Query Board

GRUH FINANCE 

I am holding 850 shares of Gruh Finance Ltd. since June 2018, purchased at Rs 357. Could you please advise if I should hold the stock or exit? 

- Milind Sakpal 

Gruh Finance Limited (GRUH) is a housing finance company. The company provides home loans to individuals and families for purchase, construction and extension of homes. The company operates in the housing finance business segment. GRUH also provides loans for repair and renovation of houses and home loans to families in the self-employed category. GRUH offers loans for purchase and construction of non-residential properties and offers mortgage loans against existing residential and commercial properties. GRUH offers developer loans on a selective basis. On the financial front, the net sales have gone up by 15 per cent on a YoY basis in Q2FY19 to reach Rs 480.54 crore as against Rs 416.22 crore in Q2FY18. The PBIDT has risen 20 per cent in Q2FY19 to Rs 463.61 crore as against Rs 363.01 crore in Q2FY18. The PAT has expanded by 20 per cent as it stood at Rs 105.49 crore in Q2FY19 versus Rs 87.87 crore in Q2FY18. Recently, there was news that Bandhan Bank is set to purchase Gruh Finance, but we are of the opinion that, as an investor, you should invest in Bandhan Bank, instead of Gruh Finance. Therefore, we recommend our investor-readers to EXIT from Gruh Finance and buy Bandhan Bank when the price corrects. For a detailed analysis of Bandhan Bank, refer to our ‘Choice Scrip’ section in Vol 34, Issue no 2.

LT FOODS 

had bought 100 shares of LT foods at Rs 83 per share. Should I hold now or sell? 

- Shruti 

LT Foods is a branded specialty foods company engaged in milling, processing and marketing of branded and non-branded Basmati rice and manufacturing of rice food products in the domestic and overseas market. Its operations include contract farming, procurement, storage, processing, packaging and distribution. 

On the consolidated financial front, the net sales of the company has risen by 8.80 per cent in Q2FY19 to reach Rs 927.77 crore as against Rs 852.71 crore in Q2FY18. The profit before interest depreciation and tax (PBIDT) came in at Rs 95.63 crore in Q2FY19, while in the corresponding quarter of the previous year, it stood at Rs 99.56 crore, a drop of 3 per cent YoY. The profit after tax (PAT) stood at Rs 37.57 crore in Q2FY19, falling marginally by 0.96 per cent from Rs 37.57 crore. On the annual front, the net sales have expanded 11 per cent to Rs 3613.70 crore in FY18 as against Rs 3244.78 crore in the previous fiscal. The PBIDT of the company stood at Rs 414.25 crore, increasing by 2 per cent from Rs 406.34 crore in FY17. The PAT came in at Rs 146.18 crore, a surge of 13 per cent in FY18 versus Rs 129.59 crore in FY17. Keeping in mind the financial performance, we recommend our investor-readers to HOLD on to the company, as in the coming quarters, the company’s stock could gain some momentum on the bourses 

TATA MOTORS 

I am holding 51 shares of Tata Motors at an average price of Rs 264. Please suggest whether to hold or sell 

- Milind Sakpal 

Tata Motors Limited is an automobile company engaged in the manufacture of motor vehicles. The company is engaged mainly in the business of automobile manufacturing consisting of all types of commercial and passenger vehicles. The company’s segments include automotive operations and all other operations. The company’s automotive segment operations include all activities relating to the development, design, manufacture, assembly and sale of vehicles, including vehicle financing, as well as sale of related parts and accessories. 

On the financial front, on a consolidated basis, the net sales of the company grew by 2.48 per cent and came in at Rs 71,292.79 crore in Q2FY19 as against Rs 69569.93 crore in Q2FY18. The profit before interest depreciation and tax (PBIDT) has however fallen by 27.41 per cent to reach Rs 6257.69 crore in the second quarter of FY19 as against Rs 8,621.04 crore that came in the corresponding quarter of FY18. The net loss came in at Rs 1,095.34 crore in Q2FY19 as against a net profit of Rs 1991.59 in Q2FY18. 

On the annual front, the net sales of the company increased by 9 per cent to reach Rs 29,461.18 crore in FY18 as against Rs 26,9692.51 crore in the previous fiscal. The PBIDT of the company for FY18 came in at Rs 35415.25, witnessing an increase of 17 per cent from Rs 30,343.23 crore in FY17. The company posted PAT of Rs 6813.10 crore in FY18, an increase of 12 per cent, as against Rs 6063.10 crore in the previous fiscal. 

On the valuation front, the company is currently trading at a PE multiple of 141.85x on its TTM earnings as against industry PE of 15.93x. The return on equity (ROE) stood at 8.88 per cent and the return on capital employed (ROCE) stood at 9.87 per cent. 

The company’s financials show a slight downtrend in the recent quarter. However, the numbers are expected to improve in the near future. So we recommend a HOLD for the long term 

BALASORE ALLOYS 

I have bought Balasore Alloys one year back when the price was Rs 73. The price now is Rs 27. Should I hold or sell it ? 

- Nandakishor Yeolekar 

Balasore Alloys is engaged in manufacturing and mining of ferro alloys. The company is also engaged in manufacturing and selling of ferro chrome of various grades. It has over five furnaces with a total capacity of approximately 60 mega volt ampere (MVA) to produce approximately 95,000 million tonnes (MT) of ferro alloys per annum. Its products include high carbon ferro chrome (FeCr60) and low silicon ferro chrome (FeCr65). It has a captive chrome ore mine in Sukinda Valley in Jajpur district in the state of Odisha. Its manganese ore mine is located at Joda in the Keonjhar district in Odisha and Hathoda in Balaghat district in Madhya Pradesh. 

On the standalone financial front, the net sales stood at Rs 320.84 crore, a jump of 15.65 per cent in Q2FY19 as against Rs 277.45 crore in Q2FY18. The profit before interest depreciation and tax (PBIDT) stood at Rs 20.6 crore in the second quarter of FY19, decreasing by 14.53 per cent from Rs 24.01 crore in the same quarter previous year. The profit after tax (PAT) for the period Q2FY19 stood at Rs 0.12 crore, a drop of over 90 per cent from Rs 21.51 crore in Q2FY18. 

On the annual front, the company in FY18 posted net sales of Rs 1210 crore, witnessing an expansion of 8 per cent from Rs 1011.81 crore in the previous fiscal. The PBIDT for FY18 grew by 5 per cent as it came in at Rs 211.14 crore, as against Rs 201.28 crore in the previous fiscal. The PAT has dropped by 22 per cent to Rs 65.56 crore in FY18 as against Rs 83.64 crore in FY17. 

On the valuation front, the company is currently trading at a P/E of 8.13x on its TTM earnings. The industry PE is 5.98. The return on equity (ROE) stood at 7.06 per cent and the return on capital employed (ROCE) was at 13.62 per cent. The price/BV stood at 0.26x. Noting the deteriorating financial performance and the valuations, the company stands on unstable grounds. Therefore, we recommend our readerinvestors to EXIT. 

BHARAT ELECTRONICS 

I have shares of Bharat Electronics at average price of Rs 112.95. Please suggest whether to hold or sell. 

- Tanmay Mohapatra 

Bharat Electronics Limited is involved in design, manufacture and supply of electronics products for the defence requirements as well as for non-defence market. The company’s principal products include weapon systems, radar and fire control systems and communication. Its defence products include defence communication, radars, naval systems, command, control, communications, computers, and intelligence systems, etc. The company’s non-defence products include turnkey system solutions, civilian radars, e-governance systems and homeland security. 

On the financial front, on a standalone basis, the company secured net sales of Rs 3282.4 crore, a jump of 34.98 per cent in Q2FY19 as against Rs 2431.73 crore in the same quarter of the previous year. The profit before interest depreciation and tax (PBIDT) came in at Rs 854.44 crore in Q2FY19 while in the corresponding quarter of the previous year it stood at Rs 592.81 crore, a jump of 44.13 per cent YoY. The profit after tax (PAT) stood at Rs 571.31 crore in Q2FY19, a rise of 38.54 per cent from Rs 412.39 crore. 

On the annual front, the net sales have expanded 20 per cent to Rs 10322.33 crore in FY18 as against Rs 8611.88 crore in the previous fiscal. The PBIDT of the company stood at Rs 2203.52 crore, which has remained rather constant as there is a marginal drop of 1 per cent from Rs 2237.05 crore in FY17. The PAT came in at Rs 1399.29 crore, falling by 10 per cent in FY18 versus Rs 1547.62 crore in FY17. 

On the valuation front, the company is currently trading at a P/E multiple of 13.92x on its TTM earnings, as against industry P/E of 23.23x. The return on equity (ROE) stood at 18.33 per cent and the return on capital employed (ROCE) was at 25.83 per cent.The financial numbers of the company demonstrate that the company has been performing consistently well. The performance is expected to be better in the upcoming quarters. We, therefore, urge our reader-investors to HOLD on to the stock. 

NMDC 

I hold 120 shares of NMDC bought at Rs 120. Kindly advice on this stock. 

- S. Kumar 

NMDC Limited is engaged in mining of iron ore. The company’s segments include iron ore and other minerals and services. Apart from this, the company is also engaged in the production and sale of diamonds, sponge iron and wind power. Its projects under construction include Bailadila Deposit11/B, Kumaraswamy iron ore project, 1.2 MTPA pellet plant at Donimalai, 3 MTPA integrated steel plant in Chhattisgarh, among many others. The company also proposes to invest in raw materials such as tungsten and rare earth minerals.

On the standalone financial front, the net sales of the company has remained flat, with just a 0.69 per cent rise to Rs 2437.92 crore in Q2FY19 from Rs 2421.33 crore in the same quarter of the previous year. In terms of profit before interest, depreciation and tax (PBIDT), it grew by 4.69 per cent in Q2FY19 at Rs 1259.41 crore versus Rs 1203.01 crore in Q2FY18. The profit after tax (PAT) stood at Rs 636.49 crore in Q2FY19, down from Rs 844.4 crore in the corresponding quarter of the previous year. The PAT too witnessed a drop of 24 per cent on a YOY basis. 

On the annual front, the net sales has climbed 32 per cent to reach Rs 11614.90 crore in FY18 as against Rs 8828.14 crore in the previous fiscal. The PBIDT has increased by 40 per cent in FY18 at Rs 6327.83 crore versus Rs 4509.86 crore reported in the previous fiscal. The PAT surged 47 per cent in FY18 as it came in at Rs 3805.88 crore, while in the previous fiscal it was Rs 2589.14 crore. On the valuation front, the company is currently trading at a PE multiple of 8.02x as against industry PE of 13.34x. The return on equity (ROE) stood at 16.24 per cent and the return on capital employed (ROCE) stood at 26.24 per cent. 

The company has been in talks as Karnataka government levied additional fee when it renewed NMDC’s licence for the Donimalai mine in Nov. 2018 and the state-owned miner contested it. The result is awaited. Looking at the annual financial performance and the valuations, we recommend a HOLD to our reader-investors. 

(Closing price as of Jan 14, 2019)