Query Board

INGERSOLL RAND 

I have 100 Ingersoll Rand shares bought at Rs 850. I have got dividend. Now the share price is Rs 490. Whats should I do ? 

- Abhilash Raval 

Ingersoll-Rand (India) is mainly operates in the business of manufacturing and sale of industrial air compressors of various capacities and related services, and its complete machines and spare parts. On financial front, the company’s revenue for the fourth quarter of FY18 was at Rs 136.28 crore as against Rs 146.9 crore in corresponding quarter of last fiscal year. During the quarter company’s EBITDA surge almost 26 per cent to Rs 23.8 crore from Rs 18.93 in Q4FY17. Notably, Ingersoll-Rand reported 30 per cent yoy surge in net profit to Rs 26.5 crore from corresponding quarter of last fiscal. On annual front, IngersollRand’s revenue for fiscal year 2018 was down marginally by 3 per cent yoy to Rs 614.8 crore. Net profit for the full year increased 15 per cent yoy to Rs 88.9 crore. On May 10, 2018, the company had declared a special dividend of Rs 202 per equity share which was bonanza for shareholders of Ingersoll-Rand. This massive dividend from Ingersoll-Rand means large cash outflow from Ingersoll-Rand’s balance sheet, thus, the stock price of IngersollRand corrected from thereon. In terms of valuation, the stock of Ingersoll-Rand is currently available at 19.7x of its TTM earnings which looks attractive compared to five year median P/E multiple of 32.7x. Moreover, the company has maintained its debt free status consistently. Considering all above factors, we urge our reader-investors to HOLD onto this stock.

HDIL 

I have 1000 shares of HDIL purchased at Rs 63. Please suggest me what to do. Should I hold or exit? 

- Arup Kumar Ray. 

Housing Development and Infrastructure Limited (HDIL) is a Mumbai based real estate development. The company is engaged in various segment of real estate business, ranging from residential, commercial and retail projects, to slum rehabilitation to land development. Furthermore, the company has launched its first flagship project under Budget Homes “The Nest” in Mulund. Ongoing Projects Segment wise breakup, as on March 31st 2018, Residential ~65 per cent, Commercial & Retail ~29 per cent and rest from SRA and company has total saleable area of 28,480,310 square feet. In term of financial performance in fourth quarter of FY18, the company’s net sale dipped 52 per cent to Rs 47.98 crore from Rs 100.91 crore in corresponding quarter of last year. EBITDA for the quarter tanked almost 64 per cent yoy to Rs 12.64 crore with corresponding margin contraction of 798 bps. The EBITDA margin for the quarter stood at Rs 26.4 per cent. The net profit dropped 48 per cent yoy to Rs 9.66 crore. On annual front, the company’s revenue fell 46.4 per cent yoy to Rs 387.8 crore in fiscal year 2018. EBITDA for the full year plunged 66.7 per cent yoy to Rs 88.44 crore. Also, net profit dipped 45.8 per cent yoy to Rs 96.7 crore in FY18. Considering continued financial deterioration of HDIL and lower coverage ratios (interest coverage: 1.14 and debt service coverage: 0.47) we urge our reader investors to EXIT from this counter. 

CLARIANT CHEMICALS 

I hold 50 shares of Clariant Chemicals bought at Rs 850. Please advise whether I should still hold the stock or exit. 

-Nilesh B 

Clariant Chemicals (India) Limited is engaged in manufacturing and selling of specialty chemicals. The company has classified its range of products into two business segments: pigments and colours, and dyes and specialty chemicals.The dyes and specialty chemicals segment includes dyestuff, synthetic resins, binder materials, functional effects, and coating and chemicals. The company’s products are offered to numerous sectors, such as agriculture, infrastructure, home and personal care, packaging, consumer goods, fibres, transportation and healthcare. For the home and personal care sector, it offers whitening dyes and functional waxes, among others. For the packaging sector, it offers pigments and specialty masterbatches. For the consumer goods sector, it offers nickel-free sealants, masterbatches foaming agents and non-halogenated flame retardants, among others. 

On the financial front, the company’s net sales stood at Rs 243 crore in the fourth quarter of FY18 posting a drop of 10 per cent as against Rs 273 crore in the same quarter of the previous fiscal. 

The PBDT of the company has fallen by 38 per cent on a YoY basis to Rs 13 crore in the fourth quarter of FY18 versus Rs 21.80 crore in the fourth quarter of FY17. The net profit of the company has decreased to Rs 1.79 crore in Q4FY18 as against Rs 7.82 crore in Q4FY17, falling by 77 per cent on a YoY basis. 

On the annual front, the net sales of the company has marginally declined by 2 per cent to Rs 1,028 crore in FY18 as against Rs 1,059 crore in FY17. The PBDT of the company dropped by 5 per cent to Rs 71.13 crore in FY18 as against Rs 75.77 crore in FY17. The net profit of the company dipped by 11 per cent, posting Rs 21.60 crore in FY18 as against Rs 24.48 crore in the previous fiscal. 

We expect the company to perform better in the upcoming quarters and, therefore, we would advise our investor-readers to HOLD the stock with a long term perspective. 

MIRZA INTERNATIONAL 

Is the right time to enter in Mirza International Ltd for the long term? 

- Naval 

Mirza International Limited is engaged in the business of manufacturing leather and leather footwear and dealing in apparels. The company operates through two segments: tannery division and shoe division. The tannery division is engaged in the manufacture of finished leather from raw hides, wet blue and crust. The company’s shoe division is engaged in manufacturing finished leather shoes. Its export products include tanned leather, white label footwear and branded footwear. Its brands include Red Tape and Oaktrak. Red Tape includes footwear; apparels, including shirts, jackets, denims, tees, pants/shorts, and accessories, such as belts, socks and wallets. Oaktrak includes both formal and urban styles serving mobile executives and businessmen. The company exports its products to Germany, the United Kingdom, the United States and France, among others. 

On the financial front, the company has posted a 9 per cent growth in net sales to Rs 225 crore in the fourth quarter of FY18 as against Rs 205 crore in the same quarter of the previous year. The PBDT of the company has remained stable at Rs 34.59 crore in Q4FY18 versus Rs 33.75 crore in the fourth quarter of the previous fiscal. Similarly the net profit of the company has remained stable at Rs 17.75 crore in Q4FY18 versus Rs 17.65 crore in Q4FY17, . 

On the annual basis, the net sales have grown marginally by 3 per cent to Rs 972 crore in FY18 as against Rs 935 crore in the previous fiscal. The company witnessed a 10 per cent growth in its PBDT at Rs 149 crore in FY2018 as against Rs 135 crore in FY2017. The net profit of the company has gone up by 9 per cent to Rs 78.41 crore in FY18 as against Rs 71 crore in the previous fiscal. 

The company has not shown much growth on a quarterly basis, although the yearly returns are stable. Therefore, we would suggest the investors to HOLD the stock, but would not recommend a fresh buy 

SOUTH INDIAN BANK 

I hold 1200 shares of South Indian Bank with average cost of Rs 29.73 per share. What is the near and far outlook for these stocks? 

- V R Sriniva 

The South Indian Bank Limited provides retail and corporate banking a well as Para banking activities, such as debit card, third-party product distribution, in addition to Treasury and Foreign Exchange Business. The Bank’s segments include Treasury, Corporate Banking, Retail banking and Other Banking Operations. The Corporate Banking segment provides loans to corporate segment. The Retail Banking segment provides loans to non-corporate customers. The treasury services consists of interest earnings on investments portfolio of the Bank, gains or losses on investment operations and earnings from foreign exchange business. 

On the financial front, the company has posted a 10 per cent growth in its revenue for Q1FY19 at Rs 1,653.91 crore as against Rs 1,490 crore on a YoY basis. In terms of PBDT, the company has posted a 29 per cent drop at Rs 269.64 crore as against Rs 379 crore in the same quarter of the previous fiscal year. The net profit of the company has fallen drastically on a YoY basis by over 77 per cent to Rs 23.04 crore in the first quarter of fiscal year 2019 as against Rs 101.47 crore in the same quarter of the previous year. 

Taking into consideration the annual reports, the company’s revenue has marginally grown by 5 per cent at Rs 6,192.81 crore in FY18 as against Rs 5,847.08 crore in FY17. The PBDT of the company has grown by almost 22 per cent posting Rs 1,480.79 crore in FY18 versus Rs 1,214.59 crore in the previous fiscal year. The net profit of the company has also fallen by 14per cent to Rs 334.80 crore in FY18 as against Rs 392.50 crore in the previous fiscal year, 2017. On the valuation front, the company has return on equity (RoE) of 6.97 per cent.and return on capital employed (RoCE) of 50.45 per cent. The company TTM P/E ratio stood at 12.44x as against the industry PE of 19.22x. 

The company has posted mixed numbers but is on a road to recovery. The stock price of South Indian Bank is thus likely to gain in the coming period. Therefore we recommend our readerinvestors to HOLD the stock. 

FEDERAL BANK 

I have 900 shares of federal bank at Rs 96.76. What is the outlook for long and short term ? Kindly suggest what to do. 

- V R Sriniva 

The Federal Bank operates in four segments: Treasury, Corporate, Retail Banking and other banking operations. The Treasury operations include trading and investments in government and corporate debt instruments, equity and mutual funds, derivative trading and foreign exchange operations on account and for customers. The Corporate Banking segment provides loans and other banking services to corporate and other clients. The Retail banking segment provides lending and other banking services to individuals or small business customers but corporate banking customers. The Other Banking Operations segment includes para banking activities, such as third party product distribution and other banking transactions. 

On the financial front, in Q1FY19 there was a rise in revenue by 14.7 per cent at Rs 2,667.38 crore as against Rs 2,324 crore in the same quarter of the previous fiscal year. The PBDT of the company has remained flat at Rs 602.92 crore in Q1FY19 versus Rs 557 crore in Q1FY18. The net profit of the company has increased by 25 per cent to Rs 262.71 crore for the first quarter of FY19 as against Rs 210.15 crore in Q1FY18. 

On an annual basis, the company has witnessed a 12 per cent growth in its revenue at Rs 9,752 crore in FY18 as against Rs 8,677 crore in FY17. In terms of PBDT, the company has witnessed a 19 per cent increase in FY18 as against Rs 1,924 crore in the fiscal year 2017. Also, the company’s net profit marginally rose by 5 per cent in FY18 to Rs 878 crore versus Rs 830 crore in FY17. On valuation front, the company has return on equity (RoE) of 8.32 per cent and the return on capital employed (RoCE) of 53.08 per cent. The company’s P/E (TTM) stood at 37.39x while the industry P/E ratio was of 19.22x. 

On the basis of the financial data we can see that the company has shown a steady growth in in its financial performance and is likely to continue the trend therefore we recommend our reader-investors to HOLD the stock.