Your Stock Queries

REI Agro

I have 1000 shares of REI Agro bought at an average price of Rs 9 per share. What should my next step be with regard to these?
- Pritesh Rawat, Via Email

REI Agro is the world’s largest basmati processing company, and manufactures Raindrops Basmati Rice as well as a wide range of other rice variants under the brand name of Raindrops. The company commands a sizeable 22 per cent share of world’s basmati market.

Let’s take a look at the financial performance of this company. Its topline for Q1FY14 stands at Rs 1125.11 crore as against Rs 1508 crore for Q1FY13, marking a decline of 25.39 per cent. The EBITDA of the company stands at Rs 205.76 crore for Q1FY14 as against Rs 216.11 crore reported during the same quarter last fiscal. However, the EBITDA margins improved significantly and stood at 18.29 per cent for Q1FY14, higher by 396 basis points on a YoY basis. Its net profit stands at Rs 5.43 crore for Q1FY14 as against Rs 2.38 crore reported during the same quarter last fiscal.

After reporting a better bottomline in the previous three quarters, the company’s net profit has suddenly fallen in this quarter, which is not good news. At 1.73x, the debt-to-equity ratio is also high. The company has paid finance cost of Rs 188 crore as against the PBIT of Rs 193.71 crore in Q1FY14. The stock is trading at a TTM PE of merely 3.22x. But there is scant likelihood of it catching up on the valuations going forward. Moreover, there is little information about its future plans available in the public domain. We advise you to exit the stock at this juncture even if you have to book losses.

Multi Commodity Exchange of India (MCX)

I have 2000 shares of MCX purchased at Rs 450 per share. Please suggest uptil what time I should hold these, as I currently have no time horizon in mind.
- Raju Verma, Via Email

MCX is India’s leading commodity futures exchange, with a market share of 87.3 per cent in terms of the value of commodity futures contracts traded in FY2012-13. As of CY2012, this was the third largest commodity futures exchange in the world in terms of the number of contracts traded, according to the US-based Futures Industry Association’s annual volume survey released in March 2013. As per the survey, MCX was the world's largest exchange in silver and gold futures, the second largest in copper and natural gas futures, and the third largest in crude oil futures in CY2012.

Let us now take a look at the financial performance of the company. The topline for Q1FY14 remained flat at Rs 122.83 crore as against Rs 122.97 crore for Q1FY13. The bottomline also declined by 7.14 per cent on a YoY basis to stand at Rs 60.12 crore for Q1FY14. On the valuations front, the stock is trading at a PE of 8.68x. However, the recent debacle at the National Spot Exchange, where the promoter of the company is also involved, has eroded the value of the stock considerably.

We see that you are sitting on a profit of 11.11 per cent as of now. It would be a good idea to book profits and make an exit from this counter, and to park your funds in some other non-controversial scrip which can help you generate wealth.

JBF Industries

The stock is currently trading close to its 52-week low. Is this the right time to enter this counter?
- Aneesh Pandey, Via email

JBF Industries is engaged in the business of producing polyester-based products. The company operates in two business segments: Domestic and International. Its product range covers polyester chips, including textile-grade and film-grade. It also includes raw white semi-dull round, dope dyed black round, cationic POY semi-dull round/full dull POY semi-dull round; fully draw yarn, which includes semi-dull and super bright trilobal, and bottle grade polyethylene terephthalate.

The performance of the company has not been encouraging as of the quarter ended June 2013. The topline witnessed a growth of 16.51 per cent to stand at Rs 2095 crore for Q1FY14 as against Rs 1798.10 crore for Q1FY13. The bottomline moved into the red, recording a loss of Rs 41.06 crore for Q1FY14 as against a profit of Rs 33.70 crore reported during the corresponding quarter of the previous fiscal. The dip in the bottomline can be put down to certain factors like the raw material expenses and the employee costs, which went up by 24.02 per cent and 34.45 per cent respectively on a YoY basis. This played spoilsport and resulting in an 88 per cent dip in the operating profit. The interest rates too have gone up considerably by 42 per cent on a yearly basis. We suggest that you steer clear of this counter as of now.

NMDC

I have purchased 100 shares of NMDC at Rs 100 per share. Should I hold these or book profits?
- Chandrima Thukral, Via Email

NMDC is a public enterprise fully owned by the Government of India. The company is involved in the exploration of a wide range of minerals including iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, beach sands, etc. It operates mines in the states of Chhattisgarh and Karnataka.

The financials of the company remained muted for the quarter ended June 2013. Its topline came in at Rs 2870.62 crore, up by a mere 1.10 per cent on a YoY basis from that of Rs 2840.35 crore in Q1FY13. The bottomline declined by 17.51 per cent YoY to stand at 1572.19 crore for Q1FY14 as against Rs 1906 crore for Q1FY13. On the valuations front, the stock is trading at a TTM PE of 8.91x. 

From the details you have provided, we see that you are sitting on a considerable profit already. Hence, we would advise you to book partial profits in at least 75 per cent of your holding to recoup you capital investment, and to stay invested in the rest for the longer term. The company is also a consistent dividend payer, which is another factor that goes in its favour.