According to global brokerage Macquarie, current market earnings projections remain overly optimistic. The firm also noted a slowdown in domestic liquidity, which has so far played a significant role in propping up the markets. As a result, Macquarie anticipates that the market’s strength may face challenges in the near term. Despite this cautious outlook, it has identified six Nifty stocks as short-term tactical investment opportunities for the next three to six months.
Following are the six stocks picked by Macquarie with up to 35percent potential upside:
1. Shriram Finance Limited
With a market cap of Rs. 1.23 lakh crores, the stock moved up by nearly 2 percent on Friday, after Macquarie has recommended a target price of Rs. 800 per share on Shriram Finance, representing a potential upside of nearly 22 percent from its Friday closing price of Rs. 654.15.
Macquarie believes that factors such as improving liquidity conditions, easing interest rates, consistent asset quality, and better growth compared to industry peers could act as short-term catalysts for the stock. The brokerage also referred to Shriram Finance as a “valuation catch-up” opportunity, highlighting that its current valuation lags behind some of its larger competitors by 50 percent to 60 percent.
2. Bharat Electronics Limited
Macquarie anticipates robust guidance from the management for the upcoming financial year. Additionally, growing export prospects are expected to support a stronger earnings per share (EPS) growth trend over the medium term.
With a market cap of Rs. 2.04 lakh crores, the stock moved up by nearly 3.4 percent on Friday, after Macquarie has recommended a target price of Rs. 350 per share on BEL, representing a potential upside of nearly 25 percent from its Friday closing price of Rs. 280.1.
3. Reliance Industries Limited
With a market cap of Rs. 16.3 lakh crores, the stock moved up by nearly 4.4 percent on Friday, after Macquarie set a target price of Rs. 1,500 per share on RIL, representing a potential upside of nearly 24 percent from its Friday closing price of Rs. 1,204.7. Macquarie attributed the stock’s recent underperformance to downward revisions in earnings estimates, a softer performance in the retail segment, and stagnant consolidated earnings growth.
However, it remains optimistic about the next 6 to 12 months, citing potential positive developments. These include an expected turnaround in group EPS, the commissioning of renewable energy projects, and further advancements toward the retail business spin-off. Brokerage added that a pickup in retail revenue growth would serve as a strong sentiment booster for the stock.
With a market cap of Rs. 2.57 lakh crores, the stock moved up by nearly 3.7 percent on Friday, after Macquarie has recommended a target price of Rs. 320 per share on Wipro, representing a potential upside of nearly 30 percent from its Friday closing price of Rs. 246.25.
Brokerage noted that Wipro could offer greater shareholder returns, supported by its strong cash position, even after the new capital allocation policy. Macquarie estimates that the company could deliver a dividend yield of around 5 percent to 6 percent over the next one year, providing a cushion against downside risk.
An additional catalyst for the stock could be its growth aligning with that of other large-cap IT firms by the first quarter of FY26—a scenario Macquarie believes is not yet reflected in current buy-side forecasts.
5. Tata Motors Limited
With a market cap of Rs. 2.25 lakh crores, the stock moved up by nearly 6.7 percent on Friday, after Macquarie set a target price of Rs. 826 per share on Tata Motors, representing a potential upside of nearly 34 percent from its Friday closing price of Rs. 613.85.
Macquarie believes Tata Motors shares are currently in an oversold zone, with recent underperformance largely attributed to concerns over volume and margin pressures in Jaguar Land Rover’s U.S. operations.
However, the brokerage remains optimistic, pointing to JLR potentially turning net cash positive in FY25, the company’s focus on premiumisation, and the possibility of better-than-expected margins and cash flows in FY26 as key factors supporting a more favorable short-term outlook.
6. NTPC Limited
Regarding NTPC, Macquarie stated that the Indian Meteorological Department’s (IMD) heatwave warning is unlikely to have a significant impact on short-term earnings. However, it strengthens the case for power-based capacity additions in the long run.
The brokerage also noted that management providing further clarity on plans for nuclear power capacity could reinforce investor confidence in the company’s long-term growth prospects.
With a market cap of Rs. 3.4 lakh crores, the stock moved up by nearly 3 percent on Friday, after Macquarie set a target price of Rs. 475 per share on NTPC, representing a potential upside of nearly 35 percent from its Friday closing price of Rs. 350.85.
The last six months have been a rollercoaster for Indian equities, and not everyone has enjoyed the ride. While benchmark indices like Nifty 50 have remained relatively resilient, several heavyweight constituents have seen their valuations erode dramatically. From auto giants to financial services players, some stocks have nosedived by as much as 50.68%, triggering concerns among investors and analysts alike.
Let’s take a closer look at the five worst-performing stocks in the Nifty 50 index, analyzing what went wrong and whether there’s any silver lining for the future.
1. IndusInd Bank – Down 50.68%
Current Price: ₹684 6-Month Performance: -50.68%
Leading the list is IndusInd Bank, which has seen a staggering 50% decline in just half a year. The sharp fall is largely attributed to rising concerns over asset quality, especially in the microfinance and unsecured lending segments. Regulatory tightening by the RBI and a risk-off sentiment toward private banks have further worsened investor confidence. Additionally, the broader global financial uncertainty has had a knock-on effect on Indian banking stocks.
2. Jio Financial Services – Down 35.67%
Current Price: ₹222.55 6-Month Performance: -35.67%
Despite the hype surrounding its spin-off from Reliance Industries, Jio Financial Services hasn’t quite lived up to the expectations. The stock has tumbled nearly 36%, primarily due to a lack of clear direction and revenue visibility in its initial quarters. Investors were expecting aggressive growth or strategic announcements, but the absence of major deals or partnerships has kept the stock under pressure.
Current Price: ₹3,659.2 6-Month Performance: -35.38%
India’s largest two-wheeler manufacturer, Hero MotoCorp, has seen its stock underperform due to a combination of weak rural demand, rising input costs, and stiff EV competition. Despite efforts to foray into the electric vehicle space, the transition has been slower than expected. With competitors like Ola Electric and Ather Energy gaining traction, Hero is under pressure to innovate faster.
4. Bajaj Auto – Down 34.91%
Current Price: ₹7,685.1 6-Month Performance: -34.91%
Another automobile behemoth, Bajaj Auto, has seen its stock take a beating amid declining export volumes and currency fluctuations in key markets like Africa and Latin America. Moreover, increasing competition in the premium motorcycle segment and concerns around margin pressure have led investors to reassess the stock’s valuation.
5. Tata Motors – Down 34.05%
Current Price: ₹613.8 6-Month Performance: -34.05%
Rounding out the list is Tata Motors, which has slipped over 34% despite a relatively strong domestic performance. The drag has largely come from its UK-based subsidiary, Jaguar Land Rover (JLR), which has faced production challenges, slowing global demand, and uncertainties around EV transition in international markets. Supply chain disruptions and global inflation have also weighed on profitability.
Global Headwinds Amplifying the Pain
The broader backdrop of rising interest rates, global inflation concerns, and geopolitical tensions has only added fuel to the fire. The ongoing trade war and protectionist policies, including tariffs introduced by the U.S. under Trump’s influence, have created ripple effects across global markets, including India.
Investors are increasingly seeking safe havens and shifting away from sectors perceived as risky or overvalued. The result? A sharp correction in stocks that were once market favorites.
Looking Ahead
While these stocks have taken a hit, long-term investors might view this correction as a potential buying opportunity, provided the companies show signs of recovery in fundamentals. However, caution is advised, especially with continued volatility expected in the near term.
Tejas Networks Limited designs and sells networking products for wireless and wired communication in India and worldwide. It provides broadband and networking solutions for telecom companies, ISPs, businesses, utilities, defense, and government agencies. Its products include fiber and mobile broadband solutions, Ethernet switches, optical transport systems, routers, and network management tools. Panatone Finvest Limited, which is a subsidiary of Tata Sons, acquired percent stake in Tejas Network.
Tejas Network is aggressively pushing for its expansion into 5G. It expects to complete BSNL’s first one lakh site order in this financial year. The management is optimistic about strong revenue growth in Q4 FY25 and FY26, driven by BSNL 5G orders, Vodafone Idea’s network expansion, and international deals spanning the US, Middle East, Africa, and Latin America. It also said that, despite revenue problems, they will continue spending on R&D worth Rs 6 billion.
It drastically improved its sales. It reported Rs 2,655.98 revenue in Q3 FY25, up by 361 percent, from its Q3FY24 revenue of only Rs 575.12 crore. However, it reported a net profit of Rs 165.67 crore in Q3 FY25 as compared to a Q3 FY24 loss of Rs 44.87 crore . As of January 2025, the company has an order book of Rs 2,681 crores.
HFCL
HFCL Limited is a global telecom products and solutions provider based in India. It manufactures optical fiber cables, telecom equipment, and defense communication products like Wi-Fi access points, routers, 5G solutions, electronic fuzes, and surveillance radars. The company also supplies networking components and offers solutions for telecom, defense, and railway communications. HFCL has partnered with Qualcomm to develop advanced 5G products.
HFCL is also pushing its 5G expansion. It benefits from government initiatives like ‘Digital India’ and the PLI scheme for domestic manufacturers. The company is actively participating in smart city projects and large-scale 5G deployments. It plans to launch new products both globally and domestically while spending on R&D, which will lead to more technological advancements.
It reported Rs 1,031.99 revenue in Q3 FY25, up by 361 percent, from its Q3FY24 revenue of only Rs 1,079.03 crore. However, it reported a net profit of Rs 72.58 crore in Q3 FY25 as compared to a Q3 FY24 net profit of Rs 82.43 crore. As of May 2024, the company has an order book worth Rs 7,685 crore.
Indian Railways is expected to increase its capital expenditure (capex) by approximately 15 percent in FY27, surpassing Rs.3 lakh crore, according to a senior official from the Ministry of Railways. This marks a significant rise from FY26, where the capex allocation is expected to remain unchanged at Rs.2.62 lakh crore. Key areas of focus for investment include network infrastructure, rolling stock, safety, and station redevelopment. The railways are also progressing on new projects such as bullet trains, hydrogen-powered trains, and the Hyperloop, with work on these initiatives expected to accelerate starting FY26.
The production of locomotives, wagons, and coaches is set to increase significantly in the coming years. For example, coach production has grown from 3,731 in FY13 to 6,550 in FY24, with plans to reach 8,000 annually. Similarly, wagon production has tripled over the past decade, with an annual target of over 30,000 wagons.
Here are a few railway stocks to benefit from this development:
1. Indian Railway Finance Corporation (IRFC)
With a market capitalization of Rs.1.62 lakh crore, IRFC’s share price closed at Rs.124.01 per share on Friday, falling 0.3 percent from its previous close. Indian Railway Finance Corporation (IRFC) serves as the financial arm of Indian Railways, responsible for funding rolling stock acquisitions and infrastructure development. It plays a crucial role in financing large-scale railway projects, including emerging initiatives like bullet trains. IRFC shares saw a dramatic rise following its IPO in January 2021, delivering nearly 900 percent returns by July 2024, before experiencing a correction.
IRFC’s partnership with India Infrastructure Finance Company Ltd (IIFCL) is designed to enhance financing opportunities for railway infrastructure projects. The company’s consistent involvement in railway expansion has created a strong base for long-term growth, which has made it attractive to investors. With a robust portfolio of projects and continued support for Indian Railways, IRFC is well-positioned for sustained performance in the railway sector.
With a market capitalization of Rs.73,371 crore, RVNL’s share price closed at Rs.350.80 per share on Friday, falling 1 percent from its previous close. The company’s current order book stands at Rs 97,000 crore, which includes Rs.49,000 crore from bidding works and Rs.47,600 crore from railway projects. This is a decline from the historically higher level of Rs.1,40,000 crore. The management is now focusing on market-driven bidding, with an expected annual turnover of Rs.28,000 crore to Rs.30,000 crore and an estimated project execution timeline of 3-4 years.
Management remains optimistic about achieving its revenue targets, citing favorable conditions in Q4. They are confident that they can maintain strong margins despite competitive pressures by leveraging operational efficiency and effective project execution.
3. Texmaco Rail & Engineering Ltd
With a market capitalization of Rs.5,393 crore, Texmaco Rail & Engineering Ltd’s share price closed at Rs.135.00 per share on Friday, falling 2.7 percent from its previous close. Texmaco Rail & Engineering Ltd specializes in the manufacturing of wagons, coaches, and freight cars. The company recently strengthened its position in the freight car segment through the acquisition of Jindal Rail and Infra, which has been rebranded as Texmaco West Rail. This acquisition has enhanced Texmaco’s production capabilities and market reach.
Texmaco has seen a significant increase in wagon production over the past decade, with annual production targets now exceeding 30,000 units. As Indian Railways’ capital expenditure plans continue to drive demand, Texmaco is poised to benefit from the growing need for railway equipment.
Written by – Ashok Kumar
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on AG Investemnt are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. AG Investment or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
This small-cap power company, which provides infrastructure services, including building, operating, and maintaining power plants, as well as working on railway, water, and industrial projects, is in focus after the company’s order book 586 percent higher than its market cap and is currently trading at a discount of 27 percent.
Stock Price Movement:
With a market capitalization of Rs. 8,594.10 crore, the shares of Power Mech Projects Limited closed at Rs. 2718.25 per equity share, up nearly 11.64 percent from its previous day’s close price of Rs. 2434.90.
ver the last five years, the stock has provided impressive returns of more than 1,521 percent. But the stock is currently trading at 27.03 percent below its 52-week high of Rs. 3,725.
Company Overview:
Power Mech Projects Limited was founded in 1999 and is an engineering and construction company that offers integrated services in the erection, testing, and commissioning (ETC) of boilers, turbines, generators, and balance of plant (BOP).
The company also provides civil works and operation and maintenance (O&M) services. The company handles large-scale projects, including ultra mega power projects, super critical thermal power projects, and sub-critical power projects.
Recent Orders:
As of March 26, 2025, Power Mech Projects Limited secured multiple significant orders, as reported. On January 1, 2025, the company received a Rs. 294 crore contract from Adani Power for overhauling and commissioning services at the Korba Phase-II Thermal Power Project. On February 25, 2025, Power Mech secured a Rs. 164.63 crore order from Bharat Heavy Electricals Limited (BHEL) for the EPC project at DVC Koderma TPS Phase-II.
Additionally, on March 21, 2025, Power Mech won a Rs. 579 crore order from BHEL for civil, structural, and architectural works at the Koderma project. The total value of these orders in Q4 FY25 amounts to Rs. 1,037.63 crore.
Order Book:
As of December 2025, the company has secured orders worth Rs. 4,242 crores and has a strong order backlog of Rs. 57,915 crores, including Rs. 18,284 crores from non-MDO projects. Looking ahead, the company is actively bidding for new projects worth Rs. 3,000 crores by March 2025 and is the lowest bidder for the Rs. 973 crore Deoghar Bypass Highway Project.
As of March 26, 2025, the company’s order book stands at Rs. 58,952.63 crore, which is approximately 585.97 percent higher than its market cap of Rs. 8,594.10 crore. This means the order book is about 6.86 times larger than the company’s market value, indicating a strong potential for future growth.
Guidance and Outlook:
The company aims for a revenue of Rs. 7,500 crores in FY26, which is an increase of 78.5 percent from FY24’s revenue of Rs. 4,207 crores. Compared to FY27, with a projected revenue of Rs. 9,000 crores, the company expects a growth of 20 percent from FY26, indicating strong growth in the coming years.
The company expects EBITDA margins to improve by 0.5 percent annually, reaching up to 1.5 percent at full capacity. The focus is on securing profitable orders and O&M contracts, with strong growth expected in the power sector due to new infrastructure projects.
Clientele:
The company has developed strong relationships with both local and international clients. In India, it works with big companies like NTPC, ONGC, Reliance, Tata Power, and Indian Oil. Globally, it partners with famous names like Siemens, GE, Mitsubishi, and Hyundai, showcasing its ability to handle large projects across different industries.
Recent quarter results and ratios:
Power Mech Projects Limited’s revenue grew by 20.76 percent, rising from Rs. 1,108 crore in Q3 FY24 to Rs. 1,338 crore in Q3 FY25. Its net profit also increased by 40.32 percent, from Rs. 62 crore in Q3 FY24 to Rs. 87 crore in Q3 FY25.
Power Mech Projects Limited’s revenue and net profit have grown at a CAGR of 13.22 percent and 21.72 percent, respectively, over the last five years.
In terms of return ratios, the company’s ROCE and ROE should be 23.8 percent and 15.9 percent, respectively. Power Mech Projects Limited has an earnings per share (EPS) of Rs. 92.9, and its debt-to-equity ratio is 0.34x.
The market was in a downtrend for the last 6 months largely because of continuous selling by Foreign Institutional Investors (FIIs). Key reasons for FII selling were the strengthening of the US dollar, concerns over a slowdown in corporate earnings growth, global economic uncertainties, high valuations of emerging markets, and trump tariff risks.
Factors that helped the Market rebound
The government is constantly working to regain India’s growth momentum. With tax cut announcements, that can help boost the GDP and help with overall economic growth. RBI also cut the Cash Reserve Ratio (CRR) & Repo rate, with further rate cut expectations to boost consumer spending. Additionally, Brent Crude prices are trading in a broad range with reduced volatility, which is highly beneficial for India as the import cost is kept in check, which in turn reduces the trade deficit.
In terms of valuations Nifty 50 PE had dropped below 20, only for the 2nd time in 5 years. It had dropped to 18.92 during the Russia-Ukraine war and had dropped to 17.15 on March 23, 2020. It showed that Nifty was highly Undervalued which led to valuation correction.
Nifty 50 Falling Trendline Breakout
A falling trendline or downtrend line is a straight line drawn across declining highs on the price chart. The line represents as a resistance level, which indicates that sellers are in control of the downtrend. When a trendline is broken, it signals a potential trend reversal or just a temporary breakout.
On a weekly time frame, the Nifty 50 has given a closing basis break out of a falling trendline. Since September the falling trendline was never broken on a closing basis.
THE MAJORITY OF NIFTY 50 STOCKS ARE STILL IN THE DEATH CROSS
The Death Cross is a bearish technical pattern that occurs when the 50-day moving average (DMA) crosses below the 200-day moving average (DMA). This crossover indicates a potential shift from an uptrend to a downtrend, signaling weakness in the stock or broader market. It is the opposite of the Golden Cross.
Out of the 50 Constituents of Nifty 50, 33 stocks, or 66 percent of the total constituents are still trading in the Death Cross, this shows that the medium-term trend is still bearish.
This small-cap stock engaged in manufacturing advanced CNC machines, with a strong focus on innovation, including 5-axis machines and AI-driven solutions for global markets, in focus after plans to expand its capacity by 3,000-4,000 machines by FY26
Stock Price Movement:
With a market capitalization of Rs. 22,967.46 crore, the shares of Jyoti CNC Automation Limited were currently trading at Rs. 1009.90 per equity share, rising nearly around 0.87 percent from its previous day’s close price of Rs. 1001.20.
Company Overview:
Jyoti CNC Automation was established in 1989 and operates with manufacturing facilities in Rajkot, India, and Strasbourg, France. The company offers a wide range of over 200 product variants and has installed more than 130,000 machines globally. It is a leader in the CNC automation industry, providing advanced solutions worldwide.
Management Guidance:
For FY25, Jyoti CNC Automation expects a strong topline growth of 40-50 percent. They aim to maintain profit margins between 25-27 percent. The company anticipates that EMS will contribute 20-25 percent of sales in FY26. The company expects an order inflow of Rs. 1,600-1,700 crore in FY25.
Jyoti CNC plans to expand its capacity by 3,000-4,000 machines by Q3 FY26, focusing on the aerospace, defense, and EMS sectors. The company’s order book as of December 2024 stands at Rs. 4,360 crore, with an expected execution time of 2.5 years.
The company invested 6.36 percent of its revenue in research and development (R&D), driving innovations such as 5-axis machines and AI-powered solutions. The company is focusing on expanding its exports to markets in the USA, China, and Southeast Asia/Africa, with the goal of capturing a 5 percent market share in these regions.
Segment Revenue Breakdown (Q3 FY25):
In Q3 of FY25, the company’s revenue was mainly driven by the Aerospace segment, which contributed 49 percent. The Auto and Auto Components segment followed with 16 percent, while General Engineering brought in 21 percent. EMS accounted for 10 percent, and other segments contributed 4 percent to the overall revenue.
New Product Launches:
In January 2025, the company launched 7 new models, showcasing its commitment to innovation. These include the GU8, a 5-axis Gantry type machining center, the AWT for alloy wheel turning, and the BTM with twin spindles and gantry automation.
Additionally, the ATM 200 caters to the EV segment, while the HP 4000 and 6000 are high-performance horizontal machining centers. The TachyonBeta, the fastest 5-axis machining center, also made its debut.
Capacity Expansion:
As of December 2024, the company currently has an installed capacity of 6,000 machines per year in India and 120 machines per year in France. Looking ahead, the company plans to expand its capacity by an additional 10,000 machines over the next two years.
Order Book:
In Q3 FY25, the company received an order inflow of Rs. 492.8 crores. This includes Aerospace (34 percent), Auto and Auto Components (25 percent), General Engineering (36 percent), Die and Mould (1 percent), and Others (4 percent). As of December 31, 2024, the total consolidated order book stood at Rs. 4,359.7 crores.
Recent quarter results:
Jyoti CNC Automation Limited’s revenue has increased from Rs. 378V crore in Q3 FY24 to Rs. 450 crore in Q3 FY25, which has grown by 19.05 percent. The net profit has also grown by 66.67 percent from Rs. 48 crore in Q3 FY24 to Rs. 80 crore in Q3 FY25.
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on AG Investment are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. AG Investment or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
Defence stocks, which were highly favored in 2024, are making a strong comeback after a sharp decline. The sector had a strong rally last year due to rising global tensions and increased exports, but faced a selloff due to high valuations, budget issues, and profit-taking. Just as investors began doubting the long-term potential, Europe’s $850 billion defence plan has turned things around, creating new opportunities for growth in the market.
Europe’s $850 billion defense plan
The EU’s decision comes after the US stopped providing military aid to Ukraine, suggesting a change in global defence priorities. To strengthen its military, the EU has asked member countries to increase their defence spending by 1.5 percent of GDP, leading to a total of EUR 650 billion ($683 billion) in defense spending over the next four years.
The EU has also introduced a joint borrowing plan of EUR 150 billion ($157 billion) to fund essential defense needs like air and missile defense, artillery, munitions, and drones. This means the total “ReArm Europe” plan could mobilize around EUR 800 billion ($850 billion).
How will this plan benefit Indian Defence stocks?
The EU’s defence spending is beneficial for domestic companies like Bharat Dynamics, Solar Industries, and Bharat Electronics. These companies have already supplied equipment and components to countries such as Armenia, and are expected to benefit further from the increased defence budget, and along with it they can benefit as follows:
Increased Demand for Defense Products: As the EU boosts its defense spending, there could be more demand for advanced defence technologies, equipment, and systems, including those produced by Indian defence companies.
Export Opportunities: As global defense spending increases, Indian defence companies may get more opportunities to export their products, particularly to European nations or other countries investing in defense.
Partnerships and Collaborations: The EU’s rearmament plan could lead to collaborations or joint ventures between Indian defense firms and European companies. This would enhance technological know-how and expand the market for Indian defence products.
Government Policies: India’s focus on self-reliance in defence manufacturing (Atmanirbhar Bharat) could align with international defence spending trends, potentially opening up government tenders and global defence contracts for Indian companies.
India’s Defence Exports
India’s defence exports have reached a record high of Rs 21,000 crore in FY24, a 33 percent increase from the previous year, thanks to the government’s push for local manufacturing through the ‘Make In India’ initiative. The government aims to raise defense exports to Rs 50,000 crore by 2029.
Elara securities mentioned that currently, the top three countries importing defense products from India are the US, France, and Armenia. Indian companies have supplied various weapons and equipment, including the 155mm artillery, Akash air defence missile, Pinaka multi-launch rocket system, the BrahMos missile, artillery guns, Dornier-228 aircraft, radars, armored vehicles, fuselage and wings for aircraft & helicopters, bulletproof vests, night vision equipment and electronics.
The stocks to keep on your radar
Zen technologies Ltd
The stock is currently priced around Rs. 1,197 in Tuesday’s trade. It has given almost 20 percent return this March, and from its 52-week high, the stock is now trading at a 52 percent discount.
Bharat Dynamics Ltd
The stock is currently priced around Rs. 1,120 in Tuesday’s trade. It has given a 16 percent return this March, and from its 52-week high, the stock is now trading at a 37 percent discount.
Data Patterns (India)
The stock is currently priced around Rs. 1,574 in Tuesday’s trade. It has given a 13 percent return this March, and from its 52-week high, the stock is now trading at a 55 percent discount.
Bharat Electronics
The stock is currently priced around Rs. 275 in Tuesday’s trade. It has given a 12 percent return this March, and from its 52-week high, the stock is now trading at a 19 percent discount.
HAL Ltd
The stock is currently priced around Rs. 3,429 in Tuesday’s trade. It has given a 12 percent return this March, and from its 52-week high, the stock is now trading at a 39 percent discount.
Paras Defence Ltd
Paras Defence Ltd The stock is currently priced around Rs. 897 in Tuesday’s trade. It has given a 10 percent return this March, and from its 52-week high, the stock is now trading at a 39 percent discount.
And other stocks like Solar Industries India Ltd, MTAR Technologies Ltd, DCX Systems Ltd, Cochin Shipyard Ltd, GRSE Ltd are also set to benefit.
Tata Chemicals Vs Aarti Industries – Financials, Future Plans & More
Tata Chemicals Vs Aarti Industries:Chemical companies were the trend a few quarters ago with almost all of them giving multi-bagger returns. However, the margins and volume came down, and so did the stock prices.
However, they are in fashion again with heavy CAPEX announcements. Are they expanding for a brighter future and are attractive to investors again?
In this article, we’ll do a comparative analysis of Tata Chemicals Vs Aarti Industries and attempt to know which of them is better suited for an investor.
Tata Chemicals Vs Aarti Industries
For our study, we’ll read about the business and financials of both stocks. Further, we’ll learn about the chemicals industry landscape and their future plans. So without further ado, let us move ahead.
Company Overview
As the first step, we’ll understand the business, scale of operations and segments of both the stocks
Tata Chemicals
Part of the salt to software conglomerate the Tata Group,Tata Chemicals Ltd. (TCL) is the 3rd largest soda ash and 6th largest sodium bicarbonate manufacturer worldwide. The business group holds a 38% shareholding in the chemicals company.
Set up in 1939, TCL has evolved into one of the leading chemicals and specialty chemicals companies in India with a global presence. It manufactures basic chemistry and specialty products such as table salt, soda ash, halogen chemicals, silica, prebiotics, and more.
The chemicals produced by the company are consumed in a variety of sectors such as glass manufacturing, paper products, medicines & drugs, pharmaceutical and more.
It has a large operational base with 13 production units and 3 R&D centres located in the US, United Kingdom, Kenya and India. Over the years, it has built a robust marketing network in 30 nations of the world.
In addition to this, TCL has a listed subsidiary, Rallis India, which manufactures and processes seeds and crop care chemicals.
Business Segments of Tata Chemicals
As for its business segments, the basic chemistry division is the largest division accounting for 81% of the income generated in FY23. The balance of 19% came from specialty products.
Talking about geographical revenue contribution, India and America bought the majority of 43% and 33% of revenue while the balance came from other Asian countries, Europe, Africa and other regions respectively.
Aarti Industries
Aarti Industries Ltd. (AIL) was started in 1984 as Aarti Organic Private Limited. Over the last 40 years, it has grown into one of the leading chemical companies in India with a global presence. It ranks among the top three chlorination & nitration and top two hydrogenation companies worldwide.
Aarti Industriesmanufactures a wide variety of benzene, sulphuric and toluene specialty chemicals. Furthermore, it produces fuel additives, calcium chloride granules, SSP, and more.
Its products find applications in agrochemicals, pharmaceuticals, pigments, polymer additives, FMCG, rubber, and other industries. DuPont, Indian Oil, BASF, Sumitomo Chemical, Atul, and UPL are some of the high-profile clients of the company.
It employs over 6,000 people across its 16 manufacturing plants, 2 research & development centres, 11 discharge plants, 5 captive power plants, 1 corporate office and 1 project & engineering office.
The chemicals maker has an extensive portfolio of 100+ products which are used by 1,100+ Indian & international customers from more than 60 countries.
Business Segments of Aarti Industries
Talking about its revenue segments, agrochemicals and polymer & additives are the two largest divisions for the company accounting for 30% and 26% of income share respectively.
The contribution of pharmaceuticals, dyes & pigments and FMCG stood at 18%, 12%, and 2% respectively with the balance of 12% coming from a mix of discretionary sectors.
As for the geographical income distribution, Indian and overseas customers brought an equitable revenue share of 52% and 48% respectively.
Industry Overview
Indian chemicals industry commands a 4% market share (worth $ 186 billion) in the global chemicals industry valued at $ 5,027 billion. China, the European Union and the US are the largest markets commanding 39%, 15% and 13% share respectively.
The sector worldwide is segmented into bulk commodity chemicals (80% share) and specialty chemicals (20% share). As for the sector-wise distribution in India, basic chemistry formulations (25%), biotech & pharmaceuticals (20%), specialty grade (21%), and petrochemicals (21%) are the primary industry segments.
Talking about the future industry prospects, the global chemicals industry is expected to grow at an annualised rate of 6.2% to touch $ 6,780 by the year 2025. The outlook for India’s chemicals sector is stronger.
For the domestic industry, the market experts have projected a CAGR of 12.2% during the period to become $ 330 billion in value. A variety of factors including higher income, a steady rise in healthcare expenditure, rapid urbanization, faster growth in certain sub-segments (personal care, home care, & food processing), and more will be the primary demand drivers going forward.
Tata Chemicals Vs Aarti Industries
Revenue & Net Profit Growth
The operating revenue of Tata Chemicals increased at a faster annualised rate of 13% in the past five fiscals than that of Aarti Industries at 9%. Similarly, the former’s net profit growth was also impressive at 20% against 3% of the latter.
The table below showcases the growth in operating revenue and net profit of Tata Chemicals and Aarti Industries over the last five financial years.
Particulars
2023
2022
2021
2020
2019
5-Yr CAGR
Tata Chemicals – Operating Revenue
16,789
12,622
10,200
10,357
10,337
13%
Tata Chemicals – Net Profit
2,452
1,400
436
1,028
1,163
20%
Aarti Industries – Operating Revenue
6,619
6,086
4,506
4,186
4,706
9%
Aarti Industries – Net Profit
545
1,186
523
536
492
3%
(figures in Rs Cr except for CAGR)
Note: Aarti Industries FY22 net profit is inflated on account of the demerger of its pharmaceutical business.
Profit Margins
In FY23, Tata Chemicals reported better margins than Aarti Industries on the back of heavy volumes and strong demand. Previously, AIL’s margins were more than that of its counterpart.
The figures below represent the operating profit margin and net profit margin of Tata Chemicals and Aarti Industries for the past few years.
Particulars
2023
2022
2021
2020
2019
Tata Chemicals – Operating Profit Margin
18.8
13.9
6.6
15.4
15.7
Tata Chemicals – Net Profit Margin
14.5
9.3
4.3
9.9
12.5
Aarti Industries – Operating Profit Margin
11.8
23.4
16.7
19.1
17.1
Aarti Industries – Net Profit Margin
8.2
18.7
11.9
13.1
10.7
(figures in %)
Return Ratios
We read above in our comparative analysis of Tata Chemicals Vs Aarti Industries that the Tata Group company saw a turnaround in the recent fiscal. Higher profitability helped the company to post better return ratios for investors. Similarly, Aarti’s RoCE and RoE fell on account of lesser profits.
The table below compares the two return ratios: RoCE and RoE of Tata Chemicals and Aarti Industries for the previous few financial years.
Particulars
2023
2022
2021
2020
2019
Tata Chemicals – Debt / Equity
0.3
0.4
0.4
0.4
0.4
Tata Chemicals – Interest Coverage
10.0
8.5
4.7
4.7
4.6
Aarti Industries – Debt / Equity
0.6
0.4
0.7
0.6
0.8
Aarti Industries – Interest Coverage
6.5
16.9
8.7
6.4
4.4
(figures in %)
Debt Analysis
During the study period, the debt situation of Tata Chemicals improved significantly with improvement in its interest coverage ratio and debt-to-equity. The reduction in Aarti Industries’ figures was not pronounced because of the large capital expenditure underway.
The table below showcases the debt/equity ratio and interest coverage ratio of Tata Chemicals and Aarti Industries over the last five fiscals.
Particulars
2023
2022
2021
2020
2019
Tata Chemicals – RoCE
10.4
6.6
4.1
7.7
7.1
Tata Chemicals – RoE
11.7
6.9
1.8
7.5
9.4
Aarti Industries – RoCE
13.4
22.4
14.3
18.1
20.5
Aarti Industries – RoE
11.1
22.1
14.9
18.0
18.7
Tata Chemicals Vs Aarti Industries–Future Plans
So far we looked at the previous fiscals’ data for our comparative study of Tata Chemicals vs Aarti Industries. Let us try to get some sense of what lies ahead for the two companies and their investors.
Tata Chemicals
The Tata Group company spent Rs 2,100 in FY23 as capital expenditure to increase production capacity. Furthermore, the management has guided Rs 800 crore CAPEX for FY24.
For the medium-term period till FY27, Tata Chemicals has CAPEX plans worth Rs 2,000 crore.
Along these lines, the management has anticipated achieving volume growth of 30%, 40%, and 400% for soda, bicarbonate, and silica respectively. This growth guidance is after incorporating current CAPEX as the base.
Lastly, its listed subsidiary Rallis India is also putting efforts to grow its product portfolio and drive sales growth in the future.
Aarti Industries
Aarti Industries has consistently spent over Rs 1,000 crore every year over the last four years towards capital expenditure. Its CAPEX stood at Rs 1,306 crore in FY23.
Furthermore, the management has earmarked additional CAPEX of roughly Rs 3,000 crore for the next few years.
The chemicals maker had 40+ products in its R&D pipeline at the end of FY23, highlighting growth opportunities in the future.
Along these lines, the company has plans to increase production capacity for Chlorotoulene, NCB, NT, Ethylation, and more products.
Tata Chemicals Vs Aarti Industries–Key Metrics
We are almost at the end of our Tata Chemicals Vs Aarti Industries comparative analysis. Let us take a quick look at some of the key metrics of the two stocks.
Particulars
Tata Chemicals
Aarti Industries
CMP
₹1,004.65
₹461.25
Market Cap (Cr.)
₹25,571
₹16,385
EPS
₹89
₹15
Stock P/E
11.4
31.5
RoE
11.7%
11.1%
Book Value
₹774
₹136
Price to Book Value
1.31
3.49
Promoter Holding
38.0%
43.6%
Conclusion
As we conclude our comparative study of Tata Chemicals Vs Aarti Industries, we can say that the recent fiscal was not good for AIL while for TCL it turned out to be a stellar one. However, Aarti Industries still trades at an expensive valuation highlighting investors’ belief in the future prospects and CAPEX execution.
In your opinion, which of the two is better placed? The legacy business of Tata Chemicals of Aarti Industries? How about we continue this conversation in the comments below?
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