Your Stock Queries

KG Denim

Is it the right time to buy shares of K G Denim? 

- Ramesh, Via Email

AVOID

KG Denim is a premier denim and apparel fabric manufacturer catering to leading fashion trends and retailers worldwide with three main product groups viz.  denims & apparel fabric, home textiles, and sale of apparels.

The financial performance of the company for Q3FY14 has remained weak. The company reported a topline of Rs 148.8 crore in the Q3FY14 as against Rs 130.87 crore in the Q3FY13, marking a jump of more than 13 per cent. Total expenditure for the quarter went up by more than 18 per cent YOY basis standing at Rs 140.14 crore at the end of Q3FY14. This was mainly due to the sharp increase in raw materials cost (up by more than 18 per cent) and other expenses (increased by around 17 per cent).  The EBITDA has reduced to Rs 12.45 crore for Q3FY14 as against Rs 16 crore reported during Q3FY13.  The company has reported a decline of more than 59 per cent in PAT to Rs 1.62 crore in the Q3FY14 on a yearly basis. The sharp plunge in PAT can be attributed to increase in total expenses and reduction in other income to Rs 0.01 crore in Q3FY14 (down by 96 per cent).

The company generates around 35 per cent of its revenue from export while it imports around 10 per cent of its total raw materials. The stock is currently trading at PE (TTM) of 2.7x which might look cheap. However, looking at the weakening financial performance of the company, we advise you not to buy this stock as of now.

Astral Poly Technik

I have bought 100 shares of Astral Poly Technik at Rs 250 per share. What should I do?

- Ninoj, Via Email

BPP

Astral Poly Technik manufactures and provides chlorinated poly vinyl chloride (CPVC) piping and plumbing systems for both residential and industrial applications including lead-free PVC pressure pipes and fittings.

The financial performance of the company for the Q3FY14 has remained strong. The company has reported a topline of Rs 265.10 crore as against Rs 206.47 crore in the Q3FY13, reporting a growth of more than 28 per cent on a YoY basis. The total expenditure in this quarter rose by 20 per cent to Rs 231.12 crore on a YoY basis mainly due to an increase in the cost of raw materials (up by more than 39 per cent) and purchase of traded goods (up by more than 116 per cent). The EBITDA and PAT witnessed a strong gain in the Q3FY14 coming to Rs 39.44 crore and Rs 21.32 crore respectively (both up by more than 100 per cent) on a YoY basis. The sharp rise in profit can be attributed to reduction in total expense as proportionate to increase in sales.

The company has continuously expanded its capacity and launched a lot of products in the market like Blazemaster, Column Pipes and Solvent Cement. We expect that these new products will help to increase the topline at a steady rate. The stock discounts its TTM earnings by 24.96x. The stock is trading very close to 52-week high. Therefore, it will be advisable to book partial profit now by selling some shares and rest can be held for one year horizon. 

Trident

I bought some shares of Trident at Rs 17.15 per share. What should I do? 

- Sagar, Via Email

HOLD

Trident is among the top 5 home textile manufacturers in the world. Its operating revenue comprises of selling of Yarn, Terry Towel, Paper & Chemical.  The financial performance of the company for Q3FY14 looks strong. Its total operating revenue rose to Rs 1020.9 crore against Rs 828.39 crore with a growth of 23.24 per cent on a yearly basis. The EBITDA has gone up by 26 per cent to Rs 183.6 crore as compared to Rs 78.52 crore of Q3FY13. Major expenditure for the company is raw material, which alone stands at 49 per cent of total operating revenue and is showing a growth of 15 per cent on a yearly basis. Net profit margin stood at 4.98 per cent during December quarter FY14 as against 1.71 per cent of Q3FY13.

The yarn segment (42 per cent of total revenue), has recorded 13 per cent growth on yearly basis. Terry towel segment (accounts for 36 per cent of total revenue) has shown a remarkable growth of 43 per cent YoY.  And in chemical & paper segment, growth is 21 per cent in the same period. The company’s 53 per cent operating revenue comes from export.

Shares of the company discount its TTM earning by 3(X), which looks attractive especially looking at the growth of the company. We expect a rise in its stock price in the near future and suggest you to hold the counter for a long term.

State Bank of India

Is this the right time to invest in State Bank of India stocks?

- Rahul, Via Email

AVOID

State Bank of India (SBI), India’s largest lender provides various banking services. In Q3FY14, the company's consolidated Net Interest Income (NII) registered a growth of 11.6 per cent (Rs 17196.81 crore) on yearly basis. Nonetheless, its net profit plunged by 39 per cent, which stands at Rs 2838.62 crore in the same period. During Q3FY14, the bank raised its provisions heavily, which resulted in its net profit dropping sharply. 

The bank's asset quality has deteriorated on sequential basis. On absolute basis, gross and net Non-Performing Asset (NPA) of the bank has increased by 5.6 per cent (Rs 67799 crore) and 15.6 per cent (Rs 37167 crore) respectively. In terms of proportion of advances, the quality of the bank's asset has fallen in October-December quarter against September ended quarter in financial year 2013-14. Gross NPA increased by 9 basis points and stood at 5.73 per cent and its net NPA stood at 3.24 per cent (increased by 33 basis points). Price to book value of the bank stands at around 0.8x which looks attractive, but looking at the deteriorating asset quality of the bank and the continuous drop in the profit of bank (in the last three quarter), we advice you not to invest in the stock at current level and wait till the bank starts showing improvement in its asset quality and net income.