Your Stock Queries

Orient Paper & Industries

I have purchased 10000 shares of Orient Paper & Industries at Rs 7 per share. Should I hold these or book profits?
- Rajendra M Parekh, Rajkot

Orient Paper & Industries operates mainly in three segments, viz. paper, cement and electrical consumer durables. The paper segment is engaged in the manufacture and sale of pulp, paper and board, the cement segment consists of manufacture and sale of cement, and the electrical consumer durables segment includes manufacture/purchase and sale of electric ceiling fans, and lights and luminaries.

Let’s take a look at the financial position of the company. For the first half of fiscal year 2014, its topline registered growth of 17.64 per cent on a YoY basis and stood at Rs 600.73 crore as against Rs 510.64 crore reported during H1FY13. The total expenditure (excluding depreciation) during the aforesaid period also saw a significant rise of 14.18 per cent to come in at Rs 634.86 crore, against Rs 556.02 crore in H1FY13. The EBITDA remained in the red for the quarter, with a loss of Rs 7.45 crore. Of course, there has been an improvement on this front since H1FY13, when it saw an EBITDA loss of Rs 26.77 crore. In H1FY14, the interest cost for the company also grew significantly to Rs 17.59 crore from Rs 6.05 crore reported during the same period last fiscal.

The company has posted losses in three of the last four quarters. We do not see a significant upside in the stock in the near future. The right strategy for you at this point would be to encash the fairly handsome ‘on paper’ profits you are sitting on and look for other better investment options in the equity space.

Swelect Energy Systems

Should I buy this scrip? If yes, at what price?
- Satish Pradhan, Pune

Swelect Energy Systems (erstwhile Numeric Power Systems) is an India-based UPS manufacturer. The company provides green power and energy solutions. The company has only one business segment, i.e. Uninterruptible Power Supply Systems (UPS). Its products include UPS systems, isolation transformers, LED lighting, voltage stabilisers, inverters and DC power/batteries, among others.

For the quarter ended September 2013, the company reported a topline of Rs 49.23 crore as against Rs 30.25 crore in Q2FY13, marking a jump of 62.74 per cent on a YoY basis. Its total expenditure for the quarter went up steeply by 50.83 per cent to stand at Rs 47.30 crore on a YoY basis. This was mainly due to the YoY increase in raw material costs (up 73.32 per cent) and employee costs (up 51.81 per cent). The EBITDA, however, witnessed strong gains, coming in at Rs 3.54 crore for Q2FY14 as against Rs 0.52 crore reported during Q2FY13. As regards the bottomline, the company saw a loss of Rs 0.97 crore for the quarter as against a profit of Rs 8.47 crore reported during Q2FY13. The bottomline has been on a downtrend for the past three quarters and has dipped into the red this time.

In terms of valuations, the company discounts its trailing 12-month earnings by 6.67x, which may look attractive to investors. But we would beg to differ. In our estimation, if you are looking to invest in this company for the longer-term, it would be wiser to wait till it comes out with its Q3FY14 results. If the bottomline sees a reversal in trend, the scrip could be considered for investment. Avoid the scrip for the time being.

VirtualSoft Systems

I am holding shares of VirtualSoft Systems, which my friend advised me to buy for a substantial target of Rs 100. Can u please tell me what should I do with these shares?
- Hakim, Via Email

For starters, we strongly advise you not take any investment decisions in haste or under the influence of anyone, and to always do your own due diligence before taking any investment decision. Anyway, as you are already invested in the counter, let us take a look at the performance of the company and see whether it has the potential to reach such a huge target as given by your learned friend.

VirtualSoft Systems (erstwhile Suri Capital & Leasing) took off in the year 1998, piloted by experts in media content development, delivery and management. The scrip is listed only on the BSE and falls under the Periodic Call Auction (PCA) category. In this category, trading does not take place regularly but only when a bid comes in.

Coming in at a mere Rs 1.16 crore, the company’s topline for Q2FY14 was higher than that of Rs 0.47 crore reported during the same quarter last year. The bottomline was in the red, with a loss of Rs 0.4 crore for the said quarter as against a loss of Rs 0.89 crore in the same period of the last fiscal. More importantly, the company has been posting losses consistent over 10 quarters, which is far from encouraging. To add to this, there is no hint from the management on its future plans or even the mention of any trigger going forward.

The only thing we can say to you is that you need to move out of the stock at the moment, even if you have to book losses. Since this is a PCA counter, it may take you several trading sessions to exit your positions.

IDFC

I had bought 40 shares of IDFC at Rs 113.35 per share. Should I hold these or sell?
- Bajay, Via Email

IDFC (formerly known as Infrastructure Development Finance Company) is an Indian integrated infrastructure finance company providing end-to-end infrastructure financing and project implementation services. The company’s businesses include corporate investment banking, alternative asset management and public market asset management.

The financial performance of the company for H1FY14 has remained strong. Its Net Interest Income (NII) grew by nine per cent YoY to stand at Rs 1371 crore for H1FY14. The Non-Interest Income stood at Rs 531 crore, up by 52 per cent on a yearly basis. The operating profit stood at Rs 1911 crore for H1FY14 as against Rs 1622 crore reported during H1FY13, which is a jump of 18 per cent. The PAT came in at Rs 1044 crore for H1FY14 as against Rs 855 crore in H1FY13, a gain of 22 per cent.

The stock is trading at a P/BV of 1.21x. In addition, the company is a consistent dividend payer with a dividend yield of 2.48 per cent at its CMP. We suggest you to hold the counter from a longer-term perspective to garner better returns.