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Utkarsh Small Finance Bank Ltd. is a scheduled commercial bank in India. The bank was established in 2009 as a microfinance institution and was granted a small finance bank license by the Reserve Bank of India in 2016. It commenced commercial operations in April 2017. The bank offers a range of financial products and services, including savings accounts, current accounts, loans, deposits, insurance and investment products. According to the Quarterly Results, the total income of the bank increased 27.3 per cent to ₹314.80 crore. 

Its net and the net profit increased by 30.45 per cent to ₹114.42 crore in Q2FY24 compared to Q2FY23. The shares of the bank have a PE of 12.6 times whereas the industry PE is 13 times and an ROE of 23 per cent. Its shareholding is dominated by promoters with a 69.28 per cent stake, followed by DIIs (12.99 per cent), public (15.66 per cent) and FIIs (2.07 per cent). 

However, at the current juncture the price of its shares is consolidated and we don’t know when this consolidation will break out or break down. Given this situation, it would be advisable to book your profit and look for another opportunity to invest your money. Hence, we recommend SELL. 

BCL Industries Ltd., a diversified Indian company established in 1976, has shifted its focus from its previously dominant edible oils business to the lucrative distillery sector. While still offering renowned Vanaspati oil brands like Home Cook, Murli and White Gold, the company now primarily concentrates on its distillery arm, generating approximately ₹1,800 crore in revenue through popular whiskeys like Royal Patiala and Old Professor. 

This strategic shift highlights BCL Industries’ commitment to capitalising on the growing demand for alcoholic beverages in the Indian market. According to its quarterly results, net sales increased by 6.2 per cent to ₹480.71 crore and operating profit increased by 467.65 per cent to ₹48.9 crore in Q2FY24 compared to Q2FY23. The company reported net profit of ₹19.67 crore in Q2FY24 compared to ₹0.82 crore in Q2FY23, an increase of 2,499 per cent. 

BCL Industries recently secured orders worth over ₹567 crore for the next year, boosting its stock price and demonstrating its strong market position. The company is in tune with the changing aspirations and lifestyles of Indians, especially the young consumers. We therefore recommend HOLD. 
 

Adani Enterprises Ltd. (AEL), the flagship of the diversified Adani Group, manages airports (including Mumbai’s bustling hub), builds highways, provides water treatment, constructs data centres, leads in solar manufacturing, has ventured into defence and aerospace, operates edible oil refineries and distributes food, mines and exports minerals, offers integrated resource solutions and produces agricultural products. 

According to its quarterly results (Q2FY24), net sales fell 41 per cent year-on-year to ₹22,517 crore from ₹38.175.23 crore in Q2FY23 while operating profit surprisingly rose 39.5 per cent to ₹2,978 crore from ₹2,135.58 crore in Q2FY23. However, net profit dipped slightly by 10.4 per cent to ₹393 crore in Q2FY24 compared to ₹438.90 crore in Q2FY23. In its annual results, net sales increased by 97.3 per cent to ₹136,977.32 crore in FY23 as compared to ₹69,420.18 crore in FY22. 

The net profit increased by 364.7 per cent to ₹2,208.94 crore in FY23 compared to ₹475.37 crore in FY22. Adani Enterprises is burdened by significant debt, exceeding double the recommended level. This raises concerns about the company’s financial stability and vulnerability during economic downturns. Its ambitious expansion plans further raise concerns about potential cash flow gaps given that funding sources remain uncertain. Failure to secure sufficient funding could derail growth and profitability. 

This has primarily been due to debt concerns, ongoing regulatory scrutiny and general market sentiment. Such instability can deter potential investors and raise questions about the company’s long-term viability. While Adani Enterprises boasts impressive compounded sales and profit growth over the past three years of 47 per cent and 46 per cent, respectively, its valuation appears stretched at a PE of 129 times. However, the stock recently saw a significant surge of over 30 per cent in the last week, fuelled by the US agency DFC deeming the Hindenburg report irrelevant. Hence, we recommend AVOID. 

Hindustan Aeronautics Ltd. (HAL) is an Indian public sector aerospace and defence company, established in 1940. It’s one of the oldest and largest of its kind globally, with 20 production units and 11 research and development centres across India. The company manufactures aircraft, helicopters, engines and avionics while also providing maintenance and repair services. According to its quarterly results, net sales increased by 9.54 per cent to ₹5,635.7 crore in Q2FY24 compared to ₹5,144.8 crore in Q2FY23 and net profit decreased by 6.5 per cent to ₹1,008.5 crore in Q2FY24 compared to ₹1,078.9 crore in Q2FY23. 

The company has been maintaining a healthy dividend payout of 30 per cent and has delivered good profit growth of 24 per cent CAGR over the last five years. The company boasts a robust order book of ₹81,784 crore thanks to fresh contracts and continued budgetary support, solidifying its financial footing with a healthy cash balance of ₹20,306 crore. However, despite strong fundamentals, including an attractive PE of 27.2 times, ROE of 27.2 per cent and ROCE of 30.6 per cent, the stock remains undervalued compared to industry standards. This presents an attractive opportunity for investors seeking to capitalise on the company’s solid financial position and growth potential, further bolstered by its debt-free status and substantial reserves. 

Furthermore, the Indian government has approved a massive ₹22.30 lakh crore defence acquisition plan. This plan includes key acquisitions like anti-tank munitions, towed gun systems and upgraded SU-30 aircraft, significantly enhancing India’s defence capabilities. Over the past few years, the Indian government has consistently paid serious attention to the indigenous empowerment of the manufacture of defence equipment and thereby increased its allocation to this sector. Given the fact that technology now plays an important role in the development of defence systems, HAL stands to benefit due to its expertise. Hence, we recommend BUY. 

(Closing price as of December 11, 2023)