Your Stock Queries

BARTRONICS INDIA

I have bought 1100 share of Bartronics India at Rs 145 per share. Should I hold these or exit the counter?
Jyoti Raichura, Via Email

EXIT

Let’s begin by admitting that you are seeking advice too late. Look at the 52-week high/low of the scrip. You have bought into it much before even that. Now consider what the company is. Technology has revolutionised the way we live. It touches every bit of life from the smallest to the most complex of human needs. The company that you are talking about is one which deals with such technology. Bartronics provides automatic identification and data capture (AIDC) solutions. Its products are used in various applications, such as access control, building management, crowd and patrol management, and retail security. Have you seen the way products are tagged at malls today? You cannot carry any product outside the shop without having billed for it, thanks to the tags. That is the power of technology embedded in the tags attached to the products. Bartronics supplies that technology. The company’s products also have applications in HR and time attendance management, healthcare and hospital management, patient tracking and patient flow management. But being in a niche category is one thing and translating it into good fundamental and financial strength is another.

On the financial front, Bartronics’ performance has been quite dismal. In the recently concluded Q3FY13, its topline declined by 61.86 per cent on a YoY basis to stand at Rs 41.30 crore as against Rs 163.82 crore during the same period last year. The bottomline too stood at a mere Rs 0.06 crore for Q3FY13 against Rs 46.37 crore for Q3FY12. The only consolation about this company is that it has been able to come back with profits after having reported losses in three preceding quarters. It has a debt of Rs 676 crore in its books which translates into a debt to equity ratio to 1.46x. What is primarily afflicting the company is a good amount of competition from cheaper imports, especially from China. Unless it addresses this issue there is no way that it can improve fundamentally. So, for now, we suggest you to exit the counter even if you have to book losses. We certainly understand the pains of having to exit at such a steep loss, but you better take this step so as to avoid further losses.
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NTPC

I have 5000 shares of NTPC, purchased at Rs 203 per share. Should I continue to hold them? Please advise.
Dr R K Rao, Secundrabad, Andhra Pradesh

HOLD

One major problem with retail investors is that they tend to take a long time in cutting their losses. Look at the previous case. It is very similar to yours. NPTC has not traded above Rs 185 for the past one year now. Even that price of Rs 185 is way below your purchase price. Why have you waited for so long to seek advice on what to do with the shares you hold? It is very important that investors realise the criticality of cutting losses at an appropriate stage so that there is minimal wealth erosion. Also, it helps in diverting funds to other profitable areas. Now let’s look at whether your case calls for the application of the above logic or not. 

NTPC engages in the generation, distribution, and sale of bulk power to state power utilities in India. It generates power from coal, gas, hydro, and liquid fuel sources. The company also undertakes consultancy and turnkey project contracts that comprise of engineering, project management, construction management, and operation and maintenance of power plants. In addition, it engages in oil and gas exploration, and coal mining activities. The company has approximately 39174 megawatts of installed power generation capacity. 

On the financial front, NTPC has reported a healthy net profit of Rs 2596 crore beating market expectations. This was 21.89 per cent more from what it had reported during the same quarter last year. Its Net sales came in at Rs 15332 crore, up by 2.9 per cent on a YoY basis. The company has reported a 31.38 per cent growth in its EBITDA, which stood at Rs 4028 crore and its EBITDA margin increased by a whopping 553 basis points to 25.53 per cent during the quarter. On the valuation front, the stock trades at a TTM PE of 11.41x and its dividend yield stands at a healthy 2.72 per cent. So, as you can see, the fundamentals of the company are in place. The problem is actually a macro issue. The power sector has been going through some rough time. There were expectations of the Budget coming up with some respite, but that hasn’t happened either. There are, however, steps being taken to bring about an improvement in the conditions of the sector. It would be better in your case to wait for a while and look for those improvements to begin reflecting in the stock price rather than be in a hurry to cut your losses now. Hence, we suggest you to hold the stock from a longer-term perspective to garner better returns going forward.
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BHARATI SHIPYARD

I am holding 600 shares of Bharati Shipyard, purchased at Rs 250 per share long ago.  Should I hold the shares or exit the counter?
Dr H J Dhruv, Rajkot, Gujarat

EXIT

From your query, we are getting a sense that you would have probably invested in Bharati Shipyard and forgotten about it, until suddenly, you came across these shares languishing in your Demat account. The stock is currently trading at its 52-week low level. But when we look at your purchase price, it looks ridiculously down from there. Your investment is as good as completely written off. Do Bharati Shipyard’s shares hold any promise of bouncing back to the levels even close to what you have bought them at? Here is the answer.

Bharati Shipyard manufactures and repairs various ships. The company offers supply vessels, anchor handling tugs cum supply vessels, platform supply vessels, multi-purpose support vessels, and ice classed vessels. It also provides tractor/stern tugs and jack up rigs, as well as operates dry dock facilities. In addition, it is involved in the generation of wind power with a capacity to generate 15 megawatts of power in the state of Maharashtra.

The performance of the company has been a real disappointment. Its topline witnessed a decline of a whopping 76.83 per cent on a YoY basis for Q3FY13, to stand at Rs 75.64 crore as against Rs 326.45 crore for Q3FY12. It reported a loss of Rs 132.99 crore as against a profit of Rs 1.62 crore for Q3FY12. This is the fourth consecutive quarter where the company has reported a loss. It has a debt of Rs 4575 crore on its books which pegs its debt to equity ratio at a stupendous 4.38x. This is not at all a good sign. We wish you would have come to us earlier and asked for advice when your investment was 25 per cent down and there were some chances of recouping at least 80 per cent of your capital rather than going the other way round. Today all we can suggest is to get away with at least the remaining 20 per cent of your investment in this counter and promise yourself to take corrective action before it is too late henceforth.
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ELGI EQUIPMENTS

I have bought 250 shares of this company. It is trading below my purchase price. Please suggest me the next step of action ?
Bhuvnesh Hasija, Via Email

HOLD

Any investment decision should be based on one basic premise; do you have the capacity to hold on to it even if it means sitting on some losses? You are suggesting that the stock is currently trading below your purchase price. We are not clear about the quantum of losses that you are currently sitting on. However, here is our suggestion.

ELGI Equipments manufactures and sells air compressors and automobile service station equipment in India. The company also offers automotive equipment, including lifting equipment, wheel servicing equipment, diagnostic equipment, lube equipment, body shop equipment and fume exhaust extraction systems to name a few.

The performance of the company, on the financial front, has not been too great. Its topline for Q3FY13 witnessed a growth of 14.22 per cent to stand at Rs 286.87 crore as against Rs 251.15 crore for Q3FY12. The bottomline witnessed a decline of 29.86 per cent on a YoY basis for Q3FY13 to stand at Rs 12.10 crore as against Rs 17.25 crore for Q3FY12. The fall in the bottomline can be attributed to higher costs. The better part about this company is that it has a negligible debt of Rs 9 crore in its books. The financials may look weak but are not bad. The company is still into profits and the balance sheet surely bears strength owing to a negligible debt. So coming back to our original question, do you have the capacity of holding on to the scrip even though you may be down from the levels you bought it at? If yes, then we would suggest you to hold on to the counter till the full year results are declared and then take a call accordingly.