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Elecon Engineering Company Ltd is engaged in delivering power transmission solutions and material handling equipment. The company caters to the needs of various sectors like steel, fertilisers, cement, coal, lignite and iron ore mines, sugar, power stations and port mechanisation in India and .The company mainly operates through the following divisions: power transmission solutions, material handling equipment and wind power. On the financial front, on a consolidated basis, the company reported net sales of Rs271.38 crore for Q1FY20 as against Rs303.48 crore for the corresponding quarter last year, thus witnessing a drop of 10.58 per cent. The company reported net profit of Rs0.29 crore in Q1FY20 down by 95 per cent, as against Rs6.91 crore in the corresponding quarter last year. The company reported a PBIDT of Rs31.71 crore in the quarter ended June 2019 as against Rs35.50 crore in the corresponding quarter last year, witnessing a drop of 10.67 per cent.On the annual front, net sales of the company stood at Rs1,223.13 crore, up by 2.91 per cent in FY19 as against Rs1,188.50 crore in FY18. The net profit of the company came in at Rs66.25 crore in FY19 as against Rs4.78 crore in FY18. We recommend our reader-investors to EXIT the stock as the price has fallen over 50 per cent on YTD basis and the financials are not robust.
Ashok Leyland offers a wide range of products like buses, trucks, engines, defence and special vehicles. Some of them like the double-decker and vestibule buses are unique models from Ashok Leyland, tailor-made for highdensity routes. On the financial front, on a consolidated basis, the net sales stood at Rs6514.73 crore in Q1FY20 as compared to Rs7043.96 crore in the same period of the previous quarter, a fall of 7.51 per cent. The PBIDT has increased marginally by 1.84 per cent in Q1FY20 to reach Rs1033.62 crore as against Rs1014.93 crore in Q1FY19. The PAT came in at Rs273.87 crore, a substantial fall of 40 per cent in Q1FY20 over Rs458.72 crore in Q1FY19. On the annual front, the net sales rose by 9.04 per cent to reach Rs28,614.03 crore in FY19, while in FY18, it had clocked sales of Rs26,242.38 crore in FY18. The PBIDT was Rs3133.11 crore in FY19, moving up by 5.84 per cent from Rs2,960.31 crore in FY18. The net profit for FY19 was Rs1,983.20 crore as against Rs1,717.73 crore in FY18. The company thus witnessed a 15.45 per cent growth in its net profit. Ashok Leyland has recently launched Oyster midi-bus, its next-generation premium AC bus. The multi-purpose bus, which has been designed and manufactured in-house, makes a good choice for executive staff and tourist transport. Based on this, we recommend a HOLD.
Punjab National Bank is one of the oldest banks in India having virtual presence in every important centre of the country. The bank caters to a wide variety of audiences through spectrum of services, including corporate and personal banking, industrial finance, agricultural finance and international finance. The core focus of the bank is on retaining and further improving low cost deposits, lending to agriculture and small and medium enterprises and repositioning of subsidiaries and joint ventures.
On the consolidated financial front, the bank has earned interest of 13326.97 crore in Q1FY20, witnessing a flat growth of 0.23 per cent on a YoY basis from Rs13296.23 crore. The bank’s total income was Rs15426.93 crore in Q1FY20 as against Rs8530.45 crore in the same quarter of the previous year, thus posting slight growth of 1.31 per cent. The company posted net profit of Rs1032.23 crore in Q1FY20 as against net loss of Rs986.66 crore in the same quarter of FY18. On the annual front, the total income in FY19 came in at Rs59,514.53 crore, a climb of 3 per cent from Rs57,608.19 crore in FY18. The operating profit for FY19 stood at Rs13,169.61 crore as compared to Rs10,435.22 crore in FY18. The bank posted a net loss of Rs110,026.41 crore for FY19 versus a net loss Rs12,584.33 crore in FY18, thus narrowing down the net loss in the fiscal year ended March 2019.
Recently, PNB has recovered Rs278.66 crore as penalty in the financial year 2018-19 from account holders not maintaining minimum balance. This amount has been recovered from about 1 crore 27 lakh customers across the country.PNB is eyeing to reduce its gross non-performing assets (NPAs) to under 12 per cent this year with better recoveries. In the quarter to June, the bank’s gross NPAs came down to 16.49 per cent at Rs77,000 crore as compared to 18.26 per cent or Rs82,889 crore for the corresponding quarter previous year. In FY19, the bank’s recoveries stood at Rs20,000 crore, which included Rs2,100 crore through a one-time settlement scheme. Looking at the improving financials, we recommend a HOLD.
Bharat Dynamics Limited is one of India’s manufacturers of munitions and missile systems. The company specialises in the manufacture of ammunitions, rifles, and panels. It also manufactures other missiles and systems for the Indian armed forces. These include the Konkurs anti-tank missiles.
On the financial front, on a standalone basis, the net sales stood at Rs859.47 crore, posting a drop of 57.09 per cent in Q4FY19 as against Rs20002.77 crore in the same quarter of the previous year. The profit before interest depreciation and tax (PBIDT) came in at Rs120.35 crore in the quarter ending March 2019, showing a fall of 68 per cent from Rs385.48 crore in the same period of the previous year. The profit after tax (PAT) for Q4FY19 was Rs124.12 crore, a drop of 63 per cent from Rs336.66 crore in the corresponding period of the previous fiscal.
On the annual front, the company posted net sales of Rs2,831.41 crore in FY19, a fall of 34 per cent from Rs4,318 crore posted in FY18. The PBIDT was reported at Rs622.11 crore, reflecting a contraction of 6 per cent in FY19 from Rs668 crore reported in FY18. The PAT stood at Rs422.59 crore in FY19, showing a fall of 20 per cent as compared to Rs528 crore in FY18.
Recently, Bharat Dynamics inaugurated a 5 MW solar power project. The project has 20,928 numbers of 265 wp and 270 wp modules powering the whole unit. The solar project, executed by Vikram Solar, India’s leading solar energy solutions provider, is expected to generate 79,00,000 units of energy annually and would be used for captive consumption by the company at its Kanchanbag unit. Solar Energy Corporation of India (SECI) was the consultant for this project and the plant was showcased in the company’s 50-year celebration as well. The company has reduced debt and is virtually debt-free. It has been maintaining a healthy dividend payout of 30.02 per cent. We recommend a HOLD as the company is expected to give a better quarter as the defence industry in India is experiencing significant and progressive change with huge opportunities for growth.
Graphite India Ltd is engaged in the manufacture of graphite electrodes, anodes, other miscellaneous carbon and graphite products, and calcined petroleum coke. The company has also diversified into specialty products, namely, flexible graphite sheets and tubes. The company also undertakes research and development activities in the area of carbon-carbon composites for defence aircraft application. The company is also engaged in the business of steel, graphite and carbon.
On the consolidated financial front, the net sales have gone up by 27.97 per cent to Rs1,693 crore in the quarter ending March 2019 from Rs27.97 crore reported in the same quarter of the previous fiscal. The profit before interest depreciation and tax (PBIDT) came in at Rs864 crore in Q4FY19 as against Rs720 crore posted in Q4FY18, showing a rise of 20 per cent. In terms of profit after tax (PAT), the company witnessed a marginal rise of almost 4 per cent as it stood at Rs564 crore in Q4FY19 as against Rs540 crore in Q4FY18. On the annual front, the net sales shot up 138 per cent to Rs7,858 crore in FY19 as against Rs3,291 crore in FY18. In FY19, the PBIDT has climbed 247.85 per cent to Rs5,023 crore as against Rs1,444 crore in FY18. The PAT jumped 230 per cent to Rs3,399 crore in FY19 as compared to Rs1,032 crore reported in FY 18.
On the valuation front, the company is currently trading at a PE multiple of 1.84x, while the industry PE stood at 1.98x. The ROCE stood at 117.41 per cent and the ROE was at 84.1 per cent. Also, EV/EBITDA in FY19 stood at 2.06x versus 9.93x in FY18, showing smooth operating performance.The company is virtually debt-free. The stock provides good dividend yield of 17.17 per cent and the company has been maintaining a healthy dividend payout of 39.77 per cent. On TTM basis, the company’s profit growth is 232.36 per cent. Also, EV/EBITDA in FY19 stood at 2.06x versus 9.93x in FY18. After reviewing the company, we would recommend a HOLD keeping in mind the abovementioned factors.
JSW Steel Ltd is the largest private sector steel manufacturer in terms of installed capacity. It is also one of the lowest cost steel producers in the world. It offers a wide range of steel products like hot rolled, cold rolled, galvanized, galvalume, pre-painted galvanised, pre-painted galvalume, TMT rebars, wire rods and special steel bars, rounds & blooms. The company is also in the business segment of steel and power.
On the financial front, on a consolidated basis, the company’s net sales for Q1FY20 stood at Rs19,407 crore, posting marginal de-growth of 2.72 per cent from Rs19,950 crore in the same quarter of the previous year. The PBIDT of the company for Q1FY20 was Rs3,716, demonstrating a contraction of 27.21 per cent from Rs5,105 crore posted in Q1FY19. The company posted net profit of Rs1,027 crore in Q1FY20 as compared to net profit of Rs2,318 crore in Q1FY19, a fall of 55.69 per cent. On the annual front, the company’s net sales for FY19 were Rs82,499 crore, up by 15.63 per cent from Rs71,349 crore recorded in FY18. The PBIDT grew over 28 per cent and came in at Rs18,952 crore in FY19 versus Rs14,794 crore posted in FY18. The net profit posted by the company in FY19 was Rs7,554 crore versus net profit of Rs6,071 crore in FY18, showing a rise of 24.43 per cent.
On the valuation part, the company is currently available at a PE of 7.17x as compared to the industry PE of 5.91x. The return on equity (RoE) stood at 26.3 per cent and the return on capital employed (RoCE) was 21.92 per cent. The average realisation declined YoY due to lower steel prices and unfavourable mix. Also, steel making operations were impacted by maintenance shut down and repair of JV of AION Capital and JSW Steel Ltd.
At the end of July, 2019, JSW Steel has been declared as the ‘preferred bidder’ for another three iron ore mines (Narayanpura manganese & iron ore mine, Dharmapura iron ore mine and BBH mines) in the auctions held by the Government of Karnataka in July 2019. The estimated resources of the aforesaid mines are around 92.97 MMT. We recommend a HOLD.