Your stock queries
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RELIANCE INDUSTRIAL INFRASTRUCTURE
I am holding shares of Reliance Industrial Infrastructure, bought at Rs 383 per share. Should I continue to hold these shares for maximum profit? I can go for long-term investment too. Please advise.
- Bishal Kumar, Via Email
Reliance Industrial Infrastructure, BSE/NSE Code 523445/RIIL, with a face value of Rs 10, is currently trading at Rs 490, which is at a 28 per cent premium to your acquisition cost. Its 52-week high/low are Rs 728 and Rs 276 respectively.
Reliance Industrial Infrastructure engages in the business of setting up/operating industrial infrastructure in India. It is also involved in leasing and providing services connected with computer software and data processing. In addition, the company owns a twin pipeline system of 200-millimetre diameter for transporting petroleum products like naphtha and kerosene, and acquires and deploys construction machinery on hire for use at various construction sites. It operates primarily in Mumbai, as well as in the Surat and Jamnagar belts of Gujarat.
On the financial front, the company has witnessed muted results for 9M FY12 on a YoY basis. The topline witnessed a growth of 20 per cent YoY for 9M FY12, and stands at Rs 45.6 crore as against Rs 38 crore for 9M FY11. The bottomline, however, witnessed de-growth of 3.66 per cent, and stands at Rs 17.37 crore as against Rs 18 crore for 9M FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 34.13x, and the EV/EBITDA stands at 23.79x, which looks a bit expensive. Looking at the subdued demand on the infrastructure front at present, we suggest that you book full profit in the stock.
TATA STEEL
I have purchased shares of Tata Steel at Rs 610 per share. Please guide me as to whether I should exit from this stock or accrue more shares at the current levels.
- Dileep, Via Email
Tata Steel, BSE/NSE Code 500470/TATASTEEL, with a face value of Rs 10, is currently trading at Rs 450, which is at a 26 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 642 and Rs 332 respectively.[PAGE BREAK]
With 23 MT of production capacity, Tata Steel is the world’s seventh largest steel company. It is one of the most diversified companies globally, with operations in 26 countries and a commercial presence in more than 50 countries. Its Indian operations have been the key EBITDA driver for the consolidated business. A high level of raw material security, low labour costs and a diversified sales mix are factors that have resulted in higher profitability for its domestic operations. In contrast, Tata Steel’s European operations have been a drag on the company’s overall profitability due to the lack of captive raw material supplies and high cost operations. The company has strategic investments in several mining assets, including those in Canada, Oman, Mozambique and Australia.
On the financial front, the company has witnessed muted results for 9M FY12 on a YoY basis. The topline witnessed a growth of 16 per cent, and stands at Rs 98901 crore as against Rs 84930 crore for 9M FY11. The bottomline witnessed a growth of a mere 3.10 per cent on a YoY basis for 9M FY12, and stands at Rs 4956 crore as against Rs 4807 crore for 9M FY11. However, there is a steady increase in the realisation per tonne for Q3 FY12 on a YoY basis, which stands at Rs 56683.20 per tonne. On the valuations front, the stock discounts its trailing 12-month earnings by 4.79x, and the EV/EBITDA stands at 4.82x. The main drawback, though, is the high debt-to-equity ratio, which stands at 1.73x. At present, we suggest that you hold the stock.
eCLERX SERVICES
I am holding 500 shares of eClerx Services purchased at Rs 650 per share. What should my next step be with regard to these?
- Chintan Joshi, Via Email
eClerx Services, BSE/NSE Code 532927/ECLERX, with a face value of Rs 10, is currently trading at Rs 749, which is at a 15 per cent premium to your acquisition cost. Its 52-week high/low stand at Rs 875 and Rs 616 respectively.
eClerx is a Knowledge Process Outsourcing (KPO) company, providing data analytics and customised process solutions to global enterprise clients. It supports core and complex activities for its clients, using proprietary processes and a scalable offshore delivery model. The company supports critical processes for more than 50 clients, which includes more than 20 Fortune 500 companies. Among these are global leaders in financial services, manufacturing, retail, media, travel and hospitality. eClerx currently employs about 4000 people. It has sales and marketing offices across Europe and North America, and a representative office in Singapore. Business from the US contributes to 75 per cent of its revenues, that from the EU contributes 21 per cent, and the remaining comes from the rest of the world.[PAGE BREAK]
On the financial front, the company’s topline and the bottomline have both fared better on a YoY basis. The topline witnessed a growth of 40 per cent on a YoY basis for 9M FY12, and stands at Rs 345 crore as against Rs 246 crore for 9M FY11. The bottomline stands at Rs 129.36 crore for 9M FY12 as against Rs 93 crore for 9M FY11, witnessing a growth of 39.25 per cent YoY. On the valuations front, the company trades at a P/E of 13.70x, and the EV/EBITDA stands at 13.91x. The company has a debt-free balance sheet. We suggest that you hold the counter for one more quarter and take a decision accordingly.
DLF
I have purchased 500 shares of DLF at Rs 205 per share. What should my next course of action be?
- C P Sharma, Via Email
DLF, BSE/NSE Code 532868/DLF, with a face value of Rs 2, is currently trading at Rs 192, which is at a 6.34 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 275 and Rs 173 respectively.
DLF is India’s largest real estate company, engaged in the development of real estate across the country. The company’s main presence is in Delhi and NCR. As of 31st January, 2012, it has launched 8.47 million square feet of space as against a plan of 15.75 million square feet for FY12, which looks way behind the target. DLF has taken an initiative to divest from its non-core asset business and has targeted around Rs 6000-7000 crore for FY13, of which it has been able to garner a cash flow of Rs 1620 crore until the end of Q3 FY12. The company is mainly looking to reduce its debt burden of Rs 25028 crore.
On the financial front, the company has witnessed muted results for 9M FY12 on a YoY basis. The topline witnessed a growth of merely two per cent YoY for 9M FY12, and stands at Rs 7012 crore as against Rs 6877 crore for 9M FY11. The bottomline, however, witnessed de-growth of 23.62 per cent, and stands at Rs 989 crore as against Rs 1295 crore for 9M FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 30.33x, and the EV/EBITDA stands at 12.94x, which looks a bit expensive. As per the management, the main reasons for the decline in profits are high interest costs, a higher proportion of lower value sales during the recently-concluded quarter and lower execution run rate due to a change from in-house execution to third party construction entities and higher provision for tax. We suggest that you exit the stock.