Share Market Tips For July 2018

Parsvnath Developers Ltd (NSE: PARSVNATH) (Share Price: Rs.11.75): Avoid

Valuation: Company is posting losses since last three years. There's no sign of recovery yet.

Reasons to avoid: The company's promoters have pledged 89.5% of their holdings. The company is sitting on high debt with a debt to equity ratio of 1.58x. The company has delivered poor growth of -20.98% over past five years and its return on equity of 2.18% over the last three years to have been very low. The company has contingent liabilities of Rs.255.48 crore.

Financial: The company posted net sales of Rs.108 crore in FY18 vs Rs.249 crore in FY17 while PAT is at a loss of Rs.117 crore in FY18 vs (Rs.34) crore in FY17.

Dredging Corporation India Ltd (NSE: DREDGECORP) (Share Price: Rs.479): Avoid

Valuation: Overvalued stock with PE of 78.86x.

Reasons to avoid: Interest coverage ratio of the company is low. Earning per share is about to touch zero levels. The company has delivered poor growth of 3.87% over last five years. The company has a low return on equity of 2.26% for last three years.

Financials: Numbers are falling down continuously since FY15. Revenue growth was down in FY17 while slight up in FY18 but overall flat. Numbers are falling like a house of cards. Profit margins are hammered last couple of years. Operational efficiency of the company is under surveillance.

Bata India (NSE: BATAINDIA) (Share Price: Rs.897): Avoid

Valuation: Overvalued as compared to close peers with trailing PE of 47.07x

Reasons to avoid: Revenue growth will be lower than peers due to increased competition. Currently stock will is trading at all time high levels.

Drivers: New brand Hush Puppies" are loosing market share on account of unavailability of stock due to poor inventory management at store level. In such case other organized players might gain market share than Bata India.

Financials: In Q4FY18, net sales down by 602% QoQ to Rs 632.3 cr. EBITDA margin compressed to 13% QoQ from 16.5% in Q3FY18. PAT done by 23.6% QoQ to Rs 52.1 cr.

Refex Industries (NSE: REFEX) (Share Price: Rs.13.5): Avoid

Valuation: Overvalued stock with PE multiple of 22.13x.

Reasons to Avoid: Promoter holding is low, I.i, 31.5% which is low as compared to closed industry peers. Promoter's stake has decreased. Promoters have pledged 27.69% of their holdings. The company has contingent liabilities of Rs.48 crore against earnings of 0.46 crore in FY18.

Financial: Numbers are uncertain for the company. Both quarter and annual numbers are way below expectations. Lack of operational efficiency is hammering the company down.

IG Petrochemical (NSE: IGPL) (Share Price: Rs. 443): Avoid

Valuation: Undervalued with trailing PE of 9.64x.

Reasons to Avoid: IG Petrochemical is one of the dominant players in Phthalic Anhydride (PA). Anti-dumping duty on PA, which was in force from December 2012 to December 2017, is under review as of now. In the interim, this duty safeguard has been extended till December 24, 2018. But the Directorate General of Trade Remedies has started the sunset review investigation concerning imports of PA originating in or exported from Asian countries like Korea, Taiwan and Israel. In recent, import from Asian countries have increased at CAGR of 30% over FY15-18; which can impact companys business in long run.

Financial: In FY18, the company recorded total income of Rs 1541.5 crores vs Rs 1234 crores in FY17. EBITDA stood at Rs 279.2 crores. The company recorded PAT of Rs 147.4 crores and EPS of Rs 35.53/ share.

Zicom Electronic Security Systems Ltd (NSE: ZICOM) (Share Price: Rs.14.7): Avoid

Valuation: Poor valuation with negative earnings.

Reasons to avoid: The company has delivered poor growth of 8.06% in last five years. The company has delivered negative return ratios. Promoter's have stake has decreased. Promoter's have pledged more than 72.1% of their holdings. Promoter holding is 10.28%. Contingent liabilities of Rs. 724.14 Cr.

Financial: On YoY basis, company has delivered negative earnings since last couple of years. Splitting year in quarters, scenario is same as all quarters are in negative territory. Borrowings increased by more than double in last few years with low interest coverage ratio.

Uttam Value Steels Ltd (NSE: UVSL) (Share Price: Rs.0.15): Avoid

Valuation: Poor valuation with negative earnings.

Educomp Solutions (NSE: EDUCOMP) (Share Price: Rs.2.85): Avoid

Valuation: Poor valuation with unstable operational efficiency.

Bata India (BSE: BATAINDIA) (Share Price: Rs.841): Avoid

Valuation: Overvalued as compared to close peers with trailing PE of 48.11x

Reasons to avoid: Revenue growth will be lower than peers due to increased competition. Currently stock will is trading at all time high levels.

Drivers: New brand Hush Puppies" are loosing market share on account of unavailability of stock due to poor inventory management at store level. In such case other organized players might gain market share than Bata India.

Financials: In Q4FY18, net sales down by 602% QoQ to Rs 632.3 cr. EBITDA margin compressed to 13% QoQ from 16.5% in Q3FY18. PAT done by 23.6% QoQ to Rs 52.1 cr.

Lycos Internet Ltd (NSE: LYCOS) (Share Price: Rs. 4.1): Avoid

Valuation: The company has lower valuation as compared to peers.

Reasons to avoid: Promoter's stake has decreased. As far as pledging is concerned, promoter's have pledged 35.92% of their holdings. Company has contingent liabilities of Rs. 61.30 Cr.

Financial: In Q1FY18, expenses margin rose more as compared to sales margin. Company still managed to post better earnings than earlier years.

A2Z Infra Engineering (NSE: A2ZINFRA) (Share Price: Rs.20.4): Avoid

Valuation: The company is overvalued with negative earnings.

Financial: In Q1FY18, net sales down by 34% QoQ to Rs.112 crores. EBITDA and PAT witnessed negative numbers.

Viceroy Hotels Ltd (NSE: VICEROY) (Share Price: Rs.7.00): Avoid

Valuation: Stock is overvalued with poor fundamentals.

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.

Financials: 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.