November 29, 2022

Bulls Hit A Six

Tale of the Tape

Hey, guys. Markets extended their unbeaten run to day 6. 🔥

Nifty and Sensex closed barely up as investors booked profits after scaling new highs. On the other hand, Midcaps and Smallcaps struggled, down -0.5% each. The advance-decline ratio was split evenly. ✌️

Most sectors ended higher. FMCG (+1.9%) and Metals (+1%) gained the most. Pharma (+0.7%) closed up for a sixth straight day. 📈

CLSA decided to show some love to Paytm. The global brokerage sees a +40% upside from its current price. 🤑 Read more below.

IDBI Bank rallied +4%. Sumitomo and another large global bank have expressed interest in acquiring GOI’s stake, according to ET. 🤝

Laurus Labs tanked 8% after a double downgrade by Kotak Institutional Equities. They see a further 15% downside from current levels. 🚨

Gland Pharma surged +7% on reports that Chinese promoters Fosun Group may sell its entire $3.6 billion stake. 💰

ICICI Prudential jumped 4% after 35 lakh shares (0.25% equity) changed hands via a block deal. 🔍

Britannia will sell a 49% stake in its dairy business to France-based Bel Group for Rs 262 cr. 🧀

IPO Update. Dharmaj Crop Guard IPO got oversubscribed 5x on day 2. Uniparts India IPO opens for subscription tomorrow. Check out our detailed analysis below. 💯

Cryptos had a rare green day. Bitcoin rose 1.5%. Ethereum gained +3%. Doge ripped +8%. 🚀

Here are the closing prints:

Nifty	18,618	+0.3%
Sensex	62,681	+0.3%
Bank Nifty	43,053	+0.1%

Buy The Dip?

It’s Paytm’s time to shine, according to CLSA. They are superrrr bullish on the stock and see a +40% upside from current levels! That’s a lot when you’re a Paytm investor! 😱

I know what you guys are thinking: What the heck is CLSA smoking? The stock is down 80% from its IPO price, constant run-ins with the RBI, and investors plus top executives are rushing for the exit door. There’s just sooooo much negativity. Why would you want to own a stock like that? 🤔

The CLSA report titled “Worth a look now?” makes a few compelling points about Paytm’s business. Over the past two years, Paytm’s net take rate has improved from nil to 0.13%. FYI – take rate is the percentage of the gross merchandise value (GMV) that Paytm records as its revenues. Lower processing costs and a higher share of the revenue from its Soundbox are key reasons behind this, which is positive. ✅

CLSA estimates revenue from the lending business to surpass Rs 3,000 cr in the next 5 years. Paytm’s recent tie-up with HDFC Bank and SBI to distribute credit cards also has huge potential, they added. At 16x EV/EBITDA, the stock is trading at a massive discount compared to global peers like Block and Adyen. Hence, the risk-reward ratio is also favourable. 👍

PS – CLSA’s vote of confidence comes hot on the heels of a similar recommendation by global investment bank Citi. They are even more bullish on the stock and have a target price of Rs 1,055 per share, +2x from current levels. Will Paytm continue to disappoint or can we see a reversal? Only time will tell. ⚔️

IPO Alert!

Uniparts India IPO opens for subscription tomorrow. The price band is fixed at Rs 548-577 per share. The company plans to raise Rs 836 cr from the markets.💰

Founded in 1994, Uniparts India is a leading supplier of machined parts used in agriculture, construction and mining. They also design prototypes and undertake large-scale production on behalf of their customers. Over 80% of their total sales come from exports – mainly the USA. Bobcat, TAFE and Kramp are some of its marquee customers. 🔩

The IPO is a 100% Offer for Sale (OFS) aka the company will not receive any funds and its existing investors are cashing out. Promoters Karan, Meher and Pamela Soni along with Ashoka Investment and Ambadevi Mauritius Holding are the sellers. 💸

Financial Snapshot: (FY22)

Revenue: Rs 1,227 cr; +36% YoY
EBITDA: Rs 272 cr; +66% YoY
EBITDA Margin: 22.1% vs 18.2% YoY
Net Profit: Rs 167 cr; +80% YoY

Bottomline: Uniparts India’s dominant position in a niche market, solid financial track record and reasonable valuations are key positives. But, fears of a recession in the US and Europe plus volatility in raw material prices and its impact on earnings remain top concerns. FWIW, the stock may list at a 21% premium to its issue price, according to grey market data. 🤑

Stocktwits Spotlight

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