Your Stock Queries
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SPICEJET
I purchased shares of SpiceJet a year ago. Please guide me as to whether I should exit from this stock or whether I should accrue more shares.
-D K Kumar, Via Email
SpiceJet, BSE Code 500285, with a face value of Rs 10, is currently trading at Rs 22.60. Its 52-week high/low are Rs 47 and Rs 15 respectively.
SpiceJet is a dedicated low-cost domestic carrier, which has rapidly gained market share and is now among the top five domestic carriers. It began its services in May 2005. Currently, it has a fleet of 30 B-737s and five Q-400s, and an extensive network between 22 destinations in India and two destinations in South East Asia. SpiceJet is India’s second largest low-cost carrier. Its business model exploits the changing preferences of price-sensitive Indian flyers. However, intense competition on the back of higher supply growth and high fuel costs weighs on the overall profitability in the sector, including that of SpiceJet.
On the financial front, the company reported muted results for 9M FY12. The topline witnessed a growth of 33 per cent on a YoY basis for 9M FY12 and stands at Rs 2888 crore as against Rs 2175 crore for 9M FY12. The bottomline, however, witnessed de-growth and stands at a loss of Rs 351 crore for 9M FY12 as against a profit of Rs 160 crore for 9M FY11. If we look at the company on a quarterly basis, we find that despite Q3 being the seasonally strongest quarter, SpiceJet posted yet another quarter of loss (fourth consecutive quarter). Though, SpiceJet reported sharp sequential improvement, this was not enough for a breakeven. Supply growth is expected to be more moderate going forward, largely on account of Kingfisher’s capacity cuts. However, traffic growth is also expected to moderate due to the slowing economy. On the valuation fronts, the stock trades at an EV/EBITDA of 6.13x. We suggest that you exit the stock, as the aviation sector is not going through favourable times.
HINDALCO INDUSTRIES
I am holding 1000 shares of Hindalco Industries purchased at Rs 155 per share. What should my next step be with respect to these?
-V T Abraham, Kerala
Hindalco Industries, BSE/NSE Code 500440/HINDALCO, with a face value of Re 1, is currently trading at Rs 124, which is at a 20 per cent premium to your acquisition cost. Its 52-week high/low stand at Rs 225 and Rs 111 respectively.[PAGE BREAK]
Hindalco Industries engages in the production and sale of aluminum and copper in India and internationally. The company’s aluminum products include rolled products, extrusions, foils, primary aluminum ingots, billets, wire rods and aluminum slabs. In addition, it provides copper products, which include copper cathodes and continuous cast copper rods. It also produces precious metals, including gold, silver, selenium, platinum and palladium, as well as sulphuric acid, phosphoric acid, diammonium phosphate, other phosphoric fertilisers and phospho gypsum. The company was formerly known as Hindustan Aluminium Corporation, and changed its name to Hindalco Industries in October 1989.
On the financial front, the company has witnessed flat results for 9M FY12 on a YoY basis. The topline witnessed a growth of 11.39 per cent and stands at Rs 18949 crore as against Rs 17012 crore for 9M FY11. The bottomline witnessed a growth of 12 per cent, and stands at Rs 1597 crore as against Rs 1428 crore for 9M FY11. The company discounts its trailing 12-month earnings by 10.28x and the EV/EBITDA stands at 5.85x. It has a dividend yield of 1.20 per cent, which is also good. We suggest that you hold the counter with a longer-term perspective to garner better results.
TILAKNAGAR INDUSTRIES
I am holding shares of Tilaknagar Industries purchased at Rs 86 per share. Please guide me as to whether I should exit from this stock or accrue more shares at the current levels.
-Girish, Via Email
Tilaknagar Industries, BSE/NSE Code 507205/TI, with a face value of Rs 10, is currently trading at Rs 52.95, which is at a 38 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 71 and Rs 28 respectively.
Tilaknagar Industries engages in the manufacture and sale of various alcoholic beverages, primarily in India. Its products include whisky, brandy, rum, vodka and gin as well as Indian-made foreign liquors. Tilaknagar Industries exports its products to the markets of Africa, the Caribbean Islands, the Middle East, the Far East, Europe and Asia. The company was formerly known as The Maharashtra Sugar Mills. It changed its name to Tilaknagar Industries in August 1993.[PAGE BREAK]
On the financial front, the company has witnessed better results for 9M FY12 on a YoY basis. The topline witnessed a growth of 17.31 per cent on a YoY basis, and stands at Rs 399 crore as against Rs 340 crore for 9M FY11. The bottomline witnessed growth of 21.72 per cent, and stands at Rs 34.69 crore for 9M FY12 as against Rs 28.50 crore for 9M FY11. The company discounts its trailing 12-month earnings by 13.90x and the EV/EBITDA stands at 8.58x. It has a dividend yield of 1.59 per cent, which is also good. We suggest that you hold the counter with a longer-term perspective to garner better results.
GAMMON INDIA
I am holding 5000 shares of Gammon India purchased at an average price of Rs 58 per share. I am willing to hold the shares for one more year. Please guide me as to what I should do with this stock.
-Ila J Patel, Via Email
Gammon India, BSE/NSE Code 509550/GAMMONIND, with a face value of Rs 2, is currently trading at Rs 42.80, which is at a 26 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 131 and Rs 39 respectively.
Gammon India, together with its subsidiaries, provides infrastructure construction and engineering services in India and internationally. It undertakes various construction works related with transportation engineering projects, which includes roads, bridges, metro viaducts, flyovers, metro railway systems, marine structures, ports and airports. It also has a presence in the construction of power projects such as thermal, hydro and nuclear power projects as well as power transmission and distribution solutions. In addition, it engages in the oil exploration and realty development businesses.
On the financial front, the company has witnessed muted results for 9M FY12 on a YoY basis. The topline witnessed
de-growth of 4.83 per cent on a YoY basis, and stands at Rs 3676 crore as against Rs 3863 crore for 9M FY11. The bottomline too witnessed de-growth of 47.03 per cent and stands at Rs 34.10 crore as against Rs 64.37 crore for 9M FY11. The company discounts its trailing 12-month earnings by 6.17x and the EV/EBITDA stands at 6.89x. It has a dividend yield of 1.76 per cent, which is also good. The debt-to-equity stands at 3.39x, which is quite high and alarming. At present, there are some concerns on the infrastructure sector as a whole. Therefore, we suggest that you exit the counter even if you have to book losses, and revisit the counter once the sector starts showing signs of revival.