Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
Sanwaria Consumer Limited is a fast-moving consumer goods (FMCG) food processing company engaged in manufacturing and selling rice, edible oil and staple food products such as pulses, sugar, soya chunks, wheat flour, rice flour, salt, suji, maida, besan, daliya and soya meal. On a standalone quarterly front, the net sales reported for Q3FY20 was Rs. 581.27 crore, down by 43.64 per cent from Rs. 1,031.38 crore in Q3FY19. The company reported an operating loss of Rs. 349.3 crore in Q3FY20 as against an operating profit of Rs. 52.83 crore in Q3FY19. The company reported a net loss of Rs. 349.30 crore in Q3FY20 as against a net profit of Rs. 42.79 crore in Q3FY19. On an annual front, net sales saw a growth of 4.93 per cent to Rs. 5,303.79 crore in FY19 from Rs. 5,054.73 crore reported in FY18. The operating profit posted impressive growth of 67.60 per cent to Rs. 195.25 crore in FY19 from Rs. 116.5 crore in FY18. Similarly, net profit surged by 84.27 per cent to Rs. 156.27 crore in FY19, up by 84.27 per cent from Rs. 84.69 crore in FY18. In the current market, most of the stocks are beaten down and selling in such market conditions is not advisable. Doing so would result in adverse losses due to idiosyncratic and systematic risks. The Union Budget for FY 2020-21 should help in reviving demand, especially in the rural markets. Thus, we recommend a HOLD for Sanwaria Consumer Limited.
Jiya Eco-Products Limited (JEPL) is engaged in manufacturing of biofuel like bio briquettes and bio pellets energy from agricultural waste and forest waste such as cotton stalk, groundnut shells, cumin waste, forest leaves, household waste, juliflora, etc. which is an alternative source of other commonly used feed such as coal, charcoal, firewood, diesel, petrol and LPG, among others. Taking into account the quarterly trend, on a consolidated basis the net sales for Q3FY20 decreased by 25.10 per cent to Rs. 42.88 crore from Rs. 57.26 crore for Q3FY19. The PBDT for Q3FY20 was reported to be Rs. 7.65 crore, which is a decrease of 2.36 per cent when compared Rs. 7.83 crore reported for Q3FY19. The company gained a net profit of Rs. 5.20 crore in Q3FY20, contracting by 23.86 per cent from Rs. 6.83 crore gained in Q3FY19. On the annual front, the net sales were reported to be Rs. 213.26 crore for FY19, thus clocking a growth of 130.35 per cent when compared to Rs. 92.58 crore for FY18. In FY19, PBDT also increased by 112.89 per cent to Rs. 28.74 crore from Rs. 13.50 crore for FY18. The company gained a net profit of Rs. 18.27 crore for FY19, which is a significant increase by 113.93 per cent from Rs. 8.54 crore gained in FY18. Considering the company’s growth potential as well the current uncertain market conditions, we recommend a HOLD till the market stabilises.
UCO Bank, which is a commercial bank, was formerly known as United Commercial Bank Ltd. The bank’s main business segments include treasury, corporate or wholesale banking, retail banking other operations. The bank offers personal banking, corporate banking, international banking and rural banking services. Its personal banking includes deposits, loans or advances and debit card services whereas its corporate banking services include deposits or advances to MSMEs, value enterprises, etc. The international segment includes foreign currency loans and remittances and rural banking includes agriculture credit, financial inclusion and MSMEs.
It has around 2,570 automated teller machines (ATMs). On the financial front, the total interest earned by the bank rose by 12.99 per cent to Rs. 3,770.74 crore for the third quarter of FY20 as against Rs. 3,337.32 crore for the same quarter of the previous fiscal. The bank reported a 25.9 per cent rise in its total income of Rs. 4,514.21 crore for Q3FY20 compared to Rs. 3,585.56 crore in Q3FY19. Evaluating the asset quality, the GNPA ratio was 19.45 per cent in the third quarter of FY20 and 27.39 per cent in the corresponding quarter of FY19. The capital adequacy ratio for Q3FY20 was 10.27 per cent and 9.33 per cent for Q3FY19.
Considering the financials on the annual front, the total interest earned rose by 2.21 per cent to Rs. 14,330.63 crore in FY19 from Rs. 14,020.13 crore in FY18. The total income rose by 4.64 per cent to Rs. 15,844.14 crore in FY19 as compared to Rs. 15,141.13 crore in FY18. The GNPA ratio for FY19 stood at 25 per cent while it was 24.64 per cent for FY18. The capital adequacy ratio for FY19 was reported to be 10.70 per cent for FY19 and 10.94 per cent for FY18. The bank continues its efforts in reducing its cost of funding so as to boost profitability. It aims to reduce its net non-performing asset ratio below 6 per cent before the beginning of FY21 from 6.34 per cent for Q3FY20. Thus, we recommend our investor-readers to HOLD.
South Indian Bank Limited is engaged in providing services related to retail and corporate banking and para-banking activities like debit card, third-party product distribution along with treasury and foreign exchange business. The treasury service segment includes interest earnings on investments portfolio, gains or losses on investment operations and earnings from foreign exchange business. Its corporate or wholesale banking segment mainly includes providing loans to the corporate segment whereas the retail banking segment includes providing loans to non-corporate customers.
On the quarterly front, the net interest earned by the bank in the third quarter of FY20 came in at Rs. 1,967.31 crore as against Rs. 1,735.16 crore in the corresponding quarter of the previous fiscal, clocking a growth of 13.38 per cent. The total income in Q3FY20 was Rs. 2,187.73 crore, an increase of 13.83 per cent from Rs. 1,921.93 crore in Q3FY19. The profit after tax rose by 7.98 per cent to reach Rs. 90.54 crore in Q3FY20 as against Rs. 83.85 crore in Q3FY19. For Q3FY20 the GNPA percentage was 4.96 per cent as compared to 4.88 per cent in Q3FY19. The CRAR ratio in Q3FY20 was 12.02 per cent and in Q3FY19 it was 11.81 per cent.
On the annual front, the net interest earned by the bank in FY19 came in at Rs. 6,876.52 crore, an increase of 11.04 per cent from Rs. 6,192.81 crore in FY18. The total income earned by the bank in FY19 was Rs. 7,602.73 crore, an increase of 8.15 per cent from Rs. 7,030.06 crore earned in the previous fiscal. The profit after tax in FY19 decreased by 26.09 per cent to reach Rs. 247.53 crore as against Rs. 334.89 in FY18. The company reported GNPA ratio of 4.92 per cent for FY19 and 3.59 per cent for FY18. In FY19, the CRAR ratio was 12.61 per cent whereas in FY18 it was 12.70 per cent. The bank strategizes in gaining higher share in retail and MSME advances to support its growth trend. Hence, we recommend HOLD.
Dilip Buildcon Limited is engaged in the business of creating infrastructure facilities on an engineering, procurement and construction (EPC) basis. The company primarily focuses on the development, operation and maintenance of roads, bridges, culverts, tunnels, high-capacity transport corridors and subways as well as building works, pump stations and civil structures. It undertakes contracts from various state governments and other parties and special purpose vehicles promoted by the company. On a consolidated quarterly front, the net sales reported for Q3FY20 fell by 1.12 per cent to Rs. 2,564.38 crore from Rs. 2,593.54 crore in Q3FY19.
The fall in revenue has largely been attributed to the extended monsoon which hampered project execution. The company reported an operating profit of Rs. 137.56 crore in Q3FY20, down by 31.40 per cent from Rs. 200.53 crore in Q3FY19. Net profit reported for the most recent quarter was Rs. 87.68 crore, down by 52.86 per cent from Rs. 186.03 crore reported in the same period for the previous fiscal year. On an annual front, the company saw growth in net sales of 18.63 per cent to Rs. 9,415.84 crore in FY19 from Rs. 7,937.47 crore in FY18. Its operating profit for the current fiscal year came in at Rs. 576.65 crore, down by 8.64 per cent from Rs. 631.22 crore reported in the previous fiscal year.
Similarly, net profit fell by 5.23 per cent to Rs. 547.44 crore in FY19, from Rs. 577.64 crore in FY18. Dilip Buildcon’s strong execution engine was impacted due to financial constraints arising from high equity outlay on hybrid annuity model (HAM) projects. However, this issue has been resolved with the Shrem and Cube Highway deal and probable closure of residual seven HAM projects. The share of non-roads’ orders in the order book stands at 36 per cent and this should de-risk concerns of growth for the company. Furthermore, with NHAI commencing awarding of projects in Q4, the company is likely to have a strong quarter with the receipt of new orders. Owing to these factors, we recommend a HOLD on Dilip Buildcon.
Indian Bank offers deposits, loans and services. The bank’s segments include treasury, corporate banking, retail banking and other banking operations. The company offers products under various categories, including agriculture, corporates, individuals, business, professional self-employed, small and medium-sized enterprises (SMEs), cards, education, non-resident Indian (NRI), property and technology. It also offers services, which include premium services, insurance services and e-payment of indirect taxes.
On a quarterly consolidated front, the net interest income (NII) was reported at Rs. 1,955 crore in Q3FY20, increasing by 14 per cent from Rs. 1,717 crore reported in Q3FY19. The company’s gross non-performing asset (GNPA) ratio in Q3FY20 improved to 7.20 per cent of gross advances from 7.46 per cent in Q3FY19. For the sequential quarter, GNPA was 7.20 per cent. The total income of the bank for the quarter ended December 31, 2019 was Rs. 6,506 crore, up by 23 per cent over Rs. 5,269 crore for the quarter ended December 31, 2018.
Its net profit for Q3FY20 rose significantly to Rs. 247 crore, up by 62 per cent from Rs. 152 crore in the quarter ended Q3FY19. On an annual basis, NII saw growth of 12 per cent to Rs. 7,018.10 crore in FY19 from Rs. 6,263.56 crore in FY18. Total income was reported at Rs. 21,067.71 crore in FY19, up by 7.9 per cent from Rs. 19,519.48 crore reported in FY18. Its net profit was reported at Rs. 321.95 crore in FY19, down significantly from Rs. 1,258.99 crore in FY18. This difference was largely on account of the increase in depreciation cost in FY19. Despite macroeconomic headwinds, the bank has reported consistent operating performance with a focus on the retail segment, which sets it on a positive earning trajectory. Moreover, the recent capital infusion by the central government and improvement in the bank’s Tier I ratio to 12.7 per cent bodes well in terms of future growth. Owing to the company’s strong capital position, moderating fresh slippages and improving GNPAs, we recommend a HOLD on Indian Bank.
(Closing price as of Mar 24, 2020)