Review
and Outlook:
High
interest rates combined with the policy paralysis of the government has taken
its toll on the corporate profits in the quarter. While some of the companies continued to
report higher profits overall it had been a disappointing quarter. Now the CSO has predicted that India will
grow at 5% and it looks like that would be the case. While the government seems to have finally
woken up to the reality, it is yet to make any significant moves except for
making some noise and some minor adjustments to let the fuel companies hike
petrol/diesel price.
India
continues to run high deficits on both current account and fiscal level. Government is trying to control CAD by hiking
import duty on gold and to let the oil companies raise fuel prices. At this point it does not look to control the
fiscal deficit and is confident that their divestments will come handy. Gold demand is high because people do not
have faith in currency that is getting debased and has already resulted in
inflation. Government should try to
address this than increase the duty on gold which would only lead to illegal
means of importing gold. All the central
banks continue to ease and debase their currency and the word currency war is
making headlines more than ever in the global market. Only time will tell where this so called “Currency
war” would lead to. If you go by past history it does not look good.
There are
too many things in government plate to look into to make India grow at rate
seen before. India is currently plagued
with corruption issues, mining bans, land acquisition and fuel supply agreement
issues, inflation etc. at domestic level.
It has to resolve all policy level issues to make it clean and
consistent for foreign investment to come in.
Our savings rate which has been helping us for long seems to be falling
which is not good sign.
RBI has
reduced the interest rate and the government seems to be finally moving albeit
at a very slow pace. Let us see how it
goes in the next few quarters. I am hopeful
that things will only get better from here on and our bad days are over unless
we get into some balance of payment issues.
Quarterly
results of our holdings
Results of
our holdings has been a mixed bag with some companies reporting decent profits
while others reported lower profits. We
do not have any company that had reported any losses.
Results
and my comments are provided below
Stock
|
Operating profit (CQ)
|
Operating profit (LQ)
|
Growth
|
Net Profit (LQ)
|
Net Profit (CQ)
|
Growth
|
Comments
|
Ador
|
7.4
|
3.11
|
-58%
|
4.91
|
2.45
|
-50%
|
Surprise drop.
Need to gather information on whether it’s a temporary drop or
permanent issue
|
Andhra Bank
|
767.6
|
712.09
|
-7%
|
303.17
|
257.09
|
-15%
|
Profits under pressure
due to growing NPAs. The quality of loan
book is not great. Would be switching
soon to better quality banks
|
Atul Auto
|
6.84
|
12.41
|
81%
|
3.09
|
8.28
|
168%
|
Company is having good
sales traction with the new RE auto model.
Also expanding distribution footprint to other states. Looks good for long term bet
|
Axis Bank
|
2059.2
|
2361.51
|
15%
|
1102.27
|
1347.22
|
22%
|
Had a good consistent
quarter. Company has raised equity
through QIP for about $2 billion.
Reasonably valued compared to HDFC bank with similar quality
|
Balmer Lawrie
|
39.46
|
43.42
|
10%
|
28.38
|
32.41
|
14%
|
Had a decent quarter
in line with inflation. Company has
increased capacity and also invested in travel portal to target retail travelers.
|
BHEL
|
2080.45
|
1634.06
|
-21%
|
1432.61
|
1181.85
|
-18%
|
As expected by the
market, the company had a negative growth in both operating and net
profits. This is already priced in the
valuation. Order books continue to be
stagnant/go down as things are tough.
This could be the story for may be next 4 quarters. Long term fundamentals remain intact
and we are in this for long term
|
Bliss GVS
|
11
|
24.68
|
124%
|
8.85
|
9.39
|
6%
|
Operating profit went
up significantly, however the net profit growth was low because of lower
other income and higher tax outgo.
Need to keep a close check on this one for volatility in earnings
|
Engineers India
|
182.24
|
131.11
|
-28%
|
151.26
|
132.33
|
-13%
|
As expected by the
market, the company had a negative growth in both operating and net
profits. This is already priced in the
valuation. Order books continue to be
stagnant/go down as things are tough. This
could be the story for the next 4 quarters.
Long term fundamentals remain intact and we are in this for long term
|
Globus Spirits
|
19.53
|
20.22
|
4%
|
11.74
|
10.7
|
-9%
|
Company seems to have
stagnating sales and net profit growth is lower because of higher
depreciation, interest and tax costs.
Very minor position in this one
and may exit this if the fundamentals don’t improve
|
HDFC
|
10348.62
|
5453.32
|
-47%
|
1020.06
|
1705.83
|
67%
|
HDFC had very good
performance as usual. This business has shown that it can grow for a very
long time
|
HDFC Bank
|
2378.03
|
3023.63
|
27%
|
1429.66
|
1859.07
|
30%
|
HDFC bank again grew
its earnings at 30% like clockwork.
Would love to have as much as I can if the price is right. Right now
buying poor man’s HDFC, Axis bank
|
Indian Bank
|
911.56
|
748.12
|
-18%
|
525.93
|
330.58
|
-37%
|
Profits under pressure
due to growing NPAs. The quality of loan
book is not great. Would be switching
soon to better quality banks
|
Indrapratha Gas
|
150.44
|
187.1
|
24%
|
69.15
|
86.34
|
25%
|
Company continues to
grow. However, the uncertainty on the ruling on the court case against PNGRB
is the only reason; I am not taking bigger position on this one. Will continue to see the outcome and get in
if it is favorable decision
|
Kirloskar Pneumatic
|
17.01
|
15.32
|
-10%
|
11.54
|
7.89
|
-32%
|
Company had stagnant
sales and the general slowdown had affected the company. The net profit degrowth was higher due to
lesser other income and higher depreciation.
Valuations need to correct to make this an attractive buy
|
Lumax Auto Tech
|
16.31
|
16.79
|
3%
|
11.92
|
10.47
|
-12%
|
At operating level, it
has been flattish in a slowdown economy.
Net profit had degrowth due to higher interest, depreciation and tax
outgo. Seems to have done okay and is
available at interesting valuation
|
Mayur Uniquoter
|
13.18
|
16.19
|
23%
|
8.65
|
10.26
|
19%
|
Impressive growth at
both operating and net profit level, however the growth slowed compared to
its previous quarter growth rate and market did not like it and the stock
price corrected. It is likely to grow
at around 15% growth and cannot maintain higher growth. Stock is fairly
valued and if goes down further, it will be a great buy
|
NMDC
|
2260.71
|
1357.39
|
-40%
|
1858.81
|
1292.8
|
-30%
|
Profits had degrowth
due to both lesser volume and price realization. Cyclical stock which will improve only when
the iron ore demand goes up. Stock has
rightly corrected. Stock is fairly valued.
Would like to get out of this as I want to reduce the portfolio size
|
Patels Airtemp
|
3.18
|
3.1
|
-3%
|
1.32
|
1.35
|
2%
|
Down time seems to be
finally over for this one. Margins are
reduced. Will switch to BHEL/Engineers
India due to better value for the price paid
|
Sun TV
|
341.13
|
376.34
|
10%
|
167.88
|
189.88
|
13%
|
Business outlook for
this one has got better due to digitization and better ad spends by
companies. It will be growing in line
with the general economy
|
Suprajit Engineering
|
16.92
|
20.02
|
18%
|
9.81
|
10.99
|
12%
|
While the whole auto
industry had slowed down, suprajit continues to grow above industry. Looks good as a long term holding. Currently fairly valued. Given that it had trouble during slowdown
in 2007-08, I would wait for it to correct a bit to add more
|
Supreme Industries
|
120.34
|
119.37
|
-1%
|
59.29
|
66.37
|
12%
|
Supreme had a flattish
quarter due to zero income on their office space sales. All other segments grew at a decent
pace. Price has run up ahead of
valuation and I would wait for the price to correct if I need to
accumulate. The company quality
continues to be a good one for long term investment
|
Swaraj Engines
|
18.21
|
18.38
|
1%
|
14.08
|
13.76
|
-2%
|
Company had a flattish
quarter due to general slowdown in auto.
Company moat remains intact and looks good for long term. Price correction would make it very
attractive to accumulate
|
TCS
|
4093.81
|
4660.49
|
14%
|
2802.77
|
3549.62
|
27%
|
Company continues to
grow without any hassles. The
valuations are very high though and would add only if it makes sense for the
price paid. Right now its is hold
|
Tide Water
|
24.3
|
21.6
|
-11%
|
15.45
|
14
|
-9%
|
Bought this as a proxy
for Castrol but does not seem to be a good decision. Would be exiting this very soon
|
Vinati Organics
|
29.4
|
25.05
|
-15%
|
16.06
|
12.44
|
-23%
|
Company had not so
good qtr compared to last one because it had a phenomenal last quarter. Profits were depressed due to exchange rate
fluctuation because of which the raw material cost as well as the interest
cost (due to ECB) went up (only on paper as of now) and the margins
compressed. Company has shown that it
is vulnerable to rupee depreciation even though it is supposed to be
naturally hedged.
|
VST Industries
|
55.48
|
49.41
|
-11%
|
37.97
|
33.4
|
-12%
|
The topline remained
flattish for VST. The margins have
gone down. This is known to be a slow
to flattish grower which had an extraordinary last year
|
VST Tillers
|
16.24
|
19.55
|
20%
|
11.83
|
12.92
|
9%
|
VST Tillers has shown
some growth in a situation where the whole auto as well as farm businesses
have shown degrowth. Net profit
growths is lesser due to high depreciation and tax and lower other
income. Operating margins have
improved inspite flat sales. Stock
price has corrected along with others thereby making it a very good buy.
|
Wim Plast
|
10.38
|
12.01
|
16%
|
6.52
|
7.64
|
17%
|
Wimplast had a very
good growth in topline as well as at operating level and net profit
level. Slowdown does not seem to have
affected this company. Company seems to be available at attractive valuation
where it will only be better if it corrects more. Yet to pull my trigger on this one
|
