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    13 Covid-negative businesses double profit in Q1, Street rewarding them

    Synopsis

    April-June quarter earnings show several businesses from across sectors such as FMCG, agriculture, pharmaceutical, IT and e-commerce remained unscathed by the business disruption.

    Covid-prrof-1---istockiStock
    Leading this pack of 13 are pharmaceutical player Laurus Laboratories and Deepak Fertilisers & Petrochemicals.
    The Covid-19 negative among India Inc are getting singled out!

    April-June quarter earnings show several businesses from across sectors such as FMCG, agriculture, pharmaceutical, IT and e-commerce remained unscathed by the business disruption.

    Many even managed to grow amid the pandemic.

    Data available with Ace Equity showed at least 13 companies doubled their bottom lines in June quarter, a period when much of the country and economic activity were closed to check rapid spread of the virus. They also swelled top lines by up to 231 per cent YoY during this period.

    Analysts have since turned bullish on these stocks considering their superlative performance through a difficult period.

    Leading this pack of 13 are pharmaceutical player Laurus Laboratories and Deepak Fertilisers & Petrochemicals. The former posted 1,038 per cent YoY profit growth for June quarter on 77 per cent sales expansion; the latter grew profit by 1,014 per cent and sales by 23 per cent.

    Laurus Lab’s Ebitda soared 228 per cent YoY to Rs 285 crore.

    Net profit climbed to Rs 172 crore from Rs 15.10 crore in the year-ago period. “Our formulations business continues to grow at a higher rate, mainly led by higher LMIC (low and middle income countries) business. The custom synthesis business has maintained its growth trajectory with a strong contribution from all the divisional segments,” said Satyanarayana Chava, Founder and CEO.

    Shares of Laurus Labs have risen 177 per cent over the past one year and those of Deepak Fertilisers, 85 per cent.

    Brokerage firm Motilal Oswal Financial Services has a ‘Buy’ rating on Laurus with a price target of Rs 1,215 “on the back of superior execution across revenue segments, resulting in expansion of ROE to 27 per cent (from 15 per cent in FY20) and sufficient levers to sustain the earnings momentum over the medium term.” it said.

    Among the other performers, Coromandel International, Aarti Drugs, Dhanuka Agritech, Tata Communications and Max Financial Services posted over 200 per cent profit growth for the quarter. Shares of these companies gained 34-276 per cent in last one year.

    Analysts are attributing the superb show of agro-linked stocks to a good rabi harvest and normal monsoon. Emkay Global Financial Services has a ‘buy’ rating on Coromandel International with a price target of Rs 910.

    The company management said the government had not paid a subsidy to NPK (nitrogen, phosphorus potassium) players for May and June to prioritise payment to urea players. In spite of lower subsidy receipts, the company expects improvement in working capital on the back of efficient supply chain (lower inventories) management.

    “This could be one of the key reasons for the improvement in the market share, as the company’s strong balance sheet allows it to withstand temporary working capital stress,” Emkay said.

    Alembic Pharma, Apollo Tricoat, IndiaMart Intermesh, Mindtree, Bombay Burmah and Britannia Industries are among other stocks that posted over 100 per cent growth in bottom line for June quarter. Revenue increased 4-231 per cent.

    JM Financial recently upgraded IndiaMart with a price target of Rs 2,930 (from Rs 2,030 earlier). “We like IndiaMart’s asset-light, negative working capital cycle and strong network effects business model. Till now we were a bit cautious due to the strong macro headwinds. However, back-to-back positive surprises demonstrate the management’s ability to smoothly march through a tough period,” the brokerage said.

    Paras Bothra, President of Equity Research, Ashika Stock Broking, said shares of pharmaceutical, IT, FMCG and agrochemicals should outperform in the months ahead and continue to give decent returns on the back of good earnings momentum.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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