Category: Personal Finance

Strong Quarterly numbers

Sharekhan expects another quarter of strong y-o-y earnings growth (barring few sectors like automobiles) on the normalised base of last year, supported by an improvement in economic activities (core sector growth of 9.9%/11.6% y-o-y in July/ August) as COVID-19 cases see a significant decline and a sharp pick up in vaccinations.

“The only caveat is the cost push pressure (a sharp rise in commodity prices and elevated freight costs) which could impact margins,” the brokerage has said.

Slightly slower growth in pharma

The Growth is expected to be slow due to pressures in the US business on account of a lack of new product approvals and higher competitive pressures.

“The growth in the India business is expected to be strong. Further, a high base in Q2FY21 and increasing cost pressures are expected to slow down the earnings growth to 4.6% yoy for Q2FY22,” the brokerage has said.

“Factors such as improving growth prospects in the US, expected strong growth in the IPM, emerging opportunities in the API space and strong capabilities developed by the Indian companies leading to a shift in preference towards complex generics / biosimilars would drive the growth going ahead,” Sharekhan has added.

Pharmaceutical companies’ growth is expected to moderate in Q2FY2022 after a series of quarters with a double-digit growth.

13 Pharma stocks among Sharekhan’s top stock picks

The brokerage has suggested 13 pharma stocks buys from its latest Q2FY2022 Results Preview.

Among the stocks to buy from the pharma space include names like Aurobindo, Cadila, Lupin, Dr Reddy’s, Sun Pharma, Biocon, Gland Pharma, Laurus Labs, Solara Active Pharma Science, Abbott India, Caplin Point Laboratories and Metropolis Healthcare.

Disclaimer

The above stocks are picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article

1. Gita Renewable Energy:

This company works to generate power using renewable sources including water, solar and hydro. After its listing way back in 2015, the company has been incurring losses and for the first time turned profitable in Q4 fy 21, which also helped the company in soaring in share price. Interestingly, the stock’s 1-year return is at a staggering 3738%. This is an increase from a share price of over Rs. 5 as on October 13, 2020 to currently over Rs. 211 apiece on the NSE.

2. JSW Energy:

This company is the private sector power generating entity that believes in efficient utilization of all resources. The company has been making endeavours and harnessing the power of sun. The company currently generate 4,559 MW, out of which 3158 MW is thermal power,1391 MW is hydropower and 10 MW solar power.

Over the 1-year period, the stock of this company has surged over 500 percent from a price of Rs. 58.65 to Rs. 379.85 as the last traded price.

3. Waaree Renewable Technologies:

Waaree is both a Global leading manufacturer of solar PV modules and a provider of solar energy solutions. Owning the Largest solar panel module manufacturing facility in India of 2 GW, Waaree is now the largest solar Module manufacturer in India.

The company to its credit has three rooftop 400-800 KWp (kilowatt peak) installations in Karnataka, Maharashtra and Haryana. So, it is more of a service provider than a power generator.

This company also during the 1-year time has made record gains of over 900 percent from a price of Rs. 18 on October 14, 2020 to currently over Rs. 185 per share.

4. Borosil Renewables:

The solar glass manufacturing company, established in the year 2010, has also made record gains during the last one year of 421 percent. The country’s huge solar glass requirement on a daily basis is met through imports from China and Malaysia. The company is the only solar glass manufacturing company meeting a huge chunk of the overall demand.

5. Websol Energy System:

This stock also gained a good 345% in the last one year to currently priced at Rs. 86 from levels of Rs. 19 a year ago.

Websol Energy System Limited is a leading manufacturer of photovoltaic crystalline solar cells and modules in India. With a state-of-the-art integrated production facility at Falta SEZ, Sector II, Falta, West Bengal, Websol has steadfastly delivered an advanced and excellent products since 1994.

GoodReturns.in

Setting a near 30% upside on the stock

Emkay Global sees a near 30% upside potential on the stock of Ramkrishna Forgings from the current levels to a target price of Rs 1,530 and that too in 1-year’s time.

“Ramkrishna Forging delivered 26% EBITDA beat versus our Q2 forecasts, driven by a 10% revenue beat and 300bps EBITDA margin beat. Revenue surprise was supported by higher-than-expected sales in industrials, while margin beat was driven by inventory gains. ROE based on H1 annualized profits expanded to a healthy 16%,” the brokerage has said. Order bookings according to Emkay Global remained consistent from auto and industrial customers in India and overseas markets.

“Recent orders could add incremental revenues of up to Rs5bn in FY23E/24E, in our view. Beginning the execution of some orders in FY22 can provide an upside risk to our FY22 volume estimates by 5%,” the brokerage has said.

Strong quarter

According to Emkay Global revenue grew 129% yoy to Rs5.8bn, above our estimate of Rs 5.3 billion, aided by higher-than-expected revenues in the Industrials segment. Domestic revenue grew 115% to Rs 2.9 billion, led by a 70% volume surge. In comparison, export revenue grew 152% to Rs 2.9 billion, led by a 100% volume jump. EBITDA margin expanded by 600 basis points yoy to 24%, (Consensus est.: 21%) above estimates, led by inventory gains. Consequently, net profits increased from Rs 21 million in Q2FY21 to Rs 0.5 billion in Q2FY22, above the estimate of Rs 0.4 billion,” the brokerage has said.

Retain buy with a price target of Rs 1,530

Emkay Global has retained a buy on the stock of Ramkrishna Forging. “With a DCF-based Dec’22 TP of Rs1,530, implying a forward EV/EBITDA of 9x. Operating leverage, B/S deleveraging, diversification and continued order wins/flows are likely to put on Ramkrishna Forging on a sustainable path of profitability. ROE is likely to rise from a low of 3% in FY21 to 23% in FY24E, driven by better margins and asset turnover,” the brokerage has said.

According to Emkay Global the key risks include delay in auto sector/macro recovery, client concentration risk and adverse currency.

Disclaimer

The above stocks are picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

A study conducted by the portal BrokerChoose’s annual crypto proliferation index reveals that at over 10 crore, India has the largest number of crypto owners in the world followed by the US and Russia.

As a percentage of the population, India has the fifth-highest rate of crypto owners at 7.3%. This index is topped by Ukraine at 12.73% of the population, followed by Russia at 11.91%, Kenya at 8.52% and the US at 8.31%.

The study also evaluated internet searches in various countries to assess the interest in cryptocurrencies.

In the past twelve months, India had the second-highest number (nearly 36 lakh) of total crypto searches, while the US saw the highest number of crypto searches at 69 lakh.

In fact, India ranked second out of 154 countries on the 2021 Global Crypto Adoption Index by Chainalysis in August this year.

India’s market grew 641% over the past year, the report showed, using a metric that estimates the total cryptocurrency received by a country.

“Large institutional-sized transfers above $10 million worth of cryptocurrency represent 42 per cent of transactions sent from India-based addresses,” said the report, adding that the numbers suggest that India’s cryptocurrency investors are part of larger, more sophisticated organisations.

Point to note: The world’s biggest cryptocurrency, bitcoin, has already gained more than 50% since the start of the year. The one-year gain stands at around 400%, which is promoting more and more Indians to opt for crypto exchanges.

A survey conducted by consulting firm Kantar shows that 19% of urban Indians intend to invest in virtual tokens in the next six months. And when it comes to crypto ownership, Bitcoin rules the roost with a preference of 75 per cent, followed by Ethereum at 40 percent, Binance coin at 23 per cent, and XRP at 18 per cent.

One major attraction is the chance to earn high profits by investing in small amounts. WazirX allows investments into bitcoin with as little as Rs100-500.

Indians who own cryptocurrency are mostly in the age bracket of 21 to 35 and live in metro cities. The owners have a “higher risk appetite”, the survey said, as they are preferring crypto, mutual fund over the fixed deposits and life insurance.

So a spurt in the popularity of crypto exchanges and platforms in recent months like CoinSwitch Kuber (CSK), WazirX, CoinDCX, ZebPay, Unocoin and BuyUcoin etc is not surprising.

Crypto exchange Zerodha has over seven million users against 11 million at CoinSwitch Kuber. There are 8.3 million at WazirX.

Unocoin has even launched deposits via UPI wallets in the Indian currency for a faster top-up to buy and sell Bitcoins and other cryptocurrencies on the platform despite the uncertainty among the prospective users regarding the usage of cryptocurrency in comparison to real money.

Last week, CoinSwitch Kuber raised over $260 million in Series C funding round from a clutch of investors, valuing the company at $1.9 billion.

A survey conducted by consulting firm Kantar shows that 19% of urban Indians intend to invest in virtual tokens in the next six months. And when it comes to crypto ownership, Bitcoin rules the roost with a preference of 75 per cent, followed by Ethereum at 40 per cent, Binance coin at 23 per cent, and XRP at 18 per cent.

Indian start-ups in the crypto space have received 73% more funding in the first six months of calendar 2021 compared to the whole of 2020, shows data from Tracxn. Another NASSCOM report titled ‘Crypto Industry in India’, said that more than 60% of states in India are emerging as crypto tech adopters, with the industry set to reach 241 million dollars by 2030 in India.

But cryptocurrencies are yet to be accepted as legal tender and lack legal framework and regulatory norms in the country.

The ball is currently in the court of the finance ministry and the Reserve Bank of India (RBI).

A cryptocurrency bill is expected in the winter session. The finance ministry has also reportedly formed a new committee to find out if income made by crypto-trading could be taxed.
Meanwhile, RBI is also looking to launch its first official digital currency as a regulated “central bank digital currency (CBDC)” by the end of 2021. Much of the scepticism stems from the fact that a worldwide boom in cryptocurrency has bred the ground for fake trading platforms.

But with larger investors warming to crypto and other digital assets, the total amount of funding for global blockchain companies hit a record $6.586 billion in the September quarter, almost double of that raised in 2020, according to market intelligence platform Blockdata.

On Monday, cryptocurrency analytics firm Elliptic raised $60 million from investors including SoftBank and Wells Fargo Strategic Capital.

The company tracks the movement of cryptocurrencies on blockchain to help financial crime compliance.

Earlier in May, a Brazilian money management firm focused on cryptocurrencies raised about $26 million from investors including SoftBank Group Corp and in July the SoftBank Latin America fund invested $200 million in the Series B funding of 2TM Group, the digital asset group that owns cryptocurrency exchange Mercado Bitcoin.

1. Waa Solar:

Part of the Madhav Group, Waa Solar is a Gujarat based entity. The company is a pan India conglomerate working in the sectors such as Renewable Energy, Infrastructure and real estates. The Company has entered power purchase agreement with the Airport Authority of India to develop Solar Power Plant at Bhopal Airport.

The company is a small cap scrip that in today’s trade has hit an upper circuit limit of 41.65 with gains of over 9 percent. The stock commands a market cap of Rs. 55 crore.

2. Synergy Green Industries:

This is again a small cap scrip with a market cap of Rs. 142 crore .Formerly know as Shantaram Machineries Pvt. Ltd., Kolhapur) The organization’s areas of activity include Machining, Shot Blasting

Painting,Quality Inspection and Packing and Dispatch.

The company is a state of the art world class foundry Installed with India’s largest automated fast loop moulding line for large castings. The company is part of the Shirgaokar Group.

The company’last trading price was Rs. 155.90 per share on the NSE.

3. Websol Energy System:

Like other players in the company, the stock of Websol also gained traction in today’s trade and hit a fresh 52-week high price of Rs. 87.95.

The company is a leading manufacturer of photovoltaic monocrystalline solar cells and modules in India. The company has its state of the art facility in West Bengal. The companies’ photovoltaic modules are used by several domestic, commercial as well as industrial applications.

4. Sterling and Wilson Solar:

The conglomerate firm RIL has acquired 40% stake in Shapoori Pallonji owned Sterling and Wilson Solar Ltd (SWSL) for Rs 2,845 crore.

The EPC powerhouse, Sterling and Wilson, commenced its operations in 1970s with a few large-scale projects in the Middle East, further venturing into the Asian subcontinent and various other countries.

The Solar EPC Division of Sterling and Wilson Private Limited, Sterling and Wilson Solar Limited commenced operations in 2011 and was subsequently demerged in 2017. This division was formed to tap into the growing renewable energy market.

Ever since the stake purchase by RIL, the stock has been gaining ground and last closed at Rs. 469.5 per share.

5. Ujaas Energy:

Started operations in the year 1979, the company based out of Indore is a provider of clean energy solutions. This is again a small cap scrip and in the previous day’s trade, the stock of the company emerged as the top stock gainer in B group after the scrip gained a huge 20 percent.

The penny stock from the space last closed at a price of Rs.3.65 per share on the NSE.

6. Gita Renewable:

This has been the outlier in the segment and last closed at a price of Rs. 211.85 per share. The company works with the prime objective of generating power using renewable sources such as hydro, solar and wind. The company based out of Tamil Nadu has turned into profitable for the first time since its listing in the year 2015. In the June ended quarter, the company’s profit surged to Rs. 36 lakh.

Disclaimer

Note there are other renowned companies’ in the space such as Suzlon etc. which also needs to be watched out for.

Equitas Bank: Well placed for long term opportunities

Equitas Bank has identified three important growth levers: (1) Small Business Loans, (2) Home Loans, and (3) Vehicle Finance. It has 8-10 years of experience in these categories and has established underwriting methods that provide it a significant advantage over other SFBs, which are primarily focused on MFI lending.

“The current valuation at 1.6x and 9.6x Sept’23 P/ABV and P/E is undemanding and does not factor in strong growth potential, improving liability franchise and possible transition to a universal bank. We value Equitas Bank at 2.25x Sept’23 P/ABV to arrive at our Target Price of Rs89. Key risks are events that could affect borrowers’ cashflows,” the brokerage has said.

Nirmal bang has issued a buy call on Equitas Small Finance Bank with a target price of Rs 89, with an upside potential of 39%.

Collection efficiency improves; asset quality to follow

Equitas Bank’s collection efficiency (CE) increased to 105 percent in July of this year, up from 78 percent in May, when covid-induced constraints were eased. It’s worth mentioning that when the initial covid wave hit, all of the bank’s customers chose to put their accounts on hold. Following that, the bank’s CE increased to 105 percent in December 20 and 109 percent in March 21. In fact, until April 21, Equitas Bank’s CE was trending in line with AU SFB (similar rival), with Equitas Bank’s performance dropping only in May 21. With the increase in economic activity, we believe the worst is likely past in terms of asset quality, and we factor in credit costs of 2% over FY22E-24E.

Key Investment Thesis

Scalable business model with a strong vintage:

Equitas Bank has identified three business lines as important growth levers: (1) Small Business Loans, (2) Home Loans, and (3) Vehicle Finance. It targets the bottom of the pyramid, where credit evaluation and underwriting are time-consuming, limiting bank competition.

Strong liability traction:

To source deposits, Equitas Bank focuses on the mass affluent group in metropolitan and semiurban areas. Through its own SELFE accounts (entirely digital acquisition) or fintech partnerships, it has bolstered its digital acquisition strategy. It offers industry-leading savings rates (7%) to attract deposits of more than Rs0.1 million, which has found traction, with CASA deposits climbing to Rs82 billion, a rise of 153 percent and 21% YoY/QoQ in the last year.

Asset quality to improve as covid restrictions have eased:

Equitas Bank’s CE increased to 105 percent in July, up from 78 percent in May, as covid-induced restrictions were eased. From Rs4.3bn (2.4 percent of advances) in 4QFY21 to Rs13.3bn (7.4 percent of advances) in July’21, the restructured book climbed to Rs13.3bn (7.4 percent of advances).

Equitas Bank can clock 17%-18% RoE on a steady-state basis:

Because 90-95 percent of advances have a fixed rate of interest, interest yields are protected. However, when the bank’s share of Micro Finance declines and it advances up the value chain in the client selection process, this may lessen slightly.

Valuation remains attractive for strong growth potential and healthy RoA:

“Equitas Bank is currently trading at 1.6x and 9.6x Sept’23 P/ABV and P/E, respectively. We have seen strong momentum in CASA mop-up while disbursements reached all-time high in 2QFY22 (business update filing) as business activities have normalized. Equitas Bank has a strong CAR at 24.1% with Tier 1 capital of 22.6%, which should support growth over the next three years without a capital raise. We estimate AUM/NII/PAT CAGR of 22%/19%/32% over FY21-24E with RoA and RoE reaching 2.3% and 17.8%, respectively by FY24E.

We initiate with a Buy and a TP of Rs89, valuing it at 2.25x Sept’23 P/ABV. Key Risks – Severe third covid wave or events that could affect borrowers’ cash flows. Dilution overhang reduces as the RBI has permitted Equitas Bank to apply for amalgamation with its Holdco – Equitas Holdings Ltd. Also, the RBI’s discussion paper on harmonizing banking guidelines no more requires promoters to reduce their stake to 40% within 5 years. The interim dilution targets of ~5-15 years are proposed to be removed. However, the same has not yet been implemented”, the brokerage has said.

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. The above stock is from Nimal Bang brokerage. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are near record highs.