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Your Stock Queries

DSIJ equity research experts add value to subscriber's stock portfolio by giving unbiased advice. Ask about your portfolio problem and get your stock queries answered.

VARUN SHIPPING COMPANY

Q: I have purchased 1500 shares of Varun Shipping at Rs 18 per share. Kindly advise me about the prospects of the company.

- Bhaskar Joshi , Via Email

A: Varun Shipping, BSE/NSE Code 500465/VARUNSHIP, with a face value of Rs 10, is currently trading at Rs 15, which is at a 16 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 26 and Rs 15 respectively.

Varun Shipping owns more than 20 vessels and operates in the hydrocarbons sector. It offers energy transportation as well as offshore exploration and production support services. The company deploys LPG carriers with some large charterers on a mix of time charters and spot charters. It also participates in the seaborne transportation of liquid cargo globally, and offers anchor handling, towing and supply vessels to offshore oil and gas companies for the exploration, production and development of oil and natural gas.

On the financial front, the company ended FY12 on a dismal note. Its topline stood at Rs 364.51 crore as against Rs 836.85 crore, marking de-growth of 56 per cent on a YoY basis. The bottomline witnessed de-growth of 37.76 per cent, and stood at Rs 9.18 crore as against Rs 14.75 crore for FY11. The company’s bottomline has been in a consistent decline over the past five fiscals, which is not encouraging at all. On the valuations front, it trades at a P/E of 24.76x and the EV/EBITDA stands at 7.10x, with the debt-to-equity ratio at 3.32x. It is better to exit the stock at this juncture even if you have to book losses.

KCP

Q: I am holding 1500 shares of KCP bought at Rs 33 per share. Kindly guide me on whether I should hold the stock or sell it off.

- J. Prabhakar, Via Email

A: KCP, BSE/NSE Code 590066/KCP, with a face value of Rs 1, is currently trading at Rs 30.50, which is at a 7.57 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 37 and Rs 22 respectively.

KCP engages in the cement, heavy engineering, sugar and biotechnology businesses, primarily in India and South-East Asia. The company manufactures and sells Portland cement. It also manufactures a range of machinery for companies in various industries including sugar, cement, steel, alumina, fertilisers, chemicals and petrochemicals, as also for power plants. In addition, the company produces a range of natural colouring products comprising paprika, curcumin and annatto for the food, cosmetics and pharmaceuticals industries. It also produces refined sugar and white sugar.

On the financial front, its topline witnessed a growth of 51.55 per cent for FY12 on a YoY basis, and stood at Rs 1016 crore as against Rs 670 crore for FY11. The bottomline witnessed a growth of 35 per cent, and stood at Rs 106 crore as against Rs 78.65 crore for FY11. On the valuations front, the stock discounts its FY12 earnings by 3.71x and the EV/EBITDA stands at 4.08x. The company has a dividend yield of 4.27 per cent, which is also worth a mention. We suggest that you hold the stock from a longer-term perspective.

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CROMPTON GREAVES

Q: I have purchased 215 shares of Crompton Greaves at Rs 140 per share. Please advise me as to what I should do with these.

- Ashish C. Adhikari, Via Email

A: Crompton Greaves, BSE/NSE Code 500093/CROMPGREAV, with a face value of Rs 2, is currently trading at Rs 114, which is at an 18 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 270 and Rs 102 respectively.

Crompton Greaves manufactures and sells high-end power and industrial equipments and solutions, consumer products and home appliances in India and internationally. Its order book was 15 per cent higher at the end of FY12 on a YoY basis, standing at Rs 10264 crore. The order backlog for the same period stands at Rs 8366 crore, up by 17 per cent on a YoY basis.

On the financial front, its topline witnessed a growth of 12.43 per cent for FY12 on a YoY basis, and stood at Rs 11248crore as against Rs 10005 crore for FY11. The bottomline witnessed de-growth of 57 per cent, and stood at Rs 373.59 crore as against Rs 888.67 crore for FY11. The stock trades at a P/E of 19.57x and its EV/EBITDA stands at 5.36x. For FY13, the company expects a strong sales growth of around 12-14 per cent supported by the healthy order book, robust order intake and good growth in its various business units including power (UHV segment) and renewables in Asia, Europe and the Americas. The industrial vertical is expected to do well thanks to its penetration in the European and Middle Eastern markets. The development of railway transportation in India is also likely to contribute to the company’s growth. At present, we suggest that you hold on to the counter from a longer-term perspective.

TIPS INDUSTRIES

Q: I have purchased 550 shares of Tips Industries at Rs 30 per share. Please advise as to what I should do with these.

- Snehal, Aurangabad, Maharashtra

A: Tips Industries, BSE/NSE Code 532375/TIPSINDLTD, with a face value of Rs 10, is currently trading at Rs 55, with a 52-week high/low Rs 70 and Rs 23 respectively. The stock is currently trading at a huge premium of 83 per cent to your acquisition cost. Tips Industries engages in the business of audio/video production and film production/distribution in India. It provides pre-recorded audio cassettes and audio CDs. The company also offers artist management services. As on March 31, 2011, it had an archive of 27 films and approximately 25000 song tracks.

On the financial front, Tips Industries has ended FY12 on a high note. The topline witnessed a growth of 8.60 per cent on a YoY basis, and stood at Rs 72.32 crore as against Rs 66.59 crore for FY11. The bottomline witnessed a stupendous growth, and stood at Rs 8.81 crore as against Rs 2.98 crore for FY11. On the valuations front, the stock discounts its trailing 12-month earnings by 10x and the EV/EBITDA stands at 11.72x. The dividend yield stands at 2.30 per cent and the debt-to-equity ratio stands at 0.68x. At present, you are sitting on hefty profits. Therefore, we suggest that you book profits.

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