Investment Memo: CONTCHM

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Our Rating: HOLD

Mehabe score: 6
G Factor: 4
Piotski Score: 5
The stock has a rating 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 4 and Piotski score of 5.

Description

Continental Chemicals is engaged in the Business of Software consultancy services.
Site: CONTCHM
Main Symbol: CONTCHM

Price Chart

Technical Analysis

• Stock trades at 143.0, above its 50dma 27.81. It also trades above its 200dma 20.86. The stock remains bullish on techicals
• The 52 week high is at 42.30 and the 52week low is at 16.10

Price Chart

P/E Chart

Sales and Margin

Strengths

– has reduced debt.
– is almost debt free.

Weakness

– Stock is trading at 8.37 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of -17.26% over past five years.
– has a low return on equity of 6.91% for last 3 years.

Competition

– The industry trades at a mean P/E of 32.0x. Cont. Chemicals trades at the industry’s max P/E of 161.22x. CONTCHM trades at a P/E of 161.0x
– Industry’s mean G-Factor is 3.4 while the mean Piotski score is 9.0. CONTCHM has a G-Factor of 4 and Piotski scoreof 5.
– Average 1 month return for industry is -14.4%. The max 1- month return was given by Tata Elxsi: a return of 12.66 %

Quarterly Results

• Sales for period ended Dec 2021 is Rs 0.19 cr compared to Rs 0.09 cr for period ended Dec 2020, a rise of 111.1% .

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• Company reported negative operating profit of Rs -0.1 cr for period ended Dec 2021. For same period last year, operating profit was -0.08.
• The EPS for quarter ended Dec 2021 is Rs 0.22 compared to Rs 0.31 for previous quarter ended Sep 2021 and Rs 0.0 for Dec 2020.

Profit & Loss Statement

Profit&Loss Comments

• Company reported sales of Rs 0.48 cr for period ended TTM vis-vis sales of Rs 0.19 cr for the period ended Mar 2021, a healthy growth of 60.4%. The 3 year sales cagr stood at 36.2%.
• Operating margins expanded to -79.17% for period ended TTM vis-vis -252.63% for period ended Mar 2021, expansion of 17346.0 bps.
• Net Profit reported at Rs 0.25 cr for period ended TTM vis-vis sales of Rs 0.14 cr for the period ended Mar 2021, rising 44.0%.
• Company reported a poor Net Profit CAGR of -9.7% over the last 3 years

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

• CashFlow from operating activities: Rs -0.7 cr for period ended Mar 2021 vis-vis Rs -0.94 cr for period ended Mar 2020

Sales Growth

Profit Growth Statement

Profit Growth Statement

Stock Price CAGR

Return of Equity

General Comments

– The stock has given a return of 1031% on a 1 Year basis vis-vis a return of % over the last 3 Years.
– The compounded sales growth on a TTM bassis is 73% vis-vis a compounded sales growth of -32% over the last 3 Years.
– The compounded profit growth on a TTM basis is 400% vis-vis a compounded profit growth of 67% over the last 3 Years.

Ratios

Shareholding Pattern

– Public shareholding has remained largely constant. The Dec 2021 public holding stood at 38.42% vis-vis 38.42% for Sep 2021

Conclusion

– has reduced debt.
– is almost debt free. – Stock is trading at 8.37 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of -17.26% over past five years.
– has a low return on equity of 6.91% for last 3 years.

• The business fundamentals of the stock remain stable. Stronger near term results will build interest in the stock. We suggest to wait for a upturn in business performance.
• Technically, the stock remains above its 50 DMA 27.81 and is trading at 143.0, thus bullish price action wise.
• Thus, overall we retain a HOLD on the stock.

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