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- Range Bound Action Continues
Range Bound Action Continues
Yash Upadhyaya
August 14, 2024
Tale of the Tape
Hiya everyone.
Nifty and Sensex (+0.2%) ended little changed after a mostly boring range-bound trading session. Smallcaps and Micaps took a hit, down -0.6% each. The advance-decline ratio was in favour of the bears (3:2).
Except IT (+1.6%), all other sectors ended in the red. Metals (-1.3%) and Pharma (-0.8%) saw the most selling pressure.
This recycling stock could see +20% potential gains in the next year. Read our top story below to find out more.
Piramal Enterprises (-10%) was the top NSE 500 loser after a disappointing Q1 show. Meanwhile, Hero MotoCorp fell after its Q1 results missed Street estimates. More details below.
Divi’s Labs, NMDC and HEG all saw big movements today. Check out their charts below to find out more.
Results reaction. Mazagon Dock Shipbuilders was up +3% after its Q1 profit more than DOUBLED and beat estimates. SJVN was also up +4% on a solid Q1 show.
Vedanta will sell up to 3.3% of Hindustan Zinc via OFS vs the 2.6% earlier announced.
Suzlon snapped its 5-day gaining streak; the stock was locked in a 5% lower circuit.
Sun Pharma was in focus after acquiring a minority stake in a US-firm for $15 million.
Power Mech Projects (+5%) will consider a bonus issue of shares on August 22.
Here are the closing prints:
Nifty | 24,144 | FLAT |
Sensex | 79,106 | +0.2% |
Bank Nifty | 49,727 | -0.2% |
Earnings
Earnings Roundup
Piramal Enterprises (-10%) was the top NSE 500 loser after posting disappointing Q1 results. The NBFCs retail book was up +43 YoY, which helped boost total assets under management to Rs 70,576 cr. But almost everything else was weak. Net interest margins dropped to 6.7% vs 7.3% last year. Asset quality also took a hit, with ‘Stage 3’ provisions coming in at Rs 279 cr vs Rs 230 cr last quarter.
Management also said disbursements were hurt in Q1 due to “regulatory changes around fair practices”. PS - the bottomline numbers look worse than they actually are because it had a one-off in Q1FY24 that gave it a high base.
Overall a meh Q1, with even more uncertainty on the horizon as Piramal looks to merge its housing finance arm with itself. FYI - CLSA has downgraded the stock, citing retail segment stress, which could put pressure on growth & credit costs. The brokerage has a new target price of Rs 860 p/sh; a further -3% downside from current levels.
Here is its Q1 report card:
Net Interest Income: Rs 807 cr; +18% YoY
PAT: Rs 181 cr; -64% YoY (vs Est: Rs 224 cr)
Gross NPA: 2.7% vs 2.4% QoQ
Net NPA: 1.1% vs 0.8% QoQ
Piramal Enterprises is -5% YTD.
What’s your view on the stock? |
Hero MotoCorp (-3%) Q1 results missed Street estimates. Volumes were up +13% YoY on the back of strong sales in the entry-level segment aided by a revival in rural demand. The firm also crossed the Rs 10k cr topline mark for the first-time ever and also reported its highest-ever quarterly PAT.
So if the results were decent, why did the stock drop? For starters, its average selling price was down -3% QoQ. Experts believe this means the company likely depended on discounts to keep volumes up. The management also said it saw a margin hit due to its EV biz. This made sure operating margins & the bottomline missed analyst expectations. There’s nothing wrong with higher discounts in a quarter where heat waves + general elections dampened sales. But the worry is that this could be a sign of things to come!
Experts are divided over Hero’s future. Goldman sees a -19% downside, citing risks to future volume growth. Jefferies on the other hand sees a +11% upside, pointing to a strong product pipeline with several new EV launches.
Here is its Q1 report card:
Revenue: Rs 10,144 cr; +16% YoY (vs Est: Rs 10,565 cr)
EBITDA: Rs 1,460 cr; +21% YoY (vs Est: Rs 1,576 cr)
EBITDA Margin: 14.4% vs 13.8% last year (Vs Est: 14.8%)
PAT: Rs 1,123 cr; +36% YoY (vs Est: Rs 1,201 cr)
Hero MotoCorp is +23% YTD.
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Stock
Pullin’ In The Dough
Gravita India has been KILLING it!! The stock has more than +2x in the last year, easily beating the broader markets. So what the hell is going on and is it too late to get in? Let’s take a look.
For the unaware: the company is a key player in India’s organised recycling sector. Most of its biz comes from recycling lead (~88% of FY24 revenue), followed by quickly growing aluminum & plastics segments. FYI - this industry is mostly dominated by unorganised players, who have a 60% market share, but that is set to change.
What’s popping? For starters, a major positive trigger is stricter implementation of India’s battery waste management rules. FYI - experts say that automakers will likely recycle 90% of their batteries by FY26 vs just 50% in FY24. This will be HUGE for Gravita, which will take a chunk of that business. If the GOI accepts GST tweaks on the buying of scrap, it could move the industry towards formalisation, which is a win for Gravita.
There are similar tailwinds for the company’s other segments. The GOI’s plastic waste management rules should boost demand in that vertical. For the aluminum segment, FY23-FY24 was rough due to metal price fluctuations. But analysts say that Gravita should be able to hedge future volatility better when a new aluminum alloy derivative contract is launched on MCX shortly!
Finally, to take advantage of all of this, Gravita is investing like crazy. It has planned capex of Rs 600 cr, out of which Rs 400 cr will go to existing segments and another Rs 200 cr to foray into new sectors like lithium ion, steel and paper. All of this will more than DOUBLE its capacity over the next three years.
TL;DR: Gravita is seeing a bunch of regulatory tailwinds across the board. It’s also planning major capex expansion to keep up with projected demand. FYI - Motilal Oswal has a target price of Rs 2,350 p/sh; +20% potential upside on top of today’s +9% rally.
What’s your view on the stock? |
Charts
Chartbusters
Here are three companies that saw big movements today!
1) Divi's Laboratories was the top Nifty loser. Experts said the largest drug in its contract manufacturing portfolio may see increased competition. ICYMI - Novartis lost its legal bid yesterday to block generic drug competition for its heart failure drug Entresto. Divi’s makes Entresto for Novartis so this is a big negative trigger. PS - Kotak expects a 10% hit to Divi’s FY27 earnings, which is when the patent ends.
2) NMDC cracked -6% intraday after the Supreme Court allowed states to collect retrospective taxes on mining activities! Whew. The SC said that all states have the power to levy and renew demand for taxes but the cut-off date will be April 2005.
3) HEG slumped after posting awful Q1 results. Its net profit fell -84% YoY, while its topline slipped -15% YoY on the back of weak demand. Its margins crashed to 6.7% vs 21% on the back of higher expenses as well FYI - the company also declared a stock split in the ratio of 1:5.
Check out their charts below:
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