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Portfolio Guide - Your stock queries answered

| 12/5/2011 10:22 AM Monday

FAG BEARINGS INDIA

I have 50 shares of Fag Bearings India purchased at `930 per share. Should I continue to hold the stock, or sell at current levels?
- Bhikulal Sarda, Chennai, Tamil Nadu

Fag Bearings India (FAL), BSE/NSE Code 505790/FAGBEARING, with a face value of `10, is currently trading at `1165, at a 25 per cent premium to your acquisition cost. Its 52-week high/low are `1433 and `760 respectively. FAG Bearings is a subsidiary of FAG  Kugelfischer GmbH, Germany, which holds a 51.33 per cent stake in it as of 30th September, 2011. The company is engaged in the manufacture and sale of ball/roller bearings and related components in India. It offers deep groove, four point and self-aligning ball bearings, as well as cylindrical, spherical and tapered roller bearings. The company’s products are used in various industries, including railways and automotive applications, as well as industrial applications such as steel works and rolling mills equipment, to name a few. It also exports its products to Europe, the United States, Asia and Africa.

On the financial front, the company has fared well during the first nine months of CY11 (the company follows the calendar year to close its books). The topline witnessed a growth of 23 per cent on a YoY basis, and stood at `962 crore for 9M CY11 as against `782.39 crore for 9M CY10. The bottomline witnessed a growth of 52 per cent on a YoY basis, and stood at `133 crore for 9M CY11 as against `87.75 crore for 9M CY10. On the valuations front, the stock discounts its trailing 12-month earnings by 11.61x and the EV/EBITDA stands at 8.42x. FAG Bearings is a zero-debt company, which gives it an edge over its peers in the current rising interest rate regime. Looking at the markets at present, we suggest that you book partial profits in the counter and hold on to the rest for longer-term gains.

HYDRO S&S INDUSTRIES

I have been holding 656 shares of Hydro S&S Industries, purchased at `43 per share, for more than a year now. Should I hold or exit?
- Dhanraj Jain, Bikaner, Rajasthan

Hydro S&S Industries, BSE/NSE Code 524019/HYDROS&S, with a face value of `10, is currently trading at `17.50, which is at a 59 per cent discount to your acquisition cost. Its 52-week high/low stand at `32 and `15 respectively.

The company manufactures and supplies reinforced polypropylene compounds, thermoplastic elastomers and fibre-reinforced composites in India. Its products are used in various industries such as automobiles, domestic appliances, furniture, business machines, medicine and sports, to name a few. It caters to the requirements of all leading OEMs and Tier-1 moulders in the Indian automobile industry.

On the financial front, it has fared well for H1 FY12 on a YoY basis. The topline witnessed a growth of 15 per cent, and stood at `74.67 crore as against `64.81 crore for H1 FY11. The bottomline witnessed a growth of 64 per cent on a YoY basis, and stood at `0.51 crore for H1 FY12 as against `0.31 crore for H1 FY11. On the valuations front, the company discounts its trailing 12-month earnings by 9.34x and the EV/EBITDA stands at 5.67x.

The main drawback of the company is its high debt, with the debt-to-equity ratio standing at 1.72x, which can prove to be a deterrent going forward. The only plus point is that its dividend yield stands as high as 3.68 per cent. However, that is not enough to recoup your losses. Therefore, we suggest that you exit the stock even you have to book losses.

ALOK INDUSTRIES

I am holding 500 shares of Alok Industries. What is the future of the company?
- C M Sitapara, Gondal, Gujarat

Alok Industries, BSE/NSE Code 521070/ALOKTEXT, with a face value of `10, is currently trading at `18.55. Its 52-week high/low are `29 and `16 respectively.

The company is engaged in weaving, knitting, processing, home textiles and garments. It has evolved into a diversified manufacturer of home textiles, garments, apparel fabrics and polyester yarns. In addition, it has a foothold in the domestic retail segment through a wholly-owned subsidiary, Alok H&A, under the cash and carry model that offers garments and home textiles at attractive price points. It also has an international presence in the retail segment through its associate concern, Grabal Alok (UK). This entity owns more than 200 outlets across England, Scotland and Wales. Apart from these, the company has invested in premium commercial/residential projects across Mumbai through its wholly-owned subsidiaries.

On the financial front, Alok Industries has witnessed muted results for H1 FY12. The topline witnessed a growth of 48 per cent on a YoY basis, and stood at `3781 crore for H1 FY12 as against `2550 crore for H1 FY11. The bottomline witnessed a growth of a mere 10 per cent on a YoY basis, and stood at `139 crore for H1 FY12 as against `126 crore for H1 FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 3.75x, which is one of the lowest in the industry, and the EV/EBITDA stands at 6.90x.

The company has a high debt of `11962 crore as at the end of FY11, taking the debt-to-equity ratio to 4.28x. There has been a 35 per cent jump in the interest payments on a YoY basis for H1 FY12, and this stands at `452 crore. Looking at this, we suggest that you exit the stock.

CABLE CORPORATION OF INDIA


I am holding 1000 shares of Cable Corporation of India. Should I accumulate more at the current levels?
- V Rajesh Shet, Udupi, Karnataka

Cable Corporation of India, BSE Code 500077/CARBORUNIV, with a face value of `10, is currently trading at `21.45. Its 52-week high/low are `35 and `19 respectively.

The company engages in the manufacture, marketing and sale of power cables and control cables, primarily in India. It provides PILC, XLPE and PVC cables. In addition, the company provides termination systems, straight joints, bushing insulating covers, sealing caps, repair sleeves, cable joints and live cable end seals.

On the financial front, the company has posted muted results for H1 FY12. The topline witnessed a growth of 10.73 per cent on a YoY basis, and stood at `93.98 crore as against `87.87 crore for H1 FY11. The company reported a loss of `9.13 crore for H1 FY12 as against a loss of `14.68 crore for H1 FY11. It has been in the red for the last eight quarters, barring the Q4 FY11 quarter only.

The debt-to-equity ratio stands at 1.33x, which can be a deterrent going forward. As we are not aware of your acquisition cost, we suggest that you exit the counter even if you have to book losses.

 

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