“Investing performance is what happens when events collide with an existing portfolio.” - Howard Marks
Capex stocks have had a good run so far this year, but there could be some steam still left, says broking firm Jefferies, as it sees gross fixed capital formation (GCFC or capex) as a percentage of nominal GDP rising to a nearly decade high of 30 percent this fiscal. And, yet, that is below the record high of 35 percent seen over a decade ago.
“With the national elections nearing, a push for completing infrastructure projects is likely which should help to drive the spending growth for remainder of the year,” write the Jefferies trio of Mahesh Nandurkar, Abhinav Sinha and Nishant Poddar.
Coffee Day Enterprises (Rs 52.83, +16.34%)
An up-move marked by high volumes and high delivery, but bulk deals data shows only high-frequency trading firms. Chatter about the company being acquired doing the rounds again.
Bull argument: A strong owner may be able to turnaround the business. Brand resonates with the 80s-90s millennials and a change in management could bring back footfalls.
Bear argument: Store count down in the last five years and too many court cases. Regaining market share will be tough given increased competition than before, and an inflationary environment.
Wockhardt (Rs 383.85, +14.38%)
The shares hit a 52-week high after the successful conclusion of the Phase 3 study for an antibiotic designed to treat pneumonia. Commercial launch eyed in mid-2024.
Bull argument: The company is looking to trim $12 million in annual expenses by restructuring its US business. Focus is on a leaner balance sheet and increasing market share.
Bear argument: Promoter stake decreased last quarter. Seven consecutive quarters of losses. Barely any FII and DII holding in stock. Low return ratios compared to peers.
Balrampur Chini (Rs 396.8, +1%)
The stock has been down 15 percent in five days after government said no ethanol from sugarcane juice and B-heavy molasses to be procured by oil marketing companies.
Bull argument: The company is well-placed to tide over this on cane development management initiatives, optimal integration volume and
strong cash flows, says JM Financial, adding that the current weakness an opportunity to accumulate.
Bear argument: Negative from a distillery volume perspective (almost nil sales of juice-based ethanol) in the immediate term and medium term. Development reinforces concerns of government interference in sector.
Mazagaon Dock (Rs 2,114, + 2.7%)
The company has bagged a Rs 1,145-crore order from ONGC for part replace of pipeline project (PRPP).
Bull argument: Defence very much the flavour of the season. Order wins continue to be robust.
Bear argument: The stock jumped nearly 4x between March and September this year, and has since been consolidating. Most of the positives may already be factored into the price.
Dr Reddy’s Laboratories (Rs 5,475.7, -5%)
The US FDA has made some adverse observations about quality control, equipment and data integrity at the company’s Bachupally unit in Telangana following an inspection.
Bull argument: The company’s sales share in the US and Europe grew faster than estimates in Q2, stock looking cheap compared to its peers.
Bear argument: The unit manufactures over 100 products and contributes 30 percent of the company’s US revenue. Any adverse regulatory action could hurt prospects of future drug approvals, says broking firm Antique.
SpiceJet (Rs 60.6, +10%)
The company plans to list its shares on the National Stock Exchange. This is expected to improve liquidity.
Bull argument: The company reported to be in to raise up to $100 million to refinance part of the promoter debt and infuse fresh equity. With the aviation sector booming, it should be able to get the money and ramp up operations.
Bear argument: Celestial Aviation, Wilmington Trust, and Aircastle Limited have pleas pending with NCLT to admit SpiceJet into insolvency over unpaid dues. Plus the airline is facing operational disruptions across India with delayed flight services.
With inputs from Shailaja, Anishaa, Yash, Ananthu and Srushti. Edited by Santosh Nair.
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