Stop! Read Before You Invest In These Trending Stock Market Tips - Part 2

Sep 01, 2017 | 04:45 PM IST

NCC (NCC): Avoid

Valuation: Over valued stock with expensive valuation as compared to closed peers. The stock is trailing at PE of 121, which is too high.

Comment: Promoter's holding is just 19.56%. Promoters' have pledged more than 29% of their holdings. Contingent liabilities of the company have reached to Rs. 1673 cr.

Company Drivers: Standalone debt of the company has increased substantially to Rs. 1794. The slowdown in execution and delay in payments had led to a significant rise in working capital for NCC in last few years.

Quarterly Performance: Q1FY18 was significantly stable for the company as compared to last few quarters due to Nagpur metro project. But the company has to work on its execution pace in order to keep revenue visibility improving.

Annual Performance: YOY performance of the company is going down since last couple of years. Cash flows are negative whereas de-growth in revenue as well as in earnings has been seen.

Marico (MARICO): Avoid

Valuation: Company is trailing near the higher end of PE. Little expensive stock.

Comment: De-stocking already had hit the performance of the company during last quarter due to GST and it is expected to carry the same momentum in coming couple of quarters.

Company Drivers: Within the segments, few products like Saffola Oats and edible oil took a hit during last year on account of high competition and de-stocking due to GST has also hurt the company.

Quarterly Performance: June quarter was down by 4.86% compared to the fiscal year. Earnings were also on the down side. VAHO segment's volume declined by 8% last quarter.

Annual Performance: All over urban to rural, performance of the company looked weak as most of the segments showed de-growth and decreased market share as well. The Y-O-Y performance was below company's estimates and it is expected to carry the same momentum for next quarter.

India Cements (INDIACEM): Avoid

Valuation: Expensive at current levels as the stock is trailing near PE of 35 whereas return ratios are decreasing as well.

Comment: Promoters' holding is 28.21%. Promoters' have pledged 43.83% of their holdings. Low promoters' holding with pledged shares adds more risk for investors.

Company Drivers: Company's business is dependent on south regions, especially AP and Telangana. Last quarter development pace slowed down in both the states, which ultimately hampered the performance of the company. Adding to this, operations of few plants were on hold due to the government circular on increased pollution and violation of norms.

Annual Performance: Cash flows were near to zero levels. Net profit was on the declining side as well.

Voltas (VOLTAS): Avoid

Valuation: Over valued stock with PE on the higher end of the average, i.e. 32.

Comment: Promoters' holding is 30% only. AC segment is giving threats to hit profit margins due to intensified competition. Inventory de-stocking is affecting the profitability. The company has a weak share in industry convergence towards inverter ACs.

Macro Drivers: Instability in Qatar region hitting the company's account books hard as Qatar accounts nearly 50% of the international order book.

Company Drivers: Voltas is willing to lose the market share rather than compromising on margins. Demand usually stands muted during the 2nd quarter of the financial year.

Quarterly Performance: Even after better revenue growth, the company posted negative earning in Q1FY18. Geographical performance of the company was on declining side.

JSW Steel (JSWSTEEL): Avoid

Valuation: Expensive stock as compared to peers.

Comment: Promoters' have pledged more than 45% of their holdings.

Company Drivers: Consolidated net debt increased steeply due to IND-AS impact and increase in working capital.

Quarterly Performance: Q1FY18 quarter was significantly down. Revenue de-growth has been shown by the company while net profit is hit nearly by 50%.

Ujjivan Financial Services (UJJIVAN): Avoid

Valuation: Over valued stock with PE 71. Closed peers are much better valued.

Comment: Company took a major hit post-demonetisation and it is not yet looking comfortable with their on going operations.

Company Drivers: Recently CDC group sales stake in Ujjivan Financial Services for over Rs. 212 cr.

Quarterly Performance: Q1FY18 performance was on poor side as expenses surged way above revenue. Due to higher expenses, net profit of the company came down sharply.

Axis Bank (AXISBANK): Avoid

Valuation: Over valued stock with expensive valuation as compared to closed peers. The stock is trailing at PE of 35, which is too high.

Comment: Slippages by 3.5% in Q1FY18. The doubtful watch list of the loan book. Rise in GNPA at 5.5% as compared to last three years.

Company Drivers: Net Interest Income growth reduced to 7.5% in FY17. Axis Bank's exposure limits to 8 accounts out of 12 accounts named by banking regulator which creates dark clouds around its asset quality.

Annual Performance: GNPA stood at 5.5x. NNPA stood at 2.3x. The rise in GNPA and NNPA questions the asset quality of the company. PAT showed de-growth of 5.3% to Rs 36792 mn.

Jet Airways (JETAIRWAYS): Avoid

Valuation: Fairly valued stock with trailing PE of 16.8x as compared to peers.

Comment: The company is having high debt with negative net worth (DE -3.31x). Margins of the company got impacted by higher aviation turbine fuel prices. The company is experiencing rising competition from domestic carriers.

Annual Performance: Sales are flat at Rs. 21552 cr. EBITDA down by 50% to Rs 1151 cr. PAT down by 66.73% to Rs 390 cr. EBITDA margin stood at 5.7% in FY17 vs 10.5% in FY16. PAT margin stood at 1.9% in FY17 vs 5.4% in FY16.

Tata Consultancy Services (TCS): Avoid

Valuation: Over valued stock with expensive valuation as compared to closed peers. The stock is trailing at PE of 18.01x.

Comment: Industry headwinds, rupee appreciation and slow down in IT spending is not in favor of the company.

Company Driver: TCS's growth momentum slowed down to ~9% in FY17 as compared to 15% in FY16 on account of industry headwinds.

Quarterly Performance: Net sales flat at Rs. 29584 cr. EBITDA down by 8.84% QoQ/5.41% YoY to Rs 7413 cr. PAT down by 10.15% QoQ/ 5.82% YoY to Rs 5950 cr.

 

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