Reviews
In this edition, we have reviewed for two stocks.
We had recommended GAIL (India) Limited in Volume 33, Issue No. 2, dated December 25, 2017–January 7, 2018, under the ‘Cover Story’ section when the scrip was trading at Rs 500. Our recommendation was based on the robust financials and valuations of the company, technological advancements, strong market share, upcoming projects and a virtually debt-free capital structure.
GAIL is the largest natural gas processing and distribution company in India. It is a major player in the oil drilling and exploration industry and operates in the business segments of natural gas, liquid hydrocarbon, LPG transmission, petrochemical and city gas distribution On a standalone quarterly basis, the sales surged 12.10 per cent to Rs 17,299 crore in Q1FY19 from Rs 15,431 crore in Q4FY18. The EBITDA was Rs 2,363 crore in Q1FY19, an increase of 18.26 per cent from Rs 1,998 crore in Q4FY18. The net profit demonstrated a growth of 23.31 per cent, as it increased to Rs 1,259 crore in Q1FY19 from Rs 1,021 crore in Q4FY18.
On an annual basis, the sales in FY18 surged 12.24 per cent to Rs 54,496 crore from Rs 48,552 crore in FY17. Consequently, the EBITDA in FY18 was reported at Rs 8,750 crore as against Rs 7,233 crore in FY17, thereby posting a growth of 20.97 per cent. The net profit of Rs 4,799 crore in FY18 shot up by 42.48 per cent, in comparison to Rs 3,368 crore in FY17.
After our recommendation, the share price of GAIL Limited rose 2.48 per cent. The company has maintained a healthy dividend payout ratio of 44.86 per cent. By virtue of these factors, we recommend our reader-investors to HOLD on to the stock.
We had recommended EIH Limited in Volume 33, Issue No. 10, dated April 16–29, 2018 under the ‘Special Report’ section, when the stock was trading at Rs 167. Our recommendation was based on a reduction in the company’s tax burden upon implementation of GST, the debt-free capital structure and strong dividend-payout ratio. Other factors included upcoming projects such as The Oberoi and other new hotels that would grow its revenue as well as the company’s effective use of working capital.
EIH Limited manages hotels and cruisers in five countries and is part of the Oberoi Group. The company also provides travel and tour services, airport restaurants, flight catering, car rentals, project management and corporate air charters. Additionally, it operates a commercial printing press.
On a quarterly standalone basis, the sales in Q1FY19 dropped 22.35 per cent to Rs 334.96 crore from Rs 431.38 crore in Q4FY18. The EBITDA dropped significantly by 56.30 per cent to Rs 56.81 crore in Q1FY19 from Rs 130.01 crore in Q4FY18. The net profit also marked a significant fall of 81.84 per cent to Rs 10.19 crore in Q1FY19 from Rs 56.13 crore in Q4FY18.
On an annual basis, the sales increased 4.57 per cent to Rs 1,599 crore in FY18 from Rs 1,529 crore in FY17. However, the EBITDA improved significantly to Rs 421 crore in FY18 from Rs 324 crore in FY17, posting a growth of 29.93 per cent. The net profit surged 73.78 per cent to Rs 179 crore in FY18 from Rs 103 crore in FY17.
After our recommendation, the share price of EIH Limited dropped 5.56 per cent. However, since the consolidated financials are demonstrating an improvement, we recommend our reader-investors to HOLD the stock