Your Stock Queries
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THERMAX
I want to invest in this company. Is it trading at the right valuations at this juncture?
- Madhulika Trehan, Via Email
| BSE/NSE Code | 500411/THERMAX |
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| Face Value | Rs 2 |
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| CMP | Rs 596 |
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| 52-Week high/low | Rs 691/ Rs 420 |
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| Your Current Profit/(Loss) | N.A |
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Valuation is a very subjective term, which depends on the market environment. Something that seems to be cheap today may suddenly look expensive if the character of the market changes significantly.So, to answer your query,one would have to look at multiple factors before making a decision. Here is the rationale which eventually would drill down to the fact that you should not be investing in this counter now but should wait for some time.
Thermax provides engineering solutions to energy and environment sectors globally. The company offers solar low-temperature collectors, boilers, including waste-heat recovery systems, municipal waste boilers and thermal oil heaters.
On the financial front, its numbers for Q3FY13 have been rather low tone. The topline declined by 18.52 per cent and stood at Rs 1029 crore as against Rs 1263 crore for Q3FY12. The bottom-line was down 20.03 per cent to stand at Rs 76.36 crore as against Rs 95.49 crore for Q3FY13. The company has a stable order inflow of Rs 600-800 crore for short cycle products and a pipeline of large orders from customers such as Tata Power, NMDC and Reliance. The management has 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 19.48x and the debt-to-equity ratio is also at a comfortable level of 0.27x. We suggest that you wait for the Q4FY13 results to come out and take a call accordingly.
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PUNJAB NATIONAL BANK
I recently bought 90 shares of Punjab National Bank at Rs 790 per share. Should I hold these from a longer-term perspective?
- Jacinta Joseph, Via Email
| BSE/NSE Code | 532461/PNB |
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| Face Value | Rs 10 |
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| CMP | Rs 819 |
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| 52-Week high/low | Rs 920/ Rs 659 |
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| Your Current Profit/(Loss) | 3.67 per cent |
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Your reaction to the way the stock you bought is moving is good to see. Some could say that you lack patience and that you should wait a bit before raising questions on what you should be doing with the stock. But on the flip side, it pays to keep close tabs on one’s investments and you probably should not worry too much about such reactions to your curiosity. Coming to Punjab National Bank, it is India’s second largest public sector bank. This itself speaks a lot about your choice.
On the financial front, PNB has reported good results for Q4FY13. The bank has been able to maintain stable asset quality on a sequential basis makes for a pleasant surprise. Its Gross NPAs as percentage of advances have declined from 4.61 per cent at the end of Q3FY13 to 4.27 per cent in Q4FY13. During the same period, its net NPAs went down by 21 basis points. However, there was some disappointment on the net profit front, which declined by 21 per cent on a yearly basis to Rs 1130.8 crore from Rs 1424 crore in the same quarter last year. Higher provisioning, which went up by 44 per cent on a yearly basis to Rs 1477.7 crore, was the reason behind such a deterioration in profits. The Net Interest Income (NII) of the bank grew by 14.16 per cent on yearly basis to Rs 3776.67 crore for the quarter.
PNB is currently trading at price-to-book value of 0.87x, which looks attractive considering the stable asset quality of the bank. Moreover, its board of directors have also announced a dividend of Rs 27 per share, which makes for a dividend yield of 3.30 per cent. We advise you to stay invested in the counter to reap longer-term benefits.
PATEL ENGINEERING
I am holding about 200 shares of Patel Engineering purchased at an average price of Rs 82 per share. Should I exit this counter and book losses?
- Hemant Rege, Via Email
| BSE/NSE Code | 531120/PATELENG |
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| Face Value | Rs 1 |
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| CMP | Rs 52.60 |
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| 52-Week high/low | Rs 102/ Rs 53 |
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| Your Current Profit/(Loss) | (35.85 per cent) |
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One of the most common mistakes that investors make is to go into a self delusion that a stock which has tanked beyond a particular limit will come back to their purchase levels. It doesn’t stop at that, as many believe that it will surpass their purchase price and do well to give them the desired profits. Well, there are only rare instances where this happens, and that too in a typically bullish market environment. For all others, there is no way out than booking losses and staying content with whatever can be salvaged. Your case probably falls in this category. Remember, following up on your investments is as critical as it is to make the right investment choices. The question that you have raised now should have ideally been raised when the stock slid below your real comfort levels. However, here is what you should be doing now.
Patel Engineering is a civil engineering construction company, which engages in the design, engineering and construction of various projects worldwide. The company has been in existence for over six decades now. So far, it has constructed 75 dams, 30 hydroelectric projects, 30 micro-tunnelling projects and has also done 250 km of tunnelling work. The company has subsidiaries in foreign countries, which have carried out projects in the USA, the Arabian Gulf, Sri Lanka, Nepal and Bhutan. All of this should ideally have translated into a fundamentally strong company. But the worry is, it hasn't.
On the financial front, its numbers for Q3FY13 have been muted. The topline witnessed a growth of 27 per cent to come in at Rs 785.22 crore as against Rs 618.37 crore for Q3FY12. The bottomline, however, declined by 13.08 per cent to stand at Rs 17.41 crore for Q3FY13 as against Rs 20.03 crore for Q3FY12. The EBITDA margins for Q3FY13 stood at 17 per cent against 18 per cent in Q3FY12. The company also had a debt of Rs 3107 crore on its books as of FY12, and this pegs its debt-to-equity ratio at 2x, which is high by any standards. On the valuations front, the stock trades at a TTM PE of 7.03x and the EV/EBITDA stands at 5.55x. This may look attractive to some but the performance does not support a positive view on it. As pointed out earlier, you are already sitting on a big loss from this investment. Hence, at this juncture, we suggest that you exit the stock even if you have to book losses.
V-GUARD INDUSTRIES
I have 250 shares of V-Guard Industries bought at Rs 350 per share. Kindly suggest whether I should hold on to the stocks or exit the counter.
- Roshan Pittie, Via Email
| BSE/NSE Code | 532953/VGUARD |
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| Face Value | Rs 10 |
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| CMP | Rs 494.35 |
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| 52-Week high/low | Rs 558/ Rs 180 |
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| Your Current Profit/(Loss) | 41.14 per cent |
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Taking profits off the table is as important as it is to book losses. Investors often tend to wait in anticipation of a higher price and lose sight of the fact that the markets can reverse and bring down the best of the stocks when the tide turns the other way round. As can be seen, right now you are sitting on some pretty decent profits from your investments. You could well take some money home and put it into some other probable profitable ideas to reap the benefits of having made a good investment in the past. Before you decide how much of it to sell and how much to retain, here are some factors for you to evaluate.
Established in 1977, V-Guard Industries is a dominant player in south India in the light electricals industry. Beginning with its flag-ship product, voltage stabilisers, over the last 10 years the company has expanded its product profile to include PVC insulated cables, LT power cables, fans, geysers, solar water heaters, pumps, UPS and inverters. The company was listed in the year 2008 and has recorded a CAGR of 35 per cent in revenues and 31 per cent in profits over the past five years.
For the quarter ended March 2013, V-Guard reported a topline of Rs 379 crore as compared to Rs 273 crore in Q4FY12. This is a robust growth of 39 per cent on a YoY basis. The bottomline, however, witnessed a decline of 53 per cent on a YoY basis for Q4FY13 to Rs 8.94 crore as against Rs 19.17 crore for the same period last year. Its EBITDA margins stood at 5.3 per cent for Q4FY13 as against 12.1 per cent in Q4FY12. This was primarily due to the significant increase in its ad spends (Rs 13.6 crore for Q4FY13 compared to Rs 3 crore in Q4FY12) on YoY basis. Of course, the higher ad spends would translate into higher sales going forward.
The management aims to garner a 25 per cent plus growth in its bottomline for FY14 and also expects the margins to bounce back to 9-9.5 per cent. On the valuations front, the stock trades at a PE of 23.45x. Considering these points, it is amply clear that the company will grow stronger fundamentally going forward. As you are sitting on substantial gains, we suggest that you book partial profits and hold the rest for the longer term to garner better returns.