WEEKLY TRENDSETTER (August 12th,2022)
| 2022 | July 29 | Aug 5 | Ch % |
| NIFTY | 17158 | 17397 | 1.14 |
| BANK NIFTY | 37491 | 37920 | 1.39 |
| USD/INR | 79.30 | 79.24 | -0.08 |
MARKET REVIEW–The week was one of consolidation though the broader market was positive and several small cap and mid cap counters regained lost ground of the previous months. The RBI verdict was stiff as a 50-bps rate hike was announced. The market’s reaction was muted as it was more or less on expected lines. The coming quarters will be interesting to watch as crude prices were showing considerable weakness which could tame inflation along with some favourable monsoon for the next 2 months as well.
BACK TO RESULTS (June qtr.)
The June quarter results are getting announced. The small and mid-cap segments are the ones where some interesting results could be looked at. This week let’s explore some of them:
Rs in cr, Bracket indicates ch in % against June,21 quarter.
| Company | Revenue | Net profit |
| Punjab Alkali | 186(+147) | 46.8(+426) |
| Nelcast | 295.2(+61) | 7.8(+284) |
| Cera Sanitary | 397(+74) | 39.9(+245) |
| CG Power | 1665(+59) | 129.9(+171) |
Punjab Alkali-The company’s main product is caustic soda and its bye products are Hydrochloric Acid, Chlorine and others. The last few quarters have seen the company go from strength to strength and the June quarter saw EPS of Rs 3.91 on a FV of Rs 2. The company is a turnaround case with accumulated losses. However, with operational working improving, interest costs have come down to negligible levels. The scrip saw a good correction post-split in Feb 22 but lower levels could be looked at for entry.
Nelcast-(70)-The company manufactures of Ductile & Grey Iron Castings which cater to the global automotive, tractor, construction, mining, railways and general engineering sectors. The last 3-4 years have seen the company making strong inroads into foreign markets. From 90 cr exports in FY19 the company reported Rs 220 cr in FY22.Going ahead the company aims to generate 28-30% revenue from exports. At current levels the stock looks fairly priced but could be looked into for accumulation at lower levels.
Cera Sanitaryware (4725)-A popular brand, the company’s core business is sanitaryware, faucets and tiles. Post Covid-19, the company started ramping up production volumes to its optimum capacity to monetize the sustainable demand generated by the end user for home upgradation, in every geographic location across the country. The June quarter was muted compared to the previous 2-3 quarters though the coming quarters could see the growth improving. With an EPS of around Rs 150, low equity, strong brand value and bright prospects, the stock could be a decent accumulation candidate.
C.G. Power (231)-Ever since the company came under the fold of the Murugappa group the turnaround has been remarkable. Its business comprises of industrial division which consists of motors and drives, power systems comprising of transformer and switchgear business and the railway division. The divisions are operating at 75% capacity utilization. The company has now started increasing its capex in the respective divisions as cash flows ease. The past losses have yet to be wiped out and that is cited as the reason for no dividend announcement. Current levels look fully priced after a steep run up. Investment appetite is however very strong and thus in the long term the scrip could scale further heights.
MARKET OUTLOOK
Some technical cues are as follows going by market trends: –
NIFTY-The index closed at near resistance levels and the next couple of weeks could be within a range as it digests the sharp upsurge seen in the last 2-3 weeks. While 17200 could provide decent support, levels of 17600 and above could attract profit-taking.
BANK NIFTY-The index did go past 38000 during the week but profit-taking trimmed gains. However, some profit taking was clearly seen in PSU banks and even in private sector banks and only select counters held up the index. Lower levels of 37000-100 should act as a strong support level while levels of 38000 and above could see profit-taking.
SCRIPS TO WATCH OUT
Mangalore Chem – (124)-The counter attracted huge volumes and is poised for a breakout past its previous high. A gradual accumulation could be considered for a possible price target of 150 in the coming weeks.
Karnataka Bank (73)-The scrip has been facing resistance around 73-75 on multiple occasions in the past. However, recent volume action suggests that a break out past this level is imminent and in the coming months levels of 90 could be seen. The scrip is also quoting cum dividend of Rs 4 and thus also offers an attractive yield.
Have a great trading week!
Note: Any queries /clarifications may be addressed to stockmasala@gmail.com .
Krish Subramanyam