MARKET MIND
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:
MUDAR PATHERYA
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: ~383 crore to ~474 crore to ~553 crore and ~643 crore. Depreciation also increased from ~255 crore to ~280 crore across terminal points; interest outflow declined from ~261 crore to ~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 ~156 crore during the September quarter in FY17 to ~333 crore in the quarter just ended — higher capacity utilisation, stronger order book and stronger customer hugs. Result: EBDT has gone ballistic from ~10.67 crore at that point to ~46.44 crore during the quarter just ended; bottom line has transformed, from a loss of ~4.13 crore to ~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 ~140 crore for the second quarter, the company reported a net profit of ~253 crore. An earnings before interest, tax, depreciation and amortisation (Ebitda) of around ~700 crore in the last quarter of FY17, compared to ~515 crore in the first quarter of FY18, 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: ~4 crore to ~12.3 crore to ~12.4 crore to ~6.3 crore to ~174 crore. This the first time in the past five quarters the company reported a profit. Interest was virtually unchanged around ~13 crore during the last quarter. This is what happens when you invest in cyclical opportunities; you see capital depreciates quarteronand 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 ~25.5 crore to ~20.4 crore to ~24 crore to ~23.8 crore to ~34.5 crore in the past few quarters. Interest outflow was virtually unchanged; interest cover was nearly six times. Salaam!