Shankara Building falls for ninth straight day to hit a new low

The stock slipped 5 per cent to Rs 302 on Thursday in the intra-day trade, plunging 42 per cent in the past three months, as compared to a 2 per cent decline in the S&P BSE Sensex.

Shares of Shankara Building Products were trading lower for the ninth straight day on Thursday, down 5 per cent to Rs 302 on the BSE, on concerns of weak earnings. The stock was trading at its lowest level since listing on April 5, 2017. In the past three months, it tanked 42 per cent, as compared to a 2 per cent decline in the S&P BSE Sensex.

The company is one of the leading organised retailers of home improvement and building products in India operating under the brand name Shankara BuildPro.

For the last quarter (January-March) of the financial year FY19, the company had posted 93 per cent year on year (YoY) drop in its net profit at Rs 1.6 crore, due to lower revenue and higher operating costs.

Ebitda (earnings before interest, tax, depreciation and amortisation) margins declined significantly to 2.7 per cent in Q4FY19 from 7.1 per cent in Q4FY18. Low margins for the year were due to increase in raw material cost over the last year. The company reported same store sales (SSS) de-growth by less than10 per cent in Q4FY19.

In May, Shankara Building Products informed the stock exchanges that the company has decided to close retail stores in six locations including Rajkot, Surat, Baroda and Nizamabad to consolidate operations. These stores combined contributed to 1.32 per cent of retail sales for Q4FY19.

The company said the overall working capital employed in the business has reduced sharply between the first half and the second half of the financial year.

“Currently, Shankara is in a correction mode. With the company consciously divesting its volatile margin processing business and increasing its focus on the high growth retail business, we believe Shankara is steadily aligning its business towards its core competency,” analysts at ICICI Securities said in Q4FY19 result update.

It has also shown a marked improvement in balance sheet through improvement in working capital. Its net debt to equity improved from 0.5 times in FY18 to 0.38 times in FY19. It should improve further with partial asset sale and release of working capital from that business. However, a recovery in the business could take a few more quarters, the brokerage firm said in report dated May 16, 2019.

At 02:58 pm, Shankara Building Products was trading 3 per cent lower at Rs 310 on the BSE, as compared to 0.13 per cent gain in the S&P BSE Sensex. A combined 61,935 equity shares changed hands on the counter on the BSE and NSE so far.