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HINDUSTAN ORGANIC CHEMICALS 

I am holding 150 shares of Hindustan Organic Chemicals, purchased at Rs 11 per share. Should I book profits?
Yogesh Kadam, Via Email

BSE/NSE Code500449/HOCLATFL
Face Value Rs 10
CMP Rs 14.25
52-Week high/low Rs 23/Rs 10
Current Profit/(Loss) 29.55 per cent

The chemicals industry in India contributes to about three per cent of India's GDP. It is highly diverse with major sectors like Petrochemicals, Inorganic Chemicals, Organic Chemicals, Fine and specialties, Bulk Drugs, Agrochemicals, Paints and Dyes, etc. Hindustan Organic Chemicals, in which you have invested, manufactures and sells basic chemical products in India. Its primary products include phenol, acetone, nitrobenzene, aniline, nitrotoluenes, chlorobenzenes, and nitrochlorobenzenes. The company provides products to resins and laminates, dyes and dyes intermediates, drugs and pharmaceuticals, rubber chemicals, paints, and pesticides industries.

Looking at the CMP of its stock, this looks like the right time for you to have raised this question. You are sitting on a handsome profit of around 30 per cent. But before we get to a conclusion, it is better to take a look at how the company has fared on the financial front.

Hindustan Organic Chemicals was set up by the Government of India in 1960 with the objective of attaining self-reliance in basic organic chemical needs. Started as a small chemical unit, has today acquired the status of a multi-unit company with two fast growing units and one subsidiary unit.

There has been some disappointment on the earnings front though. The topline remained flat for the quarter ended December 2012 witnessing a mere growth of 2.29 per cent on a YoY basis. It had stood at Rs 137.63 crore for Q3FY13 as against Rs 134.55 crore for Q3FY12. There are concerns on the bottomline too. The December 2012 quarter is the sixth consecutive quarter where the company has ended in red. The loss has mounted to Rs 34.41 crore for Q3FY13 as against a loss of Rs 23.65 crore for Q3FY12. In the last six quarters, the company has failed to remain in green even at the operating levels. At this juncture, you are lucky enough to be sitting on a sizeable profit. We therefore suggest that you book profits in the stock.
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LUPIN

I am holding 300 shares of Lupin at an average price of Rs 550 per share. Shall I exit or hold the counter as it has reached its 52-week high?
Parag Sharma, Via Email

BSE/NSE Code 500257/LUPIN
Face Value Rs 2
CMP Rs 714.60
52-Week high/low Rs 714.60/Rs 496
Current Profit/(Loss) 29.82 per cent
The Indian Pharma sector has been in the limelight for the last couple of years. Superior chemistry skills and an increased penetration of generic medicines in the markets have led to the Pharma companies excelling over the years. Let us now take a look at Lupin’s performance.

It is engaged in the production of generic and branded formulations and active pharmaceutical ingredients. The company offers various formulations in cephalosporins, cardiovascular, central nervous system, anti-asthma, anti-tuberculosis, diabetology, dermatology, gastro intestinal, pediatrics, oncology, anti-biotics, anti-infectives, and NSAID therapy segments. It also engages in novel drug discovery and development programs for metabolic/endocrine diseases, pain/inflammation, auto-immune diseases, and central nervous system disorders. In addition to this, it develops and commercialises bio-similars and new biological entities.

The financial results of the company had been strong for the quarter ended Q3FY13. This was one of the major factors for the appreciation in prices. The topline witnessed a gain of 37.63 per cent on a YoY basis for Q3FY13 to stand at Rs 2465.87 crore as against Rs 1791.7 crore for the same period of the previous fiscal. The bottomline has witnessed a growth of 42.61 per cent on a YoY basis for Q3FY13 to stand at Rs 335.23 crore as against Rs 235.06 crore for Q3FY12. If we look at the results closely, it is found that this is the fourth consecutive quarter where the bottomline of the company has grown on a consistent basis. On the valuation front, the stock discounts its trailing 12-month earnings by 30.13x and the debt to equity stands at mere 0.46x. The dividend yield of the company stands at 0.49 per cent. We suggest that you book partial profits of atleast 30 per cent of your portfolio and stay invested in the rest from a long-term perspective.
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MAHINDRA & MAHINDRA FINANCIAL SERVICES

I am holding 100 shares of Mahindra & Mahindra Financial Services, and would earn a profit of about 10 per cent if I were to sell it now. What should be my next course of action?
Madhavi Menon, Via Email

BSE/NSE Code 532720/M&MFIN
Face Value Rs 2
CMP Rs 257.60
52-Week high/low Rs 247/Rs 114
Current Profit/(Loss) NA
The company has been one of the best performers in the NBFC sector for the last fiscal. Although the auto sector in the country has not been doing too well, the parent company (Mahindra & Mahindra) performance has led to this finance company doing well on the bourses. Here is the company profile and its current financial position.

Mahindra & Mahindra Financial Services is a non-banking financial company, which provides financial products and services for the rural and semi-urban sector in India. The company offers vehicle financing for auto and utility vehicles, tractors, cars, commercial vehicles, two wheelers, three wheelers, and construction equipment. It also provides housing finance for buying, renovating, extending, and improving homes. It offers insurance solutions to retail customers and corporations and its portfolio includes personal loans. It engages in mutual fund distribution and advisory services under the brand name Mahindra Finance Finsmart.

The financials have been quite good for the company for the recently concluded Q4FY13. The topline witnessed a gain of 34.64 per cent on a YoY basis for Q3FY13 to stand at Rs 1185.18 crore as against Rs 880.27 crore for the same period of the previous fiscal. The bottomline has witnessed a growth of 42.90 per cent on a YoY basis for Q3FY13 to stand at Rs 346.37 crore as against Rs 242.39 crore for Q3FY12. This is the fourth consecutive quarter where the bottomline of the company has grown on a consistent basis. On the valuation front, the stock trades at a price to book value of 3.20x. The dividend yield stands at 1.10 per cent at the current market price. At present, we suggest that you hold on to the stock from a long-term perspective to garner better results.
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HERO MOTOCORP

I am holding 100 shares of Hero MotoCorp, bought at Rs 1525 per share. Should I hold the counter or exit?
Pavan Kumar, Via Email

BSE/NSE Code 500182/HEROMOTOCO
Face Value Rs 2
CMP Rs 1706
52-Week high/low Rs 2160/Rs 1435
Current Profit/(Loss) 12 per cent

Two-wheeler manufacturers in the country have been performing well as compared to the broader auto sector. They have been able to post good sales figures month on month in the last fiscal. Being one of the largest two-wheeler companies in India, its future prospects also look quite bright. Let’s study the company’s structure and financials before taking a call on your investment.

Hero MotoCorp engages in the manufacture and sale of two-wheelers in India. The company provides motorcycles, scooters, and spare parts. It offers its products through a network of dealers under Ignitor, Maestro, Impulse, Splendor+, Splendor NXG, Passion Pro to name a few. The company has seen significant investments in FY13. It announced the investment of a sum of Rs 2500 crore for setting up its fourth plant at Neemrana, Rajasthan and its fifth plant at Gujarat, an integrated R&D centre at Kukas, Rajasthan and capacity expansion of its existing plants. It also announced investment in a global parts centre at Neemrana.

On the financial front, the company witnessed moderate revenue growth of 1.84 per cent over Q4FY12, with the topline standing at Rs 6145.75 crore. Its EBITDA declined by 8.16 per cent to Rs 849.78 crore and net profit fell by 4.86 per cent to Rs 574.23 crore. This made for a significant decline in its margins. The EBITDA margin declined by 150 basis points to stand at 13.83 per cent and its net profit margin dropped by 66 basis points to stand at 9.34 per cent on a YoY basis. On the valuation front, the stock discounts its trailing 12-month earnings by 16.09x and the debt to equity ratio stands at 0.41x. The dividend yield stands at 2.73 per cent. At the moment, we suggest that you book partial profits in this counter.

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