In an interview to CNBC-TV18, Sharmila Joshi, head of equities at Fairwealth Securities reviews Q4 earnings of Titan Industries, Punj Lloyd and United Phosphorus.
Most of the listed companies have declared their January to March quarter results.
Below is the edited transcript of her interview with CNBC-TV18's Mitali Mukherjee and Reema Tendulkar. Also watch the accompanying video.
Q: Titan is a hit for you, but the stock is seeing some pressure today after what the management had to setout as their growth targets. What do you like about it? What do you see it doing now?
A: We do cover Titan. We have a ‘sell’ call on it. We also see the company’s growth tapering off to 22-23% kind of compound annual growth rate (CAGR) over the next couple of years.
But if you were to look at this quarter number then they have delivered. From the result perspective, it’s a hit because the growth that they have shown both in top-line as well as in bottom-line. They have always said all along the way that studded jewellery would be their focus. That’s the business that they try to grow.
If you were to take the gold jewellery, if you were to look drilled into the results then you see that the grammage has slipped this quarter as well as the customer base has also grown at a very tepid 4% or something like that. So, the customer growth also has not been great for the jewellery business. But it is the studded jewellery business that has done well for them.
When you look at their other businesses like the watches, they took a price hike. You are seeing the full effect of that. So, you are seeing a reasonable growth in the watch business largely because of the price hike that they took.
Even in terms of eyewear, things are stabilising there. You will see that business beginning to contribute going ahead. So, net-net, if you were to see all their various verticals and what they said it would do and whether they have been able to do that then they have been able to deliver quite well as far as all that is concerned. So, from that perspective it’s a hit. But yes, going ahead, definitely the concerns are there.
Q: What do you like about Punj Lloyd?
A: For the fifth quarter, we are seeing a stable performance from Punj Lloyd. That is saying a lot. Precisely we have had the stock saying one thing delivering another, all kinds of things happening in between. But now you are getting a sense that they are able to saying something and they are able to deliver what they have said.
Even in terms of order flow, they have been able to achieve their FY12 order growth. That is very heartening. In terms of EBITDA, you saw a very bad quarter last quarter. But if you look at their EBITDA margin for the entire year then you get a sense that that’s beginning to get quite reasonable. So, whether it’s revenue, whether it’s EBITDA, whether it’s profit, they have delivered what they said they would do. That’s very important for a company like Punj Lloyd because we use to keep seeing promises and then things getting detracted along the way and orders getting cancelled and so on. But now we are beginning to see a stable performance from the company.
But still the debt/equity ratio remains a concern. That is why even I would hold back from re-rating the stock. But in terms of performance, I think it is a good performance and a very healthy order book going ahead. So, there a couple of good news for Punj Lloyd, but the debt/equity would still continue to remain an issue.
Q: United Phosphorous is a miss on your list. You didn’t like the numbers or you didn’t also like the news that came preceding that about the kind of CCI penalty that was being talked about.
A: I think it’s a combination of things. If you were to look at pure numbers then they were reasonable because you did see about 17% year-on-year revenue growth. But the domestic business has not done well. So, for me that was a disappointment because the rest of the world, the other geographies that United Phosphorous is in that did reasonably, but domestic business did very badly.
CCI penalty is substantial. The management has been saying that they will present their case and hopefully it will get reduced. Ofcourse they have been smart enough to announce a buyback. That was a good move on their part. But for me it’s the domestic business because at the end of it we saw it even in Rallies, it’s the domestic business that has disappointed.
Somewhere you get a sense that perhaps the slowdown that whatever you been talking of you have seen the pinch coming in from there where farmers haven’t gone ahead and spent as much as they have done in the past. So, for me, that will remain a concern. That’s the reason why I didn’t like United Phosphorous’ numbers.
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