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Portfolio Guide - Your stock queries answered

| 11/21/2011 3:02 PM Monday

RUBY MILLS

I have 200 shares of Ruby Mills, purchased at an average price of Rs500 per share, which I am holding for the last two years. Should I continue to hold the stock or sell at the current levels? -Vaishali Manoj, Via Email

Ruby Mills, BSE/NSE Code 503169/RUBYMILLS, with a face value of Rs10, is currently trading at Rs787, which is at a 57% premium to your acquisition cost. Its 52-week high/low stand at Rs1240 and Rs693 respectively.

Ruby Mills engages in the manufacture and sale of yarn and fabrics in India. The company’s product offerings include cotton woven and blended fabrics, and cotton, blended and synthetic yarn. It is also involved in real estate development activities. The company has two plants located at Dadar in Central Mumbai and at Dhamni in Maharashtra. It has an installed capacity of 22000 spindles and 40000 meters of woven fabrics, in addition to a capacity to manufacture eight tonnes of tubular knitted fabrics.

On the financial front, the company’s performance for Q1 FY12 was nothing to write home about. Its topline witnessed a growth of 49% on a YoY basis at Rs43.59 crore as against Rs29.12 crore during Q1 FY11. The bottomline, on the other hand, witnessed a de-growth in Q1 FY12, and stood at Rs0.44 crore as against Rs20.77 crore for Q1 FY11. For the last quarter, there has been a steep increase of 33% and 57% on a YoY basis in its raw material costs and employee expenses respectively, which has played spoilsport on the bottomline front. Moreover, the company has a debt of Rs490 crore as of the end of FY11, taking its debt-to-equity ratio to 3.22x. The stock discounts its trailing 12-month earnings by 8.70x and the EV/EBITDA stands at 8.01x. Looking at this scenario, we suggest that you book profits in the counter and enjoy the real profits, rather than those on paper.

LAKSHMI ELECTRICAL CONTROL SYSTEMS

I am currently holding 1000 shares of Lakshmi Electrical Control Systems. Should I continue to hold these shares? - I Siva Kumar, Via Email

Lakshmi Electrical Control Systems (LECS), BSE Code 504258, with a face value of Rs10, is currently trading at Rs270. Its 52-week high/low stand at Rs388 and Rs220 respectively.

The company is engaged in the manufacture of switchgears, control panels and industrial plastic components in India. It generates wind power and offers industrial plastic components for engineering and electrical machinery, and control systems. It has a collaboration with the Swiss company ‘Sprecher+Schuh’ for the manufacture of LV switchgears. LECS is a group company of Lakshmi Machine Works, one of the leading Indian textile manufacturers.

On the financial front, the company has posted good results for H1 FY12. Its topline grew by 25% on a YoY basis, and stood at Rs84 crore for H1 FY12 as against Rs67 crore for H1 FY11. The bottomline grew by 19% on a YoY basis, and stood at Rs6.14 crore for H1 FY12 as against Rs5.16 crore for H1 FY11. LECS is virtually debt-free, which is a very big positive for any company in a rising interest rate regime like the current one. On the valuations front, the stock discounts its trailing 12-month earnings by 6.64x, and the EV/EBITDA stands at 2.66x. The valuation looks attractive as compared to that of its other listed peers. We are not aware of your acquisition cost. We suggest that you book profits if your acquisition cost is below the CMP for at least 50% of your holdings, and hold on to the rest for a longer term to garner better returns.

CARBORUNDUM UNIVERSAL

I am holding 200 shares of Carborundum Universal, bought at Rs150 per share. Should I accumulate more or exit? - J Kannan, Via Email

Carborundum Universal, BSE/NSE Code 513375/CARBORUNIV, with a face value of Rs1, is currently trading at Rs168, which is at a 12% discount to your acquisition cost. Its 52-week high/low are Rs175 and Rs108 respectively.

A part of the Murugappa Group of Companies, Carborundum Universal engages in the manufacture and sale of abrasives, ceramics and electro minerals in India and abroad. Its abrasives segment produces and sells bonded, coated, processed cloth, polymers, power tools and coolants. The industries that the company serves include automobile, engineering, fabrication and wood working, to name a few. It exports its products to North America, Europe, Australia, South Africa and Asia.

On the financial front, the company has posted good results in the recently-concluded H1 FY12. Its topline grew by 27.50% on a YoY basis, and stood at Rs1002 crore for H1 FY12 as against Rs786.43 crore for H1 FY11. The bottomline witnessed a growth of 39.36% on a YoY basis, and stood at Rs118 crore for H1 FY12 as against Rs84.58 crore for H1 FY11. For Q2 FY12, the electro minerals and ceramics businesses recorded a growth in excess of 25%. The abrasives business also grew by 15% on a YoY basis for the aforesaid period. The overseas subsidiaries recorded a strong growth in sales, particularly those in Russia and South Africa. On the valuations front, the stock discounts its trailing 12-month earnings by 15.41x, and the EV/EBITDA stands at 10.52x. At present, we suggest that you book partial profits, and hold on to the rest for further gains going forward.

S.E. INVESTMENTS

I am holding 1100 shares of S.E. Investments purchased at Rs130 per share. Should I continue to hold or exit the counter? - Amar Shah, Via Email

S.E. Investments, BSE/NSE Code 532900/SEINV, with a face value of Rs10, is currently trading at Rs150, which is at 15.61% premium to your acquisition cost. Its 52-week high/low are Rs152 and Rs89 respectively.

S.E. Investments provides various financial solutions to low-income families, and term loans and working capital support to traders and medium-sized enterprises in India. Its Financial Services division engages in the hiring, purchase and leasing of motor vehicles, and provides personal loans, business loans and loans against property to individuals and corporate bodies. This division also offers fixed deposit schemes, and owns and manages private safe deposit locker facilities. Its Alternate Energy division owns and operates a 2.4 MW wind energy generation unit in Vani Vilas Sagar at Chitradurga, Karnataka and a 0.8 MW wind energy generation unit in Jaisalmer, Rajasthan.

On the financial front, the company hasn’t had a notable H1 FY12. Its topline witnessed a growth of 17.33% on a YoY basis, and stood at Rs100 crore as against Rs85.54 crore for H1 FY11. The company’s bottomline remained flat, growing by just about 0.43% on a YoY basis, standing at Rs35 crore as against Rs34.90 crore for H1 FY11. The stock trades at a P/BV of 1.69x, which looks attractive as compared to that of its peers like Manappuram Finance and Shriram City Union Finance.

At present, we suggest that you book partial profits, and hold on to the rest for further gains going forward.

 

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