Monthly Stock Portfolio -June 2023

*Note: We are continuing ICICI Bank, Larsen & Toubro, Reliance, SBI and Ultratech Cement from last month i.e. May 2023.

Hero MotoCorp Ltd.:

Hero MotoCorp Limited (HMCL) holds the top position in the 2-wheeler industry, commanding a market share of 32.5%. It has a strong presence in both motorcycles and scooters, with market shares of approximately 47% and 7% respectively. Motorcycles are the primary revenue generator, accounting for around 93% of volumes, while scooters contribute around 7%. HMCL primarily operates within the domestic market, with about 97% of its volumes originating from India. Additionally, the company has expanded into the electric scooter segment through its brand VIDA. The early stage of recovery is promising, and rural areas are also experiencing growth. The upcoming wedding season demand is expected to provide further assistance. April 2023 and May 2023 have been favorable months, and the company anticipates a well-rounded growth for the year. Furthermore, HMCL has witnessed a steady improvement in its market share over the past 4-5 months. In the fourth quarter of FY23, the company increased its market share by 3% quarter-on-quarter QoQ and 2% YoY.

ICICI Bank Ltd:

ICICI Bank is the second largest private bank of India and has a leading position in other financial services businesses through its subsidiaries. The bank offers a wide range of banking and financial services including commercial banking and treasury operations to large set of customers viz. large and mid-corporates, MSME, agriculture and retail businesses. The bank is working with a widespread network of over 5,718 branches and 13,186 ATMs across country. The bank has delivered robust performance in March quarter of FY23. On consolidated front, the bank has reported 27.6% YoY growth in the Net Profit to Rs.9,853 cr. and 12.1% growth on QoQ basis. Net Interest Income increased 38.9% yearly and 7% quarterly to Rs 19,959 cr. Net Interest Margin grew to 4.90% in Q4FY23 from 4.65% in Q3FY23. Asset quality of the bank further improved in the quarter with Gross NPA to 2.81% and Net NPA to 0.48%.

Larsen & Toubro Ltd.:

 

Larsen & Toubro (L&T) holds the position of being the largest engineering and construction (E&C) company in India. It has diversified interests in EPC projects, hi-tech manufacturing, and various services. The company’s main operations encompass infrastructure, heavy engineering, defense engineering, power, hydrocarbon, and services business segments. In terms of consolidated revenue, the infrastructure segment contributes approximately 45%, followed by services with around 30%. L&T reported a strong order book of Rs.3,99,526 crore, suggesting good revenue visibility in coming years. In the next five years, the company will prioritize emerging portfolios such as green engineering, electrolyzer manufacturing, battery and cell manufacturing, data centers, and platforms (Sufin & Edutech). The company aims to enhance the balance sheet and improve return ratios through a focus on asset monetization. It plans to achieve this by maintaining a strong balance sheet, effectively managing working capital, and generating robust cash flows.

Lupin Ltd.:

Lupin has emerged as a prominent player in the generic pharmaceutical industry from India over the past ten years. The United States and India are the company’s largest markets, contributing approximately 37% and 35% respectively to its sales in FY2021. Lupin is involved in the development and commercialization of a diverse range of branded and generic formulations, biotechnology products, and active pharmaceutical ingredients (APIs). Its presence spans across more than 100 markets, including the US, India, South Africa, Asia Pacific (APAC), Latin America (LATAM), Europe, and the Middle East. In India, Lupin ranks among the top 10 companies and is recognized for its rapid growth. Lupin’s latest quarter results surpassed expectations, primarily due to a combination of factors. These include the Production Linked Incentive (PLI) grant, improved margin performance in the US market compared to the previous quarter, growth in other geographical regions, and a significant 46% increase in the API (Active Pharmaceutical Ingredient) business compared to the previous quarter.

Mahindra & Mahindra Ltd:

Mahindra & Mahindra (M&M) is the flagship company Mahindra Group, which operates in the automotive and tractor sectors. M&M stands out as the sole automotive company with a virtual presence in all segments. It holds the top position in the LCV market and is a prominent player in the UV and 3W markets. In addition to its strength in the automotive industry, M&M dominates the tractor segment with a substantial 40% market share. Company’s performance in the Q4FY23 was as expected, PAT was above expectations due to increased other income and reduced taxes. The backlog of orders for their SUV business continues to grow, reaching around 292,000 units compared to 266,000 units in the third quarter, driven by new product launches. In the tractor segment, M&M plans to increase its market share by introducing lightweight tractors, despite the overall industry expecting low growth in FY24.

Reliance Industries Ltd.:

Reliance Industries Limited (RIL) is India’s largest private sector conglomerate with diversified businesses including energy, petrochemicals, natural gas, telecommunication and retail. The company has evolved from the textile and polyester company to an integrated player across energy, metals, petrochemical, retail, telecommunication and entertainment. It majorly operates through following segments: Oil to Chemicals (O2C), Oil & Gas, Retail, Digital Services, Financial Services, and Others. Reliance Industries has beaten the broader estimated results in the March’23 quarter with 2% YoY increase in the revenue and 18% YoY increase in the Net profits. All businesses showed better performance other than oil to chemicals and financial services. The profitability outlook remains stable for O2C,  upstream and retail, while the Jio Financial Services listing (expected by October 23), commissioning of battery-PV gigafactories (in 1-2 years), and 5G deployment across country are some key positive triggers for the company.

Phoenix Mills Ltd.:

Phoenix Mills Limited (PML) is a prominent developer and operator of retail malls in India. They specialize in creating mixed-use properties that are primarily focused on retail. With their expertise, they have successfully developed over 17.5 million square feet of assets encompassing retail, commercial, hospitality, and residential spaces. In the fourth quarter of FY23, PML recorded a revenue of INR 7.3 billion, reflecting a significant 47% YoY growth and a 7% QoQ growth. The strong revenue growth was primarily fueled by a 45% year-on-year increase in the retail segment, reaching INR 4.9 billion. Additionally, the hospitality revenue witnessed an impressive surge, multiplying 2.5 times and reaching INR 1.4 billion during the quarter. The management anticipates that consumption within its retail portfolio will reach INR 115 billion, with INR 12 billion expected to come from the malls in Indore and Ahmedabad. As a result, a like-for-like (LFL) growth of 12.5% is projected.

State Bank of India Ltd:

State Bank of India Ltd. is India’s largest public sector bank operating from the last 40+ years with an extensive network of more than 21,000 branches, 55,000 ATMs in India and 232 international offices across 32 countries. It is a banking and financial services statutory body engaged in providing a wide range of products and services to individuals, commercial enterprises, large corporates, public bodies, and institutional customers. SBI has shown robust performance in the March 2023 quarter results. Net Interest Income of the bank rose by 29% YoY to Rs.40,393 Cr. while Net Profits of the bank increased hugely by 83% YoY at  Rs.16,695 Cr. Asset quality of the bank has also improved in Q4FY23 with GNPA ratio of 2.8% down by 40 bps QoQ and Net NPA of 0.7% compared to 0.8% in December quarter. Healthy loan growth momentum of the bank is expected to sustain led by retail and corporate loan growth.

Tata Power Ltd:

Tata Power is the largest privately-owned integrated power company in India. It operates in various sectors, including power generation with a capacity of 12,808 MW, with 69% coming from thermal sources and 31% from renewable sources. Additionally, Tata Power is involved in transmission, distribution (being the largest private sector player with 11.7 million customers), trading, and solar Engineering, Procurement, and Construction (EPC) services (being the largest solar EPC player in India). In the March quarter, Tata Power successfully reduced its net debt by ₹28,000 million, bringing the total debt down to ₹3,53,280 million. This reduction was primarily driven by the company’s strong operating performance, equity infusion from its strategic partner, and the release of working capital. The company has allocated approximately ₹2,500 crore for renewable energy projects, as part of its total consolidated capital expenditure of ₹6,500 crore. Tata Power’s renewable energy pipeline includes 2.6 GW of projects, and the order book stands at ₹17,000 crore, indicating a higher capital expenditure expected for FY’24.

 

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