Home Investment Memo: RTNPOWER

Investment Memo: RTNPOWER

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Our Rating: OBSERVE & HOLD

Mehabe score: 6
G Factor: 1
Piotski Score: 4
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 4.

Description

RattanIndia Power Limited is engaged in the business of dealing in power generation, distribution, trading and transmission and other ancillary and incidental activities.
Site: RTNPOWER
Main Symbol: RTNPOWER

Price Chart

Market Cap: Rs 4,167 cr Price: 7.76 Trading pe: x
Book-value: -3.56/share Div yield: 0.00 % Earning yield: 8.97%
Face-value: 10.0/share 52week high: 9.99 52week low: 2.36

Technical Analysis

  • Stock trades at 7.76, above its 50dma 6.17. It also trades above its 200dma 4.93. The stock remains bullish on techicals
  • The 52 week high is at 9.99 and the 52week low is at 2.36

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 -9.69% over past five years.
– has a low return on equity of -186.44% for last 3 years.
-Promoters have pledged 88.68% of their holding.
-Earnings include an other income of Rs.629.34 Cr.
– has high debtors of 456.60 days.
-‘s cost of borrowing seems high
-Promoter holding has decreased over last 3 years: -8.89%

Competition

– The industry trades at a mean P/E of 38.2x. Adani Green trades at the industry’s max P/E of 751.67x. RTNPOWER trades at a P/E of x
– Industry’s mean G-Factor is 3.0 while the mean Piotski score is 9.0. RTNPOWER has a G-Factor of 1 and Piotski scoreof 4.
– Average 1 month return for industry is 18.1%. The max 1- month return was given by Adani Green: a return of 40.17 %

Quarterly Results

  • Sales for period ended Sep 2021 is Rs 757.0 cr compared to Rs 198.0 cr for period ended Sep 2020, a rise of 282.3% .
  • vis-vis 122.0 for period ended Sep 2020 .

  • Operating Margins contracted -4087.6 bps for period ended Sep 2021 vis-vis Sep 2020.
  • Company reported operating profit of Rs 157.0 cr for period ended Sep 2021 and operating profit margin at 20.7 % for same period.
  • The EPS for quarter ended Sep 2021 is Rs -0.86 compared to Rs -1.54 for previous quarter ended Jun 2021 and Rs -0.93 for Sep 2020.

Profit & Loss Statement

Profit&Loss Comments

  • Company reported sales of Rs 2797.0 cr for period ended TTM vis-vis sales of Rs 1560.0 cr for the period ended Mar 2021, a healthy growth of 44.2%. The 3 year sales cagr stood at 13.3%.
  • Operating margins shrank to 27.0% for period ended TTM vis-vis 41.0% for period ended Mar 2021, contraction of 1400.0 bps.
  • Net Profit reported at Rs -1314.0 cr for period ended TTM vis-vis sales of Rs -942.0 cr for the period ended Mar 2021, falling 0%.

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

  • CashFlow from operating activities was positive.
  • CashFlow from operating activities: Rs 736.0 cr for period ended Mar 2021 vis-vis Rs 610.0 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 -191.0% compared to -186.0% over the last 3 Years.
– The stock has given a return of 140% on a 1 Year basis vis-vis a return of 27% over the last 3 Years.
– The compounded sales growth on a TTM bassis is 164% vis-vis a compounded sales growth of -9% over the last 3 Years.
– The compounded profit growth on a TTM basis is -474% vis-vis a compounded profit growth of 13% over the last 3 Years.

Ratios

Shareholding Pattern

– FII shareholding has remained largely constant. The Sep 2021 fii holding stood at 0.26% vis-vis 0.28% for Jun 2021
– Public shareholding has remained largely constant. The Sep 2021 public holding stood at 41.7% vis-vis 40.4% for Jun 2021

Conclusion

– is expected to give good quarter – has low interest coverage ratio.
-The company has delivered a poor sales growth of -9.69% over past five years.
– has a low return on equity of -186.44% for last 3 years.
-Promoters have pledged 88.68% of their holding.
-Earnings include an other income of Rs.629.34 Cr.
– has high debtors of 456.60 days.
-‘s cost of borrowing seems high
-Promoter holding has decreased over last 3 years: -8.89%

  • 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 6.17 and is trading at 7.76 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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