Review
In this edition, we have reviewed Ashoka Buildcon and Shriram Transport Finance Limited. We suggest our reader-investors to HOLD in Ashoka Buildcon and Shriram Transport Finance Limited
We had previously recommended Ashoka Buildcon Limited in Volume No. 33, Issue No. 17 under the ‘Choice Scrip’ segment. The stock was then trading at Rs147.85. We had recommended the stock on the basis of its strong execution capability and robust business model.
On a consolidated quarterly basis its net sale rose by 14.6 per cent to Rs1,189.31 crore in Q2FY21 from Rs1,037.76 crore in Q2FY20. The operating profit came in at Rs420.84 crore in Q2FY21, surging up 9.73 per cent as compared to Rs383.52 in Q2FY20. The net profit gave a massive increase of above 600 per cent to Rs63.94 crore in Q2FY21 as compared to Rs8.41 crore in the same quarter previous year. This can be traced to an 80 per cent increase in the other income in Q2FY21 as compared to Q2FY20.
On a consolidated annual basis the net sales grew by 2.85 per cent from Rs4,930.12 crore in FY19 to Rs5,070.47 crore in FY20. The operating profit posted a rise of 12.61 per cent to Rs3,3867.66 crore in FY20 as compared to performance of Rs1,471.38 crore in the previous fiscal year. The consolidated net profit was Rs148.70 crore in FY20 as compared to the net loss of Rs39.23 in the same quarter for FY19. Ashoka Buildcon has signed projects worth Rs3,800 crore in FY20. During the times of the ongoing pandemic the company could revive strongly in a short span of time.
Considering the predicted growth in the companys’ operational as well as attractive financial performance,along with stable and consistent ratings from the well-known ratings agency,we recommend HOLD.
We had previously recommended Shriram Transport Finance Limited in Volume No. 33, Issue No. 17 under the ‘Analysis’ segment. The stock was then trading at Rs1235.85. We had recommended the stock on the basis of strong commercial vehicles’ volume, macroeconomic recovery and improving rural market along with lower credit cost. On a quarterly consolidated financial front, the income from interest was reported at Rs4,299.71 crore for Q2FY21 which is an increase by 5.18 per cent as compared to Rs4,087.85 crore reported for Q2FY20. The total income calculated for Q2FY21 rose up by 4.67 per cent to Rs4,351.26 crore from Rs4,156.92 crore in Q2FY20. For Q2FY21, the company reported a net profit of Rs688.92 crore as against net profit of Rs768.29 crore in Q2FY20, yielding a decrease of 10.33 per cent. On the annual front, for FY20 the company posted interest income of Rs16,267.46 crore which is an increase by 6.07 per cent compared to Rs15,335.69 crore for FY19. The total income for FY20 rose by 6.59 per cent to Rs16,582.63 crore from Rs15,556.66 crore for FY19.
For FY20, the company reported net profit of Rs2,512.27 crore as against net profit of Rs2,575.68 crore in FY19. STFC is a leading player in the organised high-yield, pre-owned CV financing segment
with a reach of 2.10 million customers. It is aiming to increase its presence in rural and urban centres and is also on the way to build partnerships with private financiers in the unorganised market to leverage their local knowhow to enhance market share. Considering the strong financials and its expansion plans we recommend HOLD.
(Closing price as of Jan 27, 2021)