Top Stocks to Buy and Watch Today

Mahindra CIE Automotive: Mahindra & Mahindra has sold 82,42,444 shares or 2.173% shareholding in associate company Mahindra CIE Automotive. The sale has been executed through a bulk deal window at a gross price of Rs 285 per share. After the sale, the shareholding of the company in Mahindra CIE has come down from 11.427% to 9.254%.
Bharat Heavy Electrical: The company has received order for setting up the 2x660 MW Talcher thermal power project Stage-III on EPC (engineering, procurement, and construction) basis from NTPC.
IFCI: The company said the board has approved the preferential issue of equity shares up to Rs 100 crore for FY23 to the Government of India. This is subject to the approval of the shareholders.
HG Infra Engineering: Subsidiary HG Khammam Devarapalle Pkg-1 Private Limited has received financial closure for the Greenfield highway project in Telangana, from the National Highways Authority of India.

Power Grid Corporation of India: The company has received board approval for the appointment of G Ravisankar, Director (Finance) as Chief Financial Officer (CFO).

Harsha Engineers makes a bumper listing with 36% premium

Harsha Engineers International clocked gains on listing as expected before rising further but most analysts advise booking profits amid market turmoil. The stock started off the first day's trade with a whopping 36 percent premium over issue price despite nervousness in equity markets. It climbed further six percent as the day progressed to take total gains to 43 percent over issue price.

Analysts said high premium at listing is justified with the IPO generating stronger than expected demand as qualified institutional investors' portion got subscribed over 178 times. Also, the ask price is fairly valued compared to industry peers.

"We recommend booking partial profits while remaining can be kept for the long term as the company is a comprehensive solution provider offering diversified suite of precision engineering products across geographies and end-user industries and has long-standing relationships with leading clientele," said Astha Jain, senior research analyst at Hem Securities.

Rajnath Yadav, research analyst at Choice Broking, urged investors to exit given the market volatility. Although Prashanth Tapse, senior vice president of research at Mehta Equities, sounded "very optimistic" on Harsha Engineers with its dominant position, he too advised booking profits in the current market scenario. "Risk takers can hold with a long-term perspective," he added.

Santosh Meena, head of research at Swastika Investmart, termed the company as a proxy play on India becoming a global manufacturing hub: "Those who applied for listing gains can maintain a stop loss at Rs 400. Our recommendation for investors is to hold the allotted shares and long-term investors can accumulate the stock on dips."

Harsha Engineers, which is the largest manufacturer of precision bearing cages in India, raised Rs 755 crore from the public issue with a strong 74.70 times subscription during September 14-16. Of the total issue size, Rs 455 crore was raised through fresh issuance which will be used in repayment of debts, capital expenditure towards the purchase of machinery, and existing production facilities.

Sensex was down 860.62 points or 1.48 percent at 57,238.30, and the Nifty down 285.50 points or 1.65 percent at 17041.80 following weak global cues. This is the fourth straight day of selling on Dalal Street.

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SRF: Building capacity to seize the opportunity

 1.  SRF: Building capacity to seize the opportunity
(SRF IN, Mkt Cap USD9.6b, CMP INR2623, TP INR2510, 4% Downside, Neutral)
 
 
In this report, we have analyzed SRF’s Packaging Films division. The company has aggressively expanded its capacity to capitalize on the impending opportunity in the Packaging Film industry, with a shift in consumer buying behavior. We have analyzed the Packaging Film industry and the competitive intensity of SRF. The key highlights are as follows:
-       Over the last seven years, SRF aggressively incurred a cumulative capex of INR32.3b on building its Packaging Film division, resulting in an industry leading revenue/EBIDTA CAGR of 21%/39%, followed by Polyplex Corporation (PPC) at 11%/24%.
-       Global demand for Packaging Films is expected to be driven by low penetration of packaged food, higher adaptability of Flexible Packaging, rising trend toward easily recyclable packaging solutions, innovative packaging, and e-commerce.
-       However, higher competitive intensity and additional capacity build up in the industry may pressurize industry profitability in the short term.
 
SRF aggressively scales up its Packaging division to capitalize on industry opportunities
-       Given the growing need for packaged products, the management has intensified its capex spend in the Packaging Film division since FY16, with a cumulative capex of INR32.3b in the last seven years (FY16-22), of which INR6.4b was incurred in FY22, taking its total capacity to 315,000MT as of Mar'22. It generated a cumulative EBITDA of INR40.5b over the same period, earning more than the capex incurred.
-       Capital employed for SRF's Packaging segment has clocked 19% CAGR over the last seven years (FY16-22), with the same standing at INR41.8b in FY22. It has generated a RoCE of 22.6% in FY22, which is much higher than its historical average of 18.1% over FY16-22.
-       Currently, SRF has six manufacturing units, including international units in South Africa, Thailand, and Hungary. Recently, SRF commissioned a second BOPP Film line and Metallizer at Indore (Madhya Pradesh), with a capacity of 60,000mtpa, taking its total capacity to 375,000MT.
-       The company is diversifying into the manufacture of aluminum foil and has allocated a capex of INR4.3b to set up a manufacturing facility in Madhya Pradesh.
-       Revenue/EBIDTA contribution from the SRF's Packaging Film division has risen to 38%/35% in FY22 from 28%/25% in FY16.
-       Over FY16-22, revenue/EBITDA for SRF's Packaging Films division grew the fastest (at a CAGR of 21%/39%) among domestic players, followed by PPC (a CAGR of 11%/24%), Uflex - UFLX (a CAGR of 11%/17%), Cosmo First (Erstwhile Cosmo Films) - CFLM (a CAGR of 9%/27%), and Jindal Poly Films - JDPF (a CAGR of -4%/11%).
 
Growing demand for packaged food to drive growth in the Flexible Packaging industry
-       As per CRISIL, the global Flexible Plastic Packaging market is estimated at USD194.4b in CY21 (of which, BOPP/BOPET is ~USD10b/~USD15.2b), and is expected to touch USD257.4b by CY27 (4.7% CAGR). The Indian Flexible Plastic Packaging market is estimated at USD19.3b in CY21 (of which, BOPP/BOPET is ~USD0.9b/~USD0.8b), which is expected to touch USD35.3b over CY27 (~10.2% CAGR).
-       Of the global demand for BOPP Films, 60-70% is used by the Food Packaging industry, which is expected to grow by 5.5% over FY21-26 (as per Mordor Intelligence). Share of demand from industrial/non-food packaging stands ~17%/18% of global demand for BOPP Films.
-       Out of the global demand for thick PET films, ~68% is used in the Electrical and Electronic industry. Around 75% of global thin PET film demand is used in the Packaging industry. As per Fortune Business Insights, the global Electrical and Electronic industry is projected to grow by 5.3% CAGR till FY27.
-       Going forward, we expect a robust domestic demand for Packaging Films, supported by: a) low packaged food penetration and rising personal disposable income, b) Investment in the organized Retail industry, c) change in the pack format to flexible from rigid, d) the use of easily recyclable and sustainable packaging solutions.
-       End-user industries like Pharmaceutical, Food Processing, and Personal Care is expanding with huge investments from large multinational corporations. This has resulted in the need for developing cheaper and sustainable packaging solutions, which is fueling expansion in the Packaging sector.
-       Factors like an increase in the working population that requires instant food solutions, with a higher shelf-life, have forced companies to come up with innovative and durable packaging solutions.
-       According to the Indian Institute of Packaging (IIP), consumption of packaging in India has increased by 200% in the past decade.
 
Innovative packaging and a rise in e-commerce to drive long-term demand
-       Innovative Packaging: Key players in the industry are developing innovative packages that are aimed at attracting customers. Several global FMCG companies are giving their packaging designs a fresher look, keeping in mind the fact that a 'good packaging protects your product, while great packaging protects your brand'.
-       e-commerce: The e-commerce and the packaged food segment received a big boost due to the COVID-19 pandemic as consumers preferred to buy hygienically packaged products. A rise in e-commerce can place an intense focus on increased packaging requirements.
-       Sustainable packaging solutions: Increasing awareness of sustainable packaging is a huge opportunity for the industry. Major industry players have partnered with some of the best global brands to offer rationalization of the packaging structure and recyclability solutions in categories such as biscuits, noodles, tea and coffee sachets, and soap wrapper. Industry continues to invest in R&D to offer sustainable solutions like Oxo Biodegradable Films for a better tomorrow and has increased the use of water-based coatings. With growing awareness, the requirement for ecofriendly and sustainable packaging is steadily on the rise.
 
Over-supply and sustainability are key challenges for the industry
-       Recently, several new manufacturing lines of BOPET have been commissioned, with many more expected to turn operational in the coming months (majorly in India and China). This may create a demand-supply imbalance, resulting in an oversupplied market, which, in turn, will exert pressure on profitability of industry players.
-       Macro headwinds in Europe are also dampening demand, which is expected to be short-lived. With the easing of headwinds in Europe, the demand-supply imbalance is expected to normalize in the medium term, driving growth in the global Packaging Film industry.
-       Also, certain headwinds such as high logistics cost and supply-chain constraints will continue to weigh over margin in the near-term.
-       Poor waste collection and the nascent stage of recycling facilities globally can be a significant threat to the industry in the long run, considering the growing demand for sustainability.

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Dalal Street Week Ahead | 10 key factors that will keep traders busy

 

Volatile trade is expected to continue the coming week, with focus on the repo rate, monthly F&O expiry, forex reserves, current account numbers, and the US GDP. Auto stocks may also be in focus ahead of September sales data.

Volatile markets closed lower the week ended September 23 following weak global cues, as rising fears of a recession due to aggressive policy tightening by the US Federal Reserve (the Fed), along with fresh escalation of tensions between Russia and Ukraine, dented sentiment.

Benchmark indices remained under pressure for the second consecutive session, with the BSE Sensex falling 742 points, or 1.26 percent, to 58,099, and the Nifty 50 declining more than 200 points, or 1.16 percent, to 17,327, dragged down by most sectors barring auto and FMCG.

The broader markets also traded in the negative terrain as the Nifty Midcap 100 index dropped 1.32 percent and the Smallcap 100 index dipped 2.3 percent.

Volatile and range bound trade is expected to continue the coming week too, with focus on RBI policy, monthly futures and options (F&O) expiry, and global cues — including the US GDP, experts said.

"We expect volatility to remain high as we have important events like the Reserve Bank of India (RBI) Monetary Policy Committee's (MPC) policy review meeting, and monthly derivatives expiry, scheduled during the week. Besides, prevailing pressure in global indices will continue to weigh on the sentiment," Ajit Mishra, VP – Research, at Religare Broking, said.

It seems the markets are finally giving in to the pressure of global indices, especially the US indices, and are likely to inch lower yet. Hence, participants should align their positions accordingly and maintain positions on both sides, Mishra said.

Here are 10 key factors that will keep traders busy next week:

1) RBI policy

The MPC’s decision on the interest rate is due on Friday, and the street will be closely watching this. With elevated inflation worries, the MPC is likely to hike the repo rate by 25-35 bps (basis points) . With the current scenario in forex markets, a 50 bps hike can't be ruled out, with no change in inflation and growth forecast for the full year, experts said, adding that the focus will also be on the Rupee which hit record lows last week.

``Inflation remains high at around 7 percent and is unlikely to come down any time soon. This means that a rate hike is given. The quantum is what the market is interested in,’’ Madan Sabnavis, Chief Economist at Bank of Baroda, said.

While a hike of 25-35 bps would have signalled that the RBI is confident that the worst of inflation is over, recent developments in the forex market could prompt a 50 bps hike to stay on track with other markets so as to retain investor interest, he added.

2) Rupee at record low

The Indian rupee weakened for the eighth consecutive session on Friday, losing 184 paisa in the period to end at a record closing low of Rs. 80.99 to the USD, while the weekly loss was 124 paisa, weighed down by a strong US currency, escalation of Ukraine-Russia tensions, and aggressive policy tightening by several central banks globally — including the Fed and the Bank of England (BoE) to control inflation. Weakness in equity markets also weighed on the currency.

The rupee registered a fresh all time low, at 81.23 to the dollar. The panic was created by the dollar index (DXY) which witnessed strong buying as a hedge against interest rate hikes and the inflation cycle, Jateen Trivedi, VP -  Research, at LKP Securities, said.

He thinks the rupee downtrend will continue as long as positive triggers are not witnessed from the inflation front. The next trigger for the rupee is the MPC policy meet next week, which should provide some respite to the fall of the rupee. Prior to the meet, the rupee could range between Rs. 80.50-81.55.

3) Dollar at multi-year high

Another key factor to focus on would be the US dollar index, which measures the US dollar value against a basket of the world's six leading currencies. The US dollar index has increased more than 7 percent in the last one-and-half-months, to hit a record high of 113 last Friday, the highest since May 2002. This has come in the wake of consistent interest rate hikes by the Fed and expectations of further aggressive tightening to bring inflation down to the target of 2 percent, even at the cost of some economic pain.

Several experts expect the reversal in interest rates to take place in 2024 now, instead of 2023 earlier, especially after the hawkish commentary by the Fed.

"We still believe that post the recent Fed dot plots (4.6 percent terminal rate through early 2023), the inflation print will likely disappoint (vis-à-vis other economies). We believe the Fed's commentary is aimed at keeping financial conditions tight, which therefore emphasises controlling inflation at the cost of growth. The Fed has thus guided the markets to stop reacting to any softer economic numbers," Emkay Global said in a note.

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