It's All About Earnings!

Author

Yash Upadhyaya
May 08, 2024

Tale of the Tape 

Howdy folks!

Nifty and Sensex ended flat in a mostly boring range-bound trading session. Midcaps (+0.8%) and Smallcaps (+0.5%) had a solid day though. The advance-decline ratio was in favour of the bulls (3:2).

Most sectors ended in the green. Oil & Gas (+1.7%), Auto (+1.6%) and Metals (+1.5%) were the top winners. Banks (-0.5%) and IT (-0.4%) saw some selling pressure.

Dr Reddy’s Laboratories (-3%) was the top Nifty loser after experts raised concerns over its long-term outlook. Hero MotoCorp (+2%) gained on a strong Q4 show. More details below.

Aadhaar Housing Finance’s Rs 3,000-cr IPO opened today. Check out our analysis below to help you decide whether to invest.

Paytm was locked in a -5% lower circuit for a third straight day. Reports suggest that a key lending partner invoked loan guarantees over customer defaults.

Results reaction. Bharat Forge surged +16% after a strong Q4 show and guiding for a great FY25. Meanwhile, Voltas fell -5% after its Q4 margins slumped.

REC rebounded +5% after it clarified that GOI-backed loans don’t fall under the ambit of the new RBI draft rules.

Vodafone Idea (+3%) gained after brokerage Citi’s bull case for the stock projected a +100% upside.

Here are the closing prints: 

Nifty

22,303

FLAT

Sensex

73,466

-0.1%

Bank Nifty

48,021

-0.6%

Earnings
Earnings Roundup

Dr Reddy’s (-3%) Q4 results missed Street estimates. The company’s US sales were down -3% QoQ, hurt by increased pricing pressure. Higher expenses also restricted margins & the bottomline from hitting analyst projections. FYI - even a final dividend of Rs 40 p/sh for FY24 couldn’t perk up investor sentiment, with the stock ending up as the top Nifty loser today. 🤕

Here are its stats:

  • Revenue: Rs 7,083 cr; +12% YoY (vs Est: Rs 7,347 cr)

  • EBITDA: Rs 1,872 cr; +15% YoY (vs Est: Rs 2,056 cr)

  • EBITDA Margin: 26.4% vs 25.9% (vs Est: 28%)

  • PAT: Rs 1,307 cr; +36% YoY (vs Est: Rs 1,324 cr) 

Big picture: The Q4 numbers were okay enough, even if they came in under expectations. So why are investors nervous? Firstly, Dr Reddy’s depends HEAVILY on its generic cancer drug gRevlimid. The patent for that expires in 2026, which means Dr Reddy’s will have to build its US drug pipeline before that. On top of this, margins will continue to be under pressure in FY25. If the market can’t see multiple strong growth triggers, the stock may suffer, say analysts. 👎

Dr Reddy’s is +24% over the last year.

Hero MotoCorp’s (+3%) Q4 results were mostly inline with Street estimates. A double-digit bump in two-wheeler sales helped boost the topline. Softening commodity costs + price hikes carried out in Q3 aided operating margins & profitability. FYI - the company also declared a final dividend of Rs 40 p/sh for FY24!

Here is its Q4 report card:

  • Revenue: Rs 9,519 cr; +15% YoY (vs Est: 9,417 cr)

  • EBITDA: Rs 1,359 cr; +25% YoY (vs Est: Rs 1,362 cr)

  • EBITDA Margin: 14.3% vs 13% (vs Est: 14.4%)

  • PAT: Rs 1,016 cr; +18% YoY (vs Est: Rs 1,066 cr)

Big Picture: In its earnings release, the management painted a bullish future outlook, noting that future market gains would come on launches in the “premium and 125-cc segment”. They also noted that Hero would boost its scooter portfolio with Xoom 125-cc & 160-cc in H1FY25. Finally, the company also hopes to make “big strides” in EV through new product launches.

Hero MotoCorp is +77% over the last year.

Specials

5 Stocks To Buy In May - By SEBI RAs

Markets are near all-time highs but is it a good time to invest now? In this video, we cover 5 investment ideas by SEBI RAs which can deliver healthy returns even from current levels.

IPO

Aadhar Housing Finance IPO Review

Aadhar Housing Finance IPO opened for subscription today! The price band is fixed at Rs 300-315 p/sh. The company plans to raise Rs 3,000 cr from the IPO. 💸

Founded in 1990, the company is a leading housing loan company for low-income customers. It generally caters to individuals seeking small ticket loans of <Rs 15 lakh FYI - it is present across 20 states and UTs, the most extensive coverage among its peers. Disbursements during 9MFY24 stood at Rs 4,904 crore (+24% YoY). Fun fact: during 9MFY24, it also had the highest AUM (assets under management) and net worth among its peers. Asset quality (GNPA) is also superior compared to most players at just 1.3%. 📊

FYI - the IPO’s fresh issue of shares comes in at Rs 1,000 cr, the rest being under the ‘Offer for Sale’ route. Most of the proceeds will be used to meet future regulatory capital requirements. ✅

9MFY24 snapshot:

  • Net interest income: Rs 1,170 cr; +30% YoY

  • PAT: Rs 548 cr; +36% YoY

  • Net Interest margin: 9% vs 8% 

Big Picture: While things look decent for Aadhaar, the same can’t be said for its overall sector. The low-income housing finance industry grew at a mere 3% CAGR from FY18-FY23. It’s unclear how much of a growth runway the company really has. The GOI’s push for affordable housing has also seen limited success. FWIW - the IPO is reasonably priced and current grey market data suggests it may list at a decent 22% premium! 🤑

Are you applying for the IPO?

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Community Star Of The Month

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Here are a few investment & trading ideas shared by him on Stocktwits that you must check out: 😎

Raghavendra Dathe is a full-time trader and began his market journey in 2016. He specializes in mostly swing trading and 80% of his trades are in the cash segment. Raghavendra is now a full-time trader-mentor and has trained over 10k students so far. Follow him for more awesome trading insights like these. 

Disclaimer: Raghavendra Dathe is not a SEBI registered advisor and you should not construe any information discussed herein to constitute investment advice. Consult your financial advisor prior to making any actual investment or trading decisions.

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