Nestle India rises to 4-month high on strong rural demand
Nestle India rose 2.7% today to ₹17,400 and was one of the top contributors to the Nifty FMCG index (+1.1%). A rise in in-home consumption has led to double-digit growth in its key products (such as noodles, sauces and coffee) during the September quarter. As per the management, Tier 2, 3 and 4 towns and rural markets are doing extremely well, while operational issues continue in the urban markets. However, the company is seeing increased traction in online sales, which have nearly doubled over the last one year and now contribute 4% of sales. The company plans to invest ₹2,600 crore over next 3-4 years to increase its manufacturing capacity.
BEL surges on robust order book and future outlook
State-run defence company Bharat Electronics (BEL) expects 10-15% sales growth over the medium term versus a modest 6.6% growth in FY20. A strong order book of ₹52,700 crore (which is over 4 times its FY20 sales) and expectations of future order inflow are supportive to the sales momentum. The company also expects to maintain EBITDA margin in the range of 20-21% during this period. BEL’s debt free status is also comforting to an investor. The stock rose 5% today and has gained nearly 25% this month.
Graphite electrode makers soar as demand improves
Graphite India and HEG are among India’s largest makers of graphite electrodes, which are used in electric-arc furnaces in making steel. Both these companies suffered losses in Q2 on account of lower volumes and sales realisation per unit. However, improving economic activity and easing lockdown curbs are expected to help improve the demand for graphite electrodes. The improvement in demand is already visible as sales have grown for Graphite India (19%) and HEG (38%) on a quarter-on-quarter basis. As per reports, graphite electrode prices in China have risen nearly over 20% in the last two months and are at year-high levels. The Graphite India management recently commented that the downcycle of the electrode industry is bottoming out. The uptick in the steel sector supported by a revival in the infrastructure development and auto industry augurs well for graphite electrode makers. Investor interest in these stocks is evident as shares of Graphite India (+34%) and HEG (+21%) have gained sharply this month, backed by strong volumes.
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