Query Board

RELAXO FOOTWEAR

Is it the right time to invest in Relaxo Footwear? Kindly guide me.
                                                             
 -Satheesh

Relaxo Footwears Limited is engaged in manufacturing and trading of footwear and related products. The principal activity of the company is the manufacture of footwear made primarily of vulcanised or moulded rubber and plastic. Its brands include Hawaii, Flite, Sparx, Schoolmate, Elena, Casualz and Bahamas.

On the financial front on a consolidated basis, the net sales of the company witnessed 18.56 per cent rise in the second quarter of FY19 to reach Rs.545.19 crore as against Rs.459.85 crore in the same quarter of the previous year. The profit before interest depreciation and tax (PBIDT) grew by 19.57 per cent to reach Rs.73.55 crore as against Rs.61.51 crore in Q2FY18. The profit after tax (PAT) expanded by 23 per cent in Q2FY19 and came in at Rs.39.46 crore as against Rs.32.08 crore in the same quarter of FY18. On the annual front, the net sales witnessed a jump of 20 per cent and stood at Rs.1956.92 crore in FY18 versus Rs.1631.15 crore in FY17. The PBIDT expanded by 25 per cent to Rs.306 crore in FY18, while in FY17 it was Rs.244.52 crore. The profit after tax also surged by over 30 per cent to reach Rs.161.07 crore in FY18 from Rs.19.95 crore in FY17. We recommend a HOLD looking at the performance and financials of the company.

MAITHAN ALLOYS

I have 60 shares of Maithan Alloys bought at Rs.690. Kindly give your advice on this stock.

- LSS

Maithan Alloys is engaged in the business of manufacturing and exporting of all three bulk ferro alloys, including ferro silicon, ferro manganese and silico manganese and has a captive power plant. It operates through two segments, namely, ferro alloys and wind mill. It is also engaged in the generation and supply of wind power. Ferro manganese is an alloy of manganese and iron, which is used primarily in stainless steel and flat products. On the financial front, the net sales have grown by 10.48 per cent on a YoY basis to reach Rs.506.72 crore in Q2FY19 from Rs.458.62 crore. The PBIDTin the second quarter of FY19 stood at Rs.82.56 crore, declining by 8 per cent from Rs.89.92 crore in the corresponding quarter of FY18. The profit after tax (PAT) came in at Rs.65.78 crore, staying stable from Rs.65.25 crore in the same quarter of the previous year. On the annual front, the company’s net sales came in at Rs.1878.96 crore, increasing by 40 per cent in FY18 as against Rs.1342 crore in the previous fiscal year of 2017. The PBIDT of the company was at Rs.399.17 crore in FY18, up by 40 per cent from Rs.287.58 crore in FY17. The PAT expanded by 57 per cent as it came in at Rs.291.75 crore in FY18 as against Rs.185.67 crore in the previous fiscal. We recommend a HOLD as the company has reflected fairly decent growth in its financial numbers.

MIRZA INTERNATIONAL

I want to invest in Mirza International. Could you please advise me on this? is it a right time to buy it?

- Satheesh

Mirza International Limited is engaged in the business of manufacturing leather and leather footwear and is a dealer in apparels. The company operates through two segments: tannery division and shoe division. The tannery division is engaged in the manufacturing of finished leather from raw hides, wet blue and crust. The company’s shoe division is engaged in manufacturing finished leather shoes. Its export products include tanned leather, white label footwear and branded footwear. Its brands include Red Tape and Oaktrak. The company exports its products to Germany, United Kingdom, United States and France, among others. In the United Kingdom, Red Tape branded products are sold through chain stores and multi-brand outlets.

On the financial front, on a standalone basis, the net sales of the company grew by 23.03 per cent and came in at Rs.295.78 crore in Q2FY19 as against Rs.240.40 crore in Q2FY18. The profit before interest depreciation and tax (PBIDT) has remained stable with just 0.33 per cent growth to reach Rs.42.58 crore in the second quarter of FY19 as against Rs.42 crore that came in the corresponding quarter of FY18. The profit after tax (PAT) sunk by 16 per cent to reach Rs.16.11 crore in Q2FY19 as against Rs.19.34 crore in Q2FY18.

On the annual front, the net sales of the company increased marginally by 4 per cent to reach Rs.972.09 crore in FY18 as against Rs.935.68 crore in the previous fiscal. The PBIDT of the company for FY18 came in at Rs.174.41 witnessing an increase of 8 per cent from Rs.161 crore in FY17. The company posted PAT of Rs.78.42 crore in FY18, an increase of 10 per cent, as against Rs.71.74 crore in the previous fiscal. On the valuation front, the company is currently trading at a PE multiple of 12.76x on its TTM earnings as against industry PE of 45.18x. The return on equity (RoE) stood at 14.61 per cent, while its peer Liberty Shoes’ RoE stood at 4.02 per cent. The return on capital employed (RoCE) for Mirza International stood at 18.87 per cent. We thus recommend a HOLD

SUZLON ENERGY

I hold 500 shares of Suzlon Energy at an average of Rs.11. I intend to hold them for another couple of years. Would this be right?

- Bala

Suzlon Energy Limited is a provider of renewable energy solutions engaged in the production of wind turbines. It offers a range of solar energy solutions, such as solar irradiance assessment, land acquisition and approvals, infrastructure and power evacuation, supply chain, installation and commission and life cycle asset management. Its S97 is a wind turbine generator designed to make low wind sites viable. The S97 is available in two variants: S97 90 meter (m) and S97 120m. Its S111 is suitable for class III sites and a range of altitudes and temperatures. Its manufacturing facilities for wind turbine generator components and rotor blades are located in India, Brazil and the United States.

On the financial front on a consolidated basis, the net sales have increased by 3.80 per cent to reach Rs.1194.99 crore in the second quarter of FY19 as against Rs.1151 crore in the same quarter of the previous year. The operating loss (PBIDT) posted by the company stood at Rs.232.49 crore in Q2FY19 versus PBIDT of Rs.7.93 crore in Q2FY18. The net loss was Rs.625.76 crore in Q2FY19 as against a net profit of Rs.79.68 crore in the same quarter of the previous year.

On the annual front, the net sales witnessed a 34 per cent drop at Rs.8333.84 crore in FY18 as against Rs.12714 crore in FY17. The PBIDT has tumbled by 58 per cent in FY18 and came down to Rs.1082 crore from Rs.2588.21 crore in FY17. The company posted a net loss in FY18 at Rs.389.18 crore as against a net profit of Rs.899.89 crore in FY17.

In the recently concluded quarter, the company has posted disappointing numbers which has raised concerns on the company’s future performance. Thus, at this point of time, we urge our investors to minimise their exposure in this scrip. Looking at the performance, we therefore ask our readerinvestors to EXIT the stock.

INDOSTAR CAPITAL FINANCE

I bought 36 shares of IndoStar Capital Finance at Rs.572. Should I hold or sell?

- PRADEEP

IndoStar Capital Finance Private Limited is an NBFC registered with the Reserve Bank of India (RBI) as a systemically important non-deposit accepting non-banking finance company (NBFC-ND-SI). IndoStar is a wholesale credit institution that offers a wide bouquet of debt products. IndoStar has been established as a premier independent wholesale credit institution leveraging the experience of global best practices and local economic development to meet the growing credit requirements of the Indian corporate.

On the financial front, on a consolidated basis, the company secured net sales of Rs.313.47 crore, a jump of 57 per cent in Q2FY19 as against Rs.199.16 crore collected in the same quarter of the previous year. The profit before interest depreciation and tax (PBIDT) came in at Rs.249.14 crore in Q2FY19 while in the corresponding quarter of the previous year it stood at Rs.183.15 crore, a climb of 36 per cent YoY. The profit after tax (PAT) stood at Rs.70.89 crore in Q2FY19, falling marginally by 0.24 per cent from Rs.71.06 crore.

On the annual front, the net sales have expanded 18 per cent to Rs.818.54 crore in FY18 as against Rs.714.93 crore in the previous fiscal. The PBIDT of the company stood at Rs.689.80 crore, increasing by 9 per cent from Rs.634.15 crore in the previous FY17. The PAT came in at Rs.235 crore, a surge of 13 per cent in FY18 versus Rs.209.04 crore collected in FY17. On the valuation front, the company is currently trading at a P/E multiple of 13.65x on its TTM earnings as against industry P/E of 26.13x. The return on equity (ROE) stood at 11.64 per cent and the return on capital employed (ROCE) was at 11.2 per cent. The price/BV stood at 1.10x.

Keeping in mind the financial performance and the valuations too, we recommend our investor-readers to HOLD on to the company as the company in coming quarters could gain some momentum on the bourses when it would likely be a favourable time to exit.

NATCO PHARMA

I want to buy Natco Pharma Ltd. Please suggest whether it is the right time to enter.

- V.V. Ganesh

Natco Pharma Limited is a pharmaceutical company engaged in developing, manufacturing and marketing finished dosage formulations (FDF) and active pharmaceutical ingredients (APIs). The company’s segments include active pharmaceuticals ingredients, finished dosage formulations, job works, pharmacy and others. The company’s product categories include domestic formulations, international formulations, APIs and blockbusters.

On the consolidated financial front, the net sales stood at Rs.543.5 crore, a jump of 27.37 per cent in Q2FY19 as against Rs.426.7 crore in Q2FY18. The profit before interest depreciation and tax (PBIDT) stood at Rs.220.5 crore in the second quarter of FY19, increasing by 80.89 per cent from Rs.121.9 crore in the same quarter previous year. The profit after tax (PAT) for the period Q2FY19 stood at Rs.181.6 crore, gaining by over a 100 per cent from Rs.84.4 crore in Q2FY18. On the annual front, the company in FY18 posted its net sales at Rs.2184.80 crore, witnessing an expansion of 8 per cent from Rs.2020.20 crore collected in the previous fiscal. The PBIDT for FY18 substantially grew by around 40 per cent as it came in at Rs.968.80 crore as against Rs.697.30 crore in the previous fiscal. The PAT too jumped 44 per cent to Rs.695 crore in FY18 as against Rs.484.90 crore in FY17.

On the valuation front, the company is currently trading at a P/E of 14.28x on its TTM earnings. The industry PE is 22.97x. The return on equity (ROE) stood at 29.7 per cent and the return on capital employed (ROCE) was at 35.28 per cent. The price/BV stood at 3.75x. Noting the stellar financial performance and the valuations, the company stands in a suitable position. Also, the company is virtually debt-free and has been reflecting a growth of 54.36 per cent over five years. The company has been maintaining a healthy dividend payout of 19.98 per cent. Therefore, we recommend a BUY.

(Closing price as of Jan 01, 2019)