Your Stock Queries

Pratibha Industries

I have purchased 10000 shares of Pratibha Industries at Rs 24.30 per share. I can hold on to these for the foreseeable future. Please suggest when I should hold these till.
- Raju Verma, Via Email

Pratibha Industries, the flagship company of Pratibha Group, is committed to providing society at large with quality infrastructure in its field of expertise, which currently includes design, engineering and execution/construction of complex & integrated water transmission & distribution projects, water treatment plants, elevated and underground reservoirs, mass housing projects, commercial complexes, pre-cast design & construction, road construction and real estate.

Despite being in a strong sector with much promise ahead, especially with a policy focus on infrastructure and an expected change in government at the centre, the company’s financial performance for the recently concluded Q2FY14 does not offer much cause for optimism. Its topline witnessed a growth of 25.67 per cent on a YoY basis to stand at Rs 555.65 crore as against Rs 442.16 crore reported during the same quarter last fiscal. The bottomline, however, has been a real dampener, falling by 96.02 per cent on a YoY basis for Q2FY14 to stand at Rs 0.85 crore as against Rs 21.33 crore reported during Q2FY13. In fact, the bottomline has been on a downward trend for a year now, and this can be attributed to higher interest costs, up to Rs 67.04 crore for Q2FY14 as against Rs 32.70 crore for Q2FY13. For the elapsed quarter, the raw material cost has also gone up to Rs 210.11 crore, marking a jump of 107.25 per cent.

On the valuations front, the stock is trading at a TTM PE of 5.86x. Its debt-to-equity stands at 1.98x, which remains a concern for the company. We suggest that you exit the stock at this point even if you have to book losses.

Essar Oil

Should I invest in Essar Oil at the current levels?
- Via Email

Essar Oil has a global portfolio of onshore and offshore oil and gas blocks, with about 35000 sq. km available for exploration. The company has over 750000 barrels per stream day (bpsd) of global crude refining capacity in three locations, viz. Vadinar (Gujarat), Stanlow (UK) and Kenya. In marketing, it operates a network of over 1400 retail outlets across India, with another 200 under various stages of commissioning.

On the financial front, Essar Oil’s gross revenues for the July-September 2013 quarter were at an all-time high of Rs 27392 crore, up 19 per cent from those of Rs 23023 crore reported in Q2FY13. For the quarter, it reported a Current Price Gross Refining Margin of USD 6.93 per barrel as against USD 7.86 per barrel in Q2FY13. This was mainly due to the sharp reduction in the benchmark International Energy Agency (IEA) margins by USD 3.76/bbl during the quarter (IEA' margins for September 2013 quarter were a negative USD 1.30/bbl against a positive USD 2.46/bbl on a YoY basis). Negative diesel demand growth in the domestic market on the back of a heavy, timely and extended monsoon this year led to a substantial increase in diesel exports, hitting the margins further. The lower GRMs impacted the EBITDA, which stood at Rs 1033 crore for the reporting quarter compared to Rs 1169 crore in Q2FY13. The lower EBIDTA in turn saw the Profit After Tax coming in at a negative Rs 71 crore versus a profit of Rs 105 crore in the same period last year. On the optimistic side, Essar Oil has entered the bulk diesel segment, which has been de-controlled, and this augurs well for the company.

We suggest that you stay away from the counter at this juncture, and take a call on it once the Q3FY14 results are announced.

YES Bank

I am looking to invest in YES Bank from a longer-term perspective. Should I enter the counter at the current market price?
- Pratik, Via Email

YES Bank is an Indian private sector bank. Their line of business includes corporate and institutional banking, current accounts, financial markets, investment banking, corporate finance, branch banking, business and transactional banking, NRI banking and wealth management. On the expansion front, the bank reported adding 25 branches and 71 ATMs during the quarter ending September 30, 2013. Its total network now stands at 500 branches and 1122 ATMs.

On the financial front, the bank reported net interest income (NII) of Rs 672.1 crore for Q2FY14 from Rs 524.2 crore in Q2FY13, up 28.2 per cent on a yearly basis. The net interest income margins stood at 2.9 per cent in Q2FY14, the same as in Q2FY13. Further, the bank’s non-interest income grew by 61.2 per cent on a yearly basis from Rs 276.8 crore in Q2FY13 to Rs 446.1 crore for Q2FY14. Driven by growth in NIIs and non-interest income, its operating profits for Q2FY14 came in at Rs 712.9 crore, up 47.1 per cent from Rs 484.7 crore in Q2FY13. Its net profit grew by 21.3 per cent to Rs 371.1 crore during the reported quarter. However, its asset quality took a beating. As on September 30, 2013, the Gross NPAs as a proportion of gross advances stood at 0.28 per cent (0.22 per cent in Q2FY13), while the Net NPAs as a proportion of net advances were at 0.04 per cent (0.03 per cent in Q2FY13). The bank’s provisions and contingencies increased by 347 per cent on a sequential basis to Rs 179.1 crore in the reported quarter from Rs 61.7 crore in Q1FY14.

We suggest that you stay away from the counter for the time being, at least until the Q3FY14 results are announced.

Plethico Pharmaceuticals

I am holding some shares of Plethico Pharmaceuticals for the past one year. Should I continue to hold these or exit?
- Via Email

Plethico Pharmaceuticals operates in the pharmaceuticals business segments. It manufactures and markets a variety of pharmaceutical formulations, nutraceuticals, herbals and many other consumer and healthcare products in India.

The company operates in a defensive sector, but managed only a flat performance for the quarter ended September 2013. In this period, its topline witnessed a growth of a mere 5.60 per cent on a YoY basis to stand at Rs 439.12 crore as against Rs 415.84 crore posted during the same quarter last fiscal. The bottomline was also dismal, dropping by 69 per cent on a YoY basis to stand at Rs 20.97 crore as against Rs 67.68 crore posted during Q2FY13. At Rs 22.65 crore, its interest outgo for Q2FY14 increased by 47.56 per cent on a YoY basis. The EBITDA margins also witnessed a decline of around 45 basis points YoY.

The stock trades at a TTM PE of 43.50x, which is much higher than that of the leading as well as mid-sized players in the sector. As you have not mentioned your purchase price, we would not know whether you are sitting on a profit or loss. However, it would be advisable to exit the stock in either case.