“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.” - Peter Lynch
From a buy-on-dips market till about a week back, many players are now advocating a sell-on-rise approach. But there is no sense of despair yet. Just that booking profits appears a sensible short-term strategy considering that the probability of the market rallying sharply seems low. While every quarterly earnings season has its share of disappointments, this time they seem to be making more headlines than the companies which delivered good numbers.
That is the curse of high valuations—when the stock price is high, nothing seems to be good enough for the market.
Vedant Fashion (Rs 1119.45, +4.38%)
The stock rallied despite tepid year-on-year growth in topline and bottomline.
Bull argument: Touted as Titan of wedding wear market. High margin business with good return ratios
Bear argument: Mutual fund holding has decreased over the past two quarters. Stock Competition in unorganised market continues to increase. At 67 times trailing earnings, valuation not cheap despite a 25 percent correction from its record high seen in early December.
ACC (Rs 2468, +10%)
The stock rallied after December quarter net profit jumped 128 percent year-on-year.
Bull argument: Bottomline growth is driven by a sharp improvement in
operating margins. Input costs appear to be coming under control. Outlook on the sector remains positive due to capex spend by the government.
Bear argument: The rise in cement prices has slowed down over the past few months. This could likely be the trend as more capacity gets added in the system
Bajaj Auto (Rs 7,590, +5.23%)
The stock hit an all-time high after recording a 37 percent increase in net profit for Q3.
Bull argument: Strong revenue and volume growth. The fact that the company was able to achieve this despite weakness in rural markets gives analysts the confidence that the trend can be sustained in the near future
Bear argument: Valuations look expensive after the recent rally. Exports have been tepid and analysts feel a revival could be some time away.
Tata Steel (Rs 134.15, -0.74%)
The stock fell after the Q3FY24 results missed the market estimates.
Bear argument: Coking coal cost expected to increase by $10 per tonne this quarter, and that could weigh on margins. Chinese steel makers continue to dump output in global markets and that could keep steel prices in check.
Bull argument: The company expects the Netherlands unit to turn EBITDA and cash positive next year. Also, it estimates the restructuring of the UK business to be completed in 18 months, which should help improve consolidated profits.
Laurus Labs (Rs 378.5, - 5.95%)
The stock took a beating after a disappointing set of December quarter numbers.
Bull argument: Valuations already factoring in all the bad news. Things can only get better hereon.
Bear argument: The Street is worried at the fourth consecutive quarterly decline in profit and revenue. Project delay also continues to be a concern. According to Jefferies, management’s commentary on the CDMO division’s recovery “was uninspiring” and indicated much slower ramp-up than estimated.
Dalmia Bharat (Rs 2202.45, +2.02%)
The company reported a 22 percent increase in net profit in Q3FY24.
Bull argument: Net debt has fallen to Rs 4.3 billion in the October-to-December quarter compared to Rs 15 billion in the previous quarter. Domestic institutions have been steadily increasing their stake over the past few quarters. Outlook on cement sector remains positive as government expected increase capex spend.
Bear argument: Weakness in demand in eastern India which is a major business region for Dalmia Bharat. Tepid sales growth of 10 percent compounded over the last five years. Stock has underperformed most of its peers over the last six months.
With inputs from Shailaja, Srushti, Ananthu, Yasha and Anishaa
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