Trade Talk | Will Nifty Extend Gains In August Series?
Trade Talk | Alex and Hiral take us through key market levels to watch as we enter August Series as well as highlight stocks to keep on radar before going into trade today. #BQLive
Transcript
00:00 And thanks so much for tuning in. You're watching Trade Talk on BQ Prime. My name is Alex Mathew
00:04 and with me is Hiral Dadda. Happy Friday, Hiral.
00:06 Wish you the same, Alex, and a very good morning.
00:09 Good morning. Well, it ended up being a bit of a somber close to the July series for the
00:16 equity markets with a tumble in the benchmark indices. But all told, it's been a great series.
00:22 Absolutely, a good series. And a lot of sector rotation is what you've seen during the July
00:28 series. And it's going to be interesting how August pans out because now consolidation
00:33 is on the cards. Right. And that's what the markets are aiming for. If you see last two
00:38 to three trading sessions, it's the pharma space which has taken center stage. And what
00:43 analysts are expecting as well now is that it will be pharma that will be one of the
00:48 gainers in terms of the August series as well.
00:51 We're going to talk about two names from that space as well. But it'll be interesting to
00:55 see whether the banking index comes out of some of that lull that it has crept into and
01:02 really leads the charge now towards that 20,000 mark, which we're still talking about a week
01:07 later. In fact, last Thursday was when we really made that push. And we've had a little
01:12 bit of a stumble since that.
01:14 Absolutely. Because if you see in terms of the last four series, they have been absolutely
01:18 on the positive side. Right. So now there is that little bit of cooling off that will
01:22 happen in the month of August. And that's usually the trend as well that we've seen.
01:27 If you see in terms of the rollover data as well, specifically in terms of Bank Nifty,
01:33 this month we've stood at around 77.4 percent versus a 79 percent last month. Right. So
01:39 there is a slight bit of a wobble that we're seeing on that front. Moving on, if you see
01:43 in terms of stocks, it's Tech Mahindra, Axis, Bajaj Finance, they have led the losses as
01:49 well along with the M&M. And you had supply and doctor and these which actually took charge
01:55 in yesterday's session. Moving on, if you go to see the kind of weakness that we saw
02:00 in the markets yesterday as well, clearly what analysts are also indicating is that
02:05 yes, the markets are moving into that overbought territory. And that's one of the reasons where
02:10 we are seeing profit booking at higher levels so far. If you see in terms of the FIIs as
02:15 well, as you highlighted it earlier as well, they've continued to now start main sellers
02:20 and the DIIs have started to come in. So the entire economics of the markets is shifting
02:27 slightly. Where it takes us to is what we need to wait and watch. And that global scenario
02:31 is also changing, that the landscape might just be changing. If you haven't seen it,
02:38 just pay attention to this headline in Japan, where the central bank is allowing the long
02:43 term yields to go above that 0.5, or at least contemplating allowing it to go above that
02:48 0.5% mark. Ostensibly, this means that they're a little worried about inflation. And so they're
02:54 encouraging people to put money in to long term savings, which could have a bearing on
02:59 consumption as well as an inflation. So that's likely to have a bearing on the global stage.
03:05 But let's focus in on a few very key stocks that you want to watch out for. And that's
03:09 the purpose of the show as well. Varsha is joining in to tell us about a few stocks she's
03:13 picked up on the earnings front. Morning, Varsha, what are you looking at?
03:17 Good morning, guys. So we've got a bunch of companies that one needs to look out for.
03:21 The first one is Indian Hotels. Now the revenues were up 16%, which beat estimates. Now the
03:27 analysts were expecting, you know, a jump of 13% in its revenue year on year basis,
03:33 and the revenues were up 16%. Now, the company has signed almost 11 and opened five new hotels
03:40 across brands. The outlook for the remaining quarter for the upcoming quarters remains
03:44 really strong with pace of demand driven by domestic consumption momentum, global events
03:49 and revival of international arrivals. The next company that we have is Indus Tower.
03:54 Now the revenues were up 2.58%, while the EBITDA was up 51%. Margins were at 49.65%.
04:01 Now, with the 5G rollouts by operators, Indus is also keeping pace to capture the growth.
04:08 But there's one problem here. If you see the Indus trade receivables for the June quarter
04:13 have risen to almost 5,303 crores from 4,868 crores. Now, this is due to the Vodafone,
04:22 which is fainting, which is, you know, having financial difficulties. Now, the health of
04:26 this loss making company that is Vodafone is actually important for Indus long term
04:31 financial stability since this Vodafone is a key customer for Indus Tower.
04:38 The next company that we have is Home First Finance. Now, the net profit was up 34.9%,
04:43 while the net investment was at 1.64%, while NNPA at 1.14%. Now, the disbursement for the
04:54 quarter stood at 895 crore, clocking almost 35% growth. Now, the management said that
05:00 the increase in disbursement was the reason that helped total AUM to grow significantly.
05:05 The next company that we have is Asilia Solutions. Now, the revenues were up 2.5%, while net
05:11 profit was down 11.6% at 32 crore versus 36 crore quarter on quarter basis. And EBITDA
05:18 was up 11.8%, while margins were at 33.26%. Now, this company provides software services
05:26 to airline companies and the travel companies. The next company that we have is Intellect
05:31 Design Arena. Now, the revenues were up 3.8%, while net profit was up 2.7% at 93 crore.
05:38 EBITDA was up 9.5%, while EBITDA margins were at 17.8% versus 16.8%. Now, there are a number
05:46 of deals that this company has done, which will actually help this company to pace up
05:51 the growth. The last company that we have is Sona BLW. Now, the revenues were up 25.17%,
05:57 while EBITDA was up 47%, net profit was up 47%. Now, this company is actually growing
06:06 really fast when it comes to EVs. Also, the net order book for this company stands at
06:13 22,000 crore of which EV contributed almost 78%. So, significant. So, that's going to
06:21 be an interesting mix that we should be watching out for. Thanks, Farsha, for getting us all
06:25 the details as well. So, that's the first part of the earnings that we are watching
06:29 out for in today's session. Alex, Mika is going to come by to give us a couple of more
06:34 companies that she's been tracking as well. Good morning, Mika. And which are the stocks
06:38 that you've been looking at from an earnings perspective? So, first, we have NDTV that
06:42 recorded a 4.5% growth quarter-on-quarter revenue to around 70 crores. However, the
06:47 company's EBITDA loss stood at 9.49 crores as compared to 14.8 crores last quarter. And
06:54 the company's net loss stood at 8.08 crores this year versus 1.08 crores net loss last
07:00 quarter. Next, we have Ajanta Pharma. The company's earnings met and crossed the Bloomberg
07:05 estimates. The company recorded a 7% year-on-year revenue growth at 1,021 crores and a 19% net
07:12 profit increase to 208 crores. The board of directors also approved its first interim
07:17 dividend of 315 crores for the financial year 2024. Then we have Sham Metallics and Energy,
07:24 which crossed and met the Bloomberg estimates in terms of absolute revenue EBITDA and net
07:29 profit numbers. However, the company's profit was down by 42.7% this year and declined by
07:36 4.62% this quarter as compared to the year before period. The EBITDA margin stood at
07:41 12.24% versus the 18.82% last year. Next, we have JK Lakshmi Cements, which missed the
07:48 Bloomberg estimates at the revenue and net profit levels. Net profit EBITDA and EBITDA
07:53 margins saw a decline this quarter compared to the year-ago period. However, revenue saw
07:57 a 4.6% growth and the sales volume this quarter stood at 32.05 lakh tonnes as compared to
08:03 the 30.32 level last year. The company also achieved a cement capacity utilization of
08:11 85% this quarter and a clinker capacity utilization of 97% this quarter. Next, we have Bharat
08:16 Electronics, which crossed the Bloomberg estimates in terms of revenue EBITDA and net profit.
08:22 The company recorded a 12.48% revenue growth to 3,533 crores and a 47.2% net profit growth
08:30 at 539 crores. The EBITDA margins also improved this quarter at 19.04%. And lastly, we have
08:37 Blue Dot Express, which reported a 4.31% revenue decline and a 48.41% profit degrowth at 61.28
08:46 crores. EBITDA was also down 28.64% and the margins declined to 15.40% compared to the
08:55 20.66% in the year-ago period. All right. Thanks so much, Mehika, for that. For me,
09:01 the key takeaway here would be Bharat Electronics, which is a very strong set of numbers. And
09:07 this is, of course, a stock that is from a pack that has done incredibly well in the
09:11 year to date so far, and it has gained quite substantially as well. We will be speaking
09:15 with the management tomorrow as well to understand more. So there you have it. And by the way,
09:19 in case you missed any of those numbers, because understandably, the flood of the earnings
09:24 season has really caught up with us as we head into the last couple of weeks of the
09:28 earnings season for this quarter. Just have a look at the website pqprime.com. You'll
09:33 find all of this information. You can peruse it at length. For now, let's turn to another
09:38 sector that seems to be doing quite well operationally, and that's the cement space. ACC is the counter
09:44 that we're focusing on. And in the first quarter, I believe that it is a poster results that
09:49 are ahead of consensus estimates on the back of the volume number, which for other companies
09:55 also has been quite good. Rishi is joining in to tell us what the perspective is from
10:00 the brokerages as well. Rishi, morning. Good morning. Was what I was saying correct? Yeah,
10:04 absolutely. Like volume growth was what drove the profitability. But if you also look at
10:10 brokerages, they also feel that the numbers were really good. In fact, MK has increased
10:15 the target estimate by 12% and Citi has increased the target estimate by 9% to over 2300 rupees
10:21 per share. This implies 18 to 20% upside from yesterday's closing. MK in fact also increased
10:27 the EPS estimates by 2% for this financial year and 9% for the next financial year. Now,
10:33 the profits they doubled on higher volumes as well as lower cost. Now, the cement business
10:40 was what drove its profitability. It had 130% growth in its profit before tax. And even
10:45 within the cement business, it was the blended cements that contributed to much higher volumes
10:50 and higher EBITDA per tonne. But although the realizations at the overall level of the
10:56 company were much lower, and this was because of the global situation as well as domestically
11:01 where the cement prices as well as other commodity prices have been a bit suppressed. Now, if
11:06 you also look at the cost from the cost angle, the raw material costs were much lower. So
11:11 this partially offset the lower realizations. So the total cost per tonne, it also benefited
11:17 from the lower cost and the kiln cost were lower by 15%. The volume growth that I mentioned
11:24 earlier, it grew by 23% and it was majorly driven by a supply agreement that is there
11:29 with its parent company that is Ambuja Cements. So overall, I feel good numbers and even brokerages
11:35 are positive on this and the stock may continue to see some action that it missed yesterday.
11:39 Thanks, Rishi, for getting us the details. It's going to be interesting to see how ACC
11:44 reacts in trade today on the back of brokerages. But moving on, apart from the companies that
11:48 reacted to or that will react to numbers, a lot of other companies that are newsmakers
11:53 of the day, and we will have, you know, our colleagues also join in. One sector that we've
11:59 been talking about so far is the pharma pack, right? Clearly, a lot of action yesterday's
12:05 session as well. You did see the kind of contribution that Cipla as well as Dr. Reddy's gave us
12:11 in terms of trades. In fact, Cipla was the one which was locked in upper circuit as well.
12:16 In fact, Monal is joining us with more details in terms of what's in store for the sector
12:21 and which are the newsmakers from there. Good morning, Monal.
12:26 Good morning, Hiral. There's a lot of commentary around how the US business could be recovering,
12:32 which is why the sector is showing quite the results that it is, with both Dr. Reddy's
12:37 and Cipla posting a really positive performance on the North America front. Now, we have two
12:41 more names that have been, that have shown some action in the evening, that's late evening.
12:48 So there should be some impact today. We have IPCA Laboratories. Now, the Competition Commission
12:53 of India has finally approved IPCA's move to acquire around 59% stake in Unicam Laboratories.
13:01 So if you remember, we've spoken about this before in an earlier show as well. It was
13:06 somewhere in April, where IPCA had proposed an acquisition of 33%, post which, because
13:12 it's acquiring 33% of Unicam at Rs. 440 per share. It will also be required to make an
13:18 open offer for the remaining 26%. So overall, it's expending 2.4 crore. So it's getting
13:26 2.4 crore shares for 440. So it's spending 1000 crores on the direct acquisition, and
13:33 the open offer would cost it around 805 crores. Let's see what the reaction is. Also, we have
13:40 Lupin, which came out with a disclosure last evening saying it's Goa and Pitampur facilities
13:45 have now been resolved by the USFTA. Mind you, there's no typical upside here, because
13:50 these clearances came in the past, the Goa facility received its clearance in December
13:56 21, while the Pitampur Unit 2 facility has received a clearance in July earlier. So there's
14:03 no typical upside. The main thing to watch here is how does the company perform on Spiriva,
14:09 for which it has already received an approval. Today, I don't believe there should be any
14:13 reaction to this news. It's just sort of a disclosure.
14:17 Thank you so much for that, Monal, and for that perspective. Certainly, the stock as
14:22 well as the pack, you should watch out for both of them in trade today. Cipla, as Hiral
14:28 pointed out, was the top gainer yesterday and moved quite substantially. There are several
14:32 other stocks that are in the news as usual, and Himansh is joining in to give you some
14:36 perspective on that. Himansh, what are you picking up?
14:38 Right. So, good morning, Alex. So besides IHCL declaring Indian Hotels Company Limited
14:44 declaring their financial results for the quarter, the board also approved and provided
14:49 an in-principle approval for the acquisition of Pamadzi Hotels, which is currently a listed
14:54 entity in Zambia. The acquisition is valued at $15 million, and the term sheet for this
15:00 is valid for 18 months. Presently, 19% of Pamadzi Hotels is owned by Tata International
15:07 Singapore, and the transaction is subject to Tata International Singapore acquiring
15:13 the balance 10% equity in the company through a delisting process in Zambia. Indian Hotels
15:18 will then complete this acquisition in three tranches. Additionally, the board also approved
15:23 a plan for lease agreement for a proposed hotel in Frankfurt, Germany. For this, they
15:29 will first have to set up a new wholly-owned subsidiary in Germany to undertake this agreement,
15:34 and the envisaged capex for this is around 5 million euros, and they'll be going forward
15:41 in the next coming months. So, J.K. Lakshmi Simhan next, the board of directors approved
15:47 acquisition of Hydrive Developers for 16.33 crore rupees. The acquisition is to be done
15:54 at an arm's-length basis, so it's a related party transaction. The objective behind this
15:58 acquisition is that Hydrive Developers owns a chunk of land next to their grinding unit
16:04 in Surat. It measures roughly around 57,000 square meters, and this can be conveniently
16:09 combined with the grinding unit to expand their facilities. Additionally, the board
16:14 also approved fundraising of 2,500 odd crores through term loans and debt securities for
16:20 financing ongoing operations and expansion. Lastly, we have Wellspan Industries. The board
16:25 approved acquisition of a controlling state in Michigan, Engineers, which is a tech-based
16:30 engineering and construction company focusing on water infrastructure. So, this is in line
16:35 with Wellspan Industries, you know, their plan to grow in the water infrastructure business
16:40 segment and enable their entry into the tunneling business. They've already signed a share purchase
16:45 agreement for this, and the approximate cost for this is valued at 137 crores for a 50.10%
16:53 stake in the business, and it's expected to be complete in four weeks. So, those are the
16:58 stocks.
16:59 Thanks so much for getting us the details. And for me, Indian Hotels does stand out.
17:02 India is on the back of earnings and on the acquisition, and it's the hotel space which
17:06 has absolutely been in focus as well, taking into consideration the kind of occupancy rates
17:12 as well as if you talk about the room rates as well, the tariffs have been absolutely
17:17 on an increase. So, watch out for this space pretty closely. But there is another list
17:22 of stocks that we should be watching out for as well, which is an extension to what Himansh
17:27 already got for us. Saloni has been looking at a few of them. Saloni, good morning. Which
17:31 are the stocks that you've been tracking?
17:33 Good morning. So, first we've got Adani Enterprises. So, the subsidiary of the company that is
17:37 Adani New Industries has raised a trade finance facility of Rs. 3,231 crores from Barclays
17:45 PLC and Deutsche Bank. The finance was raised for securing working capital requirements
17:52 of its integrated solar module manufacturing facility. So, the subsidiary is currently
18:00 building an ecosystem of one of the biggest integrated green hydrogen businesses, including
18:05 solar modules and wind turbine manufacturing. Next, we've got NACL, which has approved
18:11 a proposal to foray into specialty materials and intermediates, special nutrition and bioproducts.
18:18 So, the company has considered an investment of Rs. 1,000 crores over the next three years
18:23 for the business. This includes finance for expansion needs of the company for its existing
18:28 manufacturing and R&D facilities, for captive as well as custom development and contract
18:33 manufacturing opportunities. And lastly, we've got an update on Real Vekas Nigam's offer
18:38 for sale which went live yesterday. So, the base offer of 7.08 crore shares representing
18:45 3.4% of the total paid-up equity capital of the company. So, the government wishes to
18:51 exercise an over-subscription option to the extent of 4.08 crore shares, representing
18:57 1.96% of the total paid-up equity share capital of the company in addition to the base offer.
19:02 Post the over-subscription, the total offer size will be up to 11.17 crore shares, representing
19:08 5.36% of the total paid-up share capital of the company.
19:12 All right, there you have it. Thank you so much, Saroni, for those updates. And we've
19:16 had an exhaustive list of stocks that we've talked about today, understandably so, because
19:20 of the earnings. And one more stock that I would not want to
19:24 miss out today is M&M, because we did see some cuts in the start of the day on the back
19:30 of the acquisition that they've made in RBL. But what was interesting to see, Alex, was
19:34 the cuts deepened further in the last hour of trade, right? So, there is some to and
19:40 fro happening, whether the investors are happy specifically taking the capital allocation
19:44 policy into consideration, because last what we had heard was that they will continue to
19:48 invest in non-core assets where they have a return on equity or investments of at least
19:53 in terms of 18% or more. Now, where RBL fits into their strategy is something we need to
19:59 wait and watch. And what happens to the stock in today's session?
20:02 And of course, you have to remember, regulatorily, as was being pointed out by our colleague
20:07 Vishwanath Nair, they will need RBI approval if they do need to take their stake above
20:13 5% in RBL Bank. Of course, they have said very clearly that they won't be taking it
20:17 above 9.99% because they very much can't. The Reserve Bank of India will not allow them
20:23 to do that as things stand right now. But of course, HIRL is going to be doing a deep
20:27 dive on M&M. So, watch out for that either later today or over the course of the weekend.
20:32 You'll be able to read that on bqprime.com. For now, that's a wrap on this edition of
20:37 Trade Talk. It's been a pleasure bringing it to you. Do stay tuned. Lots more coming
20:41 up over the course of the day. And this is BQ Prime.
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