Reviews

Reviews

In this edition, we have reviewed PI Industries Ltd. and Housing Development Finance Corporation Ltd. We suggest our reader-investors to HOLD PI Industries and Housing Development Finance Corporation

We had recommended PI Industries Ltd. in Volume 36, Issue No. 12 dated May 10-23, 2021, under the ‘Choice Scrip’ segment. The recommended price for the stock was Rs2,672.80. We had recommended the stock on the basis of the company’s future growth potential, good return on capital employed and focus on cost reduction. PI Industries is a leading player in the agro-chemicals space. The company currently operates a strong infrastructure set-up consisting 3 formulation facilities as well as 15 multi-product plants at its four manufacturing locations. The quarterly consolidated financial performance of the company reveals that net sales and operating income for Q2FY22 stood at Rs1,354.20 crore, exhibiting growth of 16.97 per cent in comparison to Rs1,157.70 crore in Q2FY21.

Operating profit climbed marginally by 1.91 per cent from Rs313.70 crore in Q2FY21 to Rs319.70 crore in Q2FY22. Net profit for Q2FY22 came in at Rs230.10 crore, up by 5.7 per cent from Rs217.70 crore recorded in Q2FY21. In terms of annual consolidated financial perfor-mance, the company posted net sales and operating income for FY21 at Rs4,577 crore, up by 35.96 per cent from Rs3,336.50 crore in FY20. Operating profit ascended by 48.31 per cent from Rs766.70 crore in FY20 to Rs1,137.10 crore in FY21. Consequentially, net profit climbed 61.01 per cent from Rs455.80 crore in FY20 to Rs733.90 crore in FY21.

Over Q2YF22, PI Industries has increased inventory levels to avert supply chain disruptions and meet customer supply schedules or continued opera-tions. The company has a surplus cash net of debt of Rs2,062 crore including recent QIP proceeds. The sector outlook continues to remain positive owing to late rains and adequate water level at reservoirs. The company’s net sales to fixed assets ratio has improved to 2.04 (September 2021) relative to 1.89 (March 2021). Over H1FY22, the company’s production throughput improved through process efficiencies, accommo-dating the growth of other products. It has also initiated manufacturing of electronic chemicals with global customers. The order book continues to remain robust at USD 1.4 billion. Hence, we recommend HOLD.

We had recommended HDFC Ltd. in Volume 36, Issue No. 11, dated April 26, 2021 to May 9, 2021, under the ‘Cover Story’ segment. The recommended price for the stock was Rs2,573.55. We had recommended the stock on the basis of the company’s strong balance-sheet, collection efficiency and margin expansion. Incorporated in 1977, HDFC is a pioneer in housing finance in India, engaged in financing the purchase and construction of residential houses and real estate. In terms of quarterly consolidated financial performance, the company reported 8.67 per cent growth in total income from Rs64,049.79 crore in Q2FY21 to Rs69,600.64 crore in Q2FY22.

Its net profit climbed marginally by 2.97 per cent from Rs3,392.98 crore in Q2FY21 relative to Rs3,493.83 crore in Q2FY22. The dividend income for Q2FY22 came in at Rs1,171 crore, up by more than 3.63 times over the same period in the previous year. The board has also granted its approval for the issuance of secured redeemable non-convertible debentures aggregating to Rs75,000 crore, in various tranches, on a private placement basis. On the annual consolidated financial performance front, FY21 total income came in at Rs1,39,071.24 crore, exhibiting a surge of 36.62 per cent relative to Rs1,01,795.90 crore in FY20. On similar lines, net profit descended by 20.58 per cent from Rs17,080.37 crore in FY20 to Rs13,566.08 crore in FY21.

The company’s asset quality improved sequentially, particularly in respect of individual loans. Its gross non performing assets (GNPAs) improved by 24 basis points to 2 per cent at the end of Q2FY22, from 2.24 per cent in Q1FY22. Individual gross NPA declined to 1.1 per cent from 1.37 per cent and non-individual gross NPA fell to 4.69 per cent from 4.87 per cent sequentially. Collection efficiency for individual loans on a cumulative basis improved to 98 per cent during the quarter ended September 30, 2021. Growth in home loans was seen in both the affordable housing segment as well as in high-end properties during Q2FY22. The demand for home loans continues to remain strong. Hence, we recommend HOLD.

(Closing price as of Nov 30, 2021)

 

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