Query Board
This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
JUBILANT INGREVIA LTD
Jubilant Ingrevia is a global integrated life science products and innovative solutions provider serving pharmaceutical, nutrition, agrochemical, consumer and industrial customers with its customised products and solutions that are innovative, cost-effective and conform to excellent quality standards. The company offers a broad portfolio of high-quality ingredients that find application in a wide range of industries. The total revenue from operations of the company saw a YoY increase of 55 per cent in Q1FY22 as compared to Q1FY21. From Rs737 crore in Q1FY21 it went to Rs1,145 crore in Q1FY22. Its EBITDA saw a robust increase in Q1FY22 at Rs287 crore as compared to Rs127 crore in Q1FY21. The profit after tax significantly zoomed from Rs53 crore in Q1FY21 to Rs168 crore in Q1FY22. On an annual basis, the revenue from operations jumped from Rs3,179 crore in FY20 to Rs3,491 crore FY21, a rise of 9.82 per cent. The EBITDA rose by 53.3 per cent to Rs627 crore in FY21 whereas in FY20 it stood at Rs409 crore. The profit after tax took a leap from Rs220 crore in FY20 to Rs316 crore in FY21, clocking gains of 43.3 per cent. The company bears a price multiple of 192, which is more than the industry multiple of 26.64 by a wide margin. Also, the returns on capital exhibited by the company are not satisfactory. Hence, our recommendation is to AVOID the scrip.
DEEP ENERGY RESOURCES LTD
Deep Energy Resources is a leading solution provider in the energy sector. It is specialised in providing air and gas compression services, drilling and work-over services as well as gas dehydration services. The company has grown to become a one-stop solution provider for every need in oil and gas field operations by providing various equipment and services on a rental and chartered-hire basis. In terms of quarterly consoli-dated financials, the company’s net sales and other operating income grew by 32.83 per cent from Rs0.40 crore in Q1FY21 to Rs0.53 crore in Q1FY22. Operating profit for Q1FY22 stood at Rs0.44 crore, up by 51.19 per cent from Rs 0.29 crore in the same quarter last year. Net profit almost doubled from Rs0.13 crore in Q1FY21 to Rs0.25 crore in Q1FY22. In terms of its annual consolidated performance, net sales and other operating income catapulted three-fold from Rs0.73 crore in FY20 to Rs2.38 crore in FY21. Operating profit for FY21 stood at Rs1.39 crore as compared to Rs0.57 crore in FY20, up by almost 2.4 times. Net profit ascended by 23.44 per cent from Rs 0.48 crore in FY20 to Rs0.60 crore in FY21. The company has delivered a poor sales growth of negative 57.38 per cent over the past five years and has a poor return on equity of 0.07 per cent for the last three years. It does not appear financially stable. Hence, we recommend EXIT.
VAKRANGEE LIMITED
Incorporated in 1990, Vakrangee Ltd. is a unique technology-driven company focused on building India’s largest network of last mile retail outlets to deliver an array of digital offerings including banking, financial services, insurance, ATM, logistics, online shopping, healthcare, travel, telecom and bill payment services to the under-served rural, semi-urban and urban population of the country. Its delivery outlets are assisted digital convenience stores better known as ‘Next-Gen Vakrangee Kendras’.
The company’s quarterly consolidated financials reveal that net sales and other operating income more than doubled from Rs67.85 crore in Q1FY21 to Rs154.02 crore in Q1FY22. In terms of reach, the company has redefined the last mile access by successfully crossing more than 11,700 kendras, spreading across covering 27 states and Union Territories, over 510 districts and 4,580 postal codes. Out of these outlets, 70 per cent of their outlets are in Tier V and VI cities. They are currently the fourth largest ATM operator in rural India with more than 5,400 modern ATMs in operation.
Operating profit for Q1FY22 stood at Rs34.08 crore, up by 67 per cent from Rs20.41 crore in the same quarter of the previous year. Net profit soared by 96.14 per cent from Rs11.89 crore in Q1FY21 to Rs23.33 crore in Q1FY22. In terms of annual performance, net sales and other operating income contracted by 54.13 per cent from Rs685.22 crore in FY20 to Rs314.29 crore in FY21. Operating profit fell by 3.58 per cent from Rs101.24 crore in FY20 to Rs97.62 crore in FY21. Net profit for FY21 came in at Rs62.79 crore, down by 11.91 per cent from Rs71.28 crore in FY20.
The company has delivered sales degrowth of 37.09 per cent over past five years, along with high debtor days, stretched cash conversion cycle and low return on equity over the last three years. FII holding has declined dramatically from 17.25 per cent in September 2018 to 9.71 per cent in June 2021. Hence, we recommend AVOID.
MTAR TECHNOLOGIES LTD
The company is a leading national player in the precision engineering industry engaged in the manufacture of mission-critical precision components to serve projects of high national importance. MTAR Technologies has machining, assembly, specialised fabrication, painting and special process facilities available in a single location, which are probably tagged as one of the best facilities available in India as well as in Asia. The key product portfolio of the company includes critical assemblies such as liquid propulsion engines for GSLV Mark III, base shroud assembly and airframes for Agni programmes, actuators for light combat aircrafts, power units for fuel cells, and fuel machining head, bridge and column, thimble package, drive mechanisms, etc. for the cores of nuclear reactors.
As regards the consolidated quarterly performance of the company, its net sales and other operating income for Q1FY22 was Rs54.03 crore, registering a rise of 10.86 per cent as compared to net sales and operating income of Rs48.74 crore for Q1FY21. The company posted operating profit for Q1FY22 at Rs17.06 crore, which grew by 44.09 per cent as compared to the operating profit of Rs11.84 crore registered for Q1FY21. It achieved net profit ofRs8.71 crore in Q1FY22 as compared to net profit of Rs5.32 crore achieved in Q1FY21, zooming up by 63.65 per cent. In terms of annual performance, its net sales and other operating income were reported at Rs246.43 crore for FY21, which rose by 15.28 per cent when compared to Rs213.77 crore for FY20.
FY21 reported an increase of 35.38 per cent in operating profit at Rs84.39 crore as compared to Rs62.33 crore for FY20. The net profit stood at Rs46.07 crore in FY21 compared to net profit of Rs31.32 crore reported in FY20, growing by 47.09 per cent. The company has recently received the biggest ever order for export of Yuma Hot Boxes and associated components approximately amounting to Rs 220 crore from Bloom Energy. The company expressed that the order depicts customer confidence and will underpin the growth targets that it has set for itself. Hence, we recommend HOLD
ADANI TRANSMISSION LTD
Adani Transmission Ltd. is one of the largest private sector power transmission companies in India with a presence across the western and northern regions. The company keenly aims at addressing the vast potential in India’s transmission sector and its ambitious target is to set up 20,000 circuit km of transmission lines by 2022. The company operates more than 8,500 circuit km of transmission lines and around 14,000 MVA of power transformation capacity. It has invested in the latest technologies, resulting in the highest network availability of over 99.80 per cent in the country, which corresponds to the best global standards.
The company’s quarterly consolidated financials recorded net sales and other operating income for Q1FY22 at Rs2,829.65 crore, a rise of 15.66 per cent as compared to net sales and operating income of Rs2,446.51 crore for Q1FY21. The company registered operating profit for Q1FY22 at Rs1,496.45 crore in comparison with an operating profit of Rs1,491.02 crore registered for Q1FY21. The net profit of Q1FY22 stood at Rs433.24 crore as compared to net profit of Rs355.4 crore in Q1FY21. In terms of annual performance, the net sales and other operating income were reported at Rs9,926.33 crore for FY21, which descended by 13.05 per cent when compared to Rs11,415.96 crore for FY20. FY21 reported an increase of 12.09 per cent in operating profit at Rs5,065.77 crore as compared to Rs4,519.19 crore for FY20.
The net profit stood at Rs1,289.57 crore in FY21 in comparison with net profit of Rs706.49 crore reported in FY20, growing attractively by 82.53 per cent. Of late, the company has crossed market capitalisation of Rs2 trillion and has become the most valued Adani Group firm, replacing Adani Green Energy Ltd. The company increased its share of the country’s power transmission segment in tariff-based competitive bidding (TBCB) bids from 24 per cent in FY16 to 35 per cent in FY21. Hence, considering the optimistic long-term prospects of companies engaged in the power sector since India is an attractive market for generation, transmission and distribution sector investments, we recommend HOLD.
GRAUER & WEIL (INDIA) LTD
Grauer and Weil (India) is engaged in the business of manufacturing and selling surface finishings, phosphating plants, electroplating plants, wastewater treatment plants and components besides their shoppertainment business which indicates stores that are readily adding interactive and exciting elements such as theatre, musical displays, etc. to draw customers. Its research and development activities have been recognised by The Indian Council of Science and Technology for their innovative and technological prowess in the chemical and paint division. It also happens to be the first chemical company in India to have received the much-coveted AS 9100 aerospace certification.
The company reported an impressive set of quarterly consolidated financials for the quarter ended June 30, 2021. Its net sales and other operating income more than doubled from Rs63.18 crore in Q1FY21 to Rs134.79 crore in Q1FY22. Operating profit for Q1FY22 stood at Rs31.44 crore, up by almost 4.5 times from Rs7.01 crore in the same quarter last year. On similar lines, net profit skyrocketed from Rs1.11 crore in Q1FY21 to a whopping Rs19.41 crore in Q1FY22. On the annual consolidated front, net sales shrunk by 2.19 per cent from Rs619.40 crore in FY20 to Rs605.83 crore in FY21. Operating profit for FY21 stood at Rs114.94 crore, up by 5.99 per cent from Rs108.44 crore in FY20.
Net profit fell by 9.08 per cent from Rs75.84 crore in FY20 to Rs68.95 crore in FY21. The company has been a trendsetter in the general metal finishing industry and a formidable player in the field of surface finishing and engineering equipment. It has persistently delivered a strong balance-sheet despite the challenging business environment. Even during the pandemic it has managed to safeguard its business fundamentals by investing nearly Rs18 crore in various business projects while maintaining a no long-term debt position. Grauer and Weil (India) plans to go ahead with its capital expenditure plan for setting up a world-class technology centre besides increasing its production capacities in paint by 30,000 kilo litre per annum. Hence, we recommend BUY.
(Closing price as of Oct 04, 2021)