Parmeshwari Silk Mills

A knowledgeable septuagerian stock broker insists that prospects for the company in the near term are not that encouraging and hence it is not advisable to buy these stocks at this juncture. According to him demand for the company’s products is on the decline and as a result, its financial performance is also poor. The company which was steadily growing of late with its sales turnover advancing from Rs. 82.98 crore in the fiscal 2016 to Rs. 143.47 crore in the fiscal 2020 with the net profit rising from Rs. 94 lakh to Rs. 5.35 crore during this period has started losing ground this year.

As the Q1 (April to June 2020) was a literally washout on account of Covid-19 prompted lockdown, the downturn in performance continues thereafter also. During the Q2 (July to September 2020), the sales turnover declined to Rs. 18.26 crore i.e. by 38.22 per cent as compared to Rs. 29.58 crore in the corresponding quarter a year ago with the net profit slumping by 87 per cent from Rs. 1.41 crore to Rs. 18 lakh only.

The trend continued in the Q3 fiscal 2021 (October to December 2020) with sales dropping by 22.23 per cent – from Rs. 41.58 crore in the Q3 FY 2020 to Rs. 32.34 crore and the profit at net level nosediving by 59 per cent - from Rs. 1.58 crore to 64 lakh, pushing down the EPS (earning per share) from Rs. 5.19 to 2.14. Shareholders who are waiting for a return on their investment for around three decades will have to wait more as the Ludhiana-based textile mill is not undertaking any aggressive marketing drive for its farbics.

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CDSL(BSE Code 543233)

The research outfit of a leading bank is bullish on Central Depository Services Ltd. (CDSL) even though the performance of the company for the Q3 FY 2021 is muted. During the quarter, revenue declined by 3.4 per cent on account of a drop in transaction charges, IPO/corporation action and evoting. The transaction revenue run-rate which almost tripled y-o-y declines by 6.9 per cent Q-o-Q due to moderation in retail activity. Revenue from pledge (Rs. 10 million monthly) will provide some cushion to transaction charges (marketlinked). The annual issues revenue (annually) was stable, the rate hike is pending and the unlisted opportunities is unfolding albeit at a slower pace.

But as far as margin is concerned, the performance is good. BO accounts are building blocks for a depository business and CDSL continues to gain BO account market share from NSDL (going up from 50.1 per cent in December 2019 to 58.1 per cent in December 2020). Its incremental market share stood at 86 per cent due to exclusive arrangements with discount brokers. Margins expanded 409 bps QoQ to 65 per cent due to lower provisions and overall cost savings. Leading to EBITDA margin expansion. The company’s EPS is on the rise.

The company has put up an encouraging show during the Q3 FY2021 with revenues surging 51 per cent to Rs. 103.20 crore from Rs. 68.49 crore in the corresponding quarter of the last year and the profit at net level recording a twofold jump at Rs. 51.03 crore during the quarter. Digital products and online services have proved to be the game changer for the capital market.

(CMP Rs 538.70, 52 week H/L Rs 566/179,, BV Rs 73.90, FV Rs 10)

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Balkrishna Industries(BSE Code 502355)

A research analyst at a leading brokerage house warns that though the going is good at Balkrishna Industries but this trend may not continue going ahead. No doubt the company attracts premium valuation at present as it is doing quite well. During the Q3 FY2021 the company’s revenues have advanced by 30 per cent to Rs. 1505 crore as compared to the same quarter a year ago and EBITDA rising by 40 per cent to Rs. 478 crore, the profit at net level has shot up by 46 per cent to Rs. 322 crore. However, the research analyst fears that going ahead, the company’s return ratios and EBITDA margins would decline in the medium term on account of significant capex commitments towards non-core business.

(CMP Rs 1655.55, 52 week H/L Rs 1885/677, BV Rs 280.10, FV Re 02)

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Minda Industries(BSE Code 532539)

A research analyst working with a mutual fund sees bullish fervor in auto components maker Minda Industries the flagship company of the Uno Minda group, maintaining that the company’s strategy to wide its customer base with existing products and adding new products has started paying rich dividends.

The company’s growing stature is well reflected in its performance during the Q3 FY 2021. With consolidated revenue growing by 36 per cent at Rs. 1802 crore as against Rs. 1327 crore in the corresponding quarter last year, an over two-fold jump from Rs. 53 crore in the Q3 FY2020 to Rs. 121 crore, riding on the continued growth momentum in the automobile industry. Enthused by this performance, the board of directors has proposed an internal dividend of 17.5 per cent (35 paise per share).

Interestingly, most automotive industry segments have reported successive improvement in off-take throughout the February 28, 2021 Corporate India 17 2nd and 3rd quarter of the current fiscal. On the back of initial bounce provided by pent-up demand aspect followed by preference for affordable personal mobility. The company also reported an improvement in its overall performance.

According to the company’s management, healthy demand coupled with higher kit value per vehicle is enabling the company to continue better than industry performance. During the quarter, the company has been able to bring in more efficiencies on the operational front as well as strengthen its balance sheet. The long term outlook for the company is all the more better as long term demand prospects are still intact and the company is well poised to capitalize on this demand.

(CMP Rs 586.50, 52 week H/L Rs 613/208, BV Rs 74.50, FV Rs 02)

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KEI Industries(BSE Code 517569)

An investment manager of a leading bank advises investors not to get disturbed by the 12 per cent drop in revenues of KEI Industries during the Q3 FY2021 as the near and medium-term outlook for the company is highly promising according to him. Though revenues have fallen, the company has reported a 11 per cent improvement in EBITDA margin during the quarter and this is a good sign for the company’s future prospects. The remarkable emphasis on the infrastructure development in the new union budget augurs well for the company.

What is more, the company’s balance sheet is improving with a marked drop in the debt burden. The net debt by December 2020 shrank from Rs. 9.25 crroe as on March 31, 2020 to Rs. 5.30 crore. Rising retail business of the company will enable to the management to bring down the debt further in the coming year.

Again the company is expanding its overseas presence. Today the company exports its products to over 45 countries. Over a year ago, the company has set up marketing/project offices in the UAE, Nepal and Zambia which along with its Australian subsidiary and South African associate company now facilitate the sale of its products to its international customers.

(CMP Rs 500.05, 52 week H/L Rs 542/208, BV Rs 181.20, FV Re 02)

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Visaka Industries(BSE Code 509055)

A knowledgeable HNI (High Networth Investor) is accumulating Visaka Industries. According to him the union Government’s strong emphasis on affordable housing in the wake of its promise to ensure a house for all within the next couple of years, prospects for this asbestos manufacturer have improved considerably. The company’s building products and materials are meeting with rising demand and this is being well reflected in its performance during the Q3 fiscal 2021. With revenues advancing by 16.3 per cent to Rs. 281 crore and EBITDA margin shot up from 10.4 per cent in the fiscal 2020 to 14.6 per cent in the same quarter this year. Going ahead the prospects will improve all the more as the demand for company’s products especially asbestos cement sheets is on a steady rise.

The company’s financial position is improving considerably and it will be a net cash company by the end of the fiscal 2022. With higher FCF generation and consequent reduction in debt, the company is likely to become a debtfree company.

(CMP Rs 480.50, 52 week H/L Rs 499/95, BV Rs 354.20, FV Re 10)

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Magma FinCorp(BSE Code 524000)

An investment banker sees bright future for Magma Fin Corp, a West Bengal-based non-banking finance company (NBFC) which has been taken over by Adar Poonawalla controlled. Rising Sun Holdings which has acquired 60 per cent stake in Magma by subscribing to Magma's Rs. 3456 crore preferential issue Adar Poonawalla has plans to merge his group finance company Poonawalla Finance with Magma and rename the merged entity as Poonawalla Finance. While Adar Poonawalla will take over as Chairman of the new entity, and Abhay Bhutala, Managing Director of Poonawalla Finance will be appointed as Managing Director of the new entity. Thus Magma will now be a part of the Poonawalla group. The original promoters of Magma viz. Sanjay Chamaria and Mayank Poddar will have a nominal 13.3 per cent stake. Mr. Chamaria will be executive Vice Chairman of the company.

The development will prove to be a game changer for Magma as the new management will leverage the company's niche products, geography and customer franchise to improve its market positioning and capitalize on upcoming growth opportunities in its various operating segments. Moreover, the preferential issue would enhance the company's capital adequacy to 68 per cent and its networth would shoot up to Rs. 6300 crore from Rs. 2748 crore as on March 31, 2020. Its total assets are expected to advance from Rs. 15,240 crore to cross Rs. 20,000-crore mark by the fiscal 2023. Again the infusion of funds will enable Magma to further invest in its housing finance subsidiary and general insurance joint venture.

(CMP Rs 98.05, 52 week H/L Rs 99/12, BV Rs 105.0, FV Re 02)

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