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Investment advisor S P Tulsian and Shahina Mukadam (of IDBI Capital Market) pick out the winners and losers, based on Q1 results of companies.
Excerpts from CNBC-TV18's exclusive interview with SP Tulsian and Shahina Mukadam:
Since you track sugar so closely, has Shree Renuka Sugar and Dhampur Sugar gone down as misses for you?
Tulsian: Incidentally, both these companies have reported very poor results. I am quite disappointed and therefore, I would give them a miss.
If I take Renuka Sugar, their topline is Rs 246 crore, which shows growth, but that includes a turnover of Rs 138 crore from trading.
If I just take the sugar segment results, they have had a turnover of Rs 107 crore on which they have earned a profit of Rs 11.1 crore, which translates into a profit margin of 10.3%.
If I compare the operating profit margin or the segment results with their first and second quarter, then that was 21% and 18%. This means that inspite of the better recovery in the Maharashtra region, their profit margin fell to about 10%, which is very strange.
So I am very disappointed with Renuka Sugars and even considering their consolidated results, the topline has grown by Rs 96 crore on which not much clarity is available. Operations from their Dubai subsidiary has earned them a profit of about Rs 22 crore on which there has been no tax liability. So the major contribution to the company has been coming from their overseas subsidiary.
Dhampur Sugar too had a turnover of Rs 120 crore from its raw sugar business, out of their total turnover of Rs 358 crore on which the net profit has been Rs 15.4 crore. That means a sharp drop in the realization, which in turm means that there is an increase in the cost of the raw materials.
If one takes the overall scenario of both these companies, it is disappointing.
Why has TVS Motor gone down as a hit with you?
Mukadam: I would think that the numbers were good. It did not meet some of the street expectations, but it met our expectations. I believe the volume growth was excellent in the motorcycle department and it is in line with our numbers for the company. For example, for this year, we are expecting a 57% turnover growth from them and I do think these numbers are in line with meeting those.
Is Varun Shipping a bit of a disappointment?
Mukadam: Yes. I think it was the depreciation, which has really hit the company in terms of the bottomline. Turnover has also been below our expectations.
Do you like Chennai Petroleum Corporation ?
Tulsian: Lately, the standalone refineries have been reporting very good numbers, mainly because of the increase in the GRM. And if you take the case of Chennai Petro, after Reliance Industries, this is the only refinery having the complexity of 9.1,
The company has shown very good performance and I hope that they will continue to do the same. On top of it, if you see practically all these standalone refineries, they are ruling at a PE multiple of close to 4-5 right now.
If I take their FY07 estimated bottomline or the resulting EPS, there is no downward risk. So ultimately, we look into the growth potential, which is very good in the next three quarters.
For the entire FY07, the GRM is likely to remain very good and for Chennai Petro, it should do well in the coming quarter. So I am hopeful and optimistic on this stock.
Is KEI Industries a hit for you?
Mukadam: They have done better than what we expected. The topline growth has been pretty strong, 53% YoY higher. They are doing well in both HT cables capacity, which just went on stream end of last year and as well as LT cables.
Also, in spite of raw material costs moving up substantially, they have been able to improve margins by about 190 basis points. So all in all, the numbers are good, with regards to valuation.
We are expecting them to do an earning of about Rs 30 for the full year and at the current price, it is just about 7 times. I think this is attractive.
Indiabulls is a hit, what did you like, the numbers from the broking business or their real estate prospects?
Tulsian: I am totally impressed with Indiabulls' realty business. In fact, if you see the present trend going on in the capital market, I do not see any future or any growth coming in the future quarters from that business.
But if one really sees their realty business model, it is quite interesting. They have given the valuations of their Elphinstone and Jupiter mill property too. Apart from that, they have 50:50 JV with DLF and 150 acre land in Sonepat.
If you take the total of all this, the present value of the market price of the share is only reflecting the realty value. Plus since they have plans of hiving off this realty business into a separate company, where shareholders will also be given shares of the realty company free of cost, I think there will be great unlocking in the value.
Since all their properties are now due for development, the value unlocking or the benefits will come to the company in the form of outright profit booking or in the form of rental income from FY08-09. So all these things makes Indiabulls quite interesting at these levels.
Any disclosures?
Tulsian: I don't have any disclosure to make.
Mukadam: No, I don't own any of these stocks.
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