Your Stock Queries

Ajanta Pharma

I am a long-time investor and am holding 50 shares of Ajanta Pharma bought at Rs 750 per share. Kindly advise me regarding the stock.
- Sumathy Kannan, Via email

Ajanta Pharma is a specialty pharmaceutical formulations company, with leading brands in the therapeutic segments of ophthalmology, dermatology and cardiology in India. The company also has a well-established branded generics business in the emerging markets of Asia, Africa and Latin America. It is in process of entering the US by building a portfolio of ANDAs for this market. The company has also received marketing authorisation in 11 EU countries, including UK, for one of its products.

On the financial front, Ajanta Pharma reported a topline of Rs 279.83 crore for Q2FY14 as against Rs 186.37 crore for Q2FY13, witnessing a growth of 47.40 per cent. Its net profit saw a higher jump and stood at Rs 55.81 crore for Q2FY14 as against Rs 21.88 crore over the corresponding quarter last year. Exports contributed 64 per cent of the total operating income for the quarter. During the quarter, the company filed three more ANDAs with the US FDA, taking the total to 18 ANDAs (two approved and 16 awaiting approval). The company is in the process of setting up two more manufacturing facilities in India, one for the regulated markets and another for India and emerging markets. As regards the valuations, the stock is trading at a TTM PE of 23.88x.

We believe that you are sitting on a handsome profit at the moment and suggest that you book partial profits in the counter.

Jaiprakash Associates

I am holding 3300 shares of Jaiprakash Associates purchased at an average price of Rs 42.50. I have no specific time horizon for these. Should I hold this investment or exit? If it is better to exit, please advise me regarding an alternative scrip.
- Sanjay Singh, Patna

Jaiprakash Associates is an infrastructural industrial conglomerate. Through its subsidiaries, the company is engaged in the engineering and construction, power, cement, real estate, hospitality and sports businesses in India. It is also involved in the manufacture and sale of lime, plaster and Portland Pozzolana cement under the brand name Jaypee Cement.

The company has disappointed as far as the financial numbers are concerned. For Q2FY14, the topline stood at Rs 3149.40 crore as against Rs 2982.54 crore for Q2FY13 witnessing a mere 5.59 per cent gain on a YoY basis. The company has suffered on the EBITDA front too, which declined by 2.85 per cent YoY to touch Rs 790.36 crore. But the real cause of concern is the margins. Its EBITDA margins declined by 218 basis points on a yearly basis to 25.10 per cent from 27.28 per cent in the previous year’s corresponding period.

The net profit for the quarter ended September 2013 stood at Rs 67.67 crore as against Rs 128 crore posted during Q2FY13, a drop of 47.14 per cent on a YoY basis. This decline can be attributed to the higher interest costs, which stood at Rs 654.15 crore as against Rs 464.39 crore reported during Q2FY13.

The stock is trading at a TTM PE of 18.80x and the debt-to-equity ratio is at 4.45x, which is high by any standards. We see that you are sitting on a considerable profit and recommend booking profits in the counter.

As for an alternative scrip to invest in, we suggest that you go through our regular recommendations in the magazine under the Choice Scrip and Low Priced Column and make an investment decision as per your risk appetite and preference.

Kabra Extrusiontechnik

I am holding 350 shares of Kabra Extrusiontechnik purchased at 35 per share. What should I do with these now?
- K Ghosh, Via email

Kabra Extrusiontechnik (KET) is a part of the Kolsite Group, which is engaged in manufacturing plastic extrusion machinery in India. KET has over four decades of rich experience in the plastics industry. The company offers a wide range of hi-tech single and twin screw extrusion lines for pipes, profiles, pellets, teleduct and mono & multilayer blown films plants.

As far as its financials are concerned, the company has given out mixed cues for the quarter ended September 2013. For the said period, its topline grew by 23.94 per cent on a YoY basis to stand at Rs 46.03 crore as against Rs 37.14 crore reported during Q2FY13. The EBITDA of the company stood at Rs 3.76 crore for Q2FY14, and the EBITDA margin was at 8.17 per cent. The EBITDA margin has gone up by 488 basis points on a YoY basis. This jump can be attributed to the low base in the same quarter of the previous year. The bottomline for this quarter stood at Rs 2.37 crore, marking a decline of 29 per cent on a YoY basis for Q2FY14. The stock trades at a TTM PE of 8.11x.

At this point, the counter lacks liquidity and no clear indication on the growth prospects of the company is available in the public domain. Therefore, it would be wise to exit the stock even if you have to book losses.

Bank of Maharashtra

I have bought 500 shares of Bank of Maharashtra at Rs 70 per share. What is the future scope for this stock?
- Hitesh Parsawala, Via email

Bank of Maharashtra (BoM) offers banking products and services in India. As of March 31, 2013, its network comprised of 1728 branches in approximately 29 states and two union territories.

The financial numbers for Q2FY14 were a letdown. Its net profit slumped by 71.78 per cent on a yearly basis to stand at Rs 46.85 crore. The total income increased by 31.32 per cent YoY, to come in at Rs 3196.56 crore. The Net Interest Income (NII) in the same period increased by 21.87 per cent YoY to Rs 876.16 crore, while the Non-Interest Income grew to Rs 183.07 crore, with a year-on-year growth of 3.31 per cent. The growth in Non Interest Income (NII) was driven mainly by growth across the fee income streams, i.e. transaction banking and retail banking fees.

BoM’s net profit decreased mainly due to the sharp rise in its Gross NPAs, which came in at Rs 2450.48 crore in Q2FY14, up 89.60 per cent on a YoY basis and 63.39 per cent on a sequential basis. The ratio of Net NPAs to the Net Advances stood at 1.76 per cent as of the end of September 2013, up from 0.80 per cent as on June 30, 2013 and 0.88 per cent as on September 30, 2012. The bank's Capital Adequacy Ratio (CAR) as per the Basel III norms stood at 10.71 per cent as on September 30, 2013, slightly higher than that of 10.76 per cent in the previous quarter of this fiscal.

In view of the dismal numbers overall, it is advisable that you book losses in the counter.