Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
Shree Renuka Sugars Limited is an agri-business and bio-energy company engaged in the business of production and refining of sugar, sugar trading, ethanol and co-generation. On a consolidated quarterly front, net sales were reported at Rs1,374.80 crore in Q4FY20, decreasing by 2.92 per cent from Rs1,416.10 crore in the same quarter for the previous fiscal year. Operating profit declined by 72.88 per cent to Rs70.90 crore in Q4FY20 from Rs261.40 crore in Q4FY19. The company reported net loss of Rs145.20 crore in Q4FY20 and net loss of Rs587 crore in Q4FY19. In terms of annual trends, the company reported net sales of Rs4,740.80 crore in FY20, up by 5.83 per cent from Rs4,479.50 crore in FY19. Operating profit came in at Rs78.30 crore in FY20, down by 84.52 per cent as compared to Rs505.90 crore in FY19. The consolidated net profit stood at Rs2,099.20 crore in FY20 as against net loss of Rs1,448.40 crore in FY19.
Due to higher sugar production across India, sugar export will be a top priority for the country going forward. The refineries of the company are port-based, which gives it an edge in terms of export of sugar. The company’s strong refining business and export portfolio are positives for the company. Our recommendation is to HOLD the scrip.
Venky’s (India) Limited specialises in poultry breeding and farming as well as chicken meat processing. On a standalone quarterly front, net sales came in at Rs541.54 crore in Q1FY21 as compared to Rs905.30 crore in Q1FY20, representing a decline of 40.18 per cent. Operating profit was reported at Rs79.76 crore in Q1FY21, falling by 27.24 per cent from Rs109.62 crore in Q1FY20. Net profit reported declined by 24.03 per cent to Rs46.98 crore in Q1FY21 from Rs61.84 crore in Q1FY20. Looking at the annual trends, net sales were reported at Rs3,261.02 crore in FY20, increasing by 7.16 per cent from Rs3,043.14 crore in FY19. Operating profit was Rs14.06 crore in FY20, down significantly by 95.83 per cent from Rs337.42 crore in FY19. The company reported net loss of Rs27.16 crore in FY20 as against net profit of Rs174.14 crore in FY19. On the back of rumours associating corona virus with the consumption of chicken, the poultry industry was adversely affected. This, combined with the lockdown, adversely affected sales turnover and realisations. However, with the restart of economic activities, a strong revival in demand is likely. The company has completed the expansion of its pathogen-free eggs capacity by setting up a new production unit in Maharashtra which is likely to aid revenue growth. Our recommendation is to HOLD this scrip.
ABB India Limited undertakes engineering and construction projects and manufactures heavy engineering and industrial equipment. It works on projects in the field of energy production, power transmission, transportation, process automation and pollution control.
On a standalone quarterly front, the company reported net sales of Rs973.40 crore in Q2CY21, down by 43.03 per cent from Rs1,708.58 crore in the same quarter for the previous fiscal year. The reduction in revenue is largely attributed to supply chain disruptions and the lockdowns. Operating profit was reported at Rs50.06 crore in Q2CY21, a decline of 65.29 per cent from Rs144.24 crore in Q2CY20. The profit after tax reported by the company was Rs16.75 crore in Q2CY21, down by 76.66 per cent from Rs69.74 crore in the corresponding quarter for the previous fiscal year.
Looking at the annual trends, net sales were reported at Rs7,229 crore in CY20 as compared to Rs6,613.36 crore in the previous calendar year, representing a growth rate of 9.31 per cent. The company reported an operating profit of Rs625.46 crore in CY20, up by 15.44 per cent from Rs541.80 crore in CY19. The company reported profit after tax of Rs302.23 crore in CY20 and Rs254.19 crore in CY19, showcasing a growth rate of 18.9 per cent.
ABB India stands to benefit from the increasing impetus given to railway electrification, mass rapid transit system (MRTS) construction planned over 26 cities, and gas and water distribution infrastructure opportunities which would emerge in the mission for smart cities (AMRUT). The pandemic and resulting lockdowns have brought about increasing digitization initiatives across core industries like cement, metal and mining, marine, oil and gas, etc. These factors are likely to bring about the next leg of growth for the company. We are positive on ABB India given its niche business related to products and services and a pure-play on digitalization and automation. As a result, our recommendation is to HOLD this scrip.
IDFC First Bank Limited operates as a bank offering personal and business checking, saving account, insurance and investment, internet banking, home loans, bill payments, overdraft and other financial services. The bank’s segments include treasury, wholesale banking, retail banking and other banking business.
On a consolidated quarterly front, the company reported total income of Rs4,413.20 crore in Q1FY21, up by 5.65 per cent from Rs4,177.18 crore in Q1FY20. CASA deposits posted strong growth, rising 145 per cent YoY to Rs23,491 crore as on June 30, 2020, as compared to Rs9,594 crore as on June 30, 2019. Pre-provisioning profit (PPOP) increased by 181 per cent to Rs892 crore in Q1FY21 as compared to Rs318 crore in Q1FY20. Net profit came in at Rs100.08 crore in Q1FY21 as against net loss of Rs611.64 crore in the same quarter for the previous fiscal year.
Looking at the annual trends, the bank reported total income of Rs17,962.73 crore in FY20, increasing by 37.58 per cent from Rs13,056.18 crore in FY19. The bank reported an operating profit before provisions and contingencies of Rs1,969.66 crore in FY20 from Rs821.65 crore in FY19, representing an impressive growth rate of 139.72 per cent. However, owing to provisions, the bank reported consolidated net loss of Rs2,843.39 crore in FY20 and consolidated net loss of Rs1,907.88 crore in FY19.
Despite the difficult economic and business environment, the bank expanded its branch count by 39 during the quarter. The management is focused on servicing the retail segment of the consumer lending business and will increase its engagement with retail asset quality going ahead. As a result, the bank’s NIMs and overall yields are expected to increase further in the future due to its increasing retail segment. Factoring in the adequate provisions for wholesale stress and lower retail NPAs, the balance-sheet seems to be resilient in these tough times. Hence, our recommendation is to HOLD the scrip.
Ashoka Buildcon Limited (ASBL) is engaged in the construction and maintenance of roads and supporting services, including operation of toll roads, etc. The company operates through three segments, namely, construction and contract-related activities, BOT projects and sales of goods. It has projects under construction in the states of Tamil Nadu, Karnataka, Odisha and West Bengal.
On a consolidated quarterly front, net sales were reported at Rs761.34 crore in Q1FY21, down by 34.82 per cent from Rs1,168.14 crore in the same period for the previous fiscal year. Operating profit declined by 25.46 per cent to Rs278.38 crore in Q1FY21 from Rs373.46 crore in Q1FY20. The company reported net loss of Rs41.08 crore in Q1FY21 and net loss of Rs26.71 crore in the corresponding quarter for the previous fiscal year.
Looking at the annual figures, net sales increased by 2.85 per cent in FY20 to Rs5,070.47 crore from Rs4,930.12 crore in FY19. Operating profit increased by 12.61 per cent to Rs1,656.92 crore in FY20 from Rs1,471.38 crore in FY19. The company reported net profit of Rs148.70 crore in FY20 as against net loss of Rs39.23 crore in the previous fiscal year.
ASBL was widely expected to have a difficult quarter on account of the pandemic-triggered lockdowns. However, its strong execution has aided recovery. This has resulted in the company posting quarterly numbers which were better than expected. As the lockdown eased, the company gradually ramped up execution, which is currently at 85 per cent run-rate. The current labour availability is at 90-95 per cent of the total required workforce. These numbers are expected to improve going forward. Its order book currently stands at Rs8,600 crore with an order book to revenue ratio of 2.5x. This provides strong revenue visibility for ASBL over the next two years, aided also by its continuous improvement in the balance-sheet. Our recommendation is to HOLD the scrip.
Federal Bank Limited operates branches and regional offices throughout India. The bank offers a wide range of financial services, including merchant banking, international banking and foreign exchange, leasing facilities, money markets and agricultural advances. It operates over 1,250 branches and over 1,520 automatic teller machines (ATMs).
On a consolidated quarterly front, net interest income (NII) increased to Rs1,296 crore in Q1FY21 from Rs1,154 crore in Q1FY20, representing a growth rate of 12.31 per cent. In Q1FY21, net NPA stood at 1.22 per cent, which is the lowest in the last 20 quarters, from 1.49 per cent in Q1FY20. The capital adequacy ratio (CRAR) stood at 14.17 per cent. Net profit increased to Rs401 crore in Q1FY21, up by 4.43 per cent from Rs384 crore in the same period for the previous fiscal year. Growth in PAT was largely supported by treasury gains. However, its core fee income declined sharply, impacted by the lockdowns and tepid loan growth.
On an annual front, NII increased to Rs4,648.90 crore from Rs4,176.35 crore registering a growth of 11.31 per cent as on March 2020. The net NPA stood at Rs1,607.17 crore and this as a percentage to net advances is 1.31 per cent, coming down by 17 bps as of March 2020. The CRAR of the bank, computed as per Basel III guidelines, stood at 14.35 per cent as of March 2020. In FY20, the annual net profit reached an all-time high of Rs1,542.78 crore. Federal Bank’s deposit growth held up much better compared to that of other mid-tier banks in light of the Yes Bank moratorium during the quarter. The bank has indicated that retail deposits, in general, have continued to grow well in April and May. Factors such as increasing retail focus, being adequately capitalised and incremental lending to better-rated borrowers are positives for the bank. Owing to these reasons, our recommendation is to HOLD this scrip.
(Closing price as of August 25, 2020)