This section gives decisive investment rationales to our subscribers on the stock queries they have raised to our research team.
Borosil Ltd. is engaged in the business of manufacturing and trading of scientific and industrial products (SIP) and consumer products. The company’s quarterly consolidated financials recorded net sales and other operating income for Q1FY22 at Rs137.88 crore, registering a strong rise as compared to net sales and operating income of Rs56.10 crore for Q1FY21. The company recorded operating profit for Q1FY22 at Rs25.46 crore, which flipped the operating loss of Rs1.53 crore registered for Q1FY21. The net loss of Q1FY22 decreased at Rs1.90 crore as against net loss of Rs7.36 crore in Q1FY21. In terms of annual performance, the net sales and other operating income were reported to be Rs584.77 crore for FY21, which descended by 8.03 per cent when compared to Rs635.85 crore for FY20. FY21 reported an increase of 13.44 per cent in operating profit at Rs99.13 crore as compared to Rs87.39 crore for FY20. The net profit stood at Rs42.35 crore in FY21 in comparison with net profit of Rs35.32 crore reported in FY20, growing by 19.92 per cent. The last eight quarters for the stock were not so appealing from a financial point of view.
Also, the stock appears to be expensive considering a high PE multiple. Hence, we recommend EXIT for this stock.
GIC HOUSING FINANCE LTD.
GIC Housing Finance Ltd (GICHFL) was formed with the objective to enter in the field of direct lending to individuals and corporates to accelerate housing activities in India. Its primary business is to grant housing loans to individuals and entities engaged in the construction or housing sector. The company recorded interest income of Rs270 crore in Q1FY22 as against Rs305 crore in Q1FY21, declining by 12 per cent. The total income plunged by 11 per cent from Rs306 crore in Q1FY21 to Rs274 crore in Q1FY22. The quarter recorded net profit of Rs3 crore in Q1FY22 as against net loss of Rs56 crore reported in Q1FY21. On the annual front, the interest income squeezed from Rs1,243.86 crore in FY20 to Rs1,218.46 crore. Total income declined by 1.16 per cent at Rs1,240.33 crore in FY21 as compared to Rs1,254.91 crore reported in FY20. Meanwhile, net profit for the period jumped from Rs45.61 crore in FY20 to Rs105.57 crore in FY21, growing attractively. According to the current trends, banks have become preferred candidates over housing finance companies (HFC). HFCs are facing tight competition from banks when it comes to financing housing loans. Furthermore, the returns posted by the company pose a caution signal in the long term. Hence we recommend EXIT for this stock.
YES BANK LTD.
Yes Bank is a high-quality, customer-centric and service-driven bank. Since inception in 2004 it has grown into a ‘full service commercial bank’ providing a complete range of products, services and technology-driven digital offerings, catering to corporate, MSME and retail customers. Yes Bank operates its investment banking, merchant banking and brokerage businesses through Yes Securities and its mutual fund business through Yes Asset Management (India) Limited, both wholly-owned subsidiaries of the bank. Headquartered in Mumbai, it has a pan-India presence across all 28 states and nine Union Territories in India including an IBU at GIFT City and a representative office in Abu Dhabi.
On the consolidated front, the net interest earned by the company de-grew by 26.5 per cent recording at 1,402 crore in Q1FY22 as compared to Rs1,908 crore recorded in Q1FY21. On the other hand, total income de-grew by 2.8 per cent on a YoY basis. The net profit for the quarter was seen improving robustly from Rs45 crore in Q1FY21 to Rs207 crore in Q1FY22. The net interest margins were seen declining from 3 per cent in Q1FY21 to 2.1 per cent in Q1FY22. Observing the annual numbers, the net interest income zoomed 9.2 per cent on a YoY basis whereas total net income grew 5.1 per cent from Rs10,247 crore in FY20 to Rs10,769 crore.
Meanwhile, the net loss lowered from Rs22,715 crore in FY20 to Rs3,462 crore in FY21. The net interest margin saw an improvement in FY21 and stood at 2.8 per cent as compared to 2.2 per cent recorded in FY20. The CASA ratio improved by 130 bps sequentially to 27.4 per cent but is not as strong compared to its peers. The bank has a decent provisioning coverage ratio (PCR) of 79.3 per cent. However, the net NPA stood high at 5.78 per cent. This private sector bank’s financial strength has declined since 2019 as is reflected by weak returns and increasing NPAs.
Considering all such factors, we recommend EXIT for this stock.
SBI LIFE INSURANCE COMPANY LTD
SBI Life Insurance, one of the most trusted life insurance companies in India, serving millions of families across India, SBI Life Insurance’s diverse range of products caters to individuals as well as group customers through protection, pension, savings and health solutions. It strives to make insurance accessible to all with its extensive presence across the country through 947 offices, 17,333 employees, a large and productive individual agent network of about 157,792 agents, 58 corporate agents, a widespread bancassurance network of 14 partners, more than 29,000 partner branches, 107 brokers and other insurance marketing firms.
On a consolidated quarterly front, the net premium earned by the company was Rs8,312.55 crore for the first quarter of FY22 compared to Rs7,588.09 crore reported in Q1FY21, a rise of 9.54 per cent. The total income from investments stood at Rs15,736.91 crore in Q1FY22, 2.72 per cent lower than Rs16,178.05 crore reported in Q1FY21. In Q1FY22, net profit was recorded at Rs223.16 crore as compared to Rs390.89 crore, squeezing by 42.9 per cent. Looking at the annual numbers, the net premium earned by the company zoomed by 23.42 per cent and was reported to be Rs49,768.28 crore for FY21 compared to Rs40,324.01 crore reported in FY20. The total income from investments stood at Rs82,084.89 crore in Q1FY22, 87.22 per cent higher than Rs43,842.84 crore reported in Q1FY21.
The company earned net profit of Rs1,455.85 crore as compared to Rs1,422.17 crore, exhibiting a growth of 2.36 per cent. The company has witnessed strong recovery after the negative impact of the second wave of the pandemic on Q1FY22 business. The individual rated premium market share of the company expanded 90 bps. A consistent growth was also recorded in the renewal premium. The shift in product mix towards higher margin products would trigger improvement in the value of new business (VNB) margin. The management is focusing on healthy double-digit growth over FY22E, which would be among the best in the past few years. Hence, we recommend BUY.
ITC LTD. ITC is one of India’s foremost private sector companies having a diversified presence in FMCG, hotels. ITC is the country’s leading FMCG marketer, a clear market leader in the Indian paperboard and packaging industry, a globally acknowledged pioneer in farmer empowerment through its wide-reaching agri-business and a prominent hotel chain in India that is a trailblazer in ‘responsible luxury.
As regards the consolidated quarterly performance of the company, net sales and other operating income for Q1FY22 stood at Rs14,240.76 crore, recording a rise of 35.91 per cent as compared to net sales and operating income of Rs10,478.46 crore for Q1FY21. The company posted an operating profit for Q1FY22 at Rs4,890.78 crore, which grew by 26.35 per cent as compared to an operating profit of Rs3,870.69 crore registered for Q1FY21. The company achieved net profit of Rs3,343.44 crore in Q1FY22 as compared to net profit of Rs2,567.07 crore achieved in Q1FY21, zooming upwards by 30.24 per cent. In terms of annual performance, the net sales and other operating income were reported to be Rs53,155.12 crore for FY21, which rose by 3.43 per cent when compared to Rs51,393.47 crore for FY20.
FY21 reported a decline of 10.17 per cent in operating profit at Rs19,635.26 crore as compared to Rs21,858.05 crore for FY20. The net profit stood at Rs13,389.80 crore in FY21 in comparison with net profit of Rs15,584.56 crore reported in FY20, slipping by 14.08 per cent. ITC is able to sustain its market leadership in the cigarette space and has delivered decent performance despite heavy taxation burden. Its FMCG business has shown good operating profitability from FY19 onwards and the trend is predicted to improve going ahead. Its agri-business witnessed a robust performance backed by tobacco leaf and traded commodities’ exports. Hence, expecting ITC’s cigarette segment EBIT growth to continue being resilient and the boost in FMCG’s profitability to sustain, we recommend HOLD.
SIS India provides security, facility management and cash logistics services, which are essential to the functioning of a vibrant and healthy economy. The company offers security services to bank, hotels, institutions, IT and ITES, residential colonies, and retail and commercial establishments. It also offers electronic security systems, consulting, housekeeping and security services like pre-employment verification and surveillance, cash services.
The company’s quarterly consolidated financials recorded net sales and other operating income for Q1FY22 at Rs2,379.29 crore, recording a rise of 9.81 per cent as compared to net sales and operating income of Rs2,166.73 crore for Q1FY21. The company recorded an operating profit for Q1FY22 at Rs132.89 crore which declined by 7.69 per cent as compared to Rs143.96 crore registered for Q1FY21.
The net profit of Q1FY22 stood at Rs60.13 crore, 3.4 per cent higher than Rs58.16 crore recorded in Q1FY21. In terms of annual performance, the net sales and other operating income were reported to be Rs9127.30 crore for FY21, which ascended by 7.57 per cent when compared to Rs8,485.17 crore for FY20. FY21 reported an increase of 74.11 per cent in operating profit at Rs998.57 crore as compared to Rs573.54 crore for FY20. The net profit stood at Rs366.66 crore in FY21 in comparison with net profit of Rs229.86 crore reported in FY20, growing robustly by 59.52 per cent. During the pandemic, the company witnessed unprecedented demand from all the major verticals as these guards act as primary scanning mechanism. Its facility management vertical also saw strong demand due to higher sanitation needs. Despite challenging global macro factors, its international security business outpaced the GDP growth rates in matured markets. The depreciating rupee also helped SIS India to gain higher realisation and increase its operating efficiency. A depreciating currency, higher demand and better service mix are predicted to continue the company’s growth momentum. Hence, we recommend HOLD.
(Closing price as of Oct 14, 2021)