Your Stock Queries

DSIJ equity research experts add value to subscriber's stock portfolio by giving unbiased advice. Ask about your portfolio problem and get your stock queries answered.

EDUCOMP SOLUTIONS

Q: I am holding 50 shares of Educomp Solutions purchased at Rs 270 per share. Should I hold the stock or exit?

- Sandeep Kumar, Kochi

Educomp Solutions, BSE/NSE Code 532696/EDUCOMP, with a face value of Rs 2, is currently trading at Rs 157. Its 52-week high/low stand at Rs 320 and Rs 128 respectively. The stock is currently trading at a 42 per cent discount to your acquisition cost.

Educomp, an educational service and support provider, has been one of the most beaten down stocks over the past one year. The scrip has fallen by almost 70 per cent to Rs 136 over the last 12 months. We, at DSIJ, in our issue dated February 26, 2012, had asked investors to avoid the scrip when it was trading at a price of Rs 236. The major reasons for our ‘avoid’ rating included the company’s weak performance during the September and December quarters of 2011, increasing competition that impacted the pricing of Smart Class revenues and led to lower margins, lower incremental growth opportunity due to a high base, burgeoning debts and a swollen balance-sheet. We also took into account the FCCB redemption obligation that was supposed to materialise by July 2012 at a premium to the principal value and the depreciating rupee value that has led to huge forex losses, impacting the bottomline of the company.

On the financial front, the company ended FY12 on a soft note. The topline grew at 10 per cent on a YoY basis, and stood at Rs 1491 crore as against Rs 1350 crore for FY11. The bottomline, however, witnessed de-growth of 59 per cent on a YoY basis for FY12, standing at Rs 135 crore as against Rs 336 crore for FY11. The scrip discounts its trailing 12-month earnings by 13.87x.

We are still of the opinion that the balance is more tilted towards risk rather than reward. Hence, we advise you to exit the stock even if you have to book losses.

LANCO INFRATECH

Q: I am holding 1200 shares of Lanco Infratech purchased at Rs 15.80 per share. What should my future strategy be?

- Sandesh Dhuri, Via Email

Lanco Infratech, BSE/NSE Code 532778/LITL, with a face value of Re 1, is currently trading at Rs 13 per share, which is at a 17 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 25 and Rs 8 respectively.

Lanco Infratech engages in engineering, procurement and construction (EPC) projects, as well as in the power, solar energy, natural resources, infrastructure and property development businesses, primarily in India. It provides EPC services for thermal and hydro power projects, transmission and distribution projects, as well as for roads, highways and bridges, metros and railways, buildings, airports and sea ports including marine structures and pipelines. The company also generates and trades in thermal, hydro, wind and solar power.

On the financial front, its performance for FY12 has not been good. The topline witnessed a growth of 33 per cent on a YoY basis, and stood at Rs 10243 crore as against Rs 7704 crore for FY11. It reported a loss of Rs 112 crore as against a profit of Rs 446 crore during FY11. The interest outgo has witnessed a jump of 40 per cent YoY, and stands at Rs 1053 crore for FY12 as against Rs 757 crore for FY11. The EV/EBITDA stands at 8.64x and the debt-to-equity ratio is as high as 3.78x.

We suggest that you exit the counter even if you have to book losses.[PAGE BREAK]

TATA MOTORS

Q: I have bought 50 shares of Tata Motors at Rs 280 per share. Please suggest the future course of action for me with respect to these.

- Shamsher Bahadur Singh, Lucknow, Uttar Pradesh

Tata Motors, BSE/NSE Code 500570/TATAMOTORS, with a face value of Rs 2, is currently trading at Rs 221, which is at 21 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 321 and Rs 138 respectively.

Tata Motors engages in the manufacture of a whole range of motor vehicles. The company has a very good dealer, sales, services, and spare parts network, and it also markets its commercial and passenger vehicles in Europe, Africa, the Middle East, South East Asia, South Asia, Russia and South America.

On a consolidated basis, the company’s performance for FY12 was pretty decent. The topline witnessed a growth of 34.66 per cent on a YoY basis, and stood at Rs 164854 crore as against Rs 122426 crore for FY11. The bottomline witnessed a YoY growth of 45.75 per cent, and stood at Rs 13516 crore as against Rs 9273 crore for FY11. On the valuations front, the company discounts its trailing 12-month earnings by 5.21x and the EV/EBITDA stands at 4.03x. The dividend yield on the stock stands at 1.82 per cent.

We are of the opinion that you should hold on to the stock from a longer-term perspective to garner better results.

DHANLAXMI BANK

Q: I am holding 2000 shares of Dhanlaxmi Bank purchased at Rs 60.50 per share. Please advise me as to what my next step should be.

- Saikat Moulik, Jalpaiguri, West Bengal

Dhanlaxmi Bank, BSE/NSE Code 532180/DHANBANK, with a face value of Rs 10, is currently trading at Rs 52, which is at a 14 per cent discount to your acquisition cost. Its 52-week high/low stand at Rs 101 and Rs 42 respectively.

Dhanlaxmi Bank provides various banking products and services in India. It primarily offers deposit products, such as savings, current and term deposits, as well as various loans, including those for property, cars, commercial vehicles and commercial equipment, personal loans, educational loans and loans against securities. It offers corporate banking services, comprising cash. As of July 7, 2011, it had a network of 275 branches and 460 automated teller machines.

On the financial front, the company witnessed a muted performance for FY12. The topline witnessed a growth of 53 per cent YoY, and stood at Rs 1393 crore as against Rs 906 crore for FY11. The bank has reported a loss of Rs 115 crore for FY12 as against a profit of Rs 26 crore for FY11. Its Net Interest Margins (NIMs) stood at 1.80 per cent for Q4FY12 as against three per cent for Q4FY11. The gross and net NPAs stood at Rs 104 crore and Rs 58 crore respectively as against Rs 67.09 crore and Rs 27.47 crore.

We suggest that you exit the counter and look at parking your funds in other private sector banks that will generate better returns for you.