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ACC beats profit estimates for Q3 despite cost spike

by 5paisa Research Team 19/10/2021

ACC Ltd, which is part of Holcim (formerly LafargeHolcim), has reported strong earnings for the quarter ended September 30, beating street estimates, even though high fuel costs increased its operational expenses.

ACC churned out 23.6% growth in net profit to Rs 450 crore as against Rs 364 crore in the year-ago period. Analysts had expected the company to post around 15% earnings growth on a year-on-year basis.

Net sales growth, however, fell a tad short of estimates, likely due to poor growth in volume sales of cement. Net sales rose 5.3% to Rs 3,653 crore for the three months ended September as against expectations of around 7% rise.

The July-September quarter—the third quarter for ACC’s financial year—is cyclically a weak period for cement makers as construction activity slows due to monsoon season.

The ACC scrip declined 2.5% ahead of the announcement of the results for the quarter in a nearly flat Mumbai market on Tuesday. The company’s share price is around 10% below its 52-week peak and closed at Rs 2,245.50 apiece.

ACC Q3 other key numbers:

1) Cement sales volume rose 1.2% to 6.57 million tonnes. This affected top-line growth.

2) Sales volume for ready mix concrete shot up nearly 50% to 0.68 million compared to year-ago period.

3) EBITDA margins rose to 19.5% from 19.4% in the same quarter last year.

4) EBITDA margin, however, is lower than the 20.9% for the nine months ended September 30.

5) Fuel costs rose 25% year-on-year. This is higher than rival UltraTech’s 17% increase in fuel costs.

ACC management commentary:

Sridhar Balakrishnan, managing director and CEO of ACC, said that the company recorded “solid performance” during the quarter through operational excellence and focus on sustainability while meeting customers’ needs.

“Despite a steep increase in fuel costs, our cost efficiency measures under project ‘Parvat’ have enabled us to maintain robust performance. I am confident that our relentless focus on execution of cost efficiency and capacity expansion projects will enable us to deliver strong shareholder value,” he said.

The company also said that economic activity is gaining momentum driven by accelerated progress in the Covid-19 vaccination drive and reduction in Covid-19 cases.

“We believe that government impetus on infrastructure and housing will augur well for cement demand in the next quarters. We are positive that the cement sector would benefit from increasing demand in various sectors such as housing, commercial and industrial construction,” ACC said.

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Solar Industries bags order worth Rs.14.7 billion from Coal India

19/10/2021

Solar Industries has won an order of INR14.7bn from Coal India (CIL) which is to be delivered in two years. Order size has almost doubled from the last one. This is on account of increased production expectation by CIL ,sharp increase in the price of key raw materials and removal of higher overburden . Moreover, the company has handed over the first batch of Multimode hand grenades (MMHG) to the Indian Army during 2QFY22. With strong visibility in international markets and defense segment along with recent improvement in domestic business, Solar's growth should happen from all the directions. Management has guided 30% revenue growth in FY22 which includes 15% volume and 15% value growth. There will be an increased FY22/23 EPS by 7%/15% respectively and introduced FY24 EPS. We have factored revenue/EBITDA/EPS CAGR of 29%/30%/37% over FY21-24E. Further, we roll over the target price to FY24E EPS. Maintain BUY with TP of INR2,780 (earlier INR1,910) based on 35xFY24E EPS.

Domestic business: strong traction across segments like CIL, housing, and infra 

The strong pick-up witnessed in housing and infra is now extended in business from CIL. CIL has doubled the order size for the bulk explosives and is to be delivered over the next two years. It covers steep inflation in RM (ammonium nitrate) and higher explosive requirement gave the acute coal shortage the power plants in the country are facing. The contribution from CIL stood at 17% of the revenue (INR4.2bn in FY21, stagnant since the last five years). However, despite the doubling of the order book for CIL for the next two years, the market share of Solar has remained at 28-30% indicating similar growth for other players as well. With a view of reducing dependence on imported coal, we expect a strong off-take from CIL to continue providing robust visibility for the domestic business of Solar. We believe that the price of key RM, ammonium nitrate is up 20-25% in the last quarter which could put pressure on margin in the near term but new order wins reflect enough price hikes to cover the RM inflation over the long term. We have built a revenue CAGR of 29% over FY21-24 in the domestic business of Solar. International geographies on a steady path; Defence - Scaling up on expected lines Revenue from international geographies continues to be on a steady growth led by the strategy of expansion in newer markets. Although, there is some delay in starting operations in Australia and Indonesia on account of COVID. The company is expected to start the operation in Tanzania in 3Q and Australia in 4QFY22 while other geographies like Turkey, Ghana, 
Nigeria, Zambia, and South Africa continue to drive the growth of the company. During the 
2QFY22, Solar started the dispatch of the MMHG to the Indian army. Solar had received the order of 1mn units (INR3bn) of MMHG to be delivered in two years. The company had guided revenue of INR3bn during FY22 (INR1.3bn in FY21) from the defense business. 

Valuation and outlook 

Being a market leader in a highly regulated domestic explosives industry with huge entry barriers, 
SOIL is well-positioned for robust growth with multiple levers in place. All the business categories of Solar - International market, defense, housing & infra and even the CIL which was stagnant for last five years is on a strong growth trajectory now. With improved revenue growth, the company is back above 25% RoCE currently from 19% in FY21 and we believe ROCE to improve and reach 33% by FY24. The stock currently trades at 32x FY24E EPS and we have valued at 35x FY24E EPS with a TP of INR2780. Any slowdown in industrial production activity and adverse currency movement in international geographies are major risks.

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Penny Stock Update: These low priced stocks gained up to 19.87% on Tuesday.

Penny Stock Update: These low priced stocks gained up to 19.87% on Tuesday.
by 5paisa Research Team 19/10/2021

Today market has closed in red, S&P BSE Information Technology is the top gainer while S&P BSE Realty is the top loser.

After a positive close on Monday (18th October 2021), the market closed in red after a sudden sell-off in the last hour of the trading session on Tuesday. Most of the sectoral indices were down and closed in red, while some sectors have closed positive. The Nifty 50 has dipped down by 0.32% i.e., it has closed down by 58.30 points. Besides, BSE Sensex is down by 0.08% i.e., it has closed down by  49.54 points in today’s trade. S&P BSE Information Technology and S&P BSE TECK were top gainers in today’s trade and closed up by 1.34% and 1.10% respectively. Information Technology stocks such as Larsen & Toubro Infotech Ltd, Mphasis Ltd, L&T Technology Services Ltd and Oracle Financial Services Software Ltd were top gainers.

Larsen & Toubro Infotech Ltd closed up by 15.93% at Rs 6847. Moreover, BSE TECK Index consists of majorly same stocks as S&P BSE Information Technology which closed in positive along with Coforge Ltd. Further BSE Capital Goods, BSE DOLLEX 30 and BSE Energy were high and closed positive in today’s trade. This is evident that the IT sector was up and closed with a green mark.

In contrast to these, the majority of sectors has closed in red. BSE Realty was the top loser in today’s trade and closed down by 4.56%. The stocks of the same index such as Indiabulls Real Estate Ltd, Oberoi Realty Ltd and DLF Ltd were top losers in today’s trade.

Likewise, S&P Fast Moving Consumer Goods, BSE CPSE and BSE Basic materials have closed in negative. S&P BSE SME IPO has again closed in red after Monday.

Here is the list of penny stock that gained up to 20% on the closing basis on Tuesday 19th October 2021:
 

Sr No.  

Stock  

LTP   

Price Gain%  

1.  

Mandhana Retail Ventures Ltd  

18.1  

19.87%  

2.  

Consolidated Construction Consortium Ltd  

0.6  

9.09%  

3.  

Zenith Steel Pipes & Industries Ltd  

0.9  

5.88  

4.  

Gayatri Highways Ltd  

0.95  

5.56  

5.  

Ankit Metal & Power Ltd.  

3.15  

5.00  

6.  

DCM Financial Services Ltd  

3.15  

5.00  

7.  

Imagicaaworld Entertainment Ltd  

12.60  

5.00  

8.  

Adroit Infotech Ltd  

12.70  

4.69  

9.  

Grand Foundry Ltd  

4.25  

4.94  

10.  

Digjam Ltd  

18.10  

4.93  

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Nestle India Q3 profit inches up 5% as rising input costs hurt

by 5paisa Research Team 19/10/2021

Nestle India said Tuesday its profit after tax for the third quarter ended September 2021 rose 5% to Rs 617.4 crore from Rs 587 crore a year earlier, helped by volume growth and price hikes as demand recovers.

The company, which follows the January-December financial year, said profit was up 14.6% sequentially from Rs 538.6 crore in the April-June period. 

Revenue for the third period rose 9.6% to Rs 3,882.5 crore from a year earlier and 11.7% sequentially. Growth was driven by increased volumes, improved demand for ready-to-eat food and milk-based products, and price hike. 

The company said its domestic sales rose 10.1% during the third quarter, a shade lower than the 10.2% sales growth recorded in the same period last year. On a quarter-on-quarter basis, sales were up an impressive 13.7%. 

Nestle India, which markets marquee brands like Maggi noodles, Nescafe coffee and Kitkat chocolates, said that the April-June quarter had been hit hard by the second wave of the coronavirus pandemic.

However, the July-September quarter saw the resurgence of organised trade and that sales via e-commerce channels accelerated as consumer behaviour shifted toward online purchases. 

Nestle India Q3 other key details

1) The company reported a 1.3% rise in exports to Rs 177.6 crore during Q3.

2) Rising commodity prices and packaging costs suppressed margins to 24.4% from 24.9%. 

3) Total input costs rose almost 16% due to higher commodity prices, particularly edible oil and packaging materials.

4) Brands like Milky bar, Kitkat and Munch saw double-digit percentage growth during the second quarter.

5) Nestle India declared second interim dividend for 2021 of Rs 110 per share, amounting to Rs 1,060.57 crore.

6) The company had in May paid the first interim dividend of Rs 25 per share.

Nestle India management commentary:

The company said there are indications that business is set to return to pre-pandemic levels in some markets. 

It also said that the out-of-home channel is on a path of recovery as the hospitality sector, offices and malls reopen and demand picks up. The e‐commerce channel showed strong acceleration on the back of convenience and pandemic-driven consumer behaviour.

“This quarter has once again seen the company deliver ‘double‐digit broad‐based value growth’ in domestic sales across categories,” said Suresh Narayanan, chairman and managing director.

“Organized trade witnessed a resurgence in the third quarter with strong revenue growth in mid‐twenties after a muted second quarter which was impacted by the pandemic second wave,” he said.

The company, however, noted that the price outlook for wheat, coffee and edible oils remains firm to bullish while costs of packaging materials continue to increase amid supply constraints, rising fuel and transportation costs.

It expects input prices to be on a bullish trend both globally and, to some extent, locally. Milk prices are expected to remain firm while the recent decision to scrap import duties on edible oils, if continued beyond March 2022, can have a positive impact in muting food inflation pressures, the company said.

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Chart Busters: Top trading set-ups to watch out for Wednesday.

Chart Busters: Top trading set-ups to watch out for Wednesday.
by 5paisa Research Team 20/10/2021

On Tuesday, the benchmark index, Nifty has marked the fresh all-time high of 18604.45 level in the first 15-minutes of the trading session. Thereafter, the index was unable to move above its first 15-minutes candles high and witnessed correction. This resulted in the formation of a bearish belt hold like candlestick pattern on the daily chart. The Nifty Midcap 100 and Nifty Smallcap 100 has formed a sizeable bearish candle on the daily chart. The overall advance decline was tilted in the favour of the decliners. It hinted that the market participants prefer to book the profits at higher levels.

Here are the top trading set-ups to watch out for Wednesday.

JK Tyre & Industries: The stock has formed a high wave like candle as of August 06, 2021, and thereafter slid into the period of consolidation. During the period of consolidation, the stock has formed a symmetrical triangle pattern on the daily chart. On Tuesday, the stock has given a breakout of symmetrical triangle pattern along with above 50-days average volume. Post the breakout, the stock has marked the high of Rs 171.70 and thereafter it has witnessed minor profit booking at higher levels as selling pressure emerged in the market. However, since the last two trading sessions, the stock is outperforming the benchmark indices, which is a bullish sign. Currently, the stock is trading above its short and long-term moving averages. These averages are in rising mode. Interestingly, the daily RSI has also given symmetrical triangle pattern breakout, which is a positive sign. Recently, the momentum indicator daily MACD line has crossed above the signal line, which resulted in the histogram turning positive. On the daily timeframe, ADX is below 10 which suggests that the trend is yet to be developed. Directional indicators continue in the ‘buy’ mode as +DI continues above –DI. The technical evidence indicates a strong upside in the next couple of trading sessions. As per the measure rule of symmetrical triangle pattern the first target is placed at Rs 175 followed by Rs 184 level. On the downside, the 8-day EMA will act as strong support for the stock.

Strides Pharma Science: The stock has formed a bearish belt hold candlestick pattern as of January 08, 2021, and thereafter marked the sequence of lower tops and lower bottoms. From the high of Rs 999, the stock has lost nearly 44 per cent in just 153 trading sessions. After registering the low of Rs 562.55, the stock has witnessed counter-trend consolidation for the next 37 trading sessions. On Tuesday, the stock has given a breakdown of upward sloping trendline support along with relatively higher volume. Currently, the stock is displaying a bearish trend as it is trading below its short and long-term moving averages. These averages are in falling mode. The 200-DMA crossed over the 50-DMA 71 days ago, called the 'death crossover', which is a long term bearish signal. The weekly RSI is in a super bearish zone and it is in falling mode. The daily RSI has given a bearish crossover. The weekly MACD stays bearish as it is trading below its zero line and signal line. Considering all the above factors, the stock is likely to extend its southward journey. On the downside, the level of Rs 500 will act as minor support. While on the upside, the zone of Rs 587-591 will act as crucial resistance for the stock.
 

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Difficult quarter for cement industry? Which cement stocks can you still invest in?

by 5paisa Research Team 20/10/2021

Heavy rains and the festival season have led to a roll back of price hikes to pass on high input costs. In Q2 FY22, the all India cement prices have been estimated to be around Rs.369 per bag. The price roll backs and depleted fuel stocks have kept the operational efficiency of cement sector, at a check. There was already an assumption that due to the second Covid-19 wave and a longer than usual monsoon season, the cement volumes would be low. Due to the late arrival of monsoon this year, the July production grew by 22.5% MoM but as expected, the cement consumption slumped in August- September owing to floods, high construction costs, funding issues etc.  The continuous acceleration in crude oil prices and exhaustion of low cost fuel stocks, didn’t help and mostly squeezed the operational performance. The coal prices increased 223% YoY and 55% QoQ. In Q2 FY22 the average price of fuel, diesel, petrol and pet-coke stood at $158 a tonne. A higher diesel price in-turn lead to a higher freight cost. Even though the cement price manufacturers tried their best to pass on the increased price of the inputs, the monsoon along with other factors mentioned before, kept the cement prices in check. According to a report by Anand Rathi, South/East cement prices declined 2.1%/5.3% QoQ due to floods, sand unavailability and high cement supply pressures after a hike in prices in the first quarter of FY22. The North and West prices were up by 3.5% and 4.1% QoQ respectively and the Central regions were steady. According to an ICRA report the cement sector production is estimated to go up 12% to 330m tonnes in FY22. 
Few favoured stocks in the cement sector-

Ramco Cements
Ramco cements is one of southern India’s largest cement companies with a capacity of 19.4m tpa. It is also expanding its operations into the eastern part of India. The company is in the middle of an expansion at various sites to increase the capacity to 20.4m tonnes and also add in clinker capacity expansion, a WHRS and a railway sliding. A capital expenditure of Rs.35 billion is estimated and set aside for this. The strategic location of these factories help in the decrease of transportation cost and thus increase the operational efficiency. 
The ROE in FY21 stood at 14.4% and estimated to decline to 13.6% in FY22 due to the losses faced in this quarter and also due to the pandemic. 

Birla Corp
This company serves the North, East and Central parts of the country.  The reason this company appears in the favoured list is because of its low cost structure, capacity expansion and favourable mix of regions served. Due to the recent acquisitions of coal mines, the fuel costs will be relatively lower than others and lead to maximum optimization of efficiency and resources. In FY 21, the company also reduced its gross debt by Rs.2.36 billion. With this streak of profitability continuing, it can prove to be a good stock to hold in the portfolio for the long term. 

Orient Cements
The main markets of this company is Maharashtra (50%), Telangana/AP/ Karnataka (35%) and MP (10%). The main three markets provide a revenue of 85% to the company. The company has two cutting edge cement manufacturing plants- in Devapur and Chittapur, along with a clinker grinding unit at Jalgaon. It is also planning on constructing a 3m tonne unit in Devapur and a split GU in Maharashtra or AP by FY24. These expansions will help the company gain in volume produced as the market penetration increases.  In FY21, the company repaid Rs. 4.21 billion in debt. A good working capital management will also aid in funding these expansion projects, efficiently. 

Dalmia Bharat
Dalmia Bharat is the Fourth largest cement group with a presence in East, South and North-east India. They have a 33m tonnes capacity. The company has plans to expand its capacity to 48.5m tonnes by FY24. They have a target of 15% CAGR capacity growth. Their main aim is to expand in North and Central India- all India operations, in the next phase of expansions. Also, they are aiming at 14%-15% ROCE in the next few years. As of FY21, the ROCE stands at 8.4%. The company has great focus on expanding into green energy, divesting non-core assets and improving the return ratios as mentioned above. 

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