Query Board

This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.

TAKE SOLUTIONS

Take Solutions has its business in providing domainintensive services in life sciences and supply chain management. Considering the financial statements on a consolidated quarterly basis, its net sales dropped significantly by 66.67 per cent to Rs216.39 crore in Q3FY21 as compared to Rs651.11 crore in Q3FY20. A decrease was seen in operating profit of Rs14.94 crore recorded in Q3FY21, down by 86.64 per cent as compared to Rs111.77 crore reported in the same quarter in the previous financial year. The net profit turned negative with loss of Rs25.46 crore in Q3FY21 as against net profit of Rs51.14 crore in Q3FY20. On the annual front the company reported net sales of Rs2,212.90 crore in FY20, an increase of 8.53 per cent as compared to net sales of Rs2,039.00 crore in FY19. The operating profit was recorded at Rs195.28 crore in FY20 as compared to Rs394.21 crore in FY19, a decline of 50.46 per cent on an annual basis. The net profit turned negative with net loss of Rs10.94 crore in FY20 as against net profit of Rs178.39 crore in FY19. Also, the company recorded high PE of 43.42. Besides the financials showing a weaker trend, the promoter holding has also decreased. The company has also recorded a low interest coverage ratio and is observed to be paying high interest as compared to the earnings. Hence, our recommendation is to AVOID this stock.

MOIL LTD.

Manganese Ore (India) Limited (MOIL) is a government enterprise engaged in the business of producing and selling different grades of manganese ore. MOIL promotes non-conventional energy resources through its 4.8 MW wind energy farm at Nagda Hills and a 15.2 MW wind farm at Ratedi Hills in Dewas district of Madhya Pradesh. Taking a look at the financial performance of MOIL on a consolidated quarterly basis, the net sales and operating income has shown an increase of 4.48 per cent at Rs267.70 crore in Q3FY21 from Rs256.22 crore in Q3FY20. The operating profit posted a decline of 4.74 per cent at Rs95.36 crore in Q3FY21 in comparison with Rs100.10 crore in Q3FY20. The net profit also saw a decline of 7.35 per cent in Q3FY21 as compared to Q2FY20. As for the annual numbers, its net sales were down by 27.95 per cent in FY20 as compared to FY19. The operating profit was down by 44.81 per cent, reflected at Rs436.65 crore in FY20 as compared to Rs791.15 crore in FY19. The net profit also showed a dip of 48.12 per cent in FY20 as compared to FY19. MOIL accounts for about 48 per cent of the country’s production, backed as it is by the government. Give its dominant position, medium to high-grade ore reserves, centrally located mines and strong and expanding customer base, we recommend HOLD for this stock.

ORIENTAL AROMATICS LIMITED

Oriental Aromatics Limited, which formerly was known as Camphor and Allied Products Limited, is engaged in the business of producing fine chemicals. Perfumery chemicals, camphor and isoborneol are the principal products of the company. Working in the domestic as well as international segments, the company serves various industries, including flavours and fragrances, pharmaceuticals, soaps and cosmetics, rubber and tyre, and paints and varnishes.

Taking into account the company’s financial statements on a consolidated quarterly basis, its net sales grew by 8.69 per cent to Rs190.68 crore in Q3FY21 as compared to Rs175.44 crore in Q3FY20. A significant increase was seen in operating profit of Rs54.06 crore recorded in Q3FY21, up by 69.73 per cent as compared to Rs29.46 crore reported in the same quarter in the previous financial year. This increase can be attributed to a reduction in various expenses. The net profit jumped up more than 100 per cent at Rs36.36 crore in Q3FY21 and Rs17.64 crore in Q3FY20. On the annual front the company reported net sales of Rs759.89 crore in FY20, an increase of 0.69 per cent as compared to net sales of Rs754.69 crore in FY19.

The operating profit came in at Rs133.84 crore in FY20 as compared to Rs116.27 crore in FY19, a rise of 15.11 per cent on an annual basis. Its PAT was Rs86.19 crore in FY20 as compared to Rs57.14 crore in FY19, an increase of 50.83 per cent. Despite the challenging pandemic situation, the Indian chemical industry has tapped various opportunities in the face of supply chain disruption in China and trade conflict among the US, Europe and China. The fine chemicals market is observed to be driven by the electronics and electrical industry followed by the automotive industry. The demand for fine chemicals is increasing rapidly from end-user industries, thereby propelling market growth. A strong financial growth is predicted along with a healthy business model. Hence, we recommend BUY for this stock.

IDBI BANK

IDBI Bank is a universal bank which provides a wide array of financial products and services encompassing deposits, loans, payment services and investment solutions. It is placed in the 13th position among 51 Indian banks and financial institutions as a result of the progress it has made in digital banking. On the quarterly front, the net interest earned by the bank in the third quarter of FY21 was Rs45.6398 crore as against Rs49.3724 crore in the corresponding quarter of the previous fiscal, a decrease of 7.5 per cent.

The total income in Q3FY21 was Rs59.3225 crore, a decrease of 4.5 per cent from Rs62.1560 crore in Q3FY20. The net profit was recorded at Rs3.7842 crore in Q3FY21 as against net loss of Rs57.6304 crore in Q3FY20. For Q3FY21 the GNPA percentage was 23.52 per cent as compared to 28.72 per cent in Q3FY20. The CRAR ratio in Q3FY21 was 14.77 per cent whereas it was 12.56 per cent in Q3FY20. The net interest earned by the bank in FY20 was Rs20,854.22 crore, a decrease of 5.64 per cent from Rs22,102.10 crore in FY19. The total income earned by the bank in FY20 was Rs25,485.44 crore, a dip of 0.59 per cent from Rs25,637.42 crore earned in the previous fiscal.

FY20 saw a loss of Rs12,847.40 crore which was less as compared to Rs15,012.97 crore in FY19. The company reported GNPA ratio of 27.53 per cent for FY20 and 27.47 per cent for FY19. In FY20 the CRAR ratio was 13.31 per cent whereas in FY19 it was 11.58 per cent. The banking sector is now laying a greater emphasis on providing improved services to their clients by upgrading their technology infrastructure and giving banks a competitive edge. The bank aims to maintain the percentage of growth in capital at 10-12 per cent for the next 2-3 years. Besides, it also witnessed improvement in ROA and ROE. The bank is likely to focus on credit cost and slippage ratio to maintain it below the 2 per cent level while keeping the NPA level below 3 per cent. In view of the strong growth prospects for the bank in the near future, we recommend HOLD for t his stock.

DEEPAK NITRITE 

Deepak Nitrite is involved in manufacturing chemical intermediates to serve the domestic and international markets with high-quality products made in a responsible and sustainable manner. The product categories of the company include fine and specialty chemicals, performance products and basic chemicals. The products find applications in segments like dyes and pigments, agrochemicals, pharmaceuticals, fuel additives, rubber, paper, detergents and personal care. The company has been a leading producer of sodium nitrite and sodium nitrate since 1972. Also, it has had a lead in phenol and acetone production since 2018 in India.

On a consolidated quarterly basis, its net sales grew by 10.25 per cent to Rs1,234.69 crore in Q3FY21 as compared to Rs1,119.86 crore in Q3FY20. An increase was seen in operating profit of Rs339.92 crore recorded in Q3FY21, up by 24.52 per cent as compared to Rs272.99 crore reported in the same quarter in the previous financial year. The net profit rose by 38.19 per cent at Rs216.56 crore in Q3FY21 and Rs156.71 crore in Q3FY20. On the annual front the company reported net sales of Rs4,229.71 crore in FY20, an increase of 56.66 per cent as compared to net sales of Rs2,699.92 crore in FY19. The operating profit was recorded at Rs1,061.00 crore in FY20 as compared to Rs429.01 crore in FY19 – a major rise beyond 100 per cent on an annual basis.

The company’s PAT was Rs611.03 crore in FY20 as compared to Rs173.66 crore in FY19, massively increasing above 200 per cent. Deepak Nitrite is in a favourable position to capture market opportunities across the chemicals and specialty chemicals landscape. The operation costs for China, the world’s largest supplier, are likely to go up due to focus on sustainable manufacturing which in turn will result in an increase in the landed cost of chemicals. As such, the competitiveness of alternate suppliers will increase which will open opportunities for established players like Deepak Nitrite. Considering the strong financial growth and potential positive business outlook, we recommend HOLD

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. Its non-corporate customers are provided loans through the retail banking segments while corporate customers are extended loans through the wholesale banking segment. On the quarterly front, the net interest earned by the bank in the third quarter of FY21 was Rs1,811.96 crore as compared Rs1,967.31 crore in the corresponding quarter of the previous fiscal, a decrease of 7.89 per cent.

The total income in Q3FY21 was Rs2,082.08 crore, a decrease of 4.82 per cent from Rs2,187.73 crore in Q3FY20. The bank incurred a net loss of Rs91.62 crore in Q3FY21 as compared to net profit of Rs90.54 crore in Q3FY20. For Q3FY21 the GNPA percentage was 4.90 per cent as compared to 4.87 per cent in Q3FY20. The CRAR ratio in Q3FY21 was 14.47 per cent and in Q3FY20 it was 13.97 per cent. The net interest earned by the bank in FY20 was 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 crore 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 is considered to be one of the most proactive banks in India with a competent technology savvy team of professional at the core of services. Its growth has been boosted through the government’s enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms. All these factors suggest that India’s banking sector is expected to post robust growth as rapidly growing businesses will turn to banks for their credit needs. Hence, we recommend HOLD

(Closing price as of Feb 19, 2021)