This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
Vedanta Limited is a natural resource company that mines, produces, and exports base metals. The company distributes metals such as zinc, iron ore, copper, silver and aluminium. On a consolidated quarterly front, the company reported net sales of Rs21,126 crore in Q3FY20 and Rs23,435 crore in Q3FY19, registering a YoY decline of 9.85 per cent. The company reported an operating profit of Rs7,161 crore in Q3FY20, increasing by 1.68 per cent from Rs7,043 crore in Q3FY19. Net profit was reported at Rs2,665 crore in Q3FY20, up by 14.28 per cent from Rs2,332 crore reported in Q3FY19. On an annual basis, net sales fell by 1.21 per cent in FY19 to Rs90,901 crore from Rs92,011 crore in FY18. The company reported an operating profit ofRs27,121 crore in FY19, down by 3.37 per cent from Rs28,067 crore in FY18. Net profit saw a decline of 29.17 per cent to Rs9,698 crore in FY19 from Rs13,692 crore in FY18. Recently the company has been in the news for a delisting offer at Rs87.5 per share. The Board of Directors of the company have approved the delisting of Vedanta Ltd with Vedanta Resources Limited, a member of promoter and promoter group of the company, expressing its intention to acquire all fully paid-up equity shares of the company. The delisting offer price is Rs87.5, however, the final offer price for the same will be determined in accordance with the reverse book building mechanism. As a result, we recommend HOLD.
Career Point Limited provides coaching services and hostel services. It is in the education field and operates through two segments – informal and formal education. The company has diversified products and integrated services in both regulated and non-regulated education, including test preparation, schools (preschools and K12), technical campuses and private universities in multiple geographies. It also provides tutorial services to students for school curriculum and various competitive examinations for engineering and medical entrance and others. It has various online platforms and technologybased learning solutions. On a consolidated quarterly basis, net sales increased by 44.36 per cent to Rs34.21 crore in Q3FY20 from Rs23.70 crore in Q3FY19. PBDT reported for Q3FY20 was Rs12.47 crore, an increase of 38.48 per cent from Rs9 crore in Q3FY19. Net profit reported for Q3FY20 was Rs8.71 crore, growing by 51.16 per cent fromRs5.76 crore in Q3FY19. On an annual basis, net sales grew by 12.21 per cent to Rs100.53 crore in FY19 from Rs89.59 crore in FY18. PBDT for FY19 was reported at Rs36.17 crore, up by 4.21 per cent from Rs34.71 crore in the previous fiscal year. Net profit grew by 8.25 per cent to Rs24.11 crore in FY19 from Rs22.27 crore in FY18. Based on the company’s strong financial performance which has been improving for the past few years, we recommend HOLD.
Indian Railway Catering and Tourism Corporation Limited is engaged in offering internet ticketing, catering and tourism. The company also offers catering and hospitality services at stations, on trains and other locations. Its segments include catering and hospitality, internet ticketing, travel and tourism and packaged drinking water branded as Rail Neer. The catering and hospitality segment includes railway and non-railway catering services. The company offers mobile catering, static catering such as food plazas, executive lounges and budget hotels as well as operates a central kitchen. The internet ticketing segment includes online booking of train and air tickets, catering, tourism and portal shopping. The travel and tourism segment develops tourism. IRCTC is engaged in offering state special tourist trains, corporate travel services, outbound air packages and cab rental services. It has over six Rail Neer plants located at Delhi, Patna, Palur, Ambernath, Amethi and Parassala.
On a quarterly consolidated front, the company reported net sales of Rs715.98 crore in Q3FY20, increasing by 64.59 per cent from Rs435.01 crore in the same period for the previous fiscal year. Operating profit came in at Rs270.42 crore in Q3FY20, increasing significantly by 140.57 per cent from Rs112.41 crore in Q3FY20. Similarly, in Q3FY20, net profit surged by 179.66 per cent to Rs205.8 crore from Rs73.59 crore in Q3FY19. On the annual front, the company reported net sales of Rs1,868.23 crore in FY19. For FY19, operating profit was reported at Rs475.92 crore and net profit was reported at Rs305.92 crore.
Since the company enjoys virtual monopoly with its business model offering major tourism-related services in all aspects under one roof, the company has positive growth potential. Though its financials may seem to be affected because of disruption in services as a result of the nationwide lockdown, considering for over a long-term period, the demand trend for its services will be increasing, thus leading to higher profitability. Hence, we recommend BUY.
Oil and Natural Gas Corporation Limited is a global energy holding company. The company is engaged in the exploration, development and production of crude oil and natural gas. Its business segments include exploration and production and refining. The company’s geographical segments include operations in two categories: in India, which includes onshore and offshore, and outside India. ONGC’s business spread include various areas such as oil field services, transportation of oil and natural gas and production of value-added products such as liquefied petroleum gas (LPG), naphtha, refining, petrochemicals, power, and unconventional and alternate sources of energy.
On a quarterly consolidated front, the net sales decreased by 6.7 per cent in Q3FY20 to Rs109,443.39 crore from Rs117,305.75 crore in Q3FY19. The company reported an operating profit ofRs17,399.90 crore in Q3FY20, decreasing by 13.6 per cent as compared to the operating profit of Rs20,138.50 reported in Q3FY19. Similarly, net profit fell by 44.65 per cent to Rs4,898.68 crore in Q3FY20 as compared to Rs8,850.72 crore gained in the same quarter for the previous fiscal year.
On an annual front, the company reported net sales of Rs453,460.57 crore in FY19, up by 25.18 per cent from Rs362,246.43 crore reported in FY18. Operating profit grew by 28.65 per cent to Rs82,792.85 crore in FY19 as compared to Rs64,357.19 crore reported in the previous fiscal year. Net profit saw a growth of 30.42 per cent to Rs30,458.68 crore in FY19 as compared to Rs23,354.85 crore reported in FY18.
WTI crude prices traded in negative for the first time on April 20 with May future contracts at historic low of USD -1.43 per barrel, ahead of expiry day. Brent price is more relevant for the Indian basket, which hasn’t declined much. ONGC seems to have a good upside valuation with cheap valuation, we recommend Hence, HOLD.
SBI Cards and Payment Services Limited is engaged in the marketing and distribution of credit cards. The company offer a wide range of credit card portfolio to individual cardholders and corporate clients, which includes lifestyle, rewards, travel and fuel, shopping, banking partnership cards and corporate cards. It is focused on offering customised benefits for its cardholders, such as reward programs and discount programs – tailored for each target demographic.
On a standalone quarterly front, the company reported total income of Rs2,510 crore in Q4FY20, increasing by 21 per cent on YoY basis from Rs2,076 crore in the same period for the previous fiscal year. The GNPA ratio in Q4FY20 and Q4FY19 was 2.01 per cent and 2.44 per cent respectively, thus showcasing an improvement of 43 bps. Owing to virus-related provisions created by the company, its net profit saw a decline of 66 per cent to Rs84 crore in Q4FY20 as compared to Rs249 crore in the corresponding period for the previous fiscal year. Looking at the annual trends, the company reported total income of Rs9,752 crore in FY20, increasing by 34 per cent from Rs7,287 crore reported in the previous fiscal year. The cost to income ratio saw an improvement of 388 bps from 60.4 per cent in FY19 to 56.6 per cent in FY20. The company reported an annual profit after tax of Rs1,245 crore in FY20 as compared to Rs865 crore in FY19, showcasing an impressive growth of 44 per cent.
The penetration of credit cards in India is relatively low, at 3 per cent compared to 42 per cent in Asian peers like China, which indicates the potential for long-term growth. Moreover, SBI Cards and Payment Services has a diversified customer acquisition network that allows it to engage prospective customers across multiple platforms, which is a key strength and competitive advantage for them. Given the company’s strong parentage and sustainability of growth rate with huge potential for digital payments in India, we recommend HOLD.
Bharti Airtel Limited is a global telecommunications company with operations in 17 countries across Asia and Africa. On a quarterly consolidated front, the company’s net sales saw growth of 8.48 per cent to Rs21,947.10 crore in Q3FY20 from Rs20,231.00 crore in Q3FY19. The company reported an operating profit of Rs9,617.30 crore in Q3FY20, up by 39.85 per cent from Rs6,876.70 crore reported in Q3FY19. However, on account of loss from exceptional items, the company reported net losses of Rs617.20 crore in Q3FY20 as against a net profit of Rs392.40 crore reported in Q3FY19.
Looking at the annual trends, the company reported net sales of Rs80,780.20 crore in FY19, down by 2.25 per cent from Rs82,638.80 crore in FY18. Operating profit declined by 13.38 per cent to Rs27,344.70 crore in FY19 from Rs31,567.80 crore in FY18. The company reported a net profit of Rs1,331.90 crore in FY19 as compared to Rs1,122.60 crore in FY18, showcasing growth in net profit of 18.64 per cent. The company’s ROCE for FY19 and FY18 was 4.73 per cent and 6.49 per cent respectively, declining by 176 bps on YoY basis. The interest coverage ratio was 0.81x in FY19 and 1.24x in FY18.
The major trend of the stock is bullish as it is trading above its weekly pivot and above its long-short term moving averages, that is, 20-week, 50-week, 100-week, and 200-week EMAs. These moving averages are exactly in ascending order, suggesting a strong trend. The stock is meeting the criteria of Mark Minervini’s trend template. Among the momentum indicators, the 14-period weekly RSI is currently quoting at 63.66 and it is in a rising trajectory, which suggests a bullish bias. The daily MACD continues to stay bullish as it is trading above its zero line and signal line. Going ahead, the stock has strong support in the zone of Rs520-Rs500, while on the higher side the major resistance is placed in the zone of Rs570-Rs580. With the telecom sector moving towards a duopoly structure, Airtel and Reliance Jio are well-placed for future growth. Thus, we recommend BUY.