Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
BALRAMPUR CHINI MILLS LTD.
Balrampur Chini Mills Limited is one of the largest sugar manufacturing companies in India. Analysing the company’s quarterly consolidated performance, net sales and other operating income for Q1FY22 stood at Rs1,140.44 crore, descending by 20.27 per cent as compared to net sales and operating income of Rs1,430.34 crore for Q1FY21. The company recorded operating profit for Q1FY22 at Rs139.27 crore, a plunge of 36.92 per cent as compared to operating profit of Rs220.78 crore registered for Q1FY21. Net profit for Q1FY22 dipped by 46.05 per cent and was reported at Rs71.86 crore as compared to a net profit of Rs133.2 crore in Q1FY21. On the annual front, net sales and other operating income were reported to be Rs4,811.66 crore for FY21, improving by 1.48 per cent when compared to Rs4,741.29 crore for FY20. FY21 reported an increase of 2.05 per cent in operating profit at Rs740.75 crore as compared to Rs725.84 crore for FY20. Net profit stood at Rs460.19 crore in FY21 in comparison with net profit of Rs511.55 crore reported in FY20, squeezing by 10.04 per cent. Due to the increased gap between the current ethanol production rate and the government set target, the company is focused on maximising ethanol produc-tion in the future. However, being a cyclical industry, the stock is trading near its all-time high. Hence, we recommend AVOID.
NESCO LTD.
Nesco Ltd. is a diversified company involved in engineer-ing and manufacturing products for railways, forging and realty development. It also runs an exhibition centre. Looking at the quarterly consolidated performance of the company, net sales and other operating income for Q4FY21 stood at Rs75.07 crore, descending by 36.25 per cent as compared to net sales and operating income of Rs84.83 crore for Q4FY20. The company recorded operating profit of Rs58 crore for Q4FY21, a decrease of 31.63 per cent as compared to operating profit of Rs84.83 crore registered for Q4FY20. Net profit for Q4FY21 reduced by 24.94 per cent and was reported at Rs39.72 crore in Q4FY21 in comparison with net profit of Rs52.92 crore in Q4FY20. On the annual front, net sales and other operating income were reported to be Rs291.10 crore for FY21, declining by 32.57 per cent when compared to Rs431.73 crore for FY20. FY21 reported a decrease of 21.98 per cent in operating profit at Rs250.26 crore as compared to Rs320.75 crore for FY20. The net profit stood at Rs172.46 crore in FY21 in comparison with net profit of Rs233.89 crore reported in FY20, going down by 26.27 per cent. The company has reported a debt-free status. Consid-ering the opportunities the company has in the near future in its various business segments, we recommend BUY
AEGIS LOGISTICS LTD.
Aegis Group secures a key position in India’s downstream oil and gas sector. Its flagship company, Aegis Logistics Limited, is India’s leading oil, gas and chemical logistics company. The group is diversified into five distinct related business segments and operates a network of bulk liquid handling terminals, liquefied petroleum gas (LPG) terminals, filling plants, pipelines, and gas stations to deliver products and services. The company’s client base includes many leading industrial companies in India as well as individual retail customers served at Aegis Auto gas stations.
In terms of the quarterly consolidated financials, net sales and other operating income for Q1FY22 were recorded at Rs678.06 crore, recording a gain of 6.55 per cent from Rs636.40 crore reported in Q1FY21. Operating profit improved by an at-tractive 56.41 per cent from Rs72.31 crore in Q1FY21 to Rs113.10 crore in Q1FY22. The company reported a net profit at Rs72.21 crore in Q1FY22, giving a strong increase of 96.01 per cent as compared to Rs36.84 crore recorded in Q1FY21. On an annual basis, net sales descended by 46.49 per cent from Rs7,183.25 crore in FY20 to Rs3,843.46 crore in FY21. Operating profit rose by 37.21 per cent to Rs424.51 crore in FY21 versus Rs309.31 crore in FY20.
The company earned a net profit of Rs249.22 crore in FY21 as compared to a net profit of Rs133.97 crore in FY20 – a whopping increase of 86.03 per cent. Over the last 20 years, the consumption of LPG in India has increased at a CAGR of 7.1 per cent whereas production and imports have increased at a CAGR of 3.4 per cent and 16 per cent, respectively. The company has made an investment of Rs85 crore in three projects in its liquid handling division. These projects are expected to be commissioned from Q1 of FY22, which would boost revenues in FY22. Also, the management has charted a transformational growth strategy, which will be announced soon. Hence, expecting a revival in the company’s gas division with the gradual opening of the economy, we recommend BUY.
JUST DIAL LTD.
Just Dial is an Indian internet technology company specialising in local search, B2B and e-commerce for different services in India over the phone, website and mobile apps. Founded in 1996, the company has its base in Mumbai. In addition to its headquarters, Just Dial has offices in Ahmedabad, Bangalore, Chandigarh, Chennai, Coimbatore, New Delhi, Hyderabad, Jaipur, Kolkata, and Pune. In 2020, Just Dial had 10,984 employees and a database of approximately 29.4 million listings and 5,36,236 active paid campaigns. The company’s quarterly consolidated financials recorded net sales and other operating income for Q1FY22 at Rs165.41 crore, recording a rise of 1.83 per cent as compared to net sales and operating income of Rs162.43 crore for Q1FY21.
The company recorded an operating profit for Q1FY22 at Rs5.61 crore which dipped significantly by 95.1 per cent as compared to an operating profit of Rs114.40 crore registered for Q1FY21. Net loss for Q1FY22 was incurred at Rs3.52 crore as against net profit of Rs83.32 crore in Q1FY21. In terms of annual performance, the net sales and other operating income were reported to be Rs675.18 crore for FY21, which descended by 29.16 per cent when compared to Rs953.11 crore for FY20. FY21 reported a decrease of 26.24 per cent in operating profit at Rs304.37 crore as compared to Rs412.63 crore for FY20. The net profit stood at Rs214.16 crore in FY21 in comparison with net profit of Rs272.31 crore reported in FY20, declining by 21.35 per cent.
The company has recently launched a B2B platform called as JD Mart on which it has spent nearly Rs50 crore on advertisements to attract traffic. A significant development for the company currently is the controlling stake to be taken over by Reliance Retail Ventures Ltd. (RRVL) for total consideration of Rs3,497 crore. The company has also recently introduced JD Omni, a cloud-hosted solution for digitizing businesses. Hence, being optimistic and looking forward for Just Dial’s performance in the coming quarter, we recommend HOLD for this stock.
CARBORUNDUM UNIVERSAL LTD
Carborundum Universal Limited (CUMI) qualifies to be one of the five manufacturers in the world bearing fully integrated operations that include mining, fusioning, wind and hydro power stations, manufacturing, marketing and distribution. The company pioneered the manufacture of coated abrasives and bonded abrasives in India in addition to the manufacture of super refractories, electro minerals, industrial ceramics and ceramic fibres. Today, the company’s products have a range of over 20,000 varieties of abrasives, ceramics, refractory products and electro-minerals manufactured across several locations in and outside the country.
Analyzing the company's quarterly consolidate performance, the net sales and other operating income for the Q1FY22 stood at Rs711.59 crore recording a rise of 58.28 per cent as compared to net sales and operating income of Rs449.58 crore for Q1FY21. The company recorded an operating profit for Q1FY22 at Rs127.85 crore which gave a robust increase as compared to an operating profit of Rs49.82 crore registered for the Q1FY21. Net profit for Q1FY22 jumped massively and was reported at Rs73.54 crore in Q1FY22 in comparison with a net profit of Rs18.39 crore in Q1FY21. On the annual front, net sales and other operating income were reported at Rs2,631.71 crore for FY21, improving by 1.26 per cent when compared to Rs2,598.97 crore for FY20. FY21 reported an increase of 12.03 per cent in operating profit at Rs496.97 crore as compared to Rs443.62 crore for FY20. The net profit stood at Rs277.98 crore in FY21 in comparison with net profit of Rs257.22 crore reported in FY20, bagging 8.07 per cent gains.
The company incurred capital expenditure of Rs103 crore during FY21, which gives some optimistic indications regarding the company’s upcoming expansion projects. Besides, the driver for growth in the abrasives market is the push received from the metal fabrication industry due to enhanced demand of pre-engineered buildings and components coupled with developments in the manufac-turing sector. Hence, we recommend HOLD.
SBI CARDS AND PAYMENT SERVICES LTD
SBI Cards and Payment Services is a NBFC that offers an extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel and fuel, and banking partnerships. It has a diversified customer acquisition network that enables it to engage prospective customers across multiple channels. Presently, it services over 11 million customers. Analysing the quarterly consolidated financials, net interest income for Q1FY22 stood at Rs1,153.45 crore, down by 18.41 per cent from Rs1,413.84 crore in Q1FY21. Total income (including other income) gained by 11.62 per cent from Rs2,195.60 crore in Q1FY21 to Rs2,450.94 crore in Q1FY22.
The net profits squeezed from Rs393.30 crore in Q1FY21 to Rs304.61 crore in Q1FY22. Analysing the annual consolidated financials, net interest income improved by 1.78 per cent from Rs4,841.3 crore in FY20 to Rs4,927.67 crore in FY21. Total income for FY21 was Rs9,713.58 crore – almost flat. The net profit plunged 20.91 per cent from Rs1,244.82 crore in FY20 to Rs984.52 crore in FY21. With the escalating popularity of credit cards as a consequence to the growing trend of buy now and pay later, the Indian credit card industry is expected to grow at a CAGR of more than 25 per cent during 2020-2025. India’s credit card market is underpenetrated by a great deal in comparison to peers such as US, China and UK. With stabilisation of income levels and a nascent untapped market, a mammoth growth opportunity exists in the near future.
SBI Cards and Payment Services is the second-largest market leader in terms of outstanding credit cards in force and total spends. Its capital adequacy ratio (CAR) is healthy at 24.8 per cent and a total management overlay of Rs297 crore is also available with the company. Strong parentage, diversified client base, industry tailwinds and capable management make SBI Cards and Payment Services an ideal candidate to ride the forthcoming wave of credit in the country. Hence, we recommend BUY.
(Closing price as of Aug 10, 2021)