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Your Stock Queries

| 7/26/2012 9:00 PM Thursday

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.

GREAVES COTTON

Q: I had bought 1000 shares of Greaves Cotton at Rs 70 per share. At present, this scrip is trading at around Rs 65. Can you please guide me on whether I should sell or hold this stock, or average my position?

- Ila Patel, Via Email

Greaves Cotton, BSE/NSE Code 501455/GREAVESCOT, with a face value of Rs 2, is currently trading at Rs 62.25, which is at an 11 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 95 and Rs 60 respectively. The company, together with its subsidiaries, offers various single-cylinder and twin-cylinder diesel and gasoline engines for three- and small four-wheeled commercial vehicles. It also manufactures lightweight petrol, diesel and kerosene engines for agricultural applications, as also construction equipments. The company exports its products principally to the Middle East, Africa and South East Asia.

Its performance for FY12 has been quite decent, with the topline having gone up by 39.64 per cent YoY to Rs 1785 crore as against Rs 1278 crore for FY11. The bottomline witnessed a growth of 49.56 per cent on a YoY basis, and stood at Rs 188 crore as against Rs 126.32 crore for FY11. The company has earmarked Rs 150 crore for expansion and plans to introduce new products with better technology and higher margins. In the automotives segment, it is focussing on expanding its presence into higher capacity engines. In the industrial segment, it is planning to develop new applications for the construction industry. In construction equipment, it is planning to launch new products for concrete and road equipment.

At present, the stock discounts its 12-month earnings by 8.01x. We advise you to be patient, and suggest that you remain invested in the stock from a longer-term perspective.

NITIN FIRE PROTECTION INDUSTRIES

Q: I have purchased 250 shares of Nitin Fire Protection Industries at Rs 30 per share. What should my next step be with regard to these?

- Amit Bhavsar, Nagpur, Maharashtra

Nitin Fire Protection Industries, BSE/NSE Code 532854/NITINFIRE, with a face value of Rs 2, is currently trading at Rs 56.50, which is an 88 per cent premium to your acquisition cost. Its 52-week high/low stand at Rs 66 and Rs 23 respectively. Nitin Fire Protection Industries designs, engineers, supplies, installs and maintains fire protection systems in India, the United Arab Emirates and South East Asia.

The company offers gas-based and water-based fire extinguishers. It also offers gaseous fire suppression systems, fire fighting equipment, fire detection and alarm systems, which include conventional and intelligent systems that comprise control panels and detectors.

The company’s results for FY12 have been a mixed bag. Its topline witnessed a growth of 21.72 per cent on a YoY basis, and stood at Rs 536 crore as against Rs 440 crore for FY11. The bottomline witnessed de-growth of 17.50 per cent, and stood at Rs 44.02 crore as against Rs 53.36 crore for FY11. On the valuations front, the stock discounts its FY12 earnings by 28.37x and the EV/EBITDA stands at 17.36x. At present, we suggest that you book partial profits of at least 50 per cent of your holding and remain invested in the rest. You can take a call on what you should do further after looking at the Q1FY13 results of the company.

 

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