BQEdge | Why You Should Keep An Eye On Bajaj Finance Today

BQEdge is specially curated for BQBlue subscribers. Every day this note will offer special equity market and stock-specific insights and flag select emerging trends in the tricky-to-trade derivatives market.

On Today’s Edition:

Why Bajaj Finance — last year’s best-performing Nifty 50 stock — may be losing steam.
What to make of Titan, Sobha’s Q3 business updates and the latest North America truck sales data

Is Bajaj Finance Losing Steam?

Q3 Business Updates

Titan Ltd.'s third quarter business performance update suggested healthy growth trends and market share gain. The Tata group company said it expects the full-year growth of around 22 percent from its jewellery business.

It will have to grow at 28 percent in the remainder of the year to achieve its guidance. The previous target was 25 percent, which was revised lower post weak first quarter.

The watch segment too showed strong momentum on the back of new launches. Brokerages like Macquarie, Citi, and Goldman Sachs reiterated their bullish rating on the stock based on the latest business update, with Goldman expecting consensus upgrades.

Sobha Developers Ltd.'s third-quarter business update suggests a pick up in new launch momentum with an improved selling price.

Morgan Stanley in a note has indicated that they expect pre-sales to remain steady, driven by both ongoing and new projects. The new sales of 0.91 million square feet was inline with six quarter average of 0.94 million square feet.

North America Class 8 Truck orders were the lowest since August 2019. The December order number was at 21,000 units, which highlights a drop of 43 percent from December last year and 24 percent drop over November this year.

Companies like Bharat Forge, RK Forgings, and GNA Axles will react negatively to this development. Citi, in a note, highlighted that December is typically the strongest month for class 8 orders, but 2018 bucked that trend. CLSA has downgraded Bharat Forge to a 'Sell' with a revised target of Rs 420 from the earlier Rs 680 as it believes that there will be cyclical pressures ahead.

‘New Buy’

Tube Investments is currently trading at multi-year highs and Axis Capital believes that it still could rise multifold. The brokerage has initiated coverage on the stock with a target of Rs 470.

The Chennai-based company specialises in engineering, bicycles, metal formed products, and chains.

The brokerage believes the company under the new leadership is now focusing on sustaining revenue growth, doubling profit before tax margins, improving return on capital employed and becoming debt-free over the next few years.

Growth areas: improving export revenue, capturing product adjacencies and inorganic opportunities.
Positives: operating leverage, lower fixed cost, efficiency gains, higher realisations and lower finance cost.

Axis Capital said, if the above would be done, then the stock of the Murugappa Group company can double in the next three-four years.