Your Stock Queries

MAHANAGAR TELEPHONE NIGAM

I am holding 320 shares of Mahanagar Telephone Nigam purchased at Rs 38 per share. What should I do with these now?

- S Joshi, Satara, Maharashtra

Mahanagar Telephone Nigam, BSE/NSE Code 500108/MTNL, with a face value of Rs 10, is currently trading at Rs 40.70, which is at a seven per cent premium to your acquisition cost. Its 52-week high/low stand at Rs 42 and Rs 19 respectively.

MTNL provides telecommunications services in Delhi and Mumbai. It offers various telecommunication services such as fixed landline and cellular telephone services. It also provides data services and internet protocol television, voice over internet protocol, infrastructure, multi-protocol label switching and video phone services.

MTNL has been struggling for quite some time now, and its financial performance for Q1FY13 has not been encouraging at all. The topline remained almost flat with de-growth of 1.19 per cent on a YoY basis, and stood at Rs 833 crore as against Rs 843 crore for Q1FY12. It reported a loss of Rs 1059 crore for the quarter as against a loss of Rs 850 crore for Q1FY12. This has been the fifth consecutive quarter in which the company has been in the red. The most alarming part is that in these five quarters, the losses have only mounted higher. The company had been debt-free till FY11, but due to the 3G allotment that it had to fund, it now has a debt of Rs 7400 crore on its books. We suggest that you exit the counter and look for other attractive investment horizons.

ADANI POWER

I am holding 100 share of Adani Power purchased at a price of Rs 63 per share. Can I hold these for the long term?

- Vighnesh Pagi, Via Email

Adani Power, BSE/NSE Code 533096/ADANIPOWER, with a face value of Rs 10, is currently trading at Rs 39.45 with a 52-week high/low of Rs 97 and Rs 40 respectively. The stock is currently trading at a 37 per cent discount to your acquisition cost.

Adani Power, together with its subsidiaries, engages in the generation and transmission of power in India. The company has more than doubled its capacity from 2 GW to 4.6 GW in FY12 and is slated to further increase its capacity to 6.6 GW by the end of FY13. But there are certain factors that are playing spoilsport. Higher than estimated fuel costs, rupee depreciation impacting operational costs even further, delays in power evacuation lines and tariff disputes with its counterparts for two projects at Mundra and Tiroda are some of these. In addition, the company has an unhedged foreign debt exposure of USD1.2 billion, which is a matter of concern. The impact of all this was evident in its FY12 results, wherein it reported a loss of Rs 93 crore compared to a profit of Rs 520 crore in FY11.

On the financial front, the company’s performance for Q1FY13 has been quite muted. While the topline stood at Rs 1463 crore, witnessing a growth of 78 per cent on a YoY basis, it reported a loss of Rs 792 crore for the same period. The interest cost has gone up several notches and stands at Rs 486 crore as against Rs 88.63 crore for Q1FY12, which is one of the main reasons for the dismal performance. The stock trades at an EV/EBITDA of 27.18x and its debt-to-equity ratio stands at 5.19x. We, at DSIJ, are not bullish on the sector as a whole and suggest that you exit the stock even if you have to book losses.[PAGE BREAK]

VIP INDUSTRIES

I am holding 120 shares of VIP Industries purchased at a price of Rs 80 per share. Kindly advise me as to whether I should hold the stock for seven-eight months more or make an exit now.

- Rukshan Dsouza, Via Email

VIP Industries, BSE/NSE Code 507880/VIPIND, with a face value of Rs 2, is currently trading at Rs 70.30. This is at a 12 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 205 and Rs 68 respectively.

VIP Industries engages in the manufacture and sale of luggage products and accessories globally. The company provides travel products, which include hard and soft-sided luggage bags, backpacks, duffels and shoulder bags, among others. It also offers light-weight luggage, locking systems, zippered compartments, multi-point adjustment trolley handles and roller-blade wheels. Its products are primarily sold under the brands VIP, Carlton, Delsey, Footloose, Alfa, Aristocrat, Skybags and Buddy. In addition, it sells moulded furniture in the name and style of Moderna.

On the financial front, the results for the first quarter of the present fiscal have not been encouraging. The topline witnessed a growth of 7.30 per cent on a YoY basis, and stood at Rs 302 crore as against Rs 282 crore for Q1FY12. The bottomline witnessed de-growth of 38.80 per cent on a YoY basis, and stood at Rs 23.50 crore as against Rs 38.40 crore for Q1FY12. On the valuations front, the stock discounts its trailing 12-month earnings by 18.95x and the EV/EBITDA stands at 9.70x. The stock enjoys a dividend yield of 2.80 per cent, which is quite good. It is presently trading at its 52-week low. We suggest that you hold on to the counter for one more quarter and take a call after looking at the numbers in the next quarter.

CIPLA

I am holding 150 shares of Cipla purchased at Rs 300 per share. Kindly advise as to what my future course of action should be.

- Suhrid Das, Cuttack, Odisha

Cipla, BSE/NSE Code 500087/CIPLA, with a face value of Rs 2, is currently trading at Rs 367 with a 52-week high/low of Rs 372 and Rs 273 respectively. The stock is currently trading at a 22 per cent premium to your acquisition cost.

Cipla engages in the manufacture and sale of pharmaceutical products. The company offers prescription pharmaceutical products for various diseases as well as animal healthcare products. It also has an OTC product portfolio, which includes products related with child care, eye care, foot and hair care, food supplements and health drinks. Further, it also provides agrochemicals (pesticides) and technology services including consulting, project appraisal, engineering, plant supply, commissioning, training, operational management, support, know-how transfer and quality control services.

On the financial front, the company’s Q1FY13 results have been quite good. Its topline witnessed a growth of 23 per cent on a YoY basis to touch Rs 1958 crore as against Rs 1591 crore during the same quarter last year. The bottomline witnessed a stellar growth of 58 per cent on a YoY basis, and stood at Rs 400.76 crore as against Rs 253 crore for Q1FY12.

On the valuations front, the company discounts its trailing 12-month earnings by 22.33x and the EV/EBITDA stands at 16.21x. The company is virtually debt-free, which is the icing on the cake. We suggest that you hold on to the counter from a longer-term perspective.