Mehabe score: 4 G Factor: 3 Piotski Score: 5 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 3 and Piotski score of 5.
Description
Nelcast is engaged in the business of manufacture of Iron Castings.(Source : 201903 Annual Report Page No:110)Site:NELCASTMain Symbol:NELCAST
Stock trades at 87.8, above its 50dma 74.48. It also trades above its 200dma 66.89. The stock remains bullish on techicals
The 52 week high is at 88.30 and the 52week low is at 47.00
Price Chart
P/E Chart
Sales and Margin
Strengths
– is expected to give good quarter
Weakness
– has low interest coverage ratio.
-The company has delivered a poor sales growth of 1.73% over past five years.
– has a low return on equity of 6.88% for last 3 years.
-Dividend payout has been low at 13.96% of profits over last 3 years
-Debtor days have increased from 74.09 to 98.09 days.
Competition
– The industry trades at a mean P/E of 42.4x. Bharat Forge trades at the industry’s max P/E of 487.41x. NELCAST trades at a P/E of 84.4x
– Industry’s mean G-Factor is 2.6 while the mean Piotski score is 8.0. NELCAST has a G-Factor of 3 and Piotski scoreof 5.
– Average 1 month return for industry is 11.8%. The max 1- month return was given by M M Forgings: a return of 27.38 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 220.45 cr compared to Rs 125.47 cr for period ended Mar 2020, a rise of 75.7%
Operating Profits reported at Rs 18.5 cr for period ended Mar 2021 vis-vis 12.89 for period ended Mar 2020 .
Operating Margins contracted -188.1 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 0.76 compared to Rs 0.7 for previous quarter ended Dec 2020 and Rs 2.63 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 611.0 cr for period ended Mar 2021 vis-vis sales of Rs 567.0 cr for the period ended Mar 2020, a growth of 7.2%. The 3 year sales cagr stood at -6.4%.
Operating margins shrank to 7.0% for period ended Mar 2021 vis-vis 9.0% for period ended Mar 2020, contraction of 200.0 bps.
Net Profit reported at Rs 9.0 cr for period ended Mar 2021 vis-vis sales of Rs 36.0 cr for the period ended Mar 2020, falling 300.0%.
Company reported a poor Net Profit CAGR of -38.1% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 83.0 cr for period ended Mar 2021 vis-vis Rs 32.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was 2.0% compared to 7.0% over the last 3 Years. – The stock has given a return of 80% 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 8% vis-vis a compounded sales growth of -6% over the last 3 Years. – The compounded profit growth on a TTM basis is -75% vis-vis a compounded profit growth of -38% over the last 3 Years.
Ratios
Shareholding Pattern
– Public shareholding has remained largely constant. The Jun 2021 public holding stood at 24.89% vis-vis 24.93% for Mar 2021
Conclusion
– is expected to give good quarter – has low interest coverage ratio.
-The company has delivered a poor sales growth of 1.73% over past five years.
– has a low return on equity of 6.88% for last 3 years.
-Dividend payout has been low at 13.96% of profits over last 3 years
-Debtor days have increased from 74.09 to 98.09 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 74.48 and is trading at 87.8 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
