Share Market Tips For December 2017
Dec 01, 2017 | 19:15 PM IST
Dec 01, 2017 | 19:15 PM IST
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Share Market Tips For December 2017
MBL Infrastructure (NSE: MBLINFRA) (Share Price: Rs.27) (Share Market Tips):Avoid
Valuation: Stock is undervalued but fundamentals are poor.Reasons to avoid: Numbers are not showing any growth. Promoters have pledged more than 35% of their holdings. Promoter holding is low, i.e. 21.74%. Contingent liabilities of Rs.1092 crore. Interest coverage ratio is low.Drivers: The government already has given a bigger push to infra sector but the company failed to capitalise the free run of the sector. Most of the closed peers have delivered significantly well in last few years but due to lack of operational efficiency, the company hardly managed to survive.Financial: Construction and engineering sector is doing well but the company failed to show positive results. On YoY basis, the company is showing continuous downtrend as earnings are hardly making any positive impact on investors. Margins are hammered in the last couple of years.
Idea Cellular Ltd (NSE: IDEA) (Share Price: Rs.102) Share Market Tip: Avoid
Valuation: Stock is overvalued with poor fundamentals.Reasons to avoid: On a monthly basis, the company is losing its subscriber base. In the month of July 2017, the company lost 2.3 million subscribers. Following this, the company's total customer base has decreased to Rs.19.39 crores. Data shows that the subscribers are opting to port to other networks. In the last couple of years, the company lost its market share more than 50%.Drivers: Reliance Jio already has threatened the entire telecom sector. Idea is one of the biggest losers of this. On monthly basis, the company is losing ARPU. In order to stay in the hunt, the company is losing margins just to match the offers provided by the peer group. Reliance Jio is giving offers with nearly zero margins.Financial: Debt is rising on YoY basis. Return ratios are delivering negative results. The last couple of quarters were marginally stable but recovery is looking little far from here.
NCC (NSE: NCC) (Share Price: Rs.135) Share Market Tip: Avoid
Valuation: Overvalued 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.1,673 crores.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 the last couple of years. Cash flows are negative whereas de-growth in revenue as well as in earnings has been seen.
Adhunik Industries (NSE: ADHUNIKIND) (Share Price: Rs.97) Share Market Tip: Avoid
Valuation: Poor valued with PE of 88x.Reasons to avoid: As compared to industry peers, return ratios are low for the company. Market share is low as well and decreasing on Q-o-Q basis. Most of the times stock remain in the circuit as the volume is too low.Drivers: Even after getting stability in the steel sector, the stock is travelling downward only while most of the closed peers are on the performing side. The company has delivered poor growth in last five years.Financial: Revenue growth is continuously down with stable earning but operating margins are getting hammered with negative operating cash flows. Debt is on increasing side as well.
KGN Industries (BSE: 531612) (Share Price: Rs.1.96) Share Market Tip: Avoid
Valuation: Stock is overvalued with poor fundamentals.Reasons to avoid: The company has delivered poor growth of -27% over last five years. Numbers are actually static and so is the business.Drivers: The business model of the company is not stable. Neither any expansion plans are on the cards nor any focus on stabilising the existing business.Financial: Company is posting poor results continuously, both on QoQ and YoY basis. Return ratios are negative and margins are going down.
Jindal Drilling Industries (NSE: JINDRILL) (Share Price: Rs.157) Share Market Tip: Avoid
Valuation: Stock is overvalued with PE multiple of 50x.Reasons to avoid: Peers are much stronger. The company has delivered poor growth of -15.79% over last five years. Strict government regulations mean limited operational efficiency which directly affects margins. Increase in raw material cost affects the profitability of the company.Drivers: Possibilities of reduction in subsidies on natural gas by the Government of India is causing a fall in demand. There is a lot of economic instability and fluctuations in India's policies which threats operations.Financial: Numbers are falling since FY12. The company has hardly posted anything positive. Margins are falling continuously.
Nitin Fire Protection (NSE: NITINFIRE) (Share Price: Rs.7.1) Share Market Tip: Avoid
Valuation: Poor valuation with negative numbers.Reasons to avoid: Return ratios are on the negative side. Promoters have pledged more than 30% of their holdings. Contingent liabilities rose to Rs.224 crore. Promoter's stake is decreasing Q-o-Q basis.Drivers: Looking at mutual funds data, few big players were on the selling side of the stock in last 6-8 months.Financial: FY17 was considerably down for the company as earnings came down to the negative region even revenue has shown significant growth. Lack of operational efficiency dragged the numbers down.
Repro India (NSE: REPRO) (Share Price: Rs.812) Share Market Tip: Avoid
Valuation: Overvalued stock with PE of 123x.Reasons to avoid: Promoter's stake has decreased. The company has delivered a poor growth of -3.8% over last five years. The stock is trading 4 times its book value.Drivers: Peer set is lower valued as compared to the company.Financial: Company has delivered negative earnings in the last couple of years while cash flows are negative as well which points out lack of operational efficiency of the company. Falling profit margins with the negative return on equity.
ACI Infocom Ltd (NSE: 517356) (Share Price: Rs.9.60)
Stock Tip: AvoidValuation: Overvalued with trailing PE of 438x.Reason to Avoid: The company has low promoters holdings of 20.66%. The company's business is earning revenue but not able to maintain margin which results in very low earnings. Drivers: the company is into IT hardware (manufacturing floppy disc) which is out of pace on account of new technology. Also, the company forays into real estate segment with small and mid-size projects on records but yet to pace up with current competitors in markets.Financials: The company has very low ROCE and in ROE in the range of ~1% since last five years. The company has low cash in hand up to Rs.0.06 crores as of now which does not provide enough safety cushion.
Sanco Trans Ltd (NSE: 523116) (Share Price: Rs.260) Share Market Tip: Avoid
Valuation: Overvalued with trailing PE of 84.78x.Reasons to Avoid: Market cap of the company is very low. On a consolidated basis, the company posted negative earnings since last two years.Drivers: Shipping and logistics industry is pacing up which can reflect in peers financials. The company delivered flat growth of 1.3% since last five years.Financials: Net sales stood at Rs 82 crores in FY17 vs Rs 76 crores in FY13. EBITDA stood at Rs 9.6 crores in FY17 vs Rs 15 crores in FY13. EPS stood at Rs 1.81 per share in FY17 vs Rs 35.37 per share in FY13.
Ujjivan Financial Services (NSE: UJJIVAN) (Share Price: Rs.363.05) Share Market Tip: Avoid
Valuation: Overvalued with negative earningsReason to Avoid: Ujjivan reported a loss in PAT due to the higher provision related to bad assets generated during demonetization. AUM growth is also subdued to ~3%.Drivers: Degrowth in MFI and micro individual loans. Higher transition cost impacted margins and may result in low profits in FY18.Financials: In Q2FY18, Interest income down by 3% YoY to Rs 339.3 crores. EBITDA down by 55% YoY resulting into negative PAT. Gross AUM is flat at Rs.6.7 crores. GNPA stood at 4.99%.
Infosys (NSE: Share Price: Rs.1016) Share Market Tip: Avoid
Valuation: Stock is fair valued.Reasons to Avoid: Promoter holding is low in the company i.e. 12.75%. The company has a new management. Though Mr.Nandan Nilekani is there but the company has a new CEO as well. Investors are waiting to hear something from him regarding new plans for the company and the strategies he wants to put forward. Better strategy from investor's point of view could be to give some time to the company to get settle down.Drivers: IT sector is going sideways for a long time and adding to this, change in top management for the company can take some cooling period. The stock is near resistance levels. Mr.Parekh is set to assume charge of the company that is recovering from a year-long acrimony between the previous management and the founders, led by N R Narayana Murthy.Financial: Numbers are stable on YoY and QoQ basis. Little uncertainty has been seen during last few quarters. Margins are stable.
Reliance Naval and Engineering (NSE: RNAVAL)(CMP: 36.2) (Share Market Tips): Avoid
Valuation: Stock is overvalued with poor fundamentals.Reasons to Avoid: Promoters have pledged 100% of their holdings. Interest coverage ratio of the company is low and debt is increasing. The company has delivered poor growth of -22.58% over past five years.Drivers: In the defence sector, peers look much stronger. Peers have stronger order book with intact revenue visibility.Financial: Last 3-4 years were in trouble for the company. The company posted continuous losses. The company is dealing with negative cash flows. The story is same on QoQ basis. Nearly all quarters are on the negative side. Return ratios are negative. Debt is on the higher side and rising over the years.
Viceroy Hotels Ltd (NSE: VICEROY) (CMP: 16.75Share Market Tip: Avoid
Valuation: Stock is overvalued with poor fundamentals.Reasons to Avoid: Promoters have pledged more than 60% of their holdings. Promoter holding is 24% only. The company has interest coverage ratio. The company has delivered poor growth of 2.43% over past five years.Drivers: The hotel industry is looking much stable as the government is taking a lot of efforts in making the majority of places in India as tourist spots. The hotel industry is in a lower slab of GST. It will be driving factor for the industry.Financial: Company posted negative earnings in FY17. Signs of recovery are bleak. Debt is increasing with low-interest coverage. Due to lack of operational efficiency, margins are getting hammered.
Flexituff International (NSE: FLRXITUFF) (CMP: 80.1) Share Market Tip: Avoid
Valuation: Undervalued stock with trailing PE of 16.14x as compare to closed peers. Reasons to Avoid: The company's promoters have pledged 81.26% of their holdings. The company is sitting on high debt with debt to equity ratio of 1.99x. Drivers: High debt of the company is eating out bottom line also pledged share percentage is much higher which does not give a long-term clear picture of the company.Financials: The company posted net sales of Rs.1,467 crores in FY17 vs Rs.1,325 crores in FY16. EBITDA margin stood at 12.59% in FY17 while PAT margin stood at 0.39% in FY17 which is very low.
Axiscades Engineering Technologies (NSE: AXISCADES) (CMP: 140.65) Share Market Tip: Avoid
Valuation: Overvalued with trailing PE of 64.43x as compared to peers.Reasons to Avoid: Operating profit of the company has got impacted due to higher project cost from the US from last one year, which in turn is eating out its net profit.Driver: The company has a global presence in the aerospace engineering sector and one of the niche player. Company's project cost from the US is affecting its margins as per management which is yet to improve.Financial: In Q1FY18, net sales down by 16% Y-o-Y to Rs 53 crores. EBITDA margin stood at 6.2% vs 16.93% in Q1FY17. PAT is negative.
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