Share Market Tips For October 2018

Sanco trans Ltd. (BSE: 523116) (Share Price: Rs.217): Avoid (10 Steps To Pick The Best Stocks)

Valuation: Overvalued with trailing PE of 450.28x.

Reasons to avoid: The market cap of the company is very low. On a consolidated basis, the company has posted negative earnings since last two years. Lack of operational efficiency hitting company's earnings.

Drivers: Shipping and logistics industry is pacing up which reflect in peers' financials. Company still posted poor earnings. The company delivered flat growth of 1.3% since last five years.

Financial: 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.

Bajaj Auto Ltd. (NSE: BAJAJ-AUTO) (Share Price: Rs.2453): Avoid

Valuation: Undervalued stock with TTM PE of 15.85x.

Reasons to avoid: Company posted compressed EBITDA margin in Q2FY19 on account of drop in net realization and higher raw material cost. The 3% y-o-y drop in net realization on vehicles sold, as against expectations of flat realization, was the firms biggest failing. Price cuts and discounts on sales may be the reason. Both pricing pressure to regain market share and higher raw material costs took a toll on margins. Further , festive season mood can set the tone for higher realization but still higher commodity cost can maintain pressure on margins.

Financial: In Q2FY19, company reported sales of Rs 1339 crores vs Rs 1071 crores in Q2FY18. EBITDA margin compressed by 290bps YoY. Net profit stood at Rs 1152 crores vs Rs 1112 crores.

Sterling Biotech Ltd. (NSE: STERLINBIO) (Share Price: Rs.0.78): Avoid

Valuation: Very expensive stock with negative returns.

Reasons to consider: The Enforcement Directorate on filed a supplementary charge sheet under the Prevention of Money Laundering Act, 2002 (PMLA) against promoters of Gujarat -based pharma firm Sterling Biotech and its directors. The investigation revealed that the Sandersara brothers and others had manipulated figures in the balance sheets of their flagship companies and induced banks to sanction higher loans. The total amount of loan fraud as on date is Rs 8,100 crores.

Financial: The company posted negative earnings since last six years. Margin is compressing. Promoters have pledged 62.29% of their holding.

Hindustan Zinc Ltd. (NSE: HINDZINC) (Share Price: Rs.279): Potential Buy

Valuation: Undervalued with TTM PE of 14.10x.

Reasons to consider: Company is financially sound with strong balance sheet. The stock price has corrected recently led by price correction in zinc and lead globally. Future outlook for metal prices is strong with a structurally positive pricing scenario for zinc and lead globally due to mining supply cuts and the metal deficit. Attractive dividend payouts and high free cash flow generation further buttress give a positive stance on the stock

Financial: In H1FY19, Revenue stood at Rs 10,087 crores vs Rs 9885 crores in H1FY18. The company reported PAT of Rs 3733 crores vs Rs 4473 crores in H1FY18. The company announces interim dividend of Rs 20/share.

JK Paper (NSE: JK Paper ) (Share Price: Rs.164) : Potential Buy

Valuation: Undervalued with trailing PE of 9.6x.

Reasons to consider: Company posted robust numbers in Q1FY19. Debt free company with healthy margins. Paper industry is doing well owing high demand. ROE improved to ~17%.

Drivers: Favorable demand-supply situation is likely to continue to benefit copier paper segment (CPM) over the medium term in uncoated W&P paper segment which accounts for ~62% of its sales volume. Higher realization fuels financial strength of the company.

Financial: In FY18, ROCE and ROE of the company decreased to 6.7% and 5.3% respectively. Revenue stood at Rs 839 crores, EPS stood at Rs 1.63/share.

Suzlon Energy (BSE: SUZLON) (Share Price: Rs.5.76): Avoid

Valuation: Expensive stock.

Reasons to avoid: Promoter's have pledged more than 99% of their holdings and holding is low: 19.79%. Promoter's stake has decreased. Debt is increasing continuously.

Financials: In Q1FY19, the company reported revenue of Rs 1277 crores vs Rs 2174 crores in Q4FY18. Operating margin turn out negative owing to high cost. The company posted negative net profit since last three quarters.

Infibeam Avenues Ltd (NSE:INFIBEAM) (Share Price: Rs.68.9) : Avoid

Valuation: Overvalued with negative TTM EPS.

Reasons to Avoid: There is no clarity on certain pointers in company. The company had negative auditor observations over the last few years. In, the FY17 company purchased software worth Rs 50 crores from MMS Solutions Pvt Ltd however in the financial statement of MMS shows no revenue and no employees for the year.

Financial: In FY18, ROCE and ROE of the company decreased to 6.7% and 5.3% respectively. Revenue stood at Rs 839 crores, EPS stood at Rs 1.63/share.