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I have bought 1000 shares of Valson Industries at Rs 25 per share. I am holding these shares for more than five years now. What should I do- hold, sell or buy more?

- Manish, Via Email

Exit

BSE/NSE Code 530459/NA
Face Value Rs 10
CMP Rs 7.88
52-Week High Rs 15/Low Rs 6
Your Current Profit/(Loss) 68.48 per cent

Valson Industries is a leading manufacturer of polyester texturised dyed yarn and processors of cotton and other fancy yarns in India.

The financial performance of the company for the last couple of quarters has remained weak. In Q3FY14 the company posted a topline of Rs 25.67 crore as against Rs 22.74 crore in the Q3FY13, reporting a growth of 11.87 per cent on YoY basis. The total expenditure for the quarter went up by 12.64 per cent standing at Rs 24.86 crore on a YoY basis. This was mainly due to an increase in raw material cost (up by 14 per cent) and other expenses (up by 17 per cent) on YoY basis. The EBITDA of the company has reduced by 4.79 per cent YoY to Rs 1.39 crore in the Q3FY14. On the bottomline front, the company posted a decrease of 24 per cent on YoY basis to Rs 0.22 crore for the quarter ended December 31, 2013. The company's performance in the last couple of years has been inconsistent.

The company generates around 5 per cent of its total revenue from exports, while it imports around 15 per cent of its raw material. The biggest areas of concern for the company are the exchange rate volatility and increasing competition. The company discounts its TTM earnings by 6.89x, while the industry P/E stands at 7.26x. The most important thing is that we do not see any upside in the stock in the near future due to the poor performance of the company and reasonable valuation. We therefore advise you to exit from the scrip immediately and look for other better performing equity scrips.

I bought shares of Kirloskar Electric at Rs 92 per share. What should I do?

- Hiren, Via Email

Exit

BSE/NSE Code 533193/KECL
Face Value Rs 10
CMP Rs 16.90
52-Week High Rs 26/Low Rs 13
Your Current Profit/(Loss) 81.63 per cent

Kirloskar Electric is an electrical engineering company having around 70 products under seven products group. The main business activity of the company is manufacturing, sales and services of diverse range of electrical and electronic equipment such as AC induction motors, AC generators, transformers, switchgears etc.

In the Q3FY14, the company reported a topline of Rs 154.48 crore as against Rs 199.84 crore in the Q3FY13 marking a fall of 22.70 per cent on a YoY basis. The total expenditure has reduced by 14.56 per cent on YoY basis to Rs 162.98 crore. It reduced due to decrease in material cost (13.61 per cent) and other expenses (10.16 per cent) on yearly basis. The EBITDA has witnessed a loss of Rs 5.16 crore in the Q3FY14 as compared to profit of Rs 13.25 crore in the Q3FY13. The fall in EBITDA can be attributed to a sharp fall in sales. The company posted a loss of Rs 19.54 crore in the Q3FY14 as compared to profit of Rs 1.15 crore in the Q3FY13. The sharp plunge in net profit was due to an increase in interest by 27.89 per cent on YoY basis to Rs 10.73 crore.

More importantly, the financial performance of the company has remained weak since the last couple of years. In the last four quarters, the company has posted loss twice. We therefore advise you to move out of the stock at the moment.

Is this the right time to invest in the stock of Tata Motors for long-term horizon?

- Kamlesh, Via Email

BUY

BSE/NSE Code 500570 / TATAMOTORS
Face Value Rs 2
CMP Rs 410
52-Week High Rs 418/ Low Rs 252
Your Current Profit/(Loss) NA

Tata Motors is India's largest automobile company by revenue of Rs 188818 crore in FY13 (USD 34.7 billion). With record sales in JLR segment, Tata Motor's overall performance in Q3FY14 has been good. In Q3FY14, the topline of the company has gone up by 38.6 per cent YoY to Rs 63876.83 crore and EBITDA is also showing a growth of 75 per cent YoY to Rs 9948 crore as against Rs 5657 crore in the corresponding quarter of the previous year, FY13. The net profit stood at Rs 4819 crore in Q3FY14 against Rs 1636 in Q3FY13. 

Under Tata Motors, JLR has targeted emerging markets such as China and Russia to increase the sales of these iconic brands. During Q3FY14, Tata Motor Group’s global wholesales, including JLR, were 250058 units against 306653 units in Q3FY13, a decrease of 18 per cent YoY. It was mainly due to a drop in domestic sales (contributes 15 per cent of operating revenue) by 38 per cent to 133701 units in Q3FY14 as compared to 217598 units in Q3FY13. The JLR segment (accounting for 83 per cent of operating revenue) has done exceptionally well in the quarter, showing 30 per cent of yearly growth to 116356 units in Q3FY14 as compared to 89055 units in Q3FY13.  On the domestic front, the company, to improve its performance, has launched two new generation cars named Bolt and Zest in the fourth quarter FY14.

The stock is currently trading at 9 times of its EPS (TTM) while industries average P/E(TTM) comes to 26 times, which indicate that the stock is relatively undervalued. Thus, we are maintaining a positive outlook and expect the stock to perform well in the long-term.

I had bought 300 Cipla shares on 13.02.2014 at Rs 396.17 per share. Kindly advice me on what to do now?

- Chirag, Via Email 

HOLD

BSE/NSE Code 500087 / CIPLA
Face Value Rs 2
CMP Rs 378.7
52-Week High Rs 450/ Low Rs 354
Your Current Profit/(Loss) 4.56 per cent

Cipla is a global pharmaceutical company, which uses cutting edge technology and innovation to meet the everyday needs of patients. The financial performance of the company in Q3FY14 was good as it recorded 31 per cent of growth YoY in international business (accounts for 59 per cent of operating revenue) and 12 per cent of growth YoY in domestic business (accounts for 41 per cent of operating revenue). In Q3FY14, the company’s operating revenue stood at Rs 2580 crore against Rs 2110 crore in Q3FY13 with a growth of 22 per cent YoY. 

The EBITDA decreased by 9 per cent YoY to Rs 520 crore over Rs 571 crore in Q3FY13. The bottomline also dropped by 23 per cent YoY to Rs 296 crore in Q3FY14 as against Rs 387 crore in Q3FY13. Material cost, which is 35 per cent of the operating revenue, increased by 14 per cent YoY due to changes in product mix (mainly higher proportion of ARVs). Its other expenditure (which is 28 per cent of operating revenue) has gone up to 33 per cent YoY on account of increase in R&D, which reached 5 per cent of operating revenue in FY14 from 4 per cent in FY13. 

Cipla's  94 per cent of operating revenue comes from formulation whose export has grown by 34 per cent YoY to Rs 1352 crore in Q3FY14, while API's export grew by 14 per cent YoY. From the last three quarters, the company’s operating revenue is mounting with an average growth rate of 9.8 per cent. Currently the stock is trading at 22 times of its trailing twelve months earning, while industries average comes to 31 times. From this we conclude that the stock is relatively undervalued and suggest you to hold the stock because it’s likely to perform better in the long-term. 

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