Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
LINCOLN PHARMACEUTICALS
Lincoln Pharmaceuticals is primarily engaged in market-ing and manufacturing several therapeutic molecules under the WHO-GMP (Good Manufacturing Practice) guidelines. The company offers day-to-day medicines like tablets, capsules, liquid injections,etc. On a consolidated quarterly basis, the company’s net sales grew by 11.87 per cent to Rs126.06 crore in Q2FY21 as compared to Rs112.69 crore in Q2FY20. The operating profit recorded in Q2FY21 was Rs30.36 crore, up by 11.62 per cent as compared to Rs27.21 crore reported in the same quarter in the previous financial year. Q2 in FY21 saw an increase by 10.53 per cent in net profit of Rs20.92 crore as compared to Rs18.93 crore in Q2FY20. On the annual front, the company reported net sales of Rs386.49 crore in FY20, an increase of 5.56 per cent as compared to net sales of Rs366.15 crore in FY19. The operating profit came in at Rs76.58 crore in FY20 as compared to Rs72.87 crore in FY19, a rise of 5.08 per cent on an annual basis. The PAT was Rs51.47 crore in FY20 as compared to Rs48.74 crore in FY19, a rise of 5.6 per cent. The company enjoys an established market position, widespread geographical reach and healthy customer and product base. Considering Lincoln’s healthy financial risk profile and growing improving financial performance, we recommend investors to BUY the stock.
AJANTA SOYA
Ajanta Soya is engaged in the manufacturing of hydroge-nated vegetable cooking oil and various kinds of refined oil with shortening products for the bakery sector such. On a standalone quarterly basis, the net sales grew by 36.68 per cent to Rs239.79 crore in Q2FY21 as compared to Rs175.43 crore in Q2FY20. The operating profit recorded in Q2FY21 was Rs10.57 crore, up by 58.22 per cent as compared to Rs6.68 crore reported inQ2FY20. Q2FY21 saw an increase in net profit by 60.49 per cent to Rs7.31 crore as compared to Rs4.56 crore in Q2FY20.
On the annual front, the company reported net sales of Rs760.13 crore in FY20, an increase of 9.43 per cent as compared to net sales of Rs694.65 crore in FY19. The operating profit came in at Rs17.41 crore in FY20 as compared to Rs3.09 crore in FY19, which is a significant increase. The company reported net profit of Rs9.80 crore in FY20 as against net loss of Rs0.40 crore incurred in FY19. The company is exposed to commodity price fluctua-tions in its business. Additionally, the growing competition in the edible oil segment can pressurize its bargaining power and profitability. There is limited ability for the company to pass on any increase in the cost of raw materials to the consumers, thus directly affecting its financial margins. Hence, we recom-mend AVOID.
ASIAN ENERGY SERVICES
Asian Energy Services is basically a service provider in the oil and gas sector which provides integrated project management or specific solutions based on what their customers require. This company was formerly known as Asian Oilfield Services Ltd. The services offered by Asian Energy Services include four seismic crews and it is engaged in three different seismic projects. The services also include seismic data acquisition, basic seismic data processing, topographic survey, continuous core drilling for minerals and CBM exploration line logging and directional core drilling to target shallow horizons. On a consolidated quarterly basis, the net sales registered de-growth by 42.57 per cent to Rs31.89 crore in Q2FY21 as compared to Rs55.52 crore in Q2FY20.
The operating profit recorded in Q2FY21 was Rs13.37 crore, down by 3.53 per cent as compared to Rs13.86 crore reported in the same quarter in the previous financial year. In spite of the decrease in revenue and PBIDT, Q2 in FY21 saw an increase in net profit of Rs6.72 crore compared to Rs6.29 crore in Q2FY20, up by 6.77 per cent. The overall profitability decreased even when the revenues are positive. On an annual front, the company reported net sales of Rs273.04 crore in FY20, an increase of 40.85 per cent as compared to net sales of Rs193.86 crore in FY19. The operating profit came in at Rs70.02 crore in FY20 as compared to Rs36.85 crore in FY19, a rise of 89.99 per cent on an annual basis.
The PAT was Rs29.24 crore in FY20 as compared to Rs9.10 crore in FY19, a significant rise of above 200 per cent. The company recently received a Letter of Award (LOA) from Oil India Ltd. for 2D seismic data acquisition of 570 LKM covering parts of North Cachar Hills, an administrative district in Assam, under the National Seismic Program (NSP) valued at around Rs 40.40 crore. The company has previously received many more LOAs as well, indicating good business operations and thus supporting investors’ confidence. Hence, looking at the company’s positive growth potential, we recommend our investors to BUY the stock.
BSE
BSE, formerly known as Bombay Stock Exchange, is considered to be Asia’s first and now the world’s fastest stock exchange with a speed of 6 microseconds. BSE is India’s leading exchange group and has played a prominent role in developing the Indian capital market. It provides an efficient and transparent market for trading in equity, debt instruments, equity derivatives, currency derivatives, commodity derivatives, interest rate derivatives, mutual funds and stock lending and borrowing. BSE also has a dedicated platform for trading in equities of small and medium enterprises (SMEs) that has been highly successful and also has an exclusive MF distribution platform, BSE STAR MF, which is India’s largest mutual funds distribution infrastructure.
On a consolidated quarterly basis the net sales grew by 15.14 per cent to Rs125.38 crore in Q2FY21 as compared to Rs108.89 crore in Q2FY20. The operating profit recorded in Q2FY21 was Rs48.14 crore, up by 25.76 per cent as compared to Rs38.28 crore reported in the same quarter in the previous financial year. Q2 in FY21 saw an increase in net profit by 24.09 per cent to Rs35.95 crore as compared to Rs28.97 crore in Q2FY20. On the annual front, the company reported net sales of Rs450.30 crore in FY20, a decrease of 11.22 per cent as compared to net sales of Rs507.20 crore in FY19. The operating profit came in at Rs253.76 crore in FY20 as compared to Rs299.38 crore in FY19, a decline of 15.24 per cent on an annual basis.
The PAT was Rs170.05 crore in FY20 as compared to Rs682.07 crore in FY19, thus decreasing by 75.07 per cent in FY20. The BSE STAR MF platform did very well in spite of the pandemic-triggered lockdowns and reported positive net equity cash inflow even when the net industry inflow underperformed. It had also announced the launch of STAR MF Corp Direct, a direct investment portal for the corporate sector to further simplify the investment process. Hence, looking at the positive momentum in the stock markets, we recommend our investors to HOLD the scrip.
ESTER INDUSTRIES
Ester Industries is a manufacturer in the plastic sector. It is mainly engaged in manufacturing polyester films, speciality polymers and engineering plastic compounds. Engineering plastics are manufactured under the brand name ‘Estoplast’. There are two segments that the company operates through, namely, polyester films and engineering plastics. Chips of normal and master-batch grades are manufactured in their speciality polyester business. Ester Industries also takes its social responsibility seriously and strives to comply with the environmental, social and government parameters while carrying on their business.
Looking at the financial statements on a quarterly basis, its net sales registered de-growth by 1.53 per cent to Rs250.53 crore in Q2FY21 as compared to Rs254.41 crore in Q2FY20. The operating profit recorded in Q2FY21 was Rs73.48 crore, up by 58.03 per cent as compared to Rs46.50 crore reported in the same quarter in the previous financial year. Net profit more than doubled to Rs45.91 crore as compared to Rs19.25 crore in Q2FY20. On the annual front, the company reported net sales of Rs1,038.70 crore in FY20, an increase of 1.03 per cent as compared to net sales of Rs1,028.06 crore in FY19. The operating profit came in at Rs198.3 crore in FY20 as compared to Rs113.67 crore in FY19, a rise of 74.45 per cent on an annual basis.
The PAT was Rs99.5 crore in FY20 as compared to Rs31.11 crore in FY19, thus yielding a major increase of more than 100 per cent. The product manufactured by the company i.e. polyester film will have consistent demand mainly due to the pharmaceutical and consumer staples’ sectors. The changes seen in the current lifestyle and the preferences of the current generation along with the disposable income available with them are more likely to lead to higher consumption of packaged food and beverages due to which the demand for flexible polyester packaging in India may increase. Since the company’s products are likely to have a positive demand going forward as well, we recommend investors to BUY the stock
SOUTH INDIAN BANK
South Indian Bank is a private sector bank headquartered in Kerala that mainly provides services related to retail and corporate banking as well as para banking activities like debit card, third party product distribution, etc. The non-corpo-rate customers are provided loans through the retail banking segments while the corporate customers are provided loans through the wholesale banking segment. On the quarterly front, the net interest earned by the bank in the second quarter of FY21 came in at Rs1,898.84 crore as compared Rs1,953.97 crore in the corresponding quarter of the previous fiscal, a decrease of 2.82 per cent. The total income in Q2FY21 was Rs2,138.74 crore, a decrease of 2.92 per cent from Rs2,203.18 crore in Q2FY20.
The net profit declined by 22.95 per cent to touch Rs65.09 crore in Q2FY21 from Rs84.48 crore in Q2FY20. For Q2FY21 the GNPA percentage was 4.87 per cent as compared to 4.92 per cent in Q2FY20. The CRAR ratio in Q2FY21 was 13.94 per cent and in Q2FY20 it was 12.08 per cent. Net interest earned by the bank in FY20 came in at Rs7,763.80 crore, an increase of 12.90 per cent from Rs6,876.52 crore in FY19. The total income earned by the bank in FY20 was Rs8,809.55 crore, an increase of 15.87 per cent from Rs7,602.73 crore earned in the previous fiscal.
There was a 57.75 per cent decrease in net profit in FY20 that touched Rs104.59 crore as against Rs247.53 in FY19. The bank reported GNPA ratio of 4.98 per cent for FY20 and 4.92 per cent for FY19. In FY20, the CRAR ratio was 13.41 per cent whereas in FY19 it was 12.61 per cent. South Indian Bank faced a weak quarter due to high slippages from its corporate and small and medium enterprise book. A slight moderation in asset quality was witnessed in Q2FY21 and may further weaken due to fresh slippages. Considering the uncertainty about the stability of the South Indian Bank’s financial and asset position as well as its growth trend, we recommend investors to AVOID the scrip.
(Closing price as of Dec 28, 2020)