Your Stock Queries

Federal Bank

I am holding 150 shares of Federal Bank purchased at an average price of Rs 389 per share. Should I hold or sell it off.
Anup Saxena, Via email

EXIT

The banking sector has been the best performing sector on the bourses so far this year. Its performance is set to improve further with the Banking Regulations Amendment Act bringing in many changes which will be in favour of banking companies. Add to this the recently passed The Enforcement of Security Interest & Recovery of Debts Laws (Amendment) Bill, 2011 and you have a sure shot winner in the banking sector. Coming to your choice of Federal Bank, lets start by telling you about its entrenchment. Federal Bank operates through a network of 1010 branches and 1100 ATMs (as of 30th September 2012). It has been able to strengthen its business well with total deposits having gone up to Rs 48397 crore in FY12 as against Rs 43015 in FY11.

Its recent performance (Q2FY13) has been quite good. The topline has witnessed a growth of 11.54 per cent on a YoY basis to stand at Rs 1525.63 crore as against Rs 1367.83 crore in Q2FY12. The bottomline witnessed a growth of 12.52 per cent on a YoY basis to stand at Rs 215 crore as against Rs 191.16 crore in Q2FY13. The bank has witnessed a steady credit growth across categories including Retail Advances, SME and Corporate Advances for Q2FY13 on a YoY basis. However the NPA’s have witnessed an uptrend. The Gross NPAs stand at Rs 1435 crore for Q2FY13 as against Rs 1250 crore for Q2FY12. Its Net NPAs stand at 0.68 per cent in Q2FY13 as against 0.58 per cent in Q2FY12. On the valuation front the stock trades at a price to book value of 1.56 times. The dividend yield on it is around 1.87 per cent. With what we have mentioned about this sector in the beginning we suggest, you hold on to the stock to garner better returns going forward.
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Raymond

I purchased 300 shares at Rs 301 per share. Should I buy more, book profit or hold?
Shaumik Bannerjee, Via Email

BPP

Before we tell you what you should be doing with this stock, lets get an answer from you to some basic questions. Why did you buy this stock? How long did you intend holding on to the stock? The reason why we thought we should raise these issues is, investors often abandon their investment ideas mid way getting jittery about short term happenings around a sector or a company. Our sincere advice at all times is that equity is a long term play; do not expect instant miracles of value creation to happen once you invest in a counter. Having said that, lets come now address your query. Raymond is a well known name in the textile sector and needs no introduction. Promoted by the Singhania Group, the company offers nearly 20000 varieties of worsted suiting to cater to customers across age groups, occasions and styles. Its brand portfolio includes Raymond, Raymond Premium Apparel, Park Avenue, ColorPlus, Parx, Makers and Notting Hill. It also has an expansive retail presence established through the exclusive chain of 'The Raymond Shop' and stand-alone brand stores.

On the financial front, for Q2FY13 the company reported a 13 per cent growth in its consolidated topline on a YoY basis. This growth was largely due to a good export season that it enjoyed. The bottomline, however, witnessed declined by 38 per cent on a YoY basis to stand at Rs 50.26 crore as against Rs 80.96 crore during Q2FY12. The company has opened 42 new stores during the quarter, half of these being the Raymond TRS stores including two large stores. On the valuation front the stock trades at 36.61x its twelve-month trailing earnings and the EV/EBITDA stands at 8.45x and offers a dividend yield of around 0.53 per cent. Since you are sitting on a sizeable profit from where you had invested, you could book partial profits by liquidating half your holdings right now. But we would still suggest, in case you are not in a hurry to encash your holdings, stay invested for a couple of more quarters.
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Jet Airways (India)

I am holding 400 shares of Jet Airways (India) at Rs 453 per share. What should be my next step?
Anil Jadhav, Via Email

EXIT

If you were to look at what has been happening in the aviation sector today, you would probably not be asking this query. Etihad has apparently firmed up its plans to buy around 48 per cent of Kingfisher Airlines. Earlier it was reported to be buying a stake in Jet Airways as well, which was however denied by the company management. So, now that you are sitting on some decent profits, should you cash out? Here is what you need to know before you decide what to do. For starters, understand that Jet operates flights to 76 destinations globally including India. As of June 20, 2012, the company operated a fleet of 103 aircrafts comprising 10 Boeing 777-300 ER aircrafts, 12 Airbus A330-200 aircrafts, 61 next generation Boeing 737-700/800/900 aircrafts, and 20 modern ATR 72-500 turboprop aircrafts. Now isn’t that a good number of planes to fly? So how has it done on the financial front? 

The aviation sector has been reeling under pressure for quite some time now. On the financial front, Jet’s topline witnessed a growth of 25.63 per cent on a YoY basis to stand at Rs 4137 crore in Q2FY13 as against Rs 3293 crore during Q2FY12. At the bottom it continued to report a loss which stood at Rs 99.67 crore during Q2FY13 as against a loss of Rs 713 crore during Q2FY12. This however is in contrast to what it had done in the first quarter. The airline carried 3.69 million passengers during Q2FY13 as against 3.89 million passengers during Q2FY12. It has achieved a seat factor of 75 per cent in Q2FY13 as against 77.8 per cent during Q2FY12, which is pretty discouraging. The company has a debt of Rs 12672 crore in its books as of FY12 which is a great cause of concern. The EV/EBITDA stands at 32.64x. The fortune of aviation companies has been beaten down badly, but the same is likely to improve, but not in a hurry. At present we see that you are sitting on some decent profit. Therefore we suggest you book profit and exit the stock fully.
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Coromandel International

I have bought 150 shares of Coromandel International at Rs 300 per share. Should I hold or exit? 
Hitesh Bansode, Via Email

HOLD

Many investors face this dilemma. The moment their investments go down in value, they get worried about whether they are doing the right thing by holding on to them. They always want to exit at the very first opportunity that comes their way. You too seem to be facing the same problem. But we would like to ask you the same set of questions that we asked one of our readers earlier. Did you buy this stock with a really short time frame in mind? Was it a trading call? If not, why do you want to know if you should exit? Remember, unless there is an explicit reason for getting out of a counter, you should hold on to your equity investments as equity is an asset class which will get you returns over a longer time frame. Now lets look at your investment idea of Coromandel International. This company, a part of the Murugappa Group, is engaged in the manufacturing and marketing of fertilizers, specialty nutrients, and crop protection products. The company manufactures a wide range of fertilisers and markets around 2.9 million tons of these making it a leader in its addressable markets and the second largest phosphatic fertiliser player in India. It has also ventured into the retail business setting up more than 425 rural retail centers in the agri and lifestyle segments.

Its recent performance has not been very great. Its topline for Q2FY13 declined 4.22 per cent to stand at Rs 2675 crore for Q2FY13 as against Rs 2792 crore during Q2FY12. On the bottomline front too the news wasn’t really encouraging. Its net profit declined by 16.11 per cent to stand at Rs 236.88 crore during Q2FY13 as against Rs 282 crore during Q2FY12. This decline in profit was mainly on account of increased costs like raw materials (+10.45 per cent), employee expenses (+11.04 per cent) and interest costs (+132 per cent) on a YoY basis. On the valuation front the stock trades at a P/E of 13.58x and the EV/EBITDA stands at 8.89x. The stock has a healthy dividend yield of 2.65 per cent. Though the performance of the company has remained rather subdued for the currently ended quarter, we suggest, you hold on to the counter from a longer term perspective to garner the benefits of the growth that will eventually come its way.