Your stock queries

HERO MOTOCORP

I want to buy shares of Hero MotoCorp at the current market price. Will these be value accretive going forward?

- Pradhan S, Pune, Maharashtra

Hero MotoCorp, BSE/NSE Code 500182/HEROMOTOCO, with a face value of Rs 2, is currently trading at Rs 1949. Its 52-week high/low are Rs 2250 and Rs 1376 respectively. 

Hero MotoCorp (formerly Hero Honda Motors) engages in the manufacture and sale of motorcycles in India. It provides a range of two-wheeler products, including motorcycles, scooters, as well as spare parts. The company markets its products under various brands including CD Dawn, CD Deluxe, Splendor Plus, to name a few. It offers its products through a network of dealers, service and spare parts outlets and dealer-appointed outlets. The company sold a record 6117599 units of two-wheelers in the period between January-December 2011, a growth of 19.2 per cent over the number sold in the entire CY 2010, when it had sold 5134549 two-wheelers.

The performance for 9M FY12 on a YoY basis has been pretty impressive. The topline witnessed a growth of 25 per cent on a YoY basis, and stood at Rs 17544 crore as against Rs 14010 crore for 9M FY11. The bottomline witnessed a growth of 24 per cent on a YoY basis, and stood at Rs 1774 crore as against Rs 1426 crore for 9M FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 17.11x and its EV/EBITDA stands at 14.37x. The debt-to-equity ratio stands at 0.50 per cent, which is quite low. The dividend yield also stands at a healthy 5.36 per cent, which is another remarkable point about this company. One can enter the stock at the current levels from a longer-term perspective.

3i INFOTECH

The 3i Infotech stock has witnessed a severe downfall in the last calendar year. Is this the right time to enter the counter?

- Palash Sur, Via Email[PAGE BREAK]

3i Infotech, BSE/NSE Code 532628/3IINFOTECH, with a face value of Rs10, is currently trading at Rs 17.35. Its 52-week high/low stand at Rs 54 and Rs 12 respectively.

The company offers software products, software development and consulting, IT infrastructure and business process outsourcing services. Further, it offers various other services such as application development and maintenance, business intelligence and enterprise applications. The company serves a range of sectors like insurance, banking, capital markets, mutual funds and asset management, wealth management, government, manufacturing and retail. It operates primarily in South Asia, Asia Pacific, Middle East, Africa, Western Europe and North America. 

On the financial front, the company’s performance for 9M FY12 has not been anything to write home about. The topline witnessed de-growth of 30 per cent on a YoY basis for 9M FY12, and stood at Rs 1327 crore as against Rs 1918 crore for 9M FY11. It reported a loss of Rs 66.25 crore for 9M FY12 as against a profit of Rs 189 crore for 9M FY11. The company has a high debt-to-equity ratio of 1.97x, which is not common in the IT domain. The interest payments stood at Rs 162 crore for 9M FY12, which is also up by 38 per cent on a YoY basis. Going forward, there is no clear visibility with regard to the earnings of the company. Therefore, we suggest that you avoid the stock at this point of time and evaluate it once there is clear visibility on the earnings front.

SHRI LAKSHMI COTSYN

I have 540 shares of Shri Lakshmi Cotsyn purchased at Rs 100 per share. What should I do with these?

- P Loney, Kochi, Kerala

Shri Lakshmi Cotsyn, BSE/NSE Code 526049/SHLAKSHMI, with a face value of Rs 10, is currently trading at Rs 139. This is at a 39 per cent premium to your acquisition cost. Its 52-week high/low stand at Rs 139 and Rs 67 respectively.

Shri Lakshmi Cotsyn engages in the manufacture and sale of home furnishing products in India. The company offers denim fabrics, bottom weight fabrics, wider width fabrics, PU coated nylon fabrics, home furnishings and bed linen. It also offers blended suitings and shirtings, cotton fusible interlinings, etc. Further, it manufactures zippers as well as safety textiles comprising bullet proof jackets, coat combats, sleeping bags, IR camouflage nets and ballistic body armors. The company exports its products to various countries.

On the financial front, it has put up a reasonably good performance for H1 FY12 on a YoY basis. The topline witnessed a growth of 26 per cent, and stood at Rs 992 crore as against Rs 788 crore for H1 FY11. The bottomline went up by 19 per cent on a YoY basis for H1 FY12, and stood at Rs 49.33 crore against Rs 41.42 crore for H1 FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 2.85x and its EV/EBITDA stands at 6.88x. The main drawback of the company is the high debt-to-equity ratio, which stands at 2.59x. The interest outgo stands at Rs 66 crore for H1 FY12, up 79 per cent on a YoY basis. The lower valuations may be attractive, but the high debt-to-equity ratio can be a dampener going forward. Therefore, we suggest that you exit the stock, as you are currently sitting on decent profits.

VINYL CHEMICALS (INDIA)

I have 1000 shares of Vinyl Chemicals (India) purchased at Rs 8 per share. What should my future course of action be?

- Abhishek Sony, Kolkata, West Bengal[PAGE BREAK]

Vinyl Chemicals (India), BSE/NSE Code 524129/VINYLINDIA, with a face value of Rs 1, is currently trading at Rs 10.35, which is at a 29 per cent premium to your acquisition cost. Its 52 week high/low are Rs 15 and Rs 7 respectively.

Vinyl Chemicals (India) engages in the trade of specialty chemicals in India. The company primarily supplies Vinyl Acetate Monomer (VAM). It sells its products principally to the textiles, paints and adhesives sectors. In December 2007, the company de-merged its VAM plant located at Mahad in Raigad District, Maharashtra, to Pidilite Industries. Currently, Pidilite Industries holds a 40 per cent stake in the company.

On the financial front, the company put up a muted performance for H1 FY12. The topline witnessed a growth of 40 per cent on a YoY basis for H1 FY12, and stood at Rs 105 crore as against Rs 75 crore for H1 FY11. The bottomline witnessed de-growth of 26 per cent on a YoY basis for H1 FY12, and stood at Rs 0.69 crore as against Rs 0.94 crore for H1 FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 4.62x and the EV/EBITDA stands at 2.67x. The dividend yield stands at 4.69 per cent. At present, we suggest that you exit the counter and book profits.