Indian equities continued its winning streak for the third consecutive week. This was despite fears of further escalation in the ongoing Russia Ukraine war and Fed’s resolve to continue its hawkish stance, thereby indicating that the rate hike cycle is far from over. Bellwether indices closed the week higher by 1.5 per cent, compared to the week before.
Mazagon Dock
Topping the returns charts last week, the stock of the defence shipbuilder Mazagon Dock has gained a whopping 22 per cent in the last five trading sessions. Interestingly, this stock was the top gainer on a one-month return basis, too, with an impressive 40 per cent gain. With no significant news or development in the company, the intensifying Russia-Ukraine war, the defence and related themes have gained investors’ attention for the past few weeks.
The company’s strong performance in the June quarter, wherein it had posted record quarterly revenue of ₹2,230 crore, a 84 per cent growth year-on-year, and an over two-fold jump in net profit to ₹217 crore aided the rally. Further, the stock’s near-term outlook remains strong, with an impressive order book totalling ₹43,343 crore. This is thanks to the Indian Navy’s plans to invest in asset acquisitions.
Further, the Centre’s resolve to strengthen the country’s defence system, given the geo-political tensions globally, has rekindled investment interest in defence sector stocks. The stock currently trades about 22 times its trailing twelve-month earnings, compared with about 26 times for the industry. With the company expected to report its Q3FY23 results this Thursday, investors may want to keep an eye on the stock. Interestingly, India’s largest state-owned shipbuilder, Cochin Shipyard’s stock also made a 11 per cent gain last week.
Alembic Pharma
The stock of Alembic Pharma came a close second to Mazagon with a 20 per cent gain over the past week. The rebound in stock prices followed the significant underperformance since the beginning of calendar year 2022, by falling over 50 per cent from its peak. The company derives over a third of its revenues from the US market and domestic market each. Besides formulations, the company produces active pharmaceutical ingredients (API) which is the basic material for formulations.
After a weak June 2022 quarter, which saw the company post an unusual drop in operating margin from 18 per cent last year to 1 per cent this year and loss at net level, some recovery in its US business, is expected this quarter. The stock currently trades 44 times its trailing twelve-month earnings, compared to 28 times for the industry.
Redington India
The other star performer was the stock of second-largest distributor of IT hardware – Redington India. The stock gained a solid 16.5 per cent last week. Strong performance in the lastest September quarter, with a record revenue and operating profit triggered the rally in the stock.
The company reported sales of ₹19,051 crore for the quarter, which is 25 per cent higher compared to the same period last year, and net profit of ₹392 crore, translating into a 21 per cent year-on-year growth. The stock currently trades at about eight times its trailing twelve-month earnings, compared to 35 times for the industry.