Dalmia Bharat (OC.IN): Reported mixed Q2 FY24 results over the weekend. Revenue (+6% y/y) missed estimates by 5%, while EPS (+155% y/y) beat estimates by 23%. The stock is trading above its long-term moving averages and is 8% off its 52-
week high. We recommend investors add to positions if the stock retakes its 21-DMA on above average volume.
Author: gundaboina saikiran
Global Laggards
Highlighted Charts
U.S.: Nutrien (NTR), G F L Environmental (GFL), Stericycle (SRCL), Zillow Group (Z), General Motors (GM), Expedia Group (EXPE), Six Flags Entertainment (SIX), ELF Beauty (ELF), Ormat Technologies (ORA), World Kinect Corporation (WKC), Raymond James Financial (RJF), Repligen (RGEN), Merit Medical System (MMSI), Krispy Kreme (DNUT), Teradyne (TER), Qorvo (QRVO), Spirit Airlines (SAVE).
Developed: Bluescope Steel (BSL.AU, BSL AU), Sig Group (SIGN.CH; SIGN SW), Toho (TOHO.JP; 9602 JP), David Campari Milano (CPR.IT; CPR IM), Gpt Group Stapled Units (GPT.AU; GPT AU), The Swatch Group (UHRN.CH; UHRN SW).
Emerging: Hybe (BH1.KR; 352820 KS), Abdullah Al Othaim (AOM.SA; AOTHAIM AB), Large Precision (LPC.TW; 3008 TT).
O’Neil Capital Equipment Sector Weekly
Dalmia Bharat (OC.IN) – $5B market cap; $9M ADV: We added Dalmia Bharat to the Emerging Markets Focus List as the stock broke out of a stage-one 11-week cup base on above average volume. Dalmia is India’s fourth largest manufacturer of
cement by capacity and is a market leader in East India. The company is expected to benefit from a surge in housing and infrastructure development in East India, primarily driven by affordable housing initiatives. Cement prices in East India have
increased sharply in the range of 20–25% over the past month and should improve Dalmia’s operational profitability going forward. Consensus expects revenue and EPS CAGR of 13% and 15%, respectively, for FY23–25. F
O’Neil Capital Equipment Sector Weekly
BAE Systems (BA.GB) – $40B market cap; $55M ADV: We added BAE Systems to our Developed Markets Focus List as the stock broke out of a stage-two 20-week cup-with-handle base on above average
volume. BAE Systems is the seventh largest defense contractor globally based on revenue. The increased defense spending across nations over the past year has translated into strong order intake for the
company. Orders grew 17% y/y in H1 FY23, resulting in an order backlog of £66B (~3x its FY22 revenue). In August, the company announced the proposed acquisition of Ball Aerospace, which should expand its
capability in the space segment and contribute ~7% in annual revenue after it closes in H1 FY24. Consensus expects an organic revenue and EPS CAGR of 6% and 9%, respectively, over the next two years.
O’Neil Capital Equipment Sector Weekly
FL-stock Larsen & Toubro (LST.IN): Per media reports, Saudi Aramco offered a contract worth $3.9B to L&T for expansion of its gas production project in Saudi Arabia. It announced revision in the buyback price to INR 3,200 from INR 3,000, for the buyback
program announced in August. The total buyback amount remains the same at INR 100B. The stock has been trading constructively along its rising 21-DMA after breaking out of a stage-one cup base in June and is 4% off its 52-week high. It is extended from an
ideal buy point. RS line is in an uptrend with a RS Rating of 74 and an A/D Rating of A-.
Update on U.S. Home Builders
- In the capital equipment sector, the home builders (Building-Residential/ Commercial) Industry Group (IG) has been the best-performing IG over the past 52 weeks.
- The IG has also maintained a strong Group Rank in the range of 5–10 and continues to do so. After a strong rally in the past 7–8 months, the XHB (Home Builders Index) is pulling back and has breached support along its 21-DMA (second time in the last four months) and 50-DMA (first time in the last four months).
- It is expected to consolidate, given the lower-than-expected builder confidence and the indication by the Fed for further price hikes.
Travel & Gaming Stocks in Australia
In Australia, the Travel and Gaming space stands out in terms of charts and technical setups through our O’Neil lens. The stocks highlighted in this note are Webjet (WEB.AU), Aristocrat Leisure (ALL.AU), and The Lottery Corporation (TLC.AU). These are a part of our Focus List and have constructive technical setups to be initiated or added at current levels.
Over the past year, WEB.AU, ALL.AU, and TLC.AU have significantly outperformed the ASX 200 index. These stocks have market leadership characteristics and are also benefiting from tailwinds in the sector they operate – travel, land-based, and online gambling. In addition, they have a very low correlation to the market.
O’Neil Capital Equipment Sector Weekly
Cera Sanitaryware (CWR.IN; CRS IN) – $1B market cap; $2M ADV: We added Cera Sanitaryware to the Emerging Markets Focus List as the stock broke out of a stage-two nine-week flat base on above
average volume. Cera is one of the top three organised players in the sanitaryware and faucets markets in India. We believe Cera’s bathroom fittings business is poised for strong growth, driven by
housing upgrades, market shift toward organized players, an extensive distribution network, and forthcoming capacity expansion. Consensus expects revenue and EPS CAGR of 16% and 21%,
respectively, over the next two years.
O’Neil Capital Equipment Sector Weekly
Infrastructure Spending – Emerging Drivers for a New Cycle – The global infrastructure spending over the next decade is expected to focus on electricity and roads. China, India and the U.S. will be the key markets as
they account for more than 50% of global investments. Key areas of focus are expected to be the revamp of aging infrastructure, development of an EV charging network, higher demand for datacenters and 5-G
towers, and increased adoption of AI.
Reiterate Buy Call on ZDM.CN
Key points:
- Buy as the stock broke out of a stage-one, 21-week cup-with-handle base on good volume.
- Dingli is China’s largest aerial work platform (AWP) manufacturer. China’s AWP market was estimated at RMB 80B in 2022 and is expected to reach RMB 138B in 2025, a CAGR of ~ 20%, driven by rising pursuits for safety, efficiency, and low costs.
- The company has accelerated its expansion in the U.S. and Europe markets by virtue of its ever-growing product pipeline and leading electrification technologies. The overseas markets accounted for 65% (+23ppt y/y) of the total revenue in 2022, and we are positive that Dingli will continue to enjoy the strong demand overseas and grab more shares.
- Dingli released stronger-than-expected Q2 earnings guidance.
