Share Market Tips For November 2017

BS Limited (NSE: BSLIMITED) Share Market Tip: Avoid (CMP: 1.30 as of 1/12/2017)

Valuation: Overvalued stock with negative earnings.
Reasons to Avoid: The company has posted weak numbers in last five quarters consistently. It has negative earnings on account of higher operating expenses and negative growth in top line.
Drivers: Promoters have pledged ~54% of their holdings. Though power sector has pace up, but it is not seen in numbers of the company.
Financials: In Q2FY18, the company posted revenue of Rs.7.9 crores vs Rs.228 crores in Q2FY17. The company posted negative PAT and hence earnings are also negative.

Fortis Healthcare (NSE: FORTIS) Share Market Tip: Avoid (CMP: 145 as of 1/12/2017)

Valuation: Stock is fairly valued with PE of 22x.
Reasons To Avoid: Promoters stake has decreased. Promoters have pledged more than 82.55% of their holding. The company has delivered a poor growth of 11.81% over past five years. Return ratios are low for the company.
Drivers: Health minister JP Nadda on Tuesday sought a detailed report from Fortis Memorial Research Institute in response to allegations of medical negligence and overcharging in its treatment of a seven-year-old girl who died of dengue, and Haryana is expected to probe the allegations. This may drag the stock further down in coming time.
Financial: In the last four years, the company improved its operational performance and the same has reflected in the numbers. But FY18 is not in line with the expectations. First two-quarters of FY18 were way below expectations for the company. December used to be better and the company might be hoping something better during December quarter.

OK Play India (BSE: 526415) Share Market Tip: Avoid (CMP: 143.05 as of 1/12/2017)

Valuation: Overvalued as compare to peers with trailing PE of 368.60x.
Reasons To Avoid: The company having debt with DE of 1.38x as of now. Revenue witnessed degrowth of 21% in FY17. It is not seeing any uptick in volume which can boost topline.
Drivers: Promoters have pledged 68.26% of their holding. The company has a portfolio of plastic toys and auto parts still it is not picking up momentum since past years.
Financials: ROE is low to 0.2% in FY17. PAT margin is flat at 0.03% in FY17. EPS was negative till FY16 and in FY17 is slightly positive to Rs.0.03 which is very low as compared to peers.

Adlabs Entertainment (NSE: ADLABS) Share Market Tip: Avoid (CMP: 69 as of 1/12/2017)

Valuation: Overvalued as earnings are negative.
Reasons to Avoid: The company witnessed an increase in debt (DE 2.67x) which weakens the balance sheet. Also, higher interest payment is affecting the net profit of the company.
Drivers: The company has many close competitors which affect the footfall growth. Low footfall growth can affect the topline as well as the margin of the company.
Financials: Net sales for FY17 is flat to positive. Net sale Stood at Rs.239 crores in FY17 vs Rs.234 crores in FY16. Net cash flow is negative since last two years.

EIH (NSE: EIHOTEL) Share Market Tip: Avoid

Valuation: Stock is overvalued with training PE of 13.75x
Reasons To Avoid: The stock is currently overvalued as compared to close peers and trading at much higher level. The company posted weak numbers in Q2FY18 results. At margin front, the company is struggling to maintain the same pace, which affects its operational efficiency.
Drivers: The company is in expansion phase which would take time to reflect in numbers.
Financials: Revenue down by 10% to Rs.1,277 crore in FY17. ROE and ROCE down to 3.84%/ 5.1% in FY17 from 4.45%/6.99% in FY16.

HEG (NSE: HEG) Share Market Tip: Avoid

Valuation: Stock is overvalued with PE of 71x.
Reasons To Avoid: Company has delivered poor growth of -9.6% over past five years. The stock is near 52-week high side and considering current numbers, it is looking difficult for the company to carry the same momentum in coming quarters. Return ratios are negative since last three years.
Drivers: The domestic market is the main driver for the company. Recently, the company has done new acquisitions and focusing on new products and services. The company has a high investment in research and development which may affect the ROI of the company. Raw material cost is rising which is ultimately hammering margins.
Financial: Considering the last couple of years, the company is posting negative earnings nearly in all quarters. Though in few quarters company tried hard to improve performance, but again delivered on the same line of loss. Ultimately, YoY performance was also hammered due to lower margins. In FY17, margins slipped around 80% as compared to FY16.

DLF (NSE: DLF) Share Market Tip: Avoid

Valuation: Stock is overvalued with PE of 135x.
Reasons To Avoid: Company has delivered poor growth of -4.27% over last five years. Borrowings increased in last year and interest coverage ratio of the company is low. Return ratios are low as well. High-interest payments are hammering down profit margins of the company. The book value of the company is 138.
Drivers: Company has the benefit of its exposure to businesses, segments and geographies which reduces the impact of economic cycles. There is limited global exposure as most of their business is in India.
Financial: On the YoY basis, operating margins improved in FY17, but high-interest payment hammered net earnings. In FY17, net earnings jumped nearly 100% but considering recent quarter performances of the company, there could be a sharp decline in the earnings of FY18. The company posted a sharp decline in revenue which increased uncertainty in the bottom line. Compared to the quarter ended September FY17 where net earnings were Rs.204.6 crore, in same quarter FY18, the company managed to deliver net earnings of Rs.12.57 crore.

Fortis Healthcare (NSE: FORTIS) Share Market Tip: Avoid

Valuation: Stock is fairly valued with PE of 22x.
Reasons To Avoid: Promoters stake has decreased. Promoters have pledged more than 82.55% of their holding. The company has delivered a poor growth of 11.81% over past five years. Return ratios are low for the company.
Drivers: Health minister JP Nadda on Tuesday sought a detailed report from Fortis Memorial Research Institute in response to allegations of medical negligence and overcharging in its treatment of a seven-year-old girl who died of dengue, and Haryana is expected to probe the allegations. This may drag the stock further down in coming time.
Financial: In the last four years, the company improved its operational performance and the same has reflected in the numbers. But FY18 is not in line with the expectations. First two-quarters of FY18 were way below expectations for the company. December used to be better and the company might be hoping something better during December quarter.

Gateway Distriparks (NSE: GDL) Share Market Tip: Avoid ( CMP: 251.05 as of 16/11/2017 )

Valuation: Overvalued as compared to peers with trailing PE of 53.13x.
Reasons To Avoid: The company posted degrowth in net sales since last three years. Also, it is unable to sustain margin which affected its EPS which is down to Rs.6.84 per share in FY17 vs Rs.17.27 per share in FY15.
Drivers: Company is facing cash crunch problem. Meanwhile, promoters have a low shareholding in the company up to 26% and promoters have pledged shares of Rs.189.68 crores.
Financials: ROCE has decreased to 6.97% in FY17 vs 17.64% in FY15. Cash flow per share decreased to Rs.5.64. Revenue growth is flat in FY17 to 1.6%.

OK Play India (BSE: 526415) Share Market Tip: Avoid (CMP: 143.05 as of 16/11/2017)

Valuation: Overvalued as compare to peers with trailing PE of 368.60x.
Reasons To Avoid: The company having debt with DE of 1.38x as of now. Revenue witnessed degrowth of 21% in FY17. It is not seeing any uptick in volume which can boost topline.
Drivers: Promoters have pledged 68.26% of their holding. The company has portfolio of plastic toys and auto parts still it is not picking up momentum since past years.
Financials: ROE is low to 0.2% in FY17. PAT margin is flat at 0.03% in FY17. EPS was negative till FY16 and in FY17 is slightly positive to Rs.0.03 which is very low as compared to peers.

Adani Enterprises (NSE: ADANIENT) Share Market Tip: Avoid ( CMP: 157 as of 16/11/2017 )

Valuation: Stock is overvalued with PE of 26x.
Reasons To Avoid: Company has low-interest coverage ratio. Return ratios are low as compared to closed to peers. EPS nearly halved in the last couple of years.
Drivers: Raw material prices are increasing which is ultimately hammering margins of the company. Promoters have pledged more than 20% of their holdings.
Financial: Q2FY18 was negative for the company. Debt is on the increasing side due to which interest payment grew significantly. The case is nowhere different in the YoY performance of the company. Due to increase in raw material cost, expenses jumped instantly.

Bharat Financial Inclusion (NSE: BHARATFIN) Share Market Tip: Avoid ( CMP: 967 as of 16/11/2017 )

Valuation: Stock is overvalued with PE of 46x.
Reasons To Avoid: Return ratios came down drastically. Profit margins are hammered due to rise in expenses.
Drivers: Company has low-interest coverage ratio. Promoters' stake is decreasing quarter on quarter. Promoters' holding is too low, i.e. 1.65%.
Financial: Bottom line is uncertain as debt is increasing year on year. Interest payment is increasing significantly.

Aditya Birla Fashion and Retail (NSE: ABFRL) Share Market Tip: Avoid ( CMP: 152 as of 16/11/2017 )

Valuation: Stock is overvalued with PE of 221x.
Reasons To Avoid: Abof kick-started reasonably well as it's performance is reflected in quarterly earnings of the company. Numbers were uncertain.
Drivers: Aditya Birla Group is reportedly bringing down the shutters of its fashion e-tailing venture, Aditya Birla Online Fashion as it failed to compete against the deep discounting-led model of rivals Flipkart and Amazon. Company cutting the salaries of their employees in order to remain on the profit side. Aditya Birla has shut down Trendin.com last year for the same reason.
Financial: On a QoQ basis, the company has started reducing its losses. Its revenue is growing. Under expenses head, depreciation and interest payment dragging the profit down. The case is the same on the YoY basis as well. Plans are looking unorganized.

Lupin (NSE: LUPIN) Share Market Tip: Avoid

Valuation: Overvalued with trailing PE of 20.8x as compared to close peers.
Reasons To Avoid: Price correction over last six months reason for the weak FY18. The company also posted weak numbers in Q2FY18.
Drivers: Revenue of the company declined in the current quarter at USA geography due to rise in competition gGlumetza and gFortamet ; also surging pricing pressure due to the consolidation of players in the USA. Meanwhile, USFDA issued a warning letter for its manufacturing plants at Goa and Indore.
Financials: In Q2FY18, the company posted revenue of Rs.3952 crores in Q2FY18 vs Rs.4290 crores in Q2FY17. Operating margin declined to 23.4% vs 24.6% in Q2FY17. EPS stood at Rs.10.07 per share vs Rs.14.68 per share in Q2FY17.

Revathi Equipment (NSE: REVATHI) Share Market Tip: Avoid

Valuation: Overvalued with trailing PE of 47x.
Reasons To Avoid: The company is posting weak numbers since last two quarters. Also, the margin of the company compressed dramatically.
Drivers: At the macro front, overall production of the economy improved which is not seen in company's top line. Its sales witnessed degrowth of more than 40% in current quarter.
Financials: In Q1FY18, the company posted revenue of Rs.21.5 crores in Q1FY18 vs Rs.30.8 crores in Q1FY17. Operating margin declined to negative vs 6% in Q1FY17. The company posted negative earnings in the current quarter.

United Breweries (NSE: UBL) Share Market Tip: Avoid

Valuation: Overvalued stock with PE of 88x.
Reasons To Avoid: Company has delivered poor growth of 5.86% over last five years. The company is lagging expansion plans. As compared to closed peers, the company has a low return on equity of 11-13%.
Drivers: Margins hit a lot during last year and continuing to hit due to increased expenses. As far as the demand for the product is concerned, last quarter was poised as few new entrants hit the company.
Financial: Financial numbers took a hit due to operational performance. Adding to this, GST made the market worst for the company.

Punj Lloyd (NSE: PUNJLLOYD) Share Market Tip: Avoid

Valuation: Poor valued stock.
Reasons To Avoid: Company has delivered poor growth of -8.54% during last five years. Contingent liabilities are increasing and have touched Rs.1,810 crore.
Drivers: Return ratios are on the negative side. Promoters have pledged more than 61.98%. Margins are falling on Q-o-Q basis and no signs of any improvement as far as operations are concerned.
Financial: On Q-o-Q basis, numbers are uncertain when closed peers are looking much stable as far as earnings are concerned. On Y-o-Y basis, last three years were in trouble as the company delivered negative earnings.

Adlabs Entertainment (NSE: ADLABS) Share Market Tip: Avoid

Valuation : Over valued as earnings are negative.
Reasons to Avoid : The company witnessed increase in debt (DE 2.67x) which weakens the balance sheet. Also, higher interest payment is affecting the net profit of the company.
Drivers: The company has many close competitors which affects the footfall growth. Low footfall growth can affect the topline as well as margin of the company.
Financials: Net sales for FY17 is flat to positive. Net sale Stood at Rs.239 crores in FY17 vs Rs.234 crores in FY16. Net cash flow is negative since last two years.

Reliance Naval and Engineering Ltd (NSE: RNAVAL) Share Market Tip: Avoid

Valuation: Poor valuation with negative earnings.
Reasons to Avoid: Return ratios are negative. Contingent liabilities are increasing. Margins are going down. There is no control on expenses.
Drivers: Promoter's have pledged entire holdings. Promoter's holdings is less than 30%. Interest coverage ratio of the company is low. Peer group looks better valued as compared to the company.
Financial: Company is delivering negative earnings since last few years. cash flows are negative as well. Debt to equity is more than 7, which is too high as compared to industry data.

Praj Industries (NSE: PRAJIND) Share Market Tip: Avoid

Valuation: Overvalued stock with PE of 45x.
Reasons to Avoid: The company has delivered poor growth of -3.69% over last 5 years. Return ratios are negative.
Drivers: Promoter's holding is around 32%. Dependency ion sugar prices is high and there used be lot of fluctuation in sugar prices.
Financial: On YoY basis, company has delivered falling sales growth. Operating margins impacted by 20% in last couple of years. Net profit slipped from Rs 60 Cr during FY15 to Rs 30 Cr in FY17.

Uttam Value Steels Ltd (NSE: UVSL) Share Market Tip: Avoid

Valuation: Poor valuation with negative earnings.
Reasons to Avoid: The company has delivered poor growth of -1.81% in last five years. The company has delivered negative return ratios.
Drivers: Promoter's have pledged more than 47% of their holdings. Lack of operational efficiency by the company dragged the company down.
Financial: On YoY basis, company has delivered negative earnings since FY14. Splitting year in quarters, scenario is same as all quarter are in negative territory.