Author: Sambit Mohanty

Pidilite Industries

Posted on by Sambit Mohanty

Key points from this report:

 

  • We recommend adding incremental positions in Pidilite as it breaks out of a stage-two five-week flat base on strong volume.
  • Leadership in the adhesives segment, focus on a three-tier portfolio, and a pioneer status in underpenetrated segments such as waterproofing and tile & stone solutions will drive Pidilite’s growth.
  • Strong fundamental ratings: Composite Rating 97. EPS Rank 93. SMR Rating of A. It has strong double-digit EPS growth estimates for FY22 and FY23.
  • Improving technical profile: RS line has been trending upward since April with an RS Rating of 52 and an A/D Rating of A. Up/Down Volume ratio greater than 1 and a positive A/D Rating denote strong institutional buying.

Asian Paints

Posted on by Sambit Mohanty

Key points from this report:

 

  • We recommend adding incremental positions in Asian Paints as the stock broke out of a stage-two, six-week flat base on strong volume. Look for the first level of support at its 50-DMA (-9%).
  • It is India’s largest paint company with strong brand equity due to its vast distribution network. The outlook for the Indian paint industry is very strong due to low per capita consumption, urbanization trends, and high awareness influencing customer preferences.
  • Fundamental ratings remain solid, with a Composite Rating of 93, an EPS Rank of 91, and an SMR Rating of A, aided by double-digit pretax margin and ROE.
  • Technical ratings have remained stable, with Up/Down Volume ratio above 1 and positive A/D Rating indicating money inflow. RS line is consolidating sideways, with an RS Rating of 54 and A/D Rating of A.

Info Edge Limited

Posted on by Sambit Mohanty

Key points from this report:

 

  • Add to positions as the stock breaks out of a stage-three consolidation base on above average volume.
  • Info Edge is India’s leading internet classifieds company. It invests in early-stage technology-based startups.
  • It holds a 15% stake in Zomato, a leader in India’s online food delivery market with about 50% share; operates Naukri, a leading job portal in the country with more than 70% traffic share; and 99acres.com, a real estate search portal with 40% share of the online real estate listings market.
  • The company acquired a 100% stake in Zwayam in June and Doselect.com in July for $8M and $3M, respectively. These acquisitions help the company to consolidate a leadership position in the job listing market.
  • Zomato IPOed in July and Policybazaar is expected to IPO later this year. IPOs of minority investments help the company realize the value of its investments.
  • Good Q1 FY22 results: Revenue was INR 3,273M (+14.8% y/y), beating consensus by 2.5%. EPS was INR 11.77 (+54.9% y/y), compared with consensus of INR 8.61.

O’Neil Capital Equipment Sector Weekly

Posted on by Sambit Mohanty

Transdigm (TDG; $33B market cap; $137M ADV), a manufacturer of aircraft components, has started discussions to acquire Meggitt
(MGGT.GB; $9B market cap; $34M ADV). It is expected to offer 900p per share. The board of Meggitt had previously asked
shareholders to accept the 800p per share offer from Parker-Hannifan (PH; $38B market cap; $291M ADV). Transdigm has upto
September 14 to make an offer. TDG is trading below its 200-DMA and is consolidating in a stage-one flat base. It has poor technical
ratings: RS Rating of 53 and A/D Rating of D-. Avoid. PH is testing support along its 200-DMA and has an RS Rating of 60 with an A/D
Rating of D.

Novatek

Posted on by Sambit Mohanty

Key points from this report:

 

  • Buy Novatek as the stock is breaking out of a stage-one flat base (pivot RUB 1,709.60).
  • It reported solid Q2 results driven by increased production and higher commodity prices.
  • With the establishment of a subsidiary for LNG, retail LNG is set to become its new driving factor.
  • Novatek expands its natural gas exposure in Vietnam, a dynamically growing region.
  • A strong set of fundamental ratings: Composite Rating of 94, SMR Rating of C, and EPS Rank of 65. EPS Rank is set to improve significantly if 2021 results meet high triple-digit growth estimates.
  • Solid technical setup the last two months: A/D Rating of A-, Up Down Volume ratio of 0.8, and RS Rating of 88 all indicate good money flows. RS line is rising back to all-time highs.

O’Neil Capital Equipment Sector Weekly

Posted on by Sambit Mohanty

Rolls Royce (RR.GB; $13B market cap; $61M ADV) reported H1 FY21 results. Underlying revenue grew to £5,227M (-3.4% y/y). Sales declined on an organic basis in the civil
aerospace and power system segments. The company returned to profitability and reported an operating profit of £307M from a loss of £1,630M in H1 FY20. It has benefited
from restructuring, which is expected to achieve savings of more than £1B in 2021. The company expects a free cash outflow of £2B in H2. It expects free cash flow o

Samsung SDI

Posted on by Sambit Mohanty

Key points from this report:

 

  • Accumulate: We recommend that investors accumulate Samsung SDI as it is breaking out of a cup-with-handle base with a pivot of KRW 770,000 after reporting strong Q2 results last week and announced plans to build a battery plant in the U.S. before 2025.
  • Good fundamental ratings: EPS Rank of 93 and SMR Rating of B.
  • Strong technical ratings: RS line has been trending up since early June with a good RS Rating of 73. Strong volume trends with A/D Rating of B+ and Up/Down Volume ratio of 1.7.
  • In the short term, we see a good number of catalysts for the stock in H2 as it starts supplying batteries to Amazon-backed electric truck startup Rivian. Additionally, it will start shipping its high nickel next-generation batteries to BMW in Q3. The company has guided that its EV battery business will grow in H2 both in terms of sales and profitability.

Deepak Nitrite

Posted on by Sambit Mohanty

Key points from this report:

 

  • We are reiterating our buy call on Deepak Nitrite as shares broke out of a 10-week cup base on strong volume and are actionable.
  • Strong growth outlook for Indian specialty chemical industry, import substitution for phenol and acetone led by capacity expansion plans, and robust demand from agrochemical and pharma end-markets are the key growth drivers.
  • Solid fundamental profile: SMR Rating A and EPS Rank 94, supported by double-digit margin and ROE. It has double-digit EPS growth estimates for FY22 and FY23.
  • Good technical profile: RS line has been trending upward since early 2019, with an RS Rating of 75 and an A/D Rating of A. Up Down Volume ratio has been greater than 1 the past eight weeks, indicating strong interest among institutional investors. The number of funds holding shares increased 85% y/y as of March to 118.

APAC Market Updat

Posted on by Sambit Mohanty

Key points from this report:

 

  • We are downgrading China to a Downtrend as the CSI 300 fell 3.22% and gapped down below the 200-DMA (5,120, +4.0%) on heavy volume. The index has been consolidating around the tight area of 5,000-5,200 but breached below this area of support today. The intraday low (4,860) was also below the previous low of ~4,900 (-0.8%) in May.
  • Among our Focus List ideas in China, Avic Jonhon Optronic Tech (CAO.CN), Wuxi Lead Auto Equipment (WLA.CN), Naura Tech. Group (SEV.CN), Contemporary Amperex Tech (CO1.CN), Guangdong Kinlong Hardware Products (GKL.CN), Eve Energy (EEC.CN), and Yunnan Energy New Material (YUM.CN) are still trading above their 50-DMA.

Chinese Lithium

Posted on by Sambit Mohanty

Key points from the report:

 

  • Vehicle electrification has become an established trend over the world. We are upbeat on demand for new energy vehicles (NEV) in the medium and long term given major countries’ initiatives of achieving carbon neutrality by 2050-2060. China’s NEV sales volume reached 1.34M in 2020, accounting for 5.4% of total auto sales. The industry plan targets a penetration rate of 20% in 2025, indicating ~6.43M sales volume and a CAGR of 36% in 2020-2025.
  • China is playing a leading role in global lithium-ion battery (LIB) manufacturing, ranging from cell manufacturing to material supplies. The cell is mainly composed of cathode material, anode material, separator, and electrolyte, accounting for about 40%, 7%, 9%, and 7% of cell costs, respectively.
  • Through the lens of our proven O’Neil Methodology, we have identified key stocks to watch and add to positions on good breakouts or low-volume pullbacks. Highlighted stocks: CATL (CO1.CN; Focus List), Eve Energy (EEC.CN; Focus List), Beijing Easpring (BEA.CN), Putailai (PUI.CN), Yunan Energy (YUM.CN; Focus List), Tinci Materials (ABH.CN), and Capchem (CAP.CN).