May 11, 2013, 03.36 PM | Source: CNBC-TV18
Balrampur Chini, Reliance Communication are a miss whereas Apollo Tyres, Central Bank, Essar OIl are a hit for SP Tulsian.
SP Tulsian (more)
CEO, sptulsian.com | Capital Expertise: Equity - Fundamental ,IPO
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Talking about sugar, how have you read the numbers of Balrampur Chini - is the lower profit after tax (PAT) worrying you?
A: The disappointment has come more because of the earnings before interest and taxes (EBIT) for sugar segement. Since crushing starts in November, market always expects January to March quarter to have full season and there is no questions of any stock getting extinguished or depleted.
As usual their distillery and cogeneration (cogen) have given very good performance and there is no disappointment from that segment. However, the EBIT of Rs 11 crore on sugar side is a little low and that’s the reason the PAT has come to a level of about Rs 71 crore vis-à-vis market expectation of about Rs 84-86 crore.
The only saving grace for the company is that they have declared a dividend of 200 percent that is Rs 2 per share after a gap of one year. Last year the company had skipped the dividend and prior to that it was 75 paisa per share because in that year the working was very bad.
This is predominantly a sugar company and if the sugar segment itself disappoints in the full season then it will not be seen positive by the market and hence a miss.
Q: Reliance Communications has doubled over last one month are you impressed by the numbers?
A: No. The top-line has been constant if we compare it quarter-on-quarter (Q-o-Q) basis and not on a year-on-year (Y-o-Y).
The PAT of Rs 300 crore plus has largely come because of the other income of Rs 800 crore plus, which otherwise used to be Rs 300 sub Rs 300 crore.
Apart from that the debt situation on a yearly basis has increased by about Rs 1,600-1,700 crore. The debt on March 31, 2013 is at Rs 37,500 crore and the debt prior to that has been closer to Rs 35,800 crore.
A couple of days back they have redeemed USD 500 million debt of External Commercial Borrowings (ECB) loan but that has not come from the profit. Probably, the new amount must have got generated.
On the margin front, there has been reduction of about 180 basis point (bps) on a sequential basis. So, all these things don’t bode well for the stock.
However, the stock has risen more than 100 percent in this last one month or so, which could probably be because strong hands are holding the stock. Otherwise in the normal situation the stock would have corrected by about four-five percent seeing these results, so this is again a miss.
Q: Essar Oil - is the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of Rs 1,500 crore is looking good to you?
A: That’s right. If you see, again on a sequential basis they have posted Rs 1,556 crore EBITDA against Rs 1,240 crore for the Q3.
However, one could argue that in Q3 they have posted very good gross refining margin (GRM), while it was at 9 dollar and 6 cents for this Q4, which could be a bit of disappointment.
Overall, the EBITDA has really pleased. Also the bottom-line of Rs 200 crore that has come after providing Rs 111 crore as the exceptional one-time loss, which they had incurred because they came out of the corporate debt restructuring (CDR) and the part of the amount of about Rs 250 crore were already provided earlier. This is the final amount, which they have charged in this Q4.
Apart from that the 88 percent of the processing of the heavy and ultra heavy by the company in Q4 again indicates a good situation going ahead because they have the higher Nelson Complexity of 14 and the 20 million tonnes refinery has all stabilised. They have operated in Q4 above 100 percent of their rated capacity. The throughput processing has been 5 million tonne plus.
The problem with this company is that the stock very volatile and the concerns continue to remain on the promoter and the interest burden too has been very high, which takes away Rs 900 crore plus interest every quarter, so that takes away the major chunk of EBITDA.
So, focusing purely on Q4 numbers, I will say this is a hit. But that does not give a recommendation to buy the stock now because you will see the stock again getting corrected to Rs 76-78 and again moving swiftly back to Rs 86-88.
So, keep a target of Rs 76-78 in mind, when it corrects one can take an entry into the stock from a short-term point of view.
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