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Closing In On All-Time Highs
Yash Upadhyaya
August 22, 2024
Tale of the Tape
Hiya everyone.
Nifty and Sensex gave up some of their morning gains but still ended in the green, up +0.2% each. Midcaps (+0.7%) did well but Smallcaps (+0.2%) underperformed. The advance-decline ratio was in favour of the bulls (3:2). Check out the Stocktwits Sentiment Meter:
Most sectors ended in the green. Metals (+0.7%), PSU Banks (+0.7%) and FMCG (+0.6%) saw the most buying. Energy (-0.6%) stocks were the top loser.
The Zomato-Paytm ticketing deal is FINALLY here. Read our top story below on what it means for both companies.
This metal stock could see a potential +50% upside over the next year. More details below.
Indigo, Kalyan Jewellers India and Paras Defence all saw big movements today. Check out their charts below to find out why.
Adani Power and Ambuja Cement were in focus after reports said the promoter would sell up to a 5% stake in both firms.
IREDA jumped +8% after it said it will consider raising Rs 4,500 cr in a board meeting on August 29. Check out our latest YouTube video for an in-depth analysis of the stock.
Aarti Drugs (+5%) will consider a proposal on August 26, which will be its sixth buyback since 2016! Meanwhile, Transport Corporation of India jumped +12% after saying it will consider its first-ever buyback next week.
Dabur India (+2%) will invest Rs 400 cr to set up a manufacturing unit in Tamil Nadu.
TVS Motor Company (+3%) hit a record high after unveiling a new Jupiter 110-cc scooter for Rs 73,700.
Eris Lifesciences (+2%) saw 98.9 lakh shares (7.27% equity) change hands in a block deal. Also, Alkem Laboratories was in focus after 8.5 lakh shares (0.7%) equity was traded in a big transaction; reports say the promoter was the likely seller.
Here are the closing prints:
Nifty | 24,812 | +0.2% |
Sensex | 81,053 | +0.2% |
Bank Nifty | 50,986 | +0.6% |
Stock
It’s A Deal
Zomato will buy Paytm’s event ticketing biz for Rs 2,048 cr! PS - This has been in the works for a while now, although the final price is higher than reported. Either way, most experts agree that this is a win-win situation. Here’s what you need to know:
Let’s start with Paytm. Vijay Shekhar Sharma gets a sweet influx of cash that will let him either bolster the company’s balance sheet or invest it in cash-back & reward programmes to boost their user base. It also lets Paytm focus on its core business areas, something almost every analyst has been asking for since it ran into trouble earlier this year!
For Zomato, the picture is more complex. It needs a new growth engine, but it’s unclear if ticketing will be a winning bet. FYI - after this deal, Zomato’s live event biz will have ~Rs 700 cr in revenue, which is a drop in the bucket for the company. The thing to watch out for is whether Zomato can scale up the business based on booming entertainment demand, which experts say will grow 15%-20% CAGR in the medium term. Luckily for Zomato investors, Deepinder Goyal is known for making acquisitions work; he bought Blinkit for $569 million in FY23 and it currently has a potential value of $11-13 billion!
The deal is on the pricey side, valued at 6.9x FY24 trailing sales. This is good news for Paytm and okay-ish news for Zomato. Elara Capital believes that if Zomato’s ticketing biz can eventually report double-digit topline growth and 15%-20% EBITDA margins, it should pay off.
Big Picture: Both stocks gave up initial gains partly due to profit-booking and partly because a lot of this news has already been priced in. The real hard work for both companies starts in using this as a building block for future growth. FYI - Jefferies is bullish, hiking Zomato’s target price to Rs 335 p/sh vs Rs 275 p/sh earlier.
Who Do You Think Got A Better Deal? |
Stocktwits Specials
Stocktwits India Momentum Index 🚀
The Stocktwits India Momentum Index was down -0.6% today!
Cochin Shipyard erased most of yesterday’s gains and was the only loser in the top 3 ranked stocks. OFSS saw profit booking near its all-time highs. Hitachi Energy was the worst performing stock; down -3%. On the other hand, Godfrey Phillips is on track to post its best weekly gains since July 2023.
PS - The Stocktwits India Momentum Index highlight the top 10 performing companies based on their weekly returns. Plus, we bring you tons of exclusive content on the featured stocks including SEBI RA trade ideas, latest news & earnings updates, fundamental and technical insights.
Stock
What The Stock!
Shyam Metalics and Energy has been on a roll! The stock has more than doubled in the last 18 months and is up a cool +20% over the last month alone. Has it topped out after the recent rally or is there still more juice left? Here’s what experts say.
For the unaware: the company is a leading metals producer, selling both intermediaries (sponge iron) and finished products (pipes, sheets). Fun fact: Shyam’s tech investment & insistence on backwards integration means it is one of the CHEAPEST producers of ferro alloys in India!
What’s popping? For starters, the company is shifting heavily from commoditised items to creating value-added products. FYI - the company’s topline contribution from higher-margin products is projected to jump from 57% in FY24 to 68% in FY27, which is huge!!!
To do this, it is around halfway through a Rs 10,000-cr capex plan that started in FY22 and will end in FY27. PS - only 25% of it has been done so far, with the majority of capex set to be done between FY25 and FY27. UBS estimates that this could result in an additional EBITDA of Rs 2,600 cr in the next three years, which means its bottomline will grow at a whopping CAGR of 50% over FY24-FY27!
Finally, a huge future positive trigger will be if Shyam is able to sell its battery-grade aluminimum foil to lithium-ion cell makers in India. The company has currently signed multiple MoUs with battery units and products are in the testing phase. If it becomes a key supplier, this will open a major revenue stream. FYI - battery-grade foil sells at Rs 1.5 lakh per tonne vs Rs 35k per tonne for normal aluminum foil.
Big Picture: Careful execution, huge capex investments and a moonshot goal could supercharge Shyam Metallics in a new rally. Key risks include any further delays to bringing new projects & plants online and a global economic downturn (which would upset steel prices). FYI - UBS has a target price of Rs 1,200 p/sh; an insane +50% potential upside from current levels!
What’s your view on the stock? |
Charts
Movers and Shakers
1) Interglobe Aviation was up +4% after getting multiple bullish calls from analysts. They cite strong recent outperformance + tight industry capacity as having kept yields & spreads strong. Recent supply additions have also prompted earnings upgrades. HSBC also believes Indigo’s business class launch will steal market share from Vistara! PS - Jefferies has upgraded it to a buy and sees a +17% upside from current levels.
2) Kalyan Jewellers India soared after 6.6 cr shares (6.4% equity) changed hands in multiple block deals. Reports say the company’s promoter was one of the likely buyers! The promoter for his part has said he plans to further increase his stake from 60.59% to 62.95%. A welcome relief from promoters hitting the exit door in almost every other company!
3) Paras Defence and Space Technologies was locked in a +5% upper circuit after bagging an industrial license from the GOI for making infrared or thermal imaging equipment. PS - the firm also announced that it would meet next week to consider raising funds.
Check out their charts below!
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