Home Investment Memo: 531380

Investment Memo: 531380

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Our Rating: OBSERVE & HOLD

Mehabe score: 3
G Factor: 1
Piotski Score: 6
The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 1 and Piotski score of 6.

Description

Centenial Surgical Suture is inter alia engaged in the development, manufacturing and supply of Medical Devices.(Source : 201903 Annual Report Page No:54)Site: 531380

Market Cap: Rs 20.6 cr Price: 56.4 Trading pe: 20.8x
Book-value: 79.9/share Div yield: 0.00 % Earning yield: 21.50%
Face-value: 10.0/share 52week high: 63.90 52week low: 29.00

Technical Analysis

  • Stock trades at 56.4, above its 50dma 50.71. It also trades above its 200dma 49.53. The stock remains bullish on techicals
  • The 52 week high is at 63.90 and the 52week low is at 29.00

Price Chart

P/E Chart

Sales and Margin

Strengths

– has reduced debt.
– is almost debt free.
-Stock is trading at 0.71 times its book value

Weakness

– Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
-The company has delivered a poor sales growth of 1.46% over past five years.
– has a low return on equity of 6.03% for last 3 years.
– has high debtors of 153.26 days.

Competition

– The industry trades at a mean P/E of 39.3x. Max Healthcare trades at the industry’s max P/E of 491.04x. 531380 trades at a P/E of 20.8x
– Industry’s mean G-Factor is 4.5 while the mean Piotski score is 9.0. 531380 has a G-Factor of 1 and Piotski scoreof 6.
– Average 1 month return for industry is 7.1%. The max 1- month return was given by Max Healthcare: a return of 13.76 %

Quarterly Results

  • Sales for period ended Mar 2021 is Rs 12.84 cr compared to Rs 13.98 cr for period ended Mar 2020, a fall of 8.2%
  • Operating Profits reported at Rs 1.1 cr for period ended Mar 2021 vis-vis 2.54 for period ended Mar 2020 .
  • Operating Margins contracted -960.2 bps for period ended Mar 2021 vis-vis Mar 2020 .
  • The EPS for Mar 2021 was Rs -0.11 compared to Rs 1.15 for previous quarter ended Dec 2020 and Rs 0.05 for Mar 2020

Profit & Loss Statement

Profit&Loss Comments

  • Company reported sales of Rs 36.93 cr for period ended Mar 2021 vis-vis sales of Rs 55.61 cr for the period ended Mar 2020, a fall of 50.6%. The 3 year sales cagr stood at -11.2%.
  • Operating margins expanded to 13.57% for period ended Mar 2021 vis-vis 10.66% for period ended Mar 2020, expansion of 291.0 bps.
  • Net Profit reported at Rs 0.96 cr for period ended Mar 2021 vis-vis sales of Rs 1.3 cr for the period ended Mar 2020, falling 35.4%.
  • Company reported a poor Net Profit CAGR of -14.6% over the last 3 years

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

    Sales Growth

    Profit Growth Statement

    Profit Growth Statement

    Stock Price CAGR

    Return of Equity

    General Comments

    – The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 5.0% compared to 6.0% over the last 3 Years.
    – The stock has given a return of 78% on a 1 Year basis vis-vis a return of 5% over the last 3 Years.
    – The compounded sales growth on a TTM bassis is -31% vis-vis a compounded sales growth of 2% over the last 3 Years.
    – The compounded profit growth on a TTM basis is -54% vis-vis a compounded profit growth of -9% over the last 3 Years.

    Ratios

    Shareholding Pattern

    – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 55.22% vis-vis 55.22% for Dec 2020

    Conclusion

    – has reduced debt.
    – is almost debt free.
    -Stock is trading at 0.71 times its book value – Though the company is reporting repeated profits, it is not paying out dividend
    – has low interest coverage ratio.
    -The company has delivered a poor sales growth of 1.46% over past five years.
    – has a low return on equity of 6.03% for last 3 years.
    – has high debtors of 153.26 days.

    • Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
    • Technically, the stock trades above its 50 DMA 50.71 and is trading at 56.4 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
    • Thus, overall, we retain a OBSERVE & HOLD.

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