Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
ONGC
ONGC is a crude oil and natural gas company in India that contributes around 75 per cent to Indian domestic production. The segments of the company include exploration and production and refining. On a consolidated quarterly basis, the net sales and operating income declined by 8.38 per cent at Rs1,00,288.83 crore in Q3FY21 from Rs1,09,466.04 crore in Q3FY20. The operating profit showed a decrease of 22.94 per cent at Rs13,407.04 crore in Q3FY21 in comparison with Rs17,397.36 crore in Q3FY20. The net profit contracted by 29.39 per cent at Rs3,512.43 crore in Q3FY21 as compared to the net profit of Rs4,974.11 crore in Q3FY20. On the annual front, its net sales dipped by 6.32 per cent in FY20 as compared to FY19. The operating profit was down by 26.5 per cent at Rs60,676.86 crore in FY20 as compared to Rs82,548.83 crore in FY19. The net profit also substantially dipped by 65.57 per cent in FY20 as compared to FY19. ONGC’s crude oil and natural gas production shrank by 3.6 per cent and 7.1 per cent in December from a year earlier due to struggle of the producers with ageing fields. ONGC depicted a 2.8 per cent decline in oil production whereas Oil India’s output was down 16.2 per cent, according to the data published by the Ministry of Oil. Hence, we recommend investors to AVOID this stock.
SNOWMAN LOGISTICS
Snowman Logistics is engaged in the business of providing temperature-controlled logistics, including storage, transportation by road and distribution of products which require temperature-controlled environment. Taking into account its financial performance, on a standalone quarterly basis the net sales and operating income increased by 2.41 per cent at Rs60.18 crore in Q3FY21 from Rs58.76 crore in Q3FY20. The operating profit increased by 21.9 per cent Rs17.46 crore in Q3FY21 as compared to Rs14.32 crore in Q3FY20. The net profit was positive at Rs1.42 crore in Q3FY21 as against net loss of Rs3.45 crore in Q3FY20. On the annual front, the net sales were up by 3.29 per cent in FY20 at Rs240.20 crore as against Rs232.55 crore posted in FY19. The operating profit inched up by 1.84 per cent at Rs63.38 crore in FY20 as compared to Rs62.24 crore in FY19. FY20 recorded a net loss of Rs15.01 crore as against net profit of Rs9.72 crore in FY19. Recently, Snowman Logistics signed a MoU with SpiceJet Ltd. for joint distribution of vaccines and ancillaries on a pan-India basis. Besides, expansion work is in progress at its new location and 8,000 pallets’ capacity will be added at Siliguri and Coimbatore while 2,600 pallets of frozen or chilled capacity will be added at Mumbai and Krishnapatnam. Given the healthy financial performance and its expansion plans, we recommend investors to BUY this stock.
EICHER MOTORS
Eicher Motors is an India-based company which operates in the automotive segment. It is known as a listed parent company of Royal Enfield, the global leader in middle-weight motorcycles. Being the world’s oldest motorcycle brand in continuous production, Royal Enfield has made distinctive motorcycles since 1901. Royal Enfield combines modern-day elements with the brand’s heritage and garners immense enthusiasm amongst global motorcyclists. Royal Enfield has more than 95 per cent market share in the mid-size motorcycles segment and in addition to motorcycles, Eicher Motors has a joint venture with Sweden’s AB Volvo – Volvo Eicher Commer-cial Vehicles Limited (VECV) – which has pioneered moderni-sation of commercial vehicles in India and other developing countries.
Analysing the financial performance of Eicher Motors, on a consolidated quarterly basis the net sales and operating income has shown a rise of 19.29 per cent at Rs2,828.26 crore in Q3FY21 from Rs2,371.01 crore in Q3FY20. The operating profit has shown an increase of 9.64 per cent at Rs797.06 crore in Q3FY21 in comparison with Rs726.97 crore in Q3FY20. The net profit also saw an improvement of 3.96 per cent in Q3FY21 as compared to Q3FY20. As for the annual numbers, its net sales were down by 6.57 per cent in FY20 as compared to FY19. The operating profit was down by 18.61 per cent, reflected at Rs2,723.60 crore in FY20 as compared to Rs3,346.50 crore in FY19.The net profit also showed a dip of 7.64 per cent in FY20 as compared to FY19.
Eicher Motors Limited continued to be a net debt-free company in the year 2019-20. The expansion of the middle-class and high-income segments will reshape future consumption and drive incremental consumption of USD 4 trillion by 2030. The company can sense strong growth prospects going forward in both the commercial vehicles and motorcycle segments. Hence, we recommend investors to HOLD the scrip
TATA STEEL
Tata Steel is engaged in the business of steel making, including raw material and finishing operations. It is currently the world’s second-most geographically diversified steel producer and one of a few steel operations that are fully integrated – from mining to manufacturing and marketing of finished products. Being a market leader in the steel industry in India, the company not only provides the best products and services but a wholesome experience too. The company operates in 26 countries and has commercial presence in over 50 countries with employees across five continents.
On a consolidated quarterly basis, the company’s net sales and operating income have shown a rise of 11.47 per cent at Rs39,594.09 crore in Q3FY21 from Rs35,520.41 crore in Q3FY20. The operating profit showed a whopping increase of 160.69 per cent at Rs9,678.51 crore in Q3FY21 in comparison with Rs3,712.67 crore in Q3FY20. The net profit turned positive at Rs3,922.56 crore in Q3FY21 as compared to net loss of Rs1,249.01 crore in Q3FY20. As for its annual numbers, net sales declined by 11.32 per cent in FY20 as compared to FY19. The operating profit was down by 37.32 per cent at Rs19,306.55 crore in FY20 as compared to Rs30,803.92 crore in FY19. Net profit also showed a dip of 88.91 per cent in FY20 as compared to FY19.
Tata Steel generated free cash flow of Rs12,078 crore in Q3FY21, which is driven by strong operating performance and better working capital management. The company also deleveraged sharply by reducing its debt by Rs10,325 crore in Q3FY21. The company has chosen disciplined capital allocation and restarted work on its pellet plant and CRM complex at Tata Steel, Kalinga Nagar. Besides, the company has also developed 25 and commercialised eight new products with applications across construction, automotive, and tubes and pipes. Considering the robust expansion plans and prediction of healthy future growth prospects, we recommend investors to HOLD this stock.
ITC
ITC is a leading private sector company having a diversified presence in FMCG, hotels, packaging, paperboards and specialty papers along with agriculture-related business. Over the last decade, ITC’s new consumer goods businesses has managed to establish a vibrant portfolio of 25 world-class Indian brands which create and retain value in India. ITC has 200+ manufacturing units and secures the first position in paper and paperboards. It has 100+ hotels across 70 locations. ITC is ranked third globally in the food industry for its ESG performance.
Considering the financial performance of ITC, on a consolidated quarterly basis the net sales and operating income increased by 6.14 per cent at Rs14,124.48 crore in Q3FY21 from Rs13,307.54 crore in Q3FY20. The operating profit declined by 5.31 per cent at Rs5,330.71 crore in Q3FY21 in comparison with Rs5,629.69 crore in Q3FY20. The net profit declined by 11.38 per cent at Rs3,587.20 crore in Q3FY21 as compared to net profit of Rs4,047.87 crore in Q3FY20. On the annual front, the net sales were up by 3.07 per cent in FY20 at Rs51,393.47 crore as against Rs49,862.11 crore posted in FY19. The operating profit increased by 6.21 per cent at Rs21,858.05 crore in FY20 as compared to Rs20,580.15 crore in FY19. FY20 recorded a net profit of Rs15,584.57 crore, 21.52 per cent higher than Rs12,824.20 crore in FY19.
ITC has leadership in the cigarettes’ business. In the recent budget in 2021, the taxes on cigarettes remain unchanged as against the hike seen in the previous budget. Also, the increased mobility of customers and return to offices will support in increasing sale of cigarettes over the next few months. The FMCG business has remained bright with a strong portfolio with trusted brands and new launches along with essentials’ portfolio maintaining its drive. Following the increase in customers activities, the agriculture and paper business are expected to revive gradually. Hence, being optimistic regarding the company’s growth prospects for company, we recommend investors to HOLD the stock.
KAJARIA CERAMICS
Kajaria Ceramics is the largest manufacturer of ceramic and vitrified tiles in India. It has annual aggregate capacity of 73 million sq. metres distributed across eight plants. Kajaria Ceramics offers more than 2,800 options in ceramic wall and floor tiles, vitrified tiles, designer tiles and much more. The company is engaged in sanitary ware and faucet verticals through its subsidiary, Kajaria Bathware (P) Ltd. The company partners with a network of 1,500 strong and loyal dealers all over the country. The market capitalization of the company has increased at a rate of 29 per cent for the past 10 years.
On a consolidated quarterly basis, its net sales and operating income increased by 13.09 per cent at Rs838.32 crore in Q3FY21 from Rs741.30 crore in Q3FY20. The operating profit jumped up by 61.62 per cent at Rs188.22 crore in Q3FY21 in comparison with Rs116.46 crore in Q3FY20. The net profit massively rose by 97.57 per cent at Rs121.03 crore in Q3FY21 as compared to net profit of Rs61.26 crore in Q3FY20. On the annual front, the net sales were down by 5.01 per cent in FY20 at Rs2,808.01 crore as against Rs2,956.20 crore recorded in FY19. The operating profit declined by 5.88 per cent at Rs440.05 crore in FY20 as compared to Rs467.52 crore in FY19. FY20 recorded a net profit of Rs253.53 crore, 10.83 per cent higher than Rs228.75 crore in FY19
The company has managed to reduce its debt levels as of March 2020, thus indicating positive signs regarding sustainability of growth. The size of the Indian ceramic tile industry is estimated to have handsome valuation and India is ranked fifth globally in the production of ceramic tiles. Increasing exports reflect the improving capabilities of Indian players in the ceramic industry. Kajaria Ceramics continues to focus on launching premium tiles and expanding its distribution which has driven the company to double its market share over the last 10 years. Hence, predicting strong growth prospects of the company we recommend investors to HOLD this stock.
Closing price as of Mar 05, 2021)