Query Board

This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team. 

TATA ELXSI LTD.

Tata Elxsi is amongst the world’s leading providers ofdesign and technology services across industries,including automotive, broadcast, communications,healthcare and transportation. The consolidated quarterlyperformance shows net sales and operating income of ₹ 231.28crore in Q4FY22, which is a 9.34 per cent increase from ₹ 211.52crore reported in Q4FY21. The operating profit also squeezed by0.69 per cent in Q4FY22 to ₹ 196.05 crore. The quarterly netprofit rose by 36.55 per cent to ₹ 29.83 crore in Q4FY22 ascompared to ₹ 21.85 crore reported in Q4FY21. The annualperformance of net sales increased to ₹ 2,470.80 crore in FY22from ₹ 1,826.16 crore in FY21. The operating profit climbed by44.13 per cent to ₹ 810.25 crore in FY22 as compared to ₹ 562.18crore in FY21. The net profit also jumped to ₹ 549.67 crore inFY22 as opposed to ₹ 368.12 crore reported in FY21. The currentyear has proved to be the strongest year of growth in thecompany’s history with all-round performance across businessunits, industries and geographies. The company has entered thenew financial year with a strong deal pipeline along with thecontinued confidence of its customers in the value of itsintegrated design and product engineering. It is also focusing oninvesting in building its talent pipeline to fuel further growth.

Hence, we recommend HOLD.

HCL TECHNOLOGIES LTD.

HCL Technologies is a next-generation global technologycompany that helps enterprises re-imagine theirbusinesses for the digital age. The company’s technologyproducts and services are built on four decades of innovationwith a world-renowned management philosophy, a strongculture of invention and risk-taking and a relentless focus oncustomer relationships. The Quarterly Results for Q4FY22 showthat net sales and operating income have grown by 18.95 percent in Q4FY22 to ₹ 22,597 crore from Q4FY21 which was₹ 19,641 crore. The operating profit in Q4FY21 stood at ₹ 4,793crore and improved by 12.04 per cent in Q4FY22 to ₹ 5,370crore. The net profit zoomed strongly beyond 200 per cent i.e. to₹ 3,600 crore for Q4FY22, whereas previously in Q4FY21 it was₹ 1,111 crore. On the annual front, net sales grew by 13.63 percent in FY22 as compared to ₹ 75,379 crore recorded in FY21.The FY22 numbers show net profit of ₹ 13,524 crore as comparedto ₹ 11,169 crore in FY21, gaining 21.09 per cent. Theoperating profit rose 2.97 per cent to ₹ 21,597 crore in FY22 asopposed to ₹ 20,975 crore in FY21. HCL Technologies is lookingat North Asia, Central America, Eastern Europe and Africa asthe new geographies for the future. It continues to see a strongdemand environment led by digital transformation in thecoming period.

Hence, we recommend HOLD.

IIFL FINANCE LTD.

IIFL Finance Limited is one of India’s top financial services’companies. It has a strong national presence across 3,119locations in more than 500 cities and offers a wide range ofloans and mortgages. The company’s quarterly standalonefinancials indicate that net sales for Q4FY22 were at ₹ 1,856.21crore as compared to net sales of ₹ 1,598.49 crore for Q4FY21.Operating profit for Q4FY22 stands at ₹ 1,226.12 crore ascompared to the operating profit in last year’s same quarterwhich was ₹ 1,030.22 crore, up by 19.2 per cent. The net profithas also been on the higher side and stands at ₹ 320.96 croresince the same period last year which was at ₹ 247.83 crore.

The annual performance of net sales is at ₹ 6,836.37 crore forFY22, which has increased from last year’s figure of ₹ 5,839.78crore. The operating profit in FY22 stood at ₹ 4,648.68 crore ascompared to ₹ 3,736.29 crore for FY21. The company hasdelivered exceptional net profit of ₹ 1,188.25 crore for FY22 ascompared to profit after tax of ₹ 760.81 crore for FY21, reflectinggrowth of 56.18 per cent. Despite investments in capacitydevelopment, net profit for FY22 increased by 56 per centyear-on-year to ₹ 1,188 crore. The year’s ROE was far above 20per cent. IIFL OPEN Fintech Private Limited (51:49) JV raisedUSD 185 million in capital from significant investors such asTiger Global, Temasek, Visa, Beenext and Google.

The company has a customer base of 2 million and the platformadds about 1,000 new customers each month. With DIY loandisbursement increasing QoQ for MSME loans to ₹ 265 croreand 100 per cent of home loan processing being paperless, thedigital strategy has acquired significant traction. Despitepandemic-related delays over the year, core products such ashome loans, gold loans and microfinance loans contributed tostrong loan asset growth of 15 per cent YoY to ₹ 51,210 crore.Retail home loan assets increased by 23 per cent YoY to₹ 17,727 crore at the end of the quarter. As of March 31, 2022,gold loans AUM had grown to ₹ 16,228 crore, up 23 per centYoY and 11 per cent QoQ.

Hence, we recommend BUY.

NMDC LTD.

NMDC Limited is a government-owned miningproducer and operates under the Ministry of Steel. Itworks on iron ore, copper, rock phosphate, limestone,gypsum, diamonds, tungsten, graphite and other minerals. It isIndia’s largest iron ore producer and exporter with threeautomated mines in Chhattisgarh and Karnataka generatingmore than 35 million tonnes of iron ore. It also owns andoperates the country’s sole mechanised diamond mine inPanna, Madhya Pradesh. The company’s quarterly standalonefinancials reveal that operating profit for Q3FY22 was ₹ 2,764.11crore as compared to ₹ 2,872.64 crore for Q3FY21.

The net sales for Q3FY22 stood at ₹ 5,873.77 crore, posting anincrease of 34.87 per cent as compared to ₹ 4,355.10 crore in thesame quarter last year. The net profit has also been on the onthe lower side and stands at ₹ 2,048.40 crore since the sameperiod last year which was at ₹ 2,108.05 crore , 2.83 per centdown from Q3FY21. The annual performance of net sales hasimproved by 31.38 per cent and was reported at ₹ 15,370.06crore for FY21 from last year’s ₹ 11,699.22 crore. The operatingprofit stood at ₹ 9,140.87 crore as compared to ₹ 6,516.28 crorefor FY20. The company has delivered an exceptional net profitof ₹ 6,247.447 crore for FY21 as compared to ₹ 3,601.52 crore forFY20.

NMDC has increased iron ore prices by ₹ 400 per tonne forboth fines and lumps, bringing the offer prices to ₹ 4,960 pertonne and ₹ 6,000 per tonne, respectively, for the third time inQ4FY22. Strong steel and foreign pellet prices have fuelledthese price increases. The demerger of Nagarnar Iron and SteelCompany (NISP) is expected to be a catalyst for the stock.NMDC hopes to have the new steel factory operational by July2022. The main mining business of NMDC is presently tradingat 2.4 times higher EV and EBITDA. Over the last 12 months,the share price of NMDC has increased by 42 per cent from₹ 113 in February 2021 to ₹ 160 in February 2022.

Hence, werecommend HOLD.

TITAN COMPANY LTD.

Titan Company Ltd., a joint venture between the TataGroup and the Tamil Nadu Industrial DevelopmentCorporation (TIDCO), commenced its operations in1984 under the name Titan Watches Limited. Titan is thefifth-largest integrated own brand watch manufacturer in theworld. Over the last three decades, brand Titan has expandedinto underpenetrated markets and created lifestyle value acrossdifferent product categories. Titan is widely known fortransforming the watch and jewellery industry in India and forshaping India’s retail market by pioneering experiential retail.The company continues to grow and set new standards forinnovation and quality with each new offering.

The company’s quarterly consolidated financials reveal that theoperating profit for Q4FY22 is ₹ 870 crore as compared to₹ 874 crore for Q4FY21, a decrease of 0.46 per cent. Net sales forQ4FY22 were at ₹ 7,267 crore, recording a decrease of 1.14 percent as compared to net sales of ₹ 7,351 crore in the samequarter last year. The net profit has also reduced and stands at₹ 527 crore as against ₹ 568 crore in Q4FY21. The annualperformance of net sales reported is ₹ 27,417 crore for FY22,which has increased by 36.48 per cent from last year’s value of ₹ 20,088 crore. The operating profit stood at ₹ 3,575 crore ascompared to ₹ 1,910 crore for FY21, which has increased by87.17 per cent.

The net profit was at ₹ 2,198 crore for FY21 as against ₹ 979 crorefor FY21, a phenomenal rise by 124.51 per cent. A robustbalance-sheet and asset light distribution model has enabledthe company to outpace peers in terms of store addition. Itplans to add 40+ Tanishq stores in FY23. Tanishq’s penetrationis still at a very nascent stage in the Indian jewellery marketwhich provides immense opportunity for Titan to enhance itsmarket share. Mandatory gold hallmarking would furtherimprove market share gains from the unorganised space.

Hence, we recommend BUY.

HDFC ASSET MANAGEMENT CO. LTD.

HDFC Asset Management Company Ltd. (HDFC AMC)is an investment manager to the schemes of HDFCMutual Fund (HDFC MF). Started in 1999, it was setup as a joint venture between Housing Development FinanceCorporation Limited (HDFC) and Standard Life InvestmentsLimited (SLI). During FY18-19 it carried out an initial publicoffering and became a publicly listed company in August 2018.It offers a comprehensive suite of savings and investmentproducts across asset classes, which provide income and wealthcreation opportunities to its large retail and institutionalcustomers.

It has a dominant position in equity investments with thehighest market share in actively managed equity-orientedfunds. The company’s quarterly consolidated financials revealthat the operating profit for Q4FY22 was ₹ 458.11 crore ascompared to ₹ 438.97 crore for Q4FY21, an increase of 4.36 percent. Net sales for Q4FY22 were at ₹ 516.28 crore, recording adecrease of 2.65 per cent as compared to ₹ 502.93 crore in thesame quarter last year. The net profit has also reduced andstands at ₹ 343.55 crore which was at ₹ 316.08 crore in Q4FY21,up by 8.69 per cent.

The annual performance of net sales is ₹ 2,115.36 crore forFY22, which has increased by 14.19 per cent from last year’svalue of ₹ 1,852.53 crore. The operating profit stood at₹ 1,917.78 crore as compared to ₹ 1,813.31 crore for FY21, whichhas increased by 5.76 per cent. The net profit was at ₹ 1,393.13crore for FY21 as against net profit R₹ 1,325.76 crore for FY21, amarginal rise by 5.08 per cent. The AMC is expected toimprove its fund performance to attract more inflows. Thelaunch of new NFOs across various segments could aid AUMgrowth. The AMC has suffered huge market share loss and thechances of recovery seem feeble.Hence, we recommend AVOID.

COAL INDIA LTD.

The state-owned coal mining corporation Coal IndiaLimited (CIL) was founded in November 1975. With amodest production of 79 million tonnes (MTs) in its firstyear, CIL has grown to become the world’s largest coal producer.CIL is a Maharatna firm, a special status granted by theIndian government to a select group of state-owned businessesin order to help them develop their operations and becomeworldwide powerhouses. Coal India is mainly engaged inmining and production of coal and also operates coal washeries.The major consumers of the company are power and steelsectors. Consumers from other sectors include cement,fertilisers, brick kilns, etc.

The company’s quarterly consolidated financials reveal that theoperating profit for Q3FY22 was ₹ 7,478.33 crore as comparedto ₹ 5,813.37 crore for Q3FY21, indicating an increase by 28.64per cent. Net sales for Q3FY22 were at ₹ 25,990.97 crore,recording an increase of 19.73 per cent as compared to net salesof ₹ 21,708.27 crore in the same quarter last year. The net profithas also been on the on the higher side at ₹ 4,559.74 crore sincethe same period which was at ₹ 3,083.95 crore, reflecting 47.85per cent increase from Q3FY21. The annual performance of netsales was at ₹ 82,710.32 crore for FY21, which has decreased by7.46 per cent from last year’s value of ₹ 89,373.34 crore.

The operating profit for FY21 stood at ₹ 22,365.82 crore ascompared to ₹ 28,026.25 crore for FY20, a decrease of 20.2 percent. The company has delivered net profit of ₹ 12,705.14 crorefor FY21 as compared to ₹ 16,701.51 crore for FY20, thusdecreasing by 23.93 per cent. Coal India has given a productiontarget of 630 MT and off-take target of ~660 MT for FY22. ForFY23E, CIL has given production and off-take target of ~700MT each. The company is expecting to deliver good EBITDAmargins for the next two years. The EBITDA margin for FY21was at 20.6 per cent.

Hence, we recommend HOLD.

DIVI'S LABORATORIES LTD.

Divi’s Laboratories Limited is a private companyregistered and headquartered in India. The companymanufactures active pharmaceutical ingredients(APIs), intermediates and nutraceutical compounds with afocus on exports. The company produces generic APIs,nutraceutical ingredients, and provides big pharmaceuticalswith custom API synthesis, giving them a competitive edgethroughout the product lifecycle.

Its quarterly consolidated financials reveal that operating profitfor Q3FY22 was ₹ 1,113.80 crore as compared to ₹ 710.53 crorefor Q3FY21, posting an increase of 56.76 per cent. Net sales forQ3FY22 were at ₹ 2,493.24 crore, an increase of 46.54 per cent ascompared to ₹ 1,701.44 crore in the same quarter last year. Thenet profit has also been on the higher side and stands at ₹ 902.24crore since the same period which was at ₹ 420.62 crore, a 91.71per cent increase from Q3FY21. The annual performance of netsales was at ₹ 6,969.40 crore for FY21, which has increased by29.20 per cent from last year’s value of ₹ 5,394.42 crore. Theoperating profit for FY21 stood at ₹ 2,922.50 crore as comparedto ₹ 2,011.80 crore for FY20, an increase of 45.27 per cent. Thecompany has delivered net profit of ₹ 1,984.29 crore for FY21 ascompared to ₹ 1,376.54 crore for FY20, up by 44.15 per cent.

Divi’s Laboratories registered a strong performance in Q3FY22aided by higher sales from ‘Molnupiravir’. We believe efforts onbackward integration, debottlenecking and utility upgrades willcontinue to yield better margins. The company also enjoysstrong margins and return ratios. Its Q3FY22 sales increased 47per cent YoY (up 25 per cent QoQ) to ₹ 25 billioin, higher thanour estimates of ₹ 22 billion, largely driven by strong growth insales of Molnupiravir .The company has capitalised ₹ 1,960million in Q3 and anticipates another ₹ 1,000 million capex tobe capitalised in Q4FY22. It is operating at 80-85 per centproduction capacity and is in a position to take any opportunitythat comes forward in terms of production.

Hence, werecommend BUY.

(Closing price as of May 16, 2022)