Your stock queries
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TATA SPONGE IRON
I wish to buy shares of Tata Sponge Iron. Will these be value accretive going forward if I buy them at the current market price?
- N Sabasiva Rao, Guntur, Andhra Pradesh
Tata Sponge Iron, BSE/NSE Code 513010/TATASPONGE, with a face value of Rs 10, is currently trading at Rs 299. Its 52-week high/low are Rs 379 and Rs 231 respectively.
Tata Sponge Iron engages in the production and sale of sponge iron in India. Its sponge iron is used by secondary steel producers for making steel. The company has a total production capacity of 390000 TPA from its three kilns. It also engages in the generation of captive power by using kiln waste heat, and has an installed capacity of 26 MW. The company was formerly known as IPITATA Sponge Iron.
On the financial front, the performance for 9M FY12 has been rather mixed. The topline witnessed de-growth of 7.60 per cent on a YoY basis, and stood at Rs 450.17 crore as against Rs 487 crore for 9M FY11. The bottomline witnessed a growth of a mere 4.32 per cent on a YoY basis, and stood at Rs 61.04 crore as against Rs 58.51 crore for 9M FY11.
On the valuations front, the company discounts its trailing 12-month earnings by 4.45x, which is much lower as compared to that of its other listed peers. The EV/EBITDA stands at 1.60x, and the company has no debt on its books, which is a good sign. Its dividend yield stands at 2.69 per cent. Keeping the valuations in mind, the stock looks like an attractive option to add to one’s portfolio, though the only glitch is the reduction in the topline numbers. Therefore, we suggest that you avoid the scrip for one more quarter and take a decision after looking at the full year’s numbers.
ADVANTA INDIA
Is this the right price to enter the Advanta India counter?
- Kailash Bahety, Via Email[PAGE BREAK]
Advanta India, BSE/NSE Code 532840/ADVANTA, with a face value of Rs 10, is currently trading at Rs 355. Its 52-week high/low stand at Rs 462 and Rs 209 respectively.
Advanta is an associate company of United Phosphorous. It engages in the research, development, production, distribution and marketing of hybrid agricultural field crop and vegetable seeds in India and internationally. Its field crop seeds include sorghum, canola, mustard, sweet corn, sunflower, corn, cotton, wheat, hybrid mustard, hybrid rice and millet seeds. Formerly known as ITC Zeneca, the company changed its name to Advanta India in September 1998.
On the financial front, its performance for H1 FY12 on a YoY basis has been pretty good. The topline witnessed a growth of 13.37 per cent, and stood at Rs 99.03 crore for H1 FY12 as against Rs 87.35 crore for H1 FY11. The bottomline witnessed a growth of 100 per cent on a YoY basis, and stood at Rs 13.79 crore for H1 FY12 as against Rs 6.89 crore for H1 FY11. Its debt-to-equity ratio stands a bit higher at 1.21x. After posting losses for the last three quarters, the company was back in the black in Q2 FY12.
We are of the opinion that investors need not make haste and enter the stock looking at the Q2 FY12 performance, as this may already have been discounted by the market. Therefore, the right strategy would be to wait for Q3 FY12 numbers and take a decision accordingly.
SUJANA TOWERS
I wish to purchase shares of Sujana Towers at the current market price. Is this the right time to enter the stock?
- Ashok Aliwar, Via Email
Sujana Towers, BSE/NSE Code 532887/SUJANATOW, with a face value of Rs 1, is currently trading at Rs 8.50. Its 52-week high/low stand at Rs 42 and Rs 5 respectively.
Sujana, together with its subsidiaries, engages in the design and manufacture of galvanised steel towers. It produces telecommunication towers and high tension towers for the power sector. The company also offers engineering and consultation services, turnkey installations as well as inspection and maintenance services. It has operations in India, Mauritius and Hong Kong.
On the financial front, the topline witnessed a growth of 41.84 per cent on a YoY basis for H1 FY12, and stood at Rs 797.21 crore as against Rs 562.06 crore for H1 FY11. The bottomline witnessed de-growth of 26 per cent on a YoY basis and stood at Rs 30 crore for H1 FY12 as against Rs 40.30 crore for H1 FY11.
On the valuations front, the stock discounts its trailing 12-month earnings by 7.58x and its EV/EBITDA stands at 3.73x. The debt-to-equity ratio stands at 0.92x. For H1 FY12, the company has witnessed a steep rise in three components, viz. raw materials (46 per cent), employee expense (35.26 per cent) and interest outgo (92 per cent). At present, we suggest that you stay away from the counter till the Q3 FY12 results are announced.[PAGE BREAK]
GREAT EASTERN SHIPPING COMPANY
I am holding 250 shares of Great Eastern Shipping Company purchased at Rs 200 per share. What should my future course of action with respect to these shares be?
- A B Ram, Via Email
Great Eastern Shipping Company (GESHIP), BSE/NSE Code 500620/GESHIP, with a face value of Rs 10, is currently trading at Rs 264, which is at a 32 per cent premium to your acquisition cost. Its 52-week high/low are Rs 305 and Rs 183 respectively.
Great Eastern Shipping engages in the shipping business in India and internationally through its subsidiaries. The company is involved in the transportation of crude oil, petroleum products, gas and dry bulk commodities. As of January 6, 2012, it operated a fleet of 34 vessels comprising 24 tankers and 14 dry bulk carriers, aggregating 2.62 million dwt. The company also offers offshore exploration and production services to oil companies. It is India’s largest private sector shipping company, with over six decades worth of expertise in the field.
On the financial front, the company’s performance for 9M FY12 has been quite soft. The topline witnessed a growth of merely 11 per cent YoY, and stood at Rs 2171 crore as against Rs 1956 crore for 9M FY11. The bottomline witnessed de- rowth of 39 per cent YoY, and stood at Rs 277 crore as against Rs 457 crore for 9M FY11. The main reason for the drop in the bottomline can be attributed to higher interest outgo, which stood at Rs 325 crore for 9M FY12 as against Rs 174 crore for 9M FY11, a whopping 86 per cent jump. The total debt on the books of the company as of FY11 stood at Rs 5995 crore, taking the debt-to-equity ratio at 0.99x. The stock discounts its trailing 12-month earnings by 14x and the EV/EBITDA stands at 7.36x. The dividend yield stands at 2.97 per cent.
We see that you are sitting on a profit of 30 per cent. Hence, it would be better to book full profits in the counter.