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Top Trading Ideas: Lux Industries

Top Trading Ideas: Lux Industries
by 5paisa Research Team 17/11/2021

The company recently posted its quarterly numbers which contained double-digit growth on every front.

Lux Industries Limited is engaged in the business of manufacturing and sale of knitwear. Its brands include Lux Cozi, Lux Venus, Lux Karishma, Lux Touch, Lux Bigshot and Lux Classic. The clothing company is a midcap company with a market cap of Rs. 13,848 crore. The company has strong financials and has reported higher than industry revenue growth and net income. Not only that, but the company has also witnessed an increase in market share from 2.36% to 5.12% in the last five years. This certainly shows that the company is on the right track with its business performance and is quite evident with its movement in the stock price.

The stock has performed exceptionally well by delivering awesome returns of 178% YTD. On a YoY basis, the stock has gained 205% and it has also gained 14.53% in three months. This shows that the stock is in no mood to stop its momentum. Lux industries recently posted its quarterly numbers which contained double-digit growth on every front. Strong management commentary regarding their business boosted investors’ confidence.

On Wednesday, the stock has logged a fresh all-time and is currently trading 8.82% up at Rs 4594.

The stock trades well above its key moving averages and RSI is going strong at 85. Huge volumes have been recorded in the last couple of days indicating higher institutional activity. The positive directional movement (+DMI) crossed the -DMI a few trading sessions back and currently it is well above it. It shows strong strength. The above parameters suggest that the stock is in super bullish mode and shows no signs of stopping as it heads into uncharted territory.

Considering the performance Lux Industries has shown, we can expect the stock to continue its momentum on the higher side. Traders can expect some good returns for the short to medium term as the technical analysis validate our point.

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RHI Magnesita India gaining momentum post strong Q2 results

RHI Magnesita India gaining momentum post strong Q2 results
by 5paisa Research Team 17/11/2021

RHI Magnesita India zoomed 5% today with positive results and a capacity expansion plan from the company. 

RHI Magnestia India Ltd is in the business of manufacturing and marketing special refractory products, systems and services to the steel industry in India and Globally. It is a market leader for special refractories in India and has many global customers for its international quality products.

Business model

Revenue Breakup: Presently, the company earns 74% of its revenues from the manufacturing of refractories and 22% from the trading of refractory items.

Dependent Industries: Demand for refractory is primarily dependent on the steel industry, which accounts for 75% of total sales. Refractory products are also used in glass, cement, non-ferrous, petrochemicals industries. 

Manufacturing Facilities: The company has 2 manufacturing facilities located in Bhiwadi, Rajasthan and Tangi, Odisha, Vizag, Andhra for its manufacturing operations.

Today, the parent company has announced to make India a research and development hub, and a manufacturing hub. They have established a new R&D centre in Rajasthan. They have allocated Rs 400 crore to increase the production capacity of its existing plants, planning for brownfield expansion and automation of these facilities.  

Financials

Recent: Two days back, they have reported strong Q2FY22 sales growth of 25%YoY stood at Rs 432 crore beating the estimates, with domestic steel production jumping 18% YoY. This was led by volume growth of 19% and a 6% price hike.

EBITDA grew 33% YoY stood at Rs 66 crore, however as EBITDA margin stood at 15.16% rose 95bps YoY though down 213bps QoQ, with inflationary cost pressures. Net profit grew 34% YoY stood at Rs 43 crore, however, the margin stood at 9.96% rose 60bps YoY.

5-year history: In the last five years from FY16 to FY21, revenue has grown at a CAGR of 24% and profit has grown at a CAGR of 20% which shows the steep growth of the company. The operating margin is consistent and stable in the range of 15% to 20% for the last 5 years.

Brokerage outlook

With capacity expansion (underway) aimed at capturing strong domestic and exports opportunity, Edelweiss estimate RHIM would log CAGRs of 19% in sales and 21% in PAT over FY21-23 with RoCE expansion of 310bps to 26.5%, with a target price of Rs 438 in next 12 months.

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Superstar stocks for tomorrow!

Superstar stocks for tomorrow!
by 5paisa Research Team 17/11/2021

Looking for stocks that could deliver good returns till tomorrow, here are the superstar stocks for tomorrow selected on a three-factor model.

Many of the time market participants see a stock opening with a gap-up and wish they should have bought this superstar stock a day before to take advantage of the gap-up move. To fulfil this wish, we have come out with a unique system, which would help us to get the list of candidates that can be probable superstar stocks for tomorrow.

The superstock stocks for tomorrow selected are based on a three-factor prudent model. The first important factor for this model is price, the second key factor is the pattern, and last but not least is the combination of momentum with volume. If a stock passes all these filters it would flash in our system and as a result, it will help traders to spot the superstar stocks for tomorrow at the right time!

Here are the superstar stocks for tomorrow.

PVR Limited: PVR was taking support at its 20-DMA for four trading sessions before shooting up 3.31% on Thursday outperforming broader indices. Volume recorded today is 1.5 times the previous day’s volume. It is nearing its 52-week high which is at 1840, and we could possibly see a breakout from hereon. The stock traded firmly in green throughout the day and RSI is showing strength on hourly, daily, and weekly time frame. PVR witnessed huge buying in the latter half of the session. The stock should be the trader’s watchlist given the potential it has for the coming days.

GlaxoSmithKline Pharmaceuticals Limited: The stock is showing good strength for a few days. It is up almost 13% in this month out of which it gained 4.72% today. The stock is trading firmly in green throughout the day and witnessed above average volumes indicating active participation of the clients. The RSI is in bullish territory and the stock looks attractive for BTST trade.

Home First Finance Company: The stock rallied 4.61% on the trading session of Thursday, as it outperformed the benchmark indices. The stock traded in a narrow range of 720-750 entire November before breaking out. It is already trading at its all-time high at 775. RSI shows good strength in every time frame. The above-average volume witnessed since a few trading sessions indicate that the momentum will stay strong for the coming days, and one could keep this stock on their watchlist.

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Star Health and Allied Insurance IPO- Largest standalone health insurance company plans to raise over Rs.2000 crore

by 5paisa Research Team 17/11/2021

Star Health Insurance, founded in 2006, is the first standalone health insurance (SAHI) company in India. Since then, the company has become the largest SAHI company in the entire insurance market of the country with a Gross Written Premium (GWP) of Rs.9,348.95 crores in FY21. They have a pan-India network of 737 health insurance branches, spread across 26 states and 4 union territories. Star Health Insurance’s product suite has insured 20.5 million lives in FY21.

The IPO comprises of a fresh issue worth Rs.20,000 million and an offer for sale up to 60,104,677 equity shares. The promoters of this issue are Safecorp Investments India LLP, WestBridge AFI I and Rakesh Jhunjhunwala. The company has close relations with numerous banks across India. The book running lead managers to the IPO are CLSA India Pvt Ltd, Credit Suisse Securities (India) Pvt Ltd, and Jefferies India Pvt Ltd. The co- book running lead managers are IIFL Securities Ltd, Ambit Pvt ltd, DAM Capital Advisors Ltd and SBI Capital Markets Ltd.

The company plans to use the proceeds from the issue to enhance and augment the capital base of the company in FY22.

According to a CRISIL research, the Indian health insurance market is still in a nascent phase and still continues to be one of the most under penetrated markets, globally. Health insurance premiums have grown at a CAGR of 19% in the last six Financial years. Compared to the 21% CAGR of private companies during FY15-FY21, the premium of SAHI witnessed a CAGR of 39%.

Financials: (In Rs mn)

PARTICULARS FY21 FY20 FY19
Equity Share Capital 5,480.87 4906.38 4,555.67
Total Borrowings  2,500 2,500 2,500
Net Worth 34,846.44 16,286.21 12,156.93

 

PARTICULARS FY21 FY20 FY19
Total Income 75,687.57 55,549.61 43,370.06
PAT (8,255.81) 2,680.02 1,282.26
EPS (In Rs/share) (16.54) 5.59 2.81

Star Health Insurance is the largest private company in the Indian health insurance sector and accounts for 16% market share in FY21. And, Star Health is the only SAHI in the top 5 health insurance companies. The company witnessed an increase of 4.9% in market share, between FY18 and FY21. The company accounts for 31% of the gross premiums collected by the retail health insurance industry in FY21. This premium was 3 times any of its close competitors.

Star Health has a network of around 350,000 agents in India as of March,2020, which is followed by CARE which has 125,000 agents as of the same date. In order to judge a non-life insurance company, combined ratio is an important measure. Anything above 100% indicates that the company is spending more than net premium earned. In FY20, Star Health had the lowest combined ratio.

The company also was the only SAHI to have a healthy ROE in FY20, having more than 10% ROE in the last three fiscal years. The company also has the maximum number of offices in India.

Strengths:

1. Star Health Insurance offers a large variety of products and services which allows the company to grab a larger market share and customer base

2. With the recent pandemic, many young professionals and people are getting read to invest in insurances. Due to the huge network and general goodwill in the market, Star Health Insurance has a higher probability of capturing these new customers

Weakness:

The plans and policies that are provided by the company are very common and almost all of its competitors provide the same policies. There is a stagnancy in innovation in the company, which can become a problem in the long run.

Key points:

1. Has an active network of about 9,500 hospitals

2. The company sold nearly 43 lakh insurance policies in the period between April 2020 and November 2020

3. Promoter, Rakesh Jhunjhunwala will not be selling his shares in the OFS, according to the DRHP

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Wellness Forever Medicare IPO- Pharmacy chain files for Rs.1600 crore IPO

by 5paisa Research Team 17/11/2021

The Adar Poonawalla backed pharmacy giant- Wellness Forever Medicare, filed a Draft Red Herring Prospectus with SEBI on October 1, 2021. The company plans to raise between Rs.1,500-Rs.1,600 crore. This IPO comprises of a fresh issue worth Rs.400 crore and an offer for sale of up to 16,044,709 equity shares. This Mumbai based pharmacy chain is the second pharmacy chain to file for an IPO after MedPlus, based in Hyderabad, filed its DRHP in August. The book running lead managers to this issue are IIFL Securities Ltd, Ambit Private Ltd, DAM Capital Advisors Ltd and HDFC Bank Limited.

Wellness Forever Medicare was founded in 2008 by three veterans in the pharmaceutical industry- Ashraf Biran, Gulshan Bakhtiani and Mohan Chavan. The company has 236 stores across 23 cities in Maharashtra, Karnataka and Goa. They have a registered customer base of 6.7 million customers as of June 31, 2021. They aim to increase their market penetration in the Tier 2 and Tier 3 cities and also actively participate in the e-commerce segment which has an estimated growth CAGR of 45%.

As a part of the OFS, Ashraf Biran and Gulshan Bakhtiani are offloading around 7,20,000 equity shares each, Mohan Chavan is offloading approximately 1,20,000 equity shares and an approximate 144.85 lakh shares are being offloaded by the other shareholders.

The Indian pharmacy retail sector has been growing at a very healthy rate because of the increase in healthcare expenditure and consumer base. India’s pharmaceutical industry is the third largest in the world by volume and 14th largest by value. The market value of the Indian pharmaceutical market is Rs.150,000 crore in FY20.

Pharmacy chains have 8.5% of the total pharmacy retail market in India in FY 2021.

The company plans on utilizing the proceeds from the issue for-

  • Rs. 70.20 crore as funding to set up new outlets

  • Rs.100 crore to be set aside for repayment or prepayment of debt

  • Rs.121.90 crore to fund working capital expenses

Wellness Forever Medicare’s revenue rose by 7% from Rs.863.25 crore in FY20 to Rs.924.02 crore in FY21. EBITDA decreased from Rs.879.16 million in FY20 to Rs.761.76 million in FY21. The EBITDA margin fell from 10.18% to 8.24% in the same period. Losses increased from Rs.53.21 million in FY20 to Rs.348.47 million in FY21. The total borrowings as per the balance sheet stand at Rs.1,023 million in FY21.

The company opened 31, 35 and 50 stores in FY19, FY20 and FY21 respectively. Out of these, 115 stores are operational as of June 30,2021. An approximate Rs.456.54 million is estimated as the cost of all the stores opened by the company in the last three fiscal years. Wellness Forever Medicare has a goal of opening 180 stores by FY24.

Strengths:

1. The company has a high inventory turnover which reduces the holding cost which in turn increases the working capital efficiency

2. Customer loyalty programs and great customer service

3. Due to vertical integration and economies of scale, they have a high gross margin

4. Discounts for customers which make the store more attractive to more people

5. E-commerce presence that provides auto refills, discounts and a wide range of products

Weaknesses:

1. They have a very limited presence, concentrated mainly in Maharashtra

2. E-commerce segment lacks in profitability to date

3. The company has difficulty in catering to the Tier 2 cities due to higher turnaround time

Opportunities:

1. The modern pharmacy retail is expected to have a growth CAGR of 25% in next 5 years, growing significantly faster than many other segments

2. The brick and mortar stores have a certain edge over e-pharmacy in adopting an omni-channel approach because they have already established network of stores which can supply the localities and act as a place to stock more inventory

Threats:

1. As the company is not very technologically advanced, there is always a chance that mismanagement of the inventory could occur which would in turn lead to a low fulfillment rate

2. High amount of competition from established e-pharmacy companies

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These low-priced stocks were locked in the upper circuit on Wednesday

These low-priced stocks were locked in the upper circuit on Wednesday.
by 5paisa Research Team 17/11/2021

Nifty Smallcap 100 index is trading at 11,260 levels, up by almost 0.50% from yesterday’s closing.

Indian headline equity indices are continuing yesterday’s correction streak.

At 2:37 pm on Wednesday, Nifty 50 and Sensex are down by 0.24% and 0.20% respectively. Similarly, Bank Nifty is down by 170 points i.e. 0.45%. Nifty Smallcap 100 index is trading at 11,260 levels, up by almost 0.50% from yesterday’s closing. Birlasoft, Lux Industries, Tanla Platforms and Trident are among the small-cap top gainers.

Following is the list of low-priced stocks that were locked in the upper circuit on Wednesday. Keep a close eye on these counters for the upcoming sessions.

Sr No  

Stock  

LTP  

Price Change (%)  

Trident  

43.05 

3i Infotech  

81.05 

4.99 

Tata Tele  

76.25 

4.96 

Sintex PlasticsTechnology  

11 

4.76 

Megasoft  

27.65 

4.93 

Goldstone Technology  

55.15 

4.95 

SPML Infra  

14.05 

4.85 

Indowind Energy  

15 

4.9 

Shah Alloys  

32.8 

4.96 

10 

Cinevista Ltd  

19.05 

4.96 

Saboo Sodium Chloro Limited has announced that it has received an unsolicited acquisition LOI (letter-of-intent) for a 100% sale of Samskara Resort and Spa. The relevant LOI is dated 8 November 2021 and is from a 30-year-old prominent Swiss RE investment firm. Negotiations are taking place in Jaipur. A sale decision, if reached, will value Samskara Resort and Spa in the range of Rs 100-150 crore. The figure will be inclusive of debt and associated trademarks and intellectual property.

The Saboo Group traces its roots back to the late 1940s when it pioneered the manufacturing of emery stones and flour mills for the first time in India. Today the Saboo group of industries is dominating the field of emery stones, flour mills and grinding machines in the entire Indian market. Apart from these products, the group is also actively involved in the manufacturing and exports of abrasives and minerals, food products i.e. salt, spices etc., solar energy, guar gum and the hospitality Industry. The Saboo group of companies is situated in the state of Rajasthan and have offices at Nawa city and Jaipur.

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