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EID Parry (India) Ltd., a part of the Murugappa Group, manufactures sugar, nutraceuticals and ethanol. It also has a farm inputs business with bio-pesticides through a subsidiary. The company has a growing retail presence selling various types of sugar while exploring ways to convert waste products into value-added items for agriculture. Financially, the company appears to be in a strong position with market capitalisation exceeding ₹10,000 crore. While the Q3FY24 results showed net sales of ₹7,770 crore and a net profit of ₹217 crore, there was a significant increase in both net sales (₹9,914 crore) and net profit (₹482 crore) in Q3FY23. 

This translates to an impressive CAGR of 27.2 per cent in profit over the past five years. However, a potential concern is the decrease in promoter holding by 2.28 per cent and FIIs by 2.56 per cent over the last quarter. EID-Parry, a large integrated sugar producer, plans to crush over 50 lakh tonnes of sugar cane and 1,100 lakh litres of ethanol in fiscal 2024. The distillery capacity is expanding, but utilisation is expected to be lower due to sugar diversion restrictions. The refinery segment is expected to perform better due to higher volumes and international sugar prices. Hence, we recommend HOLD. 
 

Established in 1993, Cupid Ltd. is a leading Indian manufacturer of male and female condoms, lubricant jelly and in vitro diagnostic (IVD) kits, with a presence in over 105 countries. Its brands include Cupid, Big Dom, Hi-Life and Bull, and it has a long-term agreement with WHO and UNFPA. The company’s market capitalisation is over ₹3,000 crore, indicating a relatively large company. However, there could be some risk associated with the company’s financial health as promoters have pledged a significant portion (56.2 per cent) of their holdings, and both debtor days and working capital days have increased substantially 

The company reported amazing numbers in its Quarterly Results (Q4FY24) and annual results (FY24). The net sales increased by 51.6 per cent to ₹62.90 crore and net profit increased by 184.5 per cent to ₹23.72 crore in Q4FY24 over Q4FY23. The net sales increased by 7.4 per cent to ₹171.09 crore and net profit increased by 26.2 per cent to ₹39.86 crore in FY24 over FY23. While tripling your investment is a great achievement, holding on to an overvalued stock for extended periods isn’t a core investment principle. We suggest taking profits and reinvesting them in undervalued stocks with strong fundamentals. Hence, we recommend SELL. 
 

20 Microns Ltd. is a leading Indian manufacturer specialising in micronised minerals and speciality chemicals. Its product portfolio includes a wide range of industrial minerals like calcium carbonate and dolomite, alongside speciality chemicals like calcite and wax. These products cater to various end-user industries such as paints, plastics, paper and construction. Financially, the company is in a strong position with a market capitalisation exceeding ₹500 crore. 

The company is likely to report positive results in both the upcoming Q4FY24 and FY24 reports. In the latest nine-month results (9MFY24), it reported net sales of ₹565.15 crore, operating profit of ₹81.56 crore and net profit of ₹42.38 crore. This follows a positive trend from the previous year’s annual results (FY23) where it reported net sales of ₹701.69 crore, operating profit of ₹88.67 crore and net profit of ₹41.87 crore. The company prioritises research and development, investing in a culture of innovation through its dedicated team of 45-50 scientists at its Vadodara facility. The company is also committed to its quality and cutting-edge solutions that fuel the development of a diverse product portfolio to meet the needs of its domestic and international customers through ongoing research and collaboration. 

Trading at a PE ratio of 11.45 times compared to the industry average of 17.35 times, the company also boasts a strong return on equity (ROE) of 15 per cent over the past five years and a compounded annual growth rate (CAGR) of 62 per cent in its stock price over the last three years. 20 Microns appears fundamentally strong, with a valuation that looks cheap compared to its industry peers. The company has seen 7.9 per cent revenue growth in the past five years, driven by strong operating profitability, improved credit metrics, deleveraging, and increased research and development spending. Hence, we recommend BUY. 
 

Fineotex Chemicals Ltd., founded in 1979, is a leading manufacturer of speciality chemicals for a variety of industries including textiles, construction, water treatment, fertiliser, leather and paint. It focuses on textile chemicals with a dedicated research and development department based in Biotex Malaysia. Fineotex Chemicals also offers customised cleaning and hygiene products. Its vast product portfolio includes over 470 categories catering to the entire textile production process from pre-treatment to finishing. 

The company’s financial performance has been strong across all the reporting periods. Looking at the most recent quarter (Q3FY24), its net sales jumped 26.75 per cent to ₹138.45 crore and net profit surged by an even higher 46.49 per cent to ₹32.92 crore, compared to the same period last year (Q3FY23). This positive trend continues when examining the year-to-date performance (9MFY24), with net sales rising 9.65 per cent to ₹415.95 crore and net profit growing by 42.48 per cent to ₹90.55 crore compared to 9MFY23. Finally, in the annual results for the fiscal year 2023 (FY23), net sales increased by 40.40 per cent to ₹517 crore and net profit grew by 57.41 per cent to ₹89.55 crore compared to FY22. 

The company appears to be in a financially sound position with minimal debt, indicating strong profitability. This is further supported by its consistent profit growth of over 31 per cent annually for the past five years and a healthy return on equity of 25.5 per cent. The company also seems to be managing its working capital efficiently, as evidenced by the reduction in both debtor days and overall working capital requirements. Fineotex Chemicals’ research and development-driven custom solutions boost customer acquisition and market share. Its expertise in textiles expands to the growing cleaning and hygiene market, creating new revenue streams and positioning it for future success. Hence, we recommend BUY
 

Axis Bank Ltd. is a leading private sector bank in India, offering a wide range of financial services to various customer segments including large corporations, mid-sized businesses, small and medium enterprises, agriculture businesses and retail customers. It is also a major player in the credit card and merchant-acquiring space, being the fourth-largest issuer of credit cards and the second-largest merchant-acquiring bank in the country. The company has reported strong financial performance with ROE exceeding 18 per cent for the past six quarters. It has achieved organic growth in CET-1 capital in the first nine months of FY24 and experienced significant growth in loans and deposits across all segments sequentially. 

It has expanded its product distribution architecture to improve profitability metrics and launched a new digital savings account, ‘Amaze’, along with scaling other new products. The bank is on track with integrating the Citibank consumer business, maintaining a stable deposit base and achieving improved cross-selling metrics. Tight liquidity impacted deposit growth and loan-to-deposit ratio (LDR) but it maintained liquidity coverage ratio through continuous deposit mobilisation efforts. Loan growth is expected to be 12-13 per cent, aligned with the industry outlook. Its credit card business includes partnerships with Flipkart, Airtel, Samsung and Google. 

While there is no specific short-term guidance on loan growth, its medium-term target is to outperform industry credit growth by 400-600 basis points. The banking sector is the backbone of the Indian economy, and Axis Bank plays a significant role within it. While interest rate fluctuations can impact short-term profitability, the bank possesses strong fundamentals and long-term growth potential. However, to fully assess its future prospects, it’s crucial to analyse how effectively Axis Bank manages these interest rate movements and adapts its strategies to maintain profitability. Hence, we recommend BUY. 

Established in 1981, G M Breweries Ltd. is a major manufacturer and marketer of alcoholic beverages in Maharashtra. It holds a monopoly on country liquor in Mumbai, Thane and Palghar districts and is the state’s largest producer with a significant market share. Its portfolio includes popular brands like G M Santra, G M Doctor and G M Limbu Punch, contributing substantially to Maharashtra’s total country liquor excise duty. 

According to its quarterly results, the net sales increased by 3.3 per cent to ₹623.24 crore, operating profit increased by 107.6 per cent to ₹96.30 crore and net profit increased by 146.8 per cent to ₹86.6 crore in Q4FY24 over Q4FY23. 

In its results, the net sales increased by 3.9 per cent to ₹2,415.30 crore, operating profit increased by 36.6 per cent to ₹187.7 crore and net profit increased by 51.7 per cent to ₹151.5 crore in FY24 over FY23. The earnings include other income of ₹80.3 crore. The company has seen strong growth over the past decade, with sales averaging a compound annual growth rate (CAGR) of 28 per cent and profits growing even faster at 22 per cent CAGR. 

While sales growth has slowed recently to 4 per cent over the past year, profit growth has remained robust at 59 per cent over the same period. G M Breweries presents an interesting case for investors. While its revenue is on the rise and the share price appears undervalued, there’s a key concern. The company’s net profit includes a significant portion of ‘other income’, raising a question about the sustainability of its profitability. Investors attracted to the current valuation should carefully consider their dependence on this non-core income source before making a decision. Hence, we recommend AVOID.

(Closing price as of April 15, 2024)