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Bombay Dyeing & Manufacturing Company

I am holding 200 shares of Bombay Dyeing & Manufacturing Company purchased at an average price of Rs 110 per share. What should my next course of action be with respect to these? 

Akshay Gothi
Via Email

Hold

BSE/NSE Code 500020/BOMDYEING
Face Value Rs 2
CMP Rs 137
52-Week High/Low Rs 139/Rs 67
Current Profit/(Loss) 27 per cent

This group would probably be among the topmost industrial houses in India, given its pedigree and the experience that it has of doing business here. However, somewhere down the line, it lost its edge and lagged in the race to the top. Nevertheless, the brand is still so strong that when it comes to textiles, Bombay Dyeing & Manufacturing Company is among the first few names that strike you. Apart from the textiles sector, where it has a stronghold, the group is also has an interest in the real estate business.

In its core business, the company sells its products through approximately 350 Bombay Dyeing stores and around 2000 multi-brand stores. This strategy of having its own stores has paid off well for the company in terms of maintaining high recall among customers. However, as we said earlier, the company has lost its niche in the Indian textile industry, losing out to competitors.

On the financial front, its recent performance has not been very encouraging. For H1FY13, its topline witnessed a growth of a mere 7.04 per cent to stand at Rs 991.45 crore as against Rs 926.22 crore during the same period last year. The company continued to be in losses, which stood at Rs 55.24 crore for H1FY13 as against Rs 73.72 crore year till date.

With a debt burden of Rs 1304 crore on its balance sheet, its debt-to-equity ratio at the end of FY12 stands at 0.73x. The interest outgo has seen an upswing of 16.78 per cent on a YoY basis for H1FY13, and stands at Rs 89.86 crore.

To answer your specific query, no matter what the fundamentals of the company, to benefit from a stock what really matters is a perfect entry and timely exit. This may sound too theoretical but is apt in your case. Currently, you are sitting on a considerable profit of 27 per cent from where you had invested in this counter. At present, we suggest that you book some profit, which will at least cover your original investment in the scrip. For the rest, we advise you to stay invested till the end of the March 2013 quarter. A good set of numbers in the March quarter may bolster your returns further. If not, you still have nothing to lose.
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Birla Corporation

Is this the right time to invest in Birla Corporation at the current market price?

Tanusree Das Gupta
Via Email 

Buy

BSE/NSE Code 500335/BIRLACORPN
Face Value Rs 10
CMP Rs 327
52-Week High/Low Rs 312/Rs 201
Current Profit/(Loss) NA

Investing in diversified companies helps protect your portfolio from the vagaries that a particular sector may face at times. This is where a stock like Birla Corporation helps. This is a flagship company of the M P Birla group, with an interest in cement, jute and power. All these have a different set of operating environments and are not correlated in any manner. A downturn in one can be offset by an uptick in the other.

Now, let’s take a look at the specifics of its business. Though Birla Corporation is a diversified company, its major interest is in the cement business. Its cement division manufactures and sells cement under the Birla Cement SAMRAT, Birla Cement KHAJURAHO, Birla Cement CHETAK and Birla Premium Cement brands. The company has a major presence in the northern and the eastern parts of the country. This division also exports its products to Nepal. Its jute division manufactures various products, including jute yarn, floor and wall coverings, lino hessian, decorative fabrics and nursery cloth, to name a few. This division exports its products to the European region, the US, Japan and other destinations.

On the financial front, its H1FY13 performance has been pretty encouraging. The topline witnessed a growth of 20.19 per cent and stood at Rs 1304 crore as against Rs 1085.22 crore during the same period last year. The bottomline witnessed a growth of 19.52 per cent, and was at Rs 164.98 crore as against Rs 138.03 crore for H1FY13. The cement division is the largest contributor to the company’s revenues. During H1FY13, this division contributed to almost 98 per cent of its revenues. The company has four cement plants located in four states, viz. Madhya Pradesh, Rajasthan, West Bengal and Uttar Pradesh, having a cumulative production of 7.03 million tonnes.

On the valuations front, Birla Corporation trades at a P/E of 8.70x and its EV/EBITDA stands at 6.78x. This is much less as compared to its other listed peers.

We suggest that you consider investing in the stock in a staggered manner. This will help you ride the diversification advantage of the company, as there is a lot that it is yet to achieve in its other two businesses of power and jute.
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Jubilant Foodworks

I am holding 454 shares of Jubilant Foodworks bought at Rs 1350 per share. Should I continue to hold these?

Manoj Lahoti
Via Email

Hold

BSE/NSE Code 533155/JUBLFOOD
Face Value Rs 10
CMP Rs 1309
52-Week High/Low Rs 1397/Rs 731
Current Profit/(Loss) 3.03 percent
‘Timely delivery or your money back’ is the mantra that this company follows when it comes to servicing customers. But the stock of a pizza retailing company will not yield results as instantaneously as it can deliver pizzas at your doorstep. With a market share of more than 70 per cent, Domino’s hardly needs any introduction to customers. Jubilant Foodworks, a part of the Jubilant Bhartia group, has the exclusive rights to this brand in India, Nepal, Bangladesh and Sri Lanka.

Jubilant has been successfully bringing in foreign food brands to the country by getting exclusive rights to their retailing here. It is India’s largest and fastest growing food service company, with a network of 515 stores (as of September 30, 2012) through which it sells Domino’s Pizzas. It has launched Dunkin’ Donuts in Delhi in April 2012. The company also has 7 Dunkin’ Donuts restaurants in India (as of December 5, 2012). With the launch of Dunkin’ Donuts in India, it is now addressing two distinct non-competing segments of the food service industry in the country, viz. the home delivery of pizzas and the all-day part food and beverage market.

On the financial front, the company’s numbers for H1FY13 have been quite good. The topline witnessed a growth of 43.58 per cent, and stood at Rs 656.61 crore as against Rs 457.30 crore for H1FY12. The bottomline witnessed a growth of 38.13 per cent and was at Rs 64.70 crore as against Rs 46.84 crore against the same period last year. The most important point to be noted about this company is that it is virtually debt-free – it had just about Rs 9.52 crore of debt on its books as of FY12. On the valuations front, the stock discounts its trailing 12-month earnings by 68.02x and the EV/EBITDA stands at 44.16x.

Jubilant’s performance is notable as it has registered a CAGR of 53.62 per cent and 141.04 per cent in its topline and bottomline respectively for the last three years. We suggest that you hold on to the stock from a longer-term perspective to garner better returns if you are not in a hurry to exit. As we said, there would be more value creation going forward.
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Thermax

I wish to invest a sum of Rs 5000 in Thermax. Is it trading at right valuations at this juncture? 

Vijay Joshi
Via Email

Buy

BSE/NSE Code 500411/THERMAX
Face Value Rs 2
CMP Rs 614
52-Week High/Low Rs 691/Rs 388
Current Profit/(Loss) NA
It is heartening to know that you are clear about the investment amount and the company you wish to invest in. This kind of thinking goes a long way in building wealth meaningfully over the years. Now, coming to your specific choice of Thermax, this is a company that provides engineering solutions to the energy and the environment sectors in India and abroad. In this background, your decision must be guided by the knowledge that companies in the heavy engineering sector have been facing some headwinds for quite some time now.

On the financial front, the company’s numbers for H1FY13 have been rather muted. The topline declined by 7.33 per cent over the year ago period to stand at Rs 2175.85 crore. The bottomline too declined by 12.83 per cent to stand at Rs 158.27 crore as against Rs 181.57 crore for H1FY13. The management, however, is confident of maintaining an order inflow run-rate of Rs 11-14 billion per quarter in H2FY13 based on the stable order inflows of Rs 6-8 billion for short-cycle products and a pipeline of large orders from customers such as Tata Power, NMDC and Reliance. This will certainly act as a positive trigger for the stock. The management has also indicated that poor grid reliability and better cost economics are leading to a rise in enquiries for smaller players from the textiles, food processing, sugar and cement sectors.

On the valuations front, the stock trades at a P/E of 19.16x and its debt-to-equity ratio is also at a comfortable level of 0.27x. At the current levels, you can enter the stock in a staggered manner.

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