It’s that sweet spot of the year when the air lightens, the light mellows, a festive December attracts and the excited pursuit of a probable multi-bagger beckons. What a life (apologies to all in the National Capital Region).
Here are some of the companies that attracted my attention during the September quarter of the current financial year:
Torrent Power: If you think the power sector theme is passé, welcome to the outlier. Earnings before depreciation and taxes (EBDT) increased in the past four quarters: Rs 383 crore to Rs 474 crore to Rs 553 crore and Rs 643 crore. Depreciation also increased from Rs 255 crore to Rs 280 crore across terminal points; interest outflow declined from Rs 261 crore to Rs 213 crore; profit after tax trebled. Crazy things happen with valuations when companies suddenly have surplus cash on their books.
Ramkrishna Forgings: It doubled revenue throughput – from Rs 156 crore during the September quarter in FY17 to Rs 333 crore in the quarter just ended — higher capacity utilisation, stronger order book and stronger customer hugs. Result: EBDT has gone ballistic from Rs 10.67 crore at that point to Rs 46.44 crore during the quarter just ended; bottom line has transformed, from a loss of Rs 4.13 crore to Rs 23.53-crore profit, even as interest outflow has remained virtually unchanged, indicating expanded interest cover and cash-richness. Picture abhi baaki hai mere dost.
Rain Industries: When seasoned analysts had forecast a net profit of Rs 140 crore for the second quarter, the company reported a net profit of Rs 253 crore. An earnings before interest, tax, depreciation and amortisation (Ebidta) of around Rs 700 crore in the last quarter, compared to Rs 515 crore in the first quarter, with virtually no increase in interest outflow indicates possibly an inflection quarter; an interest cover of close to five times is an unmistakable signal for a company traditionally restricted by debt. If the company can sustain this Ebitda run rate —a big if — while knocking back debt, then analysts may need to revise their price targets yet again.
HEG: After quarters of defensive reporting, it has posted the kind of numbers that make you believe it is time for a visit to the optician. Consider the EBDT sequence in the past five quarters: Rs 3.98 crore to Rs 12.33 crore to Rs 12.44 crore to Rs 6.33 crore to Rs 174 crore. This the first time in the past five quarters the company reported a profit. Interest was virtually unchanged around Rs 13 crore during the last quarter. This is what happens when you invest in cyclical opportunities; for quarter-on-quarter you see capital depreciate, and then comes that one quarter when you clean the table out.
Subros: You wouldn’t believe the passenger car sector needed Red Bull if you saw the results of this company. EBDT has moved from Rs 25.48 crore to Rs 20.44 crore to Rs 23.96 crore to Rs 23.79 crore to Rs 34.48 crore in the past few quarters. Interest outflow was virtually unchanged; interest cover was nearly six times. Salaam!
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
