From Graphite India to Apcotex Industries, Q3 numbers tell their own story

Graphite has reported the kind of third quarter numbers that will prompt you to exhale on your glasses, wipe those and read again

At a time when equity gyrations keep investors guessing, it might be better to seek refuge in some of the numbers reported by select companies.

Graphite India: The company has reported the kind of third quarter numbers that will prompt you to exhale on your glasses, wipe those and read again. Consider the ebit (earnings before interest and tax) of the last five quarters: Rs 400 million, Rs 330 million, Rs 450 million, Rs 1,370 million and Rs 5,190 million. That’s right, Rs 5,190 million, an amount that such a company would have made across years. The company’s Q3 tax outgo of Rs 1,760 million is the quantum to make global competitors envious! Interest was less than Rs 20 million, indicating sales against advances. The kind of things that can happen in commodity-based businesses marked by industry attrition, cost moderation and hanging in there.

Apcotex Industries: An interesting instance of a company that has done better virtually every quarter. Even as sales have been range-bound, the EBIT has increased across each of the last five quarters: Rs 53 million, Rs 55.4 million, Rs 76.7 million, Rs 136.2 million and Rs 189.7 mn. The curious explained point is the sharp increase in other income from Rs 11.2 million in Q4 FY17 to Rs 46.6 million in Q3 FY18 though what I like is that interest outflow has been maintained around Rs 5 million or below across each of the last three quarters. The only problem is the speed with which the market has discounted this improvement, making it imperative for the management to work harder to match investor expectations.

Indsil Hydro Power: The company has virtually transformed its reality in the last five quarters. Even as overall revenues have been slightly erratic quarter-on-quarter, there has been EBIT growth in every single of the last five quarters: from Rs 21.3 million to Rs 80.2 million in Q3 FY18. Interest has been largely maintained around Rs 18 million, generating a comfortable interest cover of around five. For a company come virtually from the cold (PAT of less than Rs 5 million in Q3 FY17), the forthcoming quarters will indicate whether it can continue to ride a sectorial rebound to justify a market cap of Rs 3 billion.

Southern Petrochemical: Did the company report a sustainable breakout in Q3 FY18? Consider the reality: sales increased from Rs 4.34 billion in Q3 FY17 to Rs 5.27 billion in Q3 FY18, the EBIT virtually quadrupling to Rs 213.4 million with an interest cover of around seven and quarterly profit after tax rising to its highest in recent times (Rs 174.8 million). Some questions to be asked: will the Q3 kicker extend into Q4? Will much of the improvement be derived from operations (as opposed to sizeable other income in Q4 FY17)? Is there any way the company can moderate its Q2 interest outflow (interest cover of less than two)? Only if I could be convinced that the improvement is sustainable and quarterly earnings before interest, depreciation, tax and amortisation could increase 30 per cent and the stock could correct (market cap Rs 7.75 billion) then we could have a buy on our hands.

The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed