Reviews

In this edition, we have reviewed Mahindra & Mahindra Financial Services and Tata Sponge Iron. We suggest our reader-investors to HOLD in Mahindra & Mahindra Financial Services and Tata Sponge Iron.




We had recommended Mahindra & Mahindra Financial Services in volume 33, issue No. 12, dated May 14–27, 2018, under the ‘Special Report’ section. The shares of the company were then trading at Rs. 504.35. We had recommended the stock looking at the attractive auto finance market and a rise in demand for vehicles. Mahindra & Mahindra Financial Services Limited is an NBFC. The company serves the financing needs of population residing in rural and semi-urban areas of India. The company provides several retail products and services, such as financing vehicles for commercial and personal use, tractors, small and medium enterprise (SME) loans, and various other financial products. On the financial front, the net sales of the company has grown by 22.21 per cent to Rs. 2,222 crore in Q3FY19 versus Rs. 1818 crore in the same quarter of the previous year. The PBDT of the company stood at Rs. 1,529 crore in Q3FY19 and witnessed a rise of 13.02 per cent YoY from Rs. 1,353.48 crore. The net profit has however dropped by 19 per cent YoY to Rs. 318 crore in Q3FY19 versus Rs. 396.22 crore. In annual terms, the net sales have increased by 16 per cent to Rs. 7,147 crore in FY18 as against Rs. 6173.91 crore in FY17. The PBDT of the company in FY18 was Rs. 4352.37, showing a growth of 24 per cent from Rs. 3523.52 crore in FY17. The company has witnessed a substantial 123 per cent increase in PAT to Rs. 891 crore in FY18 as against Rs. 400.23 crore in the previous fiscal. Since our recommendation, the share price has fallen by 12 per cent approximately. The stock is likely to recover as is evident from the financials. Hence, a HOLD is recommended.




We had recommended Tata Sponge Iron in volume 33, issue no 14 dated June 11 - 24, 2018, in the ‘Cover Story‘ when the scrip was trading at Rs. 1,088.65. Our recommendation was based on high capacity utilisation, improving financials of the company and favourable outlook for the steel sector. Tata Sponge Iron Limited is engaged in the production of sponge iron by direct reduction method of iron ore and generation of power from waste heat. The company operates mainly through two segments, namely, manufacture of sponge iron and generation of power. The company manufactures sponge iron by Tisco Direct Reduction technology. The company’s total generation of power from its power plants is approximately 160 million kilowatt-hours. On the financial front, the net sales of the company surged 21 per cent on a YoY basis and stood at Rs. 260 crore in Q3FY19 as against Rs. 214.47 crore. The profit before interest, depreciation and tax stood at Rs. 30.35 crore in Q3FY19, posting a 36 per cent dip from Rs. 48.11 crore in Q3FY18. The profit after tax (PAT) has fallen by 25 per cent and came in at Rs. 26.81 crore in Q3FY19 as against Rs. 36 crore in the same quarter of the previous year. On the annual front, the net sales grew 44 per cent in FY18 to Rs. 800 crore as compared to Rs. 557.31 crore in FY17. The PBIDT exceeded 129 per cent to Rs. 225.76 crore in FY18 versus Rs. 98.71 crore in FY17. Also, the PAT went up by 140 per cent to Rs. 140.88 crore in FY18. Since our recommendation, the stock of the company has fallen by over 32 per cent. However, the company we believe would deliver substantial growth in the upcoming quarters. Therefore, we would like our investor-readers to HOLD the stock.

(Closing price as of Mar 11, 2019)

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