectively in FY25-26.
3. PI Industries:
This agrochemicals company rose by 1.2% on Thursday after announcing the acquisition of UK-listed Plant Health Care Plc (PHC) for around £32.8 million (approx. Rs 341.7 crore). The acquisition will be funded from previous QIP proceeds. The transaction is set to be finalised by Q2FY25. PI Industries features in a screener of stocks near their 52-week highs.
PHC is an agriculture company with subsidiaries in the US, Brazil, and several other countries. It is known for its experience in protein/peptide technology within the agricultural biological space. Agricultural biologicals are a form of crop protection made from natural materials. With this acquisition, PI Industries can use PHC’s technology to manufacture biological products in India and strengthen the biologicals portfolio.
PI has seen steady growth in biologicals, with an existing portfolio of eight products and more in the development pipeline. In FY24, revenue from biologicals rose around 29% YoY. During the year, the company’s revenue rose 18.1% YoY to Rs 7,665.8 crore, while net profit was up 36.8% YoY to Rs 1,681.5 crore.
PI’s domestic business was muted due to a delayed and erratic monsoon. However, the IMD and Skymet have forecast normal monsoons for this year, and the management is optimistic about a healthy Q1FY25 performance.
Over the past year, the agrochem firm’s share price has declined by 1%, compared to the industry’s 14.5% growth. FY24 has been a tough year for agrochemical companies as they faced challenges from declining input prices, destocking, and higher China supplies. However, ICICI Securities sees green shoots in the industry. Agrochemical inventory has fallen below normal, and the underlying demand remains steady. US agrochemical companies have been focusing on outsourcing, which benefits Indian specialty chemical companies like PI Industries, as it derives 78% of revenue from exports.
Analysts are bullish on the company considering the growth opportunities. Jefferies believes the acquisition of PHC is attractive based on new product traction, providing PI Industries with an annual revenue potential of $75 million. The brokerage has a ‘Buy’ call with a target price of Rs 4,750 per share. The company is in the PE Buy Zone indicating that its currently trading below its historical PE.
4. LIC Housing Finance:
This housing finance company rose by 7.7% in the past week to hit its all-time high of Rs 809.9 on Friday after the government's announcement of three crore additional houses under Pradhan Mantri Awas Yojana. MD and CEO Tribhuwan Adhikari expects this initiative to create new market opportunities for the firm. The company plans to disburse Rs 75,000 crore in housing loans this year.
In FY24, LIC Housing Finance focused on profitability and is now transitioning towards growth. It reported a 15% YoY increase in individual home loan disbursements in Q4FY24, marking a turnaround from previous declines. In FY24, the firm’s net profit increased by 64.6% YoY to Rs 4,759.2 crore, due to better cost management and reduced NPAs, while revenue rose by 20% to Rs 27,277.8 crore.
The company is aiming for double-digit growth in FY25 by focusing on tech enhancements. It anticipates stable asset quality and expects earnings to improve, driven by increased home loan demand and lower credit costs. Recovery from a Rs 4,000 crore written-off pool bolstered by a positive real estate cycle, is pivotal for future growth. Adhikari says, "We expect NIMs to comfortably remain in the 2.7-2.9% range, with delivery closer to the higher end, thanks to a higher interest rate regime and our operational efficiency."
Sharekhan maintains a 'Buy' rating on the stock with a target price of Rs 850. The brokerage believes the firm will benefit from the real estate sector's growth and rising per capita income. It expects NII and PAT to grow at 5.5% and 5% CAGR respectively over FY25-26.
5. Dr. Reddy's Laboratories:
This pharma company rose by 7.2% in the past week after its Switzerland-based arm, Dr. Reddy’s Laboratories SA, inked an agreement with Haleon to acquire Nicotinell and related brands. The firm will pay £458 million (Rs 4,832 crore) upfront and an additional performance-based cash payment of up to £42 million (Rs 443 crore) in CY25 and CY26. The product portfolio being acquired has an annual sales of approx Rs 2,290 crore.
Dr. Reddy’s Laboratories has been investing in areas like novel molecules, consumer healthcare, and digital therapeutics. This acquisition will enable the company to gain access to a global over-the-counter medicine (OTC) anchor brand, and has the potential to build a global consumer healthcare OTC business.
In FY24, the company’s net profit grew 23.8% YoY to Rs 5,577.9 crore while its revenue grew 12.4% YoY. It also beat Trendlyne Forecaster’s net profit estimate by 2.1%. The growth was primarily driven by increased global generics revenue, especially in North America and emerging markets.
Going forward, the company plans to spend 8.5-9% of FY25 revenues on research and development (R&D), of which 20% will be allocated to biosimilars, 60% to small molecules, and 20% to either API or other initiatives. Speaking about guidance, Chief Executive Officer Erez Israeli says, “We expect EBITDA and ROCE to be around 25% in the long term with double-digit revenue growth.”
Management optimism notwithstanding, KR Choksey downgraded Dr. Reddy's Laboratories to ‘Reduce’ from ‘Hold’ rating as it anticipates an increase in expenses on R&D, marketing, and promotions in FY25 due to key Dr. Reddy products in the US like gRevlimid, going off patent. The brokerage also notes that the stock is trading at higher levels than anticipated. However, the stock is in the PE Buy Zone, which means that its trading below its historical averages The company appears in a screener for stocks with increasing shareholding by mutual funds in the past month.
Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.
