Market mind: Many stories in March quarter results

The announcement of March-quarter results tells me the direction of the country’s economy irrespective of what the Prime Miniter/Finance Minister/Chief Minister may be saying. These have been some of my finds over the last few days.

Welspun Enterprises: There was a time when some marquee clients deserted, observers lost nerve and this stock was battered. Most were alarmed: if this could happen to a prominent brand, how could investors ever be secure? Consider how the numbers nosedived: a loss of around Rs 57 million at EBIT (pre-other income) in Q4 FY17. Even as recent as Q3 FY18, this figure was no more than Rs 54 million and then in Q4 came the rocket - Rs 400 million. Add other income and you have a figure of Rs 670 million. I like this trend; what I don’t like is the market cap of around Rs 30 billion. Why would anyone want to pay a 25 P/E (based on the annualised fourth quarter) for a company that may only be getting its act together?

Kokuyo Camlin: There were times when I wondered why the Japanese collaborator would have put money into this sluggish company. Returns were negligible compared with the invested quantum. The Q4 performance has got me thinking: EBIT more than doubled (mature sector!) to Rs 125 million in Q4 even as revenues marginally declined. The catch lies under ‘Purchase of Traded Goods’, which declined from Rs 566 million to Rs 494 million whereas consumption of raw materials remained unchanged (someone please explain this to me). Market cap? Rs 11 billion! That’s a PE ratio in excess of 100! Which means that if I buy the stock today, my descendants would recover my cost in 2118 (at today’s earnings pace). Ha!

India Glycols: In Q1 FY18, the company reported an EBIDTA of Rs 600 million and while there was talk that the next season’s sugar output would be higher, no one (including this molasses-dependant manufacturer of MEG) would have known by how much. The sugar season of 2017-18 produced India’s highest ever sugar output; the molasses generated was more than the corresponding downstream distillery capacity. Most sugar manufacturers disbursed (takseem is the right word) molasses free (some paid to deliver and get it out of their system). By Q4, India Glycols’ EBIDTA was Rs 1.06 billion. The word is that next season’s sugar output is likely to be even higher – the kind of scenario that would make the CFO of India Glycols swim in cash at the office each morning. Market cap is Rs 1.7 billion, but there is the lurking fear: what happens when the sugar output declines?

Tata Metaliks: The company reported its fourth successive quarterly increase in EBIDTA, which tells me that the government is investing in a bigger way in the country’s water transportation infrastructure (though I would have liked to see accruals funding that growth and not an 80 per cent increase in interest outflow in Q4). Market cap at Rs 20 billion may not be too expensive though I would like to see increased capacity in the pipeline to get some solace.

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