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Craftsman Automation still a good buy? Brokerage houses predict 40.87% upside, price target of Rs.3055

by 5paisa Research Team 20/10/2021

Craftsman Automation, founded in 1986 in Coimbatore, has become one of the leading names in precision manufacturing in various fields and engineering organization.

It is expected that the demand and sales of medium and heavy commercial vehicles along with two-wheeler will increase in FY22 as there is an upward trend seen in the economic activity as well as easing of lock-down rules and this would in-turn lead to a strong economic growth. The M& HCV are estimated to show a turn for the better in FY23. Even though the scarcity of semiconductors still pose a problem and creates challenges for the passenger car productions, the slack will be taken up by growth in the other areas mentioned. Analysts expect a growth of 17% in FY22 and 24% in FY23.

Key points in Q2 report:

1. The Stellantis order won by Craftsman worth Rs.2 billion will begin at the end of FY23.

2. The company also won a first of its kind order for tractor transmissions.

3. A decision to replace machines has been made which will help in n increasing productivity and efficiency.

The Net Income of the company saw a drastic increase from Rs.367 million in FY20 to Rs.968 million in FY21. According to analysts, this uptrend is going to continue and estimated Net Income of Rs.1575 million has been estimated for FY22.

The amount of profits are also estimated to increase given the investment in newer machines which will lead to higher and more efficient productivity, and also duet to the better storage solutions implemented by the company.

A revenue growth of 54.03% was reported in the second quarter of FY22 and the revenue was 31.21% higher than the June quarter of FY22. The highest revenues were recorded in the Automotive Powertrain vertical, standing at Rs.292 crore. The PAT also rose by 118.83% YoY compared to the quarter ended September 2020.

The Earnings per share value of the company stood at Rs.23.65 as compared to Rs.11.35 in the same quarter of FY21 and RS.11.39 in the previous quarter of FY22, leading to a 107.64% QoQ uptrend. The inventory days have shown an increasing trend since FY19 and a further increase is expected by 11.67%. A higher inventory days value shows how that the company is not able to turn their inventory into sales at the rate at which it was before. This can be attributed to the pandemic and shortage of supplies currently.

Mutual funds in totality have increased their holdings from 7.64% to 8.24% in Q2 of FY22 and so have the FII and FPI.

A 74% growth in earnings as well as a 20% Revenue CAGR for FY21-23 has been predicted by analysts.

A BUY call has been given for the share of this company by many brokerage firms with the price target set at Rs.3055.

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Difficult quarter for Rallis India, profit declines 31.4% QoQ

by 5paisa Research Team 20/10/2021

Rallis India, a subsidiary of Tata Chemicals, focuses on the Farm essentials vertical. Rallis is one of the top crop care companies in the country and covers more than 80% of India’s districts.

According to the Q2 FY21 results, the company reported a 32.53% YoY decline in consolidated PAT to Rs.564 million from the corresponding quarter, last year; and a 31.4% decline QoQ.

A very small growth of 0.4% was shown in the Revenue, standing at Rs.7278 million from Rs.7250 million in Q2 FY21. The EBITDA Margin fell by 420bps, from 16.1% to 12.1% which indicates that Rallis is not able to pass on the increasing costs it is facing to its customers by proportionately increasing the prices. The employee costs and other expenses have shown an increase of 13.8% and 8.4% YoY, respectively.

The shortcomings in the report can be mainly attributed to the fact that the un-seasonal and late monsoons this year, destroyed crop quality and was also not in the least favorable to agri input companies in this quarter. The seed business saw a sharp decline of 65% due to the changing patterns of cropping all over the country. The raw material problems are proving to be an additional burden on the company and preventing optimum operational efficiency and growth.

Looking on the positive side, during this September ending quarter, the company has launched three new products under the heads- crop protection and crop nutrition. Also, the Ankleshwar project of debottlenecking for two A.Is was commissioned.

After the Q2 results were announced, the share price of the company dipped sharply by 7.12% on the National Stock Exchange. It opened at Rs.287 which is at a high discount to its closing price on 19th October i.e. Rs.304.

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Havells Q2 profit slips on high input costs but sales up 31%

by 5paisa Research Team 20/10/2021

Havells India Ltd, one of the largest electrical equipment and home appliance makers in the country, posted a decline in its earnings for the quarter ended September 30 even though its revenue shot up during the period.

The company said on Wednesday its consolidated net profit for the second quarter fell 7% to Rs 302 crore from Rs 326 crore in the quarter ended September 30, 2020.

This was largely due to a sharp rise in input costs that rose more than 50% during the quarter and comprised two-thirds of total expenses as against 60% in the past.

The company’s revenue from operations, however, shot up 31.6% to Rs 3,238 crore during the second quarter.

Revenue was driven by a 46% rise in sales of its mainstay cables business. Sales from the cables business, which comprises a third of total business, increased to Rs 1,144 crore from Rs 784.67 crore a year earlier.

The Lloyd Consumer business unit, which it had acquired to gain entry into consumer electrical equipment and larger appliances sector, sported 23.5% growth over the year-ago period. The Lloyd unit, which was making nominal profits previously, again slipped into the red last quarter.

Shares of Havells declined 1.35% to close at Rs 1,405.35 apiece on the BSE in a weak Mumbai market on Wednesday. Still, the shares have doubled over the past year. The company declared results after markets closed.

Havells Q2: Other key highlights

1) Sales from the lighting and fixtures business grew 32% year-on-year.

2) Sales from the electrical consumer durables unit, which comprises products like fans, rose 26% to Rs 730 crore.

3) The switchgears business recorded an increase of 21% in sales to Rs 448 crore during the quarter.

4) The electrical consumer durables wing, which is one of the more profitable units, and the cables and switchgears division posted modest growth in profit.

5) The lighting business, in contrast, posted a 47% increase in segment profit.

Havells' omnichannel strategy, rising costs

The company said that it has clocked healthy growth across business verticals and that its omnichannel strategy including online, rural, modern trade and enterprise business penetration is playing out well, adding new customers and broad-basing demand channels.

Havells also noted that there has been increased conversion in projects and the B2B segment.

On the flip side, it pointed out the increase in commodity cost remains unabated with severe escalation in a rather short period.

“Price increases have been staggered creating a lag effect on margins. However, we maintain a positive outlook on demand growth which could support margin as well,” it added.

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Monetary policy normalization in progress

20/10/2021

Overall monetary policy was in line expecting no change in repo rate which is at 4%, and accommodative stance unchanged. RBI has reduced its inflation forecast to 5.3% for FY22 which was 5.7% earlier and expects it to be even lower for Q2 & Q3 of FY22. The inflationary expectations for 3 months as well as 1 year ahead have also fallen. RBI kept the FY22 GDP growth forecast unchanged at 9.5%, with Q2 and Q3 GDP growth numbers being revised up, focusing optimism about investment and consumer sentiment revival. The RBI has begun its gradual liquidity normalization process by the temporary stoppage of the G-Sap -2.0 program with the end of on-tap TLTRO liquidity the scheme by Dec21and reducing surplus liquidity by ~INR 6trn till Dec using VRRR and may keep surplus liquidity at ~INR 2-3trn. On the other hand, the 
US Fed is likely to delay their asset tapering announcement to Dec21 from the earlier anticipated Nov21with consecutive non-farm payroll data for the past 2 months averaging ~ 280k. This may give the RBI more space to adjust the system liquidity and push up the lower end of the yield curve by a) Increasing the reverse repo rate by 40 bps in FY22 to normalize the monetary policy corridor to 25bps; and b) 14-day VRRR auctions (and a possible 28-day VRRR later). Given the lower inflation trajectory for FY22, we 
expect the repo rate to be increased only in 1QFY23 as growth is likely to normalize and be broad-based by then. 

Business confidence improves steadily and reaches the highest since 2009 


RBI's business assessment index improved from 89.7 in 1Q to 116.7 in 2Q. This is higher than the pre-Covid level and achieved an LTA of 108 which is the highest since the start of the index in 2009. The expectations index has improved from 124.1 in 2Q to 135.7 in 3Q. This is also significantly higher than providing an LTA of 116 and the highest level since the start of the index in 2009. RBI's current consumer base has also improved from 48.6 in Jul21 to 57.7 in Sep21. But this is significantly lower than LTA of 9). The future expectations have improved from 104 to 107 during the same time when compared to the LTA of 116. The improved sentiments are in sync with the pickup in high-frequency indicators like railway freight traffic, cement production, electricity demand, e-way bills, and GST collection. 

GFCF likely to revive, robust export growth, resilient agriculture 

The FY22 GDP growth forecast is constant at 9.5%, Q2FY22 growth increased by 60 bps to 7.9%, and also the Q3FY22 GDP increased by 50 bps to 6.8%. RBI expects a CAPEX recovery cycle in semi-annual monetary policy statements due to the following reasons. Improvement in the interest coverage ratio of manufacturing units, PLI nurturing private investment, mega schemes like National Infrastructure Plan & National Monetization Plan to increase infrastructure spending; and Central governments assistance to remain robust likely to reach $400bn in FY22 as the mobility restrictions subside, export of labor-intensive sectors (apparel, leather products, tea) is likely to rise. In the agricultural sector, the Kharif foodgrain production in FY22 grew by 0.6% which was helped by good monsoon rainfall and increased MSP prices. Rabi production is likely to grow as reservoir levels are currently at 80% of the full reservoir level.GDP growth for FY22 and FY23 is likely to be at 9.8% and 9.4%, respectively. In Q2FY22 and Q3FY22 the economy is likely to grow by 6.7% and 7.7%, respectively. The downside risks to growth are supply constraints semiconductor and coal shortage, high cost of raw materials, uncertainty around COVID. 

RBI’s steps for Liquidity Normalisation 

The liquidity normalization process had started in Aug21. This was further scaled up in the Oct21 monetary policy meeting with the announcement of the fortnightly calendar for the 14-day VRRR auctions till the 1st week of Dec21. Apart from this the RBI also temporarily halted the G-Sap -2.0 program and announced the end of the On-tap TLTRO liquidity scheme by Dec21. All these measures may reduce the surplus liquidity in the system by ~INR 6trillion till Dec along with maintaining surplus liquidity at ~INR 2-3trillion. The RBI also proposed an introduction of the 28-day VRRR in the future. Starting with a short tenure (14-day VRRR) and moving forward with instruments with longer tenure will push up the cost of liquidity gradually. The RBI reiterated that policy normalization will be a gradual process based on evolving domestic conditions. It does not make any drastic change immediately as the situation is under control. 

Repo rates to hike in early Q1FY23 

From the policy stance and commentary which is provided later, it is clear that growth remains the top priority of the RBI at the present juncture. RBI is following the best practices of the other economies step-by-step with stoppage of measures like Quantitative Easing by halting G-SAP 2 temporarily, by normalization of liquidity (RBI auction of VRRR), and finally by normalization of policies. We expect a delay in the US Fed asset tapering announcement to Dec21 which has been anticipated in Nov21 due to low non-farm payroll data for the past 2 months averaging 280k, which will give the RBI more headroom to adjust the system liquidity before normalizing the policy rates. An increase in the reverse repo rate by 40 bps in FY22 to normalize the monetary policy corridor to 25bps is expected. Any hike in the repo rate is only likely in early 1QFY23 as growth is likely to normalize and be broad-based by 1QFY23.

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Penny Stock Update: These Penny Stocks gained up to 14.29% on Wednesday.

Penny Stock Update: These Penny Stocks gained up to 14.29% on Wednesday.
by 5paisa Research Team 20/10/2021

On Wednesday, market closed in red for the second day in a row, the BSE Telecom is the top gainer while Consumer Durable is the top loser.

After a negative closing on Tuesday (19th October 2021), the market continued to close deep down in red in today's trade as well. Today all the indices were down except one sectoral index which closed with a green mark. Nifty 50 continues to fall and was down 152.15 points i.e., 0.83%. Besides, BSE SENSEX also continued the downward trend, which is down by 456.09 points i.e., 0.74%. Stocks that dragged the Nifty 50 down are Reliance, Bajaj Finserv, Infosys, HDFC Bank and Titan Company. Reliance has pulled the Nifty 50 Index by almost 30 points and closed at Rs 2700.40, and other stocks also pulled down the index in double digits. Moreover, stocks dragging the SENSEX were Reliance, Infosys, HDFC Bank, Titan Company and Bajaj Finserv.

BSE Telecom is the only sectoral index that closed positive in today’s trade. Telecom stocks such as Idea, Bharti Airtel, Sterlite Technologies and Indus Towers closed in green. Idea and Bharti Airtel closed up by 6.40% at Rs 10.70 and 4.03% at Rs 708.45 respectively.

BSE Consumer Durables, SME IPO, CPSE and S&P BSE IPO are top losers in today’s trade. Consumer Durables tripped down by 3.36%. Consumer Durables stocks such as Dixon Technologies, Titan, VIP Industries were top losers pulling the index down in today’s trade. Dixon Technology is down by 8.77% at Rs 5214.30. The SME IPO is trading in red since Monday, today it is down by 3.15%.

Here is the list of penny stock that gained up to 15% on a closing basis on Wednesday 20th October 2021:

Sr No.  

Stock  

LTP   

Price Gain%  

1.  

Raj Rayon Industries Ltd  

0.4  

14.29  

2.  

Zenith Steel Pipes & Industries Ltd  

0.95  

5.56  

3.  

Gayatri Highways Ltd  

1  

5.26  

4.  

Eurotex Industries And Exports Ltd  

14.70  

5.00  

5.  

Digjam Ltd  

19  

4.97  

6.  

Hotel Rugby Ltd

3.20  

4.92  

7.  

Parenteral Drugs (India) Ltd  

3.20  

4.92  

8.  

Dish TV India Ltd

18.15  

4.91  

9.  

Rohit Ferro-Tech Ltd

12.85  

4.90  

10.  

Standard Industries Ltd

16.15  

4.87  

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

Chart Busters: Top trading set-ups to watch out for Thursday.
by 5paisa Research Team 21/10/2021

The benchmark index, Nifty has continued its downward journey on Wednesday as well. The index has lost 152 points or 0.83% and it has slipped below the 18300 mark. In the last two trading sessions, the Nifty index has lost nearly 2%. While Nifty Midcap 100 and Nifty Smallcap 100 has lost over 5% in the last two trading sessions. For the second consecutive trading session, the overall advance-decline was largely tilted in the favour of the decliners. The India VIX has surged by over 5%.

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

Indian Bank: The stock has given a breakout of Ascending triangle pattern as of October 12, 2021, and thereafter the stock has surged by over 12% in just four trading sessions. After registering the high of Rs 174.80, the stock has witnessed correction from higher levels as selling pressure emerged in the market. On Wednesday, the stock has taken support near the breakout point and recovered almost 6.44% from the day's low. The price action formed a hammer candle on the daily chart. The formation of the hammer pattern happens near the support zone, which indicates further bullish momentum in the stock. Currently, the stock is trading above its short and long-term moving averages. These averages are in a rising trajectory, which is a bullish sign. The momentum indicators and oscillators are also supporting the overall bullish structure. The leading indicator, RSI is in bullish territory. The daily MACD stays bullish as it is trading above its zero line and signal line. The MACD histogram is suggesting a pickup in upward momentum. Going ahead, the retesting of the breakout level gives an opportunity to build a fresh long position. On the downside, today's low of Rs 153.55 will act as strong support for the stock. While on the upside, the prior swing high of Rs 174.80 will act as minor resistance for the stock.

Polycab India: On Wednesday, the stock has given a neckline breakdown of Adam and Adam double top pattern. This breakdown was supported by above 50-days average volume. Additionally, the stock has formed three black crows candlestick pattern. The three black crows candlestick pattern is a bearish reversal candlestick pattern. This pattern occurs when bears overtake the bulls during three consecutive trading sessions. Currently, the stock is trading below its 20-day EMA. The 20-day EMA has started edging lower and the rising angle of 50-day EMA is slowed down considerably. Recently, the price has made a parallel high, but most of the indicators, including the RSI, have not reached the prior highs. The CCI has also supported the same phenomenon. This indicates limited upside. The fast stochastic is trading below its slow stochastic line. Technically, all the factors are currently aligned in support of the bears. Hence, we would advise the traders to be with a bearish bias. In case, the stock sustains below its 50-day EMA then it may touch the level of Rs 2229, followed by Rs 2130 level. On the upside, the 20-day EMA will act as crucial resistance for the stock.

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