1. Hindalco Industries:

This aluminum products manufacturer has gained 4% over the past week, driven by a surge in aluminum prices. The increase follows China’s proposal to reduce or eliminate export tax rebates on commodities like copper and aluminum starting December 1. This announcement pushed London Metal Exchange (LME) aluminum prices up by 8% to $2,730 per tonne on November 18.

The Chinese decision seeks to address the oversupply of Chinese aluminum in global markets, a long-standing issue that has caused trade tensions with the US and Europe. Analysts believe it will reduce China’s exports, tighten global supply, and boost prices, benefiting Indian aluminum companies like Hindalco, Vedanta, and National Aluminium Company (NALCO).

Hindalco posted a 78% YoY increase in net profit to Rs 3,909 crore in Q2FY25, supported by lower power, fuel, and finance costs. Revenue rose 8.5% YoY to Rs 59,278 crore, driven by growth in Novelis, and the upstream, downstream aluminum, and copper segments. Novelis, Hindalco’s US-based subsidiary, reported Q2FY25 revenue of $4.3 billion, with EBITDA at $462 million (-5% YoY). The EBITDA decline was attributed to rising aluminum scrap prices and a loss of $25 million from flood damage at its Sierre, Switzerland plant.

Hindalco is focusing on Indian upstream projects, including aluminum and copper smelters and an alumina refinery, with a total capex of $4-5 billion over the next 3 to 3.5 years. MD Satish Pai said, "The company will fund this capex through a combination of internal cash and debt, raising $1-1.5 billion over three years. Our capex guidance for this year stands at Rs 6,000 crore, and for next year, we expect it to be around Rs 8,000 crore."

Post results, Motilal Oswal maintains its ‘Buy’ rating on Hindalco with a target price of Rs 780, indicating a potential upside of 19.6%. The brokerage believes that the ongoing capex in Novelis is expected to position Hindalco as a global leader in the beverage cans and automotive flat rolled products (FRP) segments. However, the cost of production in the aluminum business may rise due to higher coal e-auction premiums and increasing scrap prices, potentially impacting margins in the short term.

2. PI Industries:

This agrochemicals company has declined by 3.5% over the past week following the announcement of its Q2FY25 earnings on November 13. PI Industries' revenue grew by 4.9% to Rs 2,221 crore during the quarter, helped by an improvement in the custom synthesis and manufacturing (CSM) segment. However, revenue missed Forecaster estimates by 3.5%. Meanwhile, net profit grew by 5.8% YoY to Rs 508.2 crore, and EBITDA margins were up 220 bps YoY to 28.3%, led by a favourable product mix.

The company’s domestic and pharma businesses continued to witness subdued demand during the quarter. The management highlighted that delayed and erratic rainfall and pricing pressures on inventories weighed on Kharif seed demand and market sentiment. The pharma business was impacted due to the slow offtake of some of its products. However, the company expects volumes to pick up in H2 and targets revenue of Rs 250-270 crore from the pharma business in FY25. PI Industries’ export segment (which contributes over 78% to the revenue) witnessed healthy growth, with its revenue increasing by 8% YoY during the quarter.

Going forward, the company expects lower, single-digit (~7-9%) revenue growth for FY25 compared to its earlier guidance of around 15%. Speaking on this, Mayank Singhal, the Managing Director of the company, said, “The global crop protection industry faces challenges due to volatility in agricultural markets, fluctuating commodity prices, destocking trends, pricing pressures, rising inflation, and delayed purchase decisions. Considering the current global industry scenario, we have re-aligned our overall outlook.”

Following the company’s results, Motilal Oswal maintains its ‘Buy’ rating on PI Industries with a target price of Rs 5,200. The brokerage has a positive outlook on the company, driven by consistent growth momentum in the CSM business, product launches in the domestic market (six to seven new launches in FY25), and ramping up of the pharma API and CDMO segments.

3. Britannia Industries:

This packaged foods company declined by over 2% on 21st November as the Food Safety and Standards Authority of India (FSSAI) issued a notice to the company regarding the use of a preservative in a batch of one of its products and prohibited its sale. 

The company had announced its Q2FY25 result on 11th November. Its net profit declined by 9.5% YoY on the back of rise in raw material and employee expenses, while its revenue rose 5.1% YoY. The company missed the Trendlyne Forecaster estimates for net profit by 11.6% and revenue by 1.6%. It appears in a screener of stocks which are categorised as Expensive Performers  according to DVM scores.

Q2FY25 was a lacklustre quarter for the company due to weak demand and high food inflation numbers, specially for items like cereals (6.9%), vegetables (42.2%), and refined edible oils (35.7%). The company’s rural market however showed mid to high single digit revenue growth, but the urban market including modern trade and e-commerce delivered slower growth as compared to previous quarters. The FMCG market slowdown was significant in urban metros – it contributed 75% of the overall sector slowdown. The FMCG sector grew by just 4.1% in volume during the September quarter, down from 7.2% during the same period last year. Heavy monsoon rains worsened the slowdown, especially for out-of-home consumption. 

Varun Berry, vice chairman and managing director of the company, highlighted the company's plans to implement a 4-5% price hike in select SKUs over the next two quarters to combat raw material cost pressures. On price hikes Berry added, “We are very vigilant about competitive pricing actions because we understand that as market leaders, we need to take the lead. However, we do not want to be uncompetitive, and that is something we are keeping an eye on.” He also noted that Britannia has seen a rise in rural distribution where its number of distributors are now over 30,000 and its focus states are performing better. The company has an estimated 33% market share in India's organised biscuits market.. 

KR Choksey has retained an ‘Accumulate’ rating on Britannia with a target price of Rs 5,601. The brokerage has lowered its FY25 and FY26 EPS estimates by 11.5% and 6.1%, respectively, due to higher-than-expected raw material and employee cost, weaker-than-expected Q2FY25 and heightened competition. However, it also highlights the company’s cost optimization and growth in emerging channels. It expects Revenue, EBITDA, Adj. PAT to grow at CAGR 6.2%, 8.4%, 9.3%, respectively, over FY25-26.

4. Indraprastha Gas Ltd (IGL):

This gas distribution company's shares fell by 23% this week following the government's announcement of a 20% reduction in APM (Administered Price Mechanism) gas allocation. APM is a system designed to regulate prices of essential commodities like petroleum and natural gas in India. The latest reduction, effective November 16, 2024, follows an earlier 21% cut in allocation implemented on October 16.

GAIL, the nodal agency for domestic gas distribution, has curtailed IGL's supply, which directly impacts its operations in retailing CNG for vehicles and piped cooking gas for households in Delhi and nearby cities. 

Company Secretary and Compliance Officer Vivek Sahay said, “GAIL has further reduced IGL's gas supply and this reduction is expected to negatively impact the company's profitability." Domestic gas, priced at a government-regulated $6.5 per MMBtu, is significantly cheaper than imported liquefied natural gas (LNG). As of Q1FY25, the raw material composition for IGL consisted of 62% APM gas and 38% RLNG. The reduced allocation forces IGL to rely more on costly imported LNG, driving up input costs. With gas costs forming a substantial part of CNG pricing, this shift is likely to compress IGL's profit margins.

Looking ahead, the management says that it is focused on balancing supply costs and sustaining profitability. To address the challenge of reduced APM gas allocation which is expected to negatively impact profitability, the company is pursuing long-term contracts to procure gas at prices closer to APM rates. 

Price hikes for CNG and cooking gas are also expected in the near future. If successful, this approach could help restore margins to previous levels and mitigate the adverse effects of reduced domestic gas supply.

Trendlyne classifies this stock as a value stock, under radar. Macquarie has upgraded IGL from 'Neutral' to 'Outperform'. However, they have reduced the price target from Rs 480 to Rs 400, which implies a potential upside of 27.9%.

5. Century Plyboards (India):

This plyboard manufacturer fell by 22.4% over the past month and 6.1% on November 13 after announcing its Q2FY25 results. Its net profit missed Forecaster estimates by 41.9% as it declined 58.7% YoY to Rs 40 crore in Q2FY25. However, its revenue increased 18.7% YoY to Rs 1,183.6 crore, driven by strong volume growth in the plywood and Medium Density Fibre Board (MDF) segments during the quarter.

The sharp drop in the net profit was due to a 25.8% YoY surge in total expenditure, driven by higher raw material costs, especially timber prices which have been rising due to shortages in South India. Additional drivers included a Rs 13 crore forex loss from imported machinery for a new panel plant and increased marketing expenses in the Laminates segment to regain market share and support the new Andhra Pradesh facility.

During the quarter, the Plywood and Allied Products segment grew 20.9% YoY to Rs 665.2 crore, accounting for 54.5% of the total revenue. Commenting on this segment Sanjay Agarwal, MD and CEO of the company said, “We have revised our guidelines for H2 at 12% plus sales growth and EBITDA margins between 12% and 14%”. The company had earlier given a sales guidance of 10% for FY25.

The management also expects over 10% margins in the MDF segment, which grew 36.4% YoY to Rs 268.4 crore contributing 23.9% of the total revenue, this rise was supported by the new facility in Andhra Pradesh. Agarwal also mentioned that the company aims to achieve market share between 13% to 14% from 8% currently.

Following the results, BOB Capital Markets maintained a ‘Hold’ rating on Century Plyboards with a target price of Rs 725. The brokerage anticipates the company’s EPS to grow at a 14.8% CAGR over FY25-27, with expected CAGRs of 17.6% for revenue and 34.3% for EBITDA during the same period.
 

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