Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
Granules India Limited is a pharmaceutical company with presence across the pharmaceutical manufacturing value chain, including active pharmaceutical ingredients (APIs), pharmaceutical formulation intermediaries (PFIs) and finished dosages (FDs). Its business operations include three areas: core business, emerging business and contract research and manufacturing services (CRAMS). On the consolidated financial front, in Q4FY20 the company reported net total income of Rs 622.40 crore which is an increase of around 1.17 per cent compared to the total income of Rs 615.19 crore in Q4FY19. PBT increased by 62.30 per cent to Rs 136.69 crore in Q4FY20 as against Rs 84.22 crore in Q4FY19. The company gained net profit of Rs 92.33 crore for Q4FY20, increasing by 44.19 per cent from Rs 64.03 crore gained in Q4FY19. On the annual front, the company’s total income for FY20 is Rs 2635.20 crore which is a 14.28 per cent increase from total income of Rs 2,305.88 crore reported for FY19. PBT for FY20 increased by 38.58 per cent to Rs 451.12 crore compared to Rs 325.51 crore of FY19. In FY20 the company’s net profit rose significantly by 41.87 per cent to Rs 335.39 crore from Rs 236.40 crore in FY19. Post lifting of the restrictions imposed on export of Paracetamol API, PFI, etc., the company’s capacity utilisation has seen a significant improvement. The pharmaceutical sector continues to benefit from the current situation. Hence, we recommend HOLD.
BF Investment Limited is a non-deposit taking core investment company engaged in the business of loans and investments. The company is a part of Kalyani Group and holds investments in its various units. On a quarterly consolidated front, the company reported total income of Rs 6.30 crore in Q3FY20, increasing by 17.84 per cent from Rs 5.35 crore in Q3FY19. The operating profit reported by the company was Rs 4.25 crore in Q3FY20, up by 5.3 per cent from Rs 4.03 crore in Q3FY19. BF Investment reported a consolidated net profit of Rs 27.33 crore in Q3FY20, down by 38.34 per cent from consolidated net profit of Rs 44.33 crore in Q3FY19. On the annual front, the company’s total income saw growth of 70.31 per cent in FY19 and was reported at Rs 19.80 crore from Rs 11.62 crore in FY18. Operating profit came in at Rs 15.39 crore in FY19 as compared to Rs 8.31 crore in FY18, representing a growth rate of 85.19 per cent. The consolidated net profit of the company was reported at Rs 126.44 crore in FY19, down by 20.87 per cent from Rs 159.79 crore in FY18. The main source of income for BF Investment is in the form of dividends declared by the companies it invests in. Fluctuations in the securities market and the global economic scenario pose a risk of devaluation of the investments made by the company, especially in the current environment. Hence, we recommend our investor readers to BOOK PROFIT on this scrip.
Kalyani Investment Company Limited (KICL) is a non-deposit taking core investment company offering investments and loans. The company holds an investment portfolio consisting of listed and unlisted companies which are in various sectors, including forging, steel, power generation, chemicals and banking. On a consolidated quarterly front, the company reported total income of Rs 10.73 crore in Q3FY20, down by 33.76 per cent from Rs 16.20 crore in Q3FY19. Profit after depreciation and tax came in at Rs 9.72 crore in Q3FY20, declining significantly by 36.44 per cent from Rs 15.30 crore in Q3FY19. The company reported consolidated net profit of Rs 18.33 crore in Q3FY20, down by 24.96 per cent from Rs 24.42 crore in Q3FY19.
Looking at the annual trends, the company reported total income of Rs 32.27 crore in FY19, expanding by 12.47 per cent from Rs 28.69 crore in FY18. The profit before tax and depreciation reported by the company in FY19 was Rs 28.89 crore, up by 9.03 per cent from Rs 26.50 crore in FY18. The company reported consolidated net profit of Rs 61.08 crore in FY19 and Rs 50.76 crore in FY18, showcasing growth of 20.34 per cent on a YoY basis. The company’s ROCE ratio has seen a declining trend since FY17 when it was 1.74 per cent, followed by 0.96 per cent in FY18 and 0.65 per cent in FY19.
Being a core investment company, any adverse impact on the industries whose securities are held by Kalyani Investment Company also has a bearing on its performance. More than 90 per cent of the company’s assets are held in the form of investments in shares or debts in group companies, out of which 60 per cent of these investments are in equity shares. Hence, a majority of the company’s income comes in the form of dividend on investments held by it, which has seen a drop in December 2019 on a QoQ and YoY basis. Owing to the current volatility in the Indian stock market and declining performance based on the company’s ROCE ratio, we recommend SELL.
Vinati Organics Limited is engaged in the manufacture of organic and inorganic chemical compounds and nitrogenous energetic compounds. The company manufactures speciality organic intermediates and monomers such as Isobutyl Benzene (IBB) and 2-Acrylamindo 2-Methylpropane Sulfonic Acid (ATBS), among others.
On a standalone quarterly front, net sales declined by 21.31 per cent to Rs 238.47 crore in Q3FY20 from Rs 303.05 crore in the same quarter for the previous fiscal year. The company reported an operating profit of Rs 98.39 crore in Q3FY20, down by 13.48 per cent from Rs 113.72 crore in Q3FY19. The company reported net profit of Rs 66.83 crore in Q3FY20, down by 5.45 per cent from Rs 70.68 crore in the corresponding quarter for the previous fiscal year.
Looking at the annual trends, net sales expanded by 49.3 per cent to Rs 1,108.14 crore in FY19 from Rs 742.20 crore in the previous fiscal year. The company reported operating profit of Rs 453.57 crore in FY19, increasing significantly by 98.98 per cent from Rs 227.95 crore in FY18. Similarly, the net profit after tax increased by 96.33 per cent to Rs 282.49 crore in FY19 from Rs 143.88 crore in the previous fiscal year.
Generally, the margins for speciality chemicals are higher than basic chemicals, thus making the business more attractive along with the fact that very few companies are into this business, most of whom are involved in different products. Vinati Organics enjoys global leadership in two speciality chemicals with a market share of 70 per cent in IBB and 80 per cent in ATBS. More than 75 per cent of its revenues come from these two products. The company is also coming up with new products such as Butyl Phenol in order to diversify its product range as well. Given the capacity expansion in ATBS, the launch of new products and a superior margin profile, we recommend HOLD.
Axis Bank’s business segments include treasury operations including investments in sovereign and corporate debt, equity and mutual fund services, etc. Its retail banking constitutes lending to individuals and small businesses while corporate or wholesale banking includes corporate advisory services, placements and syndication, project appraisals, capital market-related services, etc.
On the consolidated quarterly front, the net interest earned by the bank in the fourth quarter of FY20 came in at Rs 16,503.10 crore as against Rs 15,094.47 crore in the corresponding quarter of the previous fiscal, clocking a growth of 9.33 per cent. The total income in Q4FY20 was Rs 20,786.23 crore, an increase of 9.68 per cent from Rs 18,950.85 crore in Q4FY19. The bank reported net loss of Rs 1,250.09 crore for Q4FY20 as against net profit of Rs 1,677.90 crore gained in Q4FY19.
On the annual front, the net interest earned by the bank in FY20 came in at Rs 63,715.68 crore, an increase of 13.69 per cent from Rs 56,043.65 crore in FY19. The total income earned by the bank in FY20 was Rs 80,057.67 crore, an increase of 13.99 per cent from Rs 70,232.40 crore earned in the previous fiscal. The profit after tax in FY20 decreased significantly by 168 per cent to reach Rs 1,878.75 crore as against Rs 5,047.09 in FY19. For FY20 the GNPA percentage was 4.86 per cent as compared to 5.26 per cent in FY19. The CRAR ratio in FY20 was 17.53 per cent and in FY19 it was 15.84 per cent.
Currently, the bank is said to have enough liquidity owing to the qualified institutional placement (QIP) undertaken in Q2FY20. It has also increased its provisioning coverage ratio to 69 per cent as against 62 per cent in Q4FY19. Though the management of the company remains cautious regarding outcomes from the uncertain environment caused by the virus pandemic, advances and deposit growth for Q4FY20 continued to be favourable despite the lockdown, indicating a more stable and positive positioning of the bank. Thus, we recommend HOLD.
Deepak Nitrite is acknowledged as a major manufacturer of chemical intermediates. The company has a diversified portfolio of intermediates that cater to the dyes and pigments, agrochemical, pharmaceuticals, plastics, textiles, paper and home and personal care segments in India and overseas as well. Deepak Nitrite’s growing portfolio, which contains more than 100 products, consists of 42 per cent basic chemicals and 29 per cent each of fine and speciality chemicals and performance products.
On a consolidated financial front, in Q4FY20, the company reported sales of Rs 1,055.54 crore, an increase of around 4.04 per cent compared to net sales of Rs 1,016.63 crore reported in Q4FY19. There was a 39.68 per cent increase in PBDT from Rs 169.73 crore reported in Q4FY19 to Rs 237.08 crore reported in Q4FY20. Similarly, the company gained net profit of Rs 172.30 in Q4FY20, clocking growth by 88.39 per cent as compared to net profit of Rs 91.46 crore gained in the same quarter of the previous fiscal year.
On the annual front, net sales for FY20 have increased 56.66 per cent to Rs 4,229.71 crore from Rs 2,699.92 crore in FY19. For FY20, the company calculated the PBDT to be Rs 946.16 crore, which is a significant rise by 173.63 per cent compared to Rs 345.77 crore for FY19. The company gained net profit of Rs 611.03 crore in FY20 as against net profit of Rs 173.66 crore gained in FY19.
The impact of the nationwide lockdown was counterbalanced by consistent margin profiles across the company’s business segments. Deepak Nitrite is expected to benefit from the newly commissioned Isopropyl Alcohol (IPA) plant and improving profitability in Deepak Phenolics (DPL). It has acquired land for future expansions at most locations that it operates from with capex plans in the pipeline. Going forward, the company’s focus on forward integration and diversified portfolio will boost growth. Hence, HOLD.
(Closing price as of June 17, 2020)