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Your Questions August 2018

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By IE&M Research

I have 200 shares of Heritage Foods Ltd. Please let me know its future.
Sanatan Pandey, New Delhi

BSE Code/ NSE: 519552 /HERITGFOOD; Face Value: Rs5; CMP: Rs602
52 Weeks H/L (Rs) 885.10 / 525.00; Market Cap Rs (crore): 1403
HOLD

 

Heritage Foods has reported a healthy set of numbers for the first quarter, especially on the operating front. Revenue growth was muted at 4.1% yoy to Rs641.6 crore. Due to the softening of milk prices, the company’s gross margin expanded by 363bps yoy. EBITDA jumped by 30.5% yoy to Rs46 crore. EBITDA margin also expanded by 145bps yoy to 7.2%. On account of higher depreciation and interest cost, PAT growth was slow at 14.7% yoy to Rs21.4 crore. Dairy segment reported revenue growth of 4.8% yoy to Rs618.7 crore. Depreciation for the quarter increased by 22.9% yoy and interest cost was up by 41.4% yoy. Other income stood at Rs1.9 crore against Rs1.5 crore in Q1FY18. The Heritage Group is one of the fastest growing companies in India, with two-business divisions-Dairy and Renewable Energy under its flagship Company Heritage Foods Ltd., which was founded in 1992 by N. Chandrababu Naidu. Currently Heritage’s milk and milk products have a market presence in Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharastra, Odisha, NCR Delhi, Haryana, Rajasthan, Madhya Pradesh, Punjab, Uttar Pradesh, Gujarat and Uttarakhand. Since you have not mentioned your entry price, we cannot give you any suggestion. But as far as the company is concerned, it has a bright future.

 

I have 350 shares of Phillips Carbon Black Ltd. which I bought at Rs301. Now the stock is not showing improvement. Can you please suggest me what steps should be best for my investment.
T Rajendran, Chennai

BSE Code/ NSE: 506590 PHILIPCARB; Face Value: Rs2; CMP: Rs260
52 Weeks H/L (Rs) 318.98 – 108.96; Market Cap Rs (crore): 4514
HOLD

 

Phillips Carbon Black Limited (PCBL), a part of RP-Sanjiv Goenka Group, is India’s largest carbon black producer and exporter. The company has four strategically located state-of-the-art plants at Durgapur, Palej, Cochin and Mundra. Set up in collaboration with US company Phillips Petroleum, PCBL started production in 1962 with 14,000 metric tonnes (MT) of carbon black at Durgapur. Currently, it has a production capacity of 5,15,000 MT per annum in India, and involves a dedicated capacity of Specialty Blacks of 40,000 MT per annum at Palej, and 76 MW of Green power. PCBL has etched its global footprints and has a market presence in more than 30 nations with decanting stations, warehouses located near customer locations. The company provides a complete portfolio of products to meet the specific end requirements across Rubber, Plastics, Coatings, Inks and other niche industries globally.

The operating profits (including hedging cost and foreign exchange fluctuation) for Q1FY19 came in at Rs157 crore, a rise by 70% yoy. The EBITDA margin expanded significantly by 432bps yoy to 20.1% in Q1FY19. The net profit after tax stood at Rs97.5 crore, a rise of 103% yoy. PCBL reported highest ever quarterly profit before tax and profit after tax. The capacity expansion of 56,000 tonne at Mundra in Gujarat made steady progress during the period and is expected to be completed by Q3FY19. The capacity expansion of 32,000 tonne at Palej in Gujarat is expected to be completed by Q2FY20. The combined estimated investment is Rs450 crore. So there is a lot happening and certainly all this will have a positive bearing going forward. Our suggestion is please hold it.

 

I’ve shares of Jubilant Life Sciences Ltd. Please tell me its future.
PRS Sonavane, Nagpur

BSE Code/ NSE: 530019/JUBILANT; Face Value: Rs1; CMP: Rs762
52 Weeks H/L (Rs) 1,039 – 600; Market Cap Rs (crore): 12413
HOLD

 

Jubilant Life Sciences’ (JLS) revenue in Q1FY19 grew by 33.6% yoy to Rs2,079 crore whereas its EBITDA grew by 29.6% yoy to Rs437.6 crore vs. Rs337.6 crore in Q1FY18. The EBITDA margins stood at 21.1% in Q1FY19 vs. 20.3% in Q4FY18 and 21.7% in Q1FY18. PAT grew by 39.4% yoy to Rs200.4 crore in Q1FY19. Pharmaceuticals business revenue grew by 44.9% yoy to Rs1,181 crore in Q1FY19. JLS’s Speciality injectables business grew by 74% yoy, while generics business grew by 4.6% yoy in Q1FY19.

JSL is an integrated global pharmaceutical and life sciences company engaged in manufacturing and supply of APIs, Solid Dosage Formulations, Radiopharmaceuticals, Allergy Therapy Products, Advance Intermediates, Fine Ingredients, Crop Science Ingredients, Life Science Chemicals and Nutritional Products. It also provides services in Contract Manufacturing of Sterile Injectables and Drug Discovery Solutions. The Company’s strength lies in its unique offerings of Pharmaceutical and Life Sciences products and services. JLS is on track to launch six new products in FY19E and has commercialized one product so far. JLS’ new Acetic Anhydride plant is expected to be commissioned by end Q3FY19E. This will provide additional revenues of Rs300cr/annum, when it reaches full capacity utilization. You are advised to keep the shares in your portfolio.

 

I bought 600 shares of Welspun Enterprises Ltd. at Rs 146 after reading about the company in your May issue. I must say I’m happy as surprisingly, immediately after your analysis, the stock went up and made a new high. I was reluctant to book profit within a month when I could have easily pocketed Rs 30,000 but it came down and I’m making only around Rs10,000 right now. I wish to know whether it’s premature to get out of this counter.
Ratnesh P, Bengluru

BSE Code/ NSE: 532553 WELENT; Face Value: Rs10; CMP: Rs164
52 Weeks H/L (Rs) 202.85 – 106.20; Market Cap Rs (crore): 2807
HOLD

Thank you very much for your appreciation. Since last two months the overall market is down. The Indian Sensex has never been a true barometer of the market. It is just an indicator of the perception high networth investors and Institutional investors have in Indian economy and frontline stocks. So it was to happen with Welspun Enterprises also. But we feel it would be really premature to leave the counter. We’ve gone in detail about the company and its future which we don’t feel to repeat here as nothing has changed. However, the quarterly results have been announced and it has been according to our expectations.

The company has posted 99.64% jump in its consolidated net profit at Rs 22.78 crore for the period ended June 30, 2018 and clocked a net profit of Rs 11.41 crore in the April-June quarter of 2017-18 fiscal. Its total income in the first quarter also rose to Rs 380 crore from Rs 237 crore in the year-ago period. The expenses during the quarter under review were at Rs 340 crore as against Rs 206 crore in April-June 2017. Currently, there are close to 40 HAM projects of NHAI, with a total project cost of Rs. 370 billion, open for bidding. Welspun Enterprises is selectively targeting to bid for many of these projects and with a strong order book and healthy cash balance, the company is well-positioned for early financial closure.

During the quarter, the company received provisional certificate for commercial operation of Delhi-Meerut Expressway w.e.f. June 28, 2018. The project, which was completed in a record period of 19 months (vs. scheduled completion period of 30 months), was inaugurated by the Prime Minister Narendra Modi. Apart from demonstrating the operational excellence of the company, the early completion by 11 months entitles WEL to a bonus from the authority.

Besides, the company has a significant stake in oil & gas blocks along with Adani group. You should be ready to keep it for two years to get the maximum returns.

About the author: IE&M Team

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