This article provides a fundamental analysis of Bliss GVS Pharma Ltd, Sasken Communication Technologies Ltd, Superhouse Ltd, Suzlon Energy Ltd and Punjab National Bank.
In order to benefit the maximum from this article, an investor should focus more on the process of analysis instead of looking for good or bad aspects of the company. She should learn the interpretation of different types of data and transactions and pay attention to the parts of annual reports etc used to get the information. This will help her in improving her stock analysis skills.
Bliss GVS Pharma Ltd
Q: Dear sir, your articles are very helpful for beginners like me. I did my investments without proper knowledge and based on tips. After losing my money, I have started studying.
I have a doubt, is it wrong to stick to the expected returns, like I have. My investment in Bliss GVS Pharma Ltd, where I m getting nearly 45% profit. As I was expecting 100% profit, I didn’t sell Bliss GVS Pharma Ltd when it reached nearly 65%.
I never got a 100% profit in my investments, at least I expect Bliss GVS Pharma Ltd to hit my average pricing of xx/-. Holding from nearly 6 months. Thanks in advance.
Dr Vijay Malik’s Response
Thanks for your feedback.
I do not believe in buying a company with a target price in mind. It is a losing strategy, which leads an investor to sell her winning bets with Ltd profits, and she ends up holding losing investments waiting to achieve breakeven.
If an investor keeps a target price in mind, she would never be able to get multi-baggers in her portfolio.
Warren Buffett acknowledges that most of his wealth is the result of about 8-10 good investment decisions like Coca Cola, Gillette, Wells Fargo, Washington Post etc. If he had kept a target price in mind, his wealth would have been languishing at a few hundred million dollars and not billions, which he owns today. Therefore, I would suggest you not keep an expected return in mind and stay invested till the time business strength of the company is intact.
Analysis of Bliss GVS Pharma Ltd:
I glanced through the financial numbers of Bliss GVS Pharma Ltd. The numbers though looking attractive at the first look, are hiding some concerning developments regarding the business operations of the company.
Sales of Bliss GVS Pharma Ltd have been growing at a good rate for the last 10 years. The company has low debt in comparison to its net worth. The interest coverage ratio is good.
However, Bliss GVS Pharma Ltd is not able to collect its profits in cash. Over the last 10 years, it has reported profits of INR 322 cr. but has received only INR 130 cr. as cash flow from operations. It is a serious issue, as the benefits of sales growth are not flowing to the company and its shareholders. The money is being stuck in receivables, as the company is not able to collect money from its buyers. It might indicate a weak business position of the company or aggressive sales bookings, which the customers might be disputing, or other such issues.
Other operational efficiency parameters of Bliss GVS Pharma Ltd like sales turnover, inventory turnover are also deteriorating in the last 2-3 years. Therefore, I would suggest you do a detailed due diligence of Bliss GVS Pharma before taking any investment-related decision about it.
Further advised reading: How to do Business Analysis of Pharmaceutical Companies
Hope it helps to resolve your query.
regards,
“Sasken Communication Technologies Ltd” and “Superhouse Ltd”
Q: Hi, after applying your analytical steps, I have chosen Sasken Communication Technologies Ltd & Superhouse Ltd for investments. Your views about these 2 stocks.
Dr Vijay Malik’s Response
Thanks for writing to me.
Analysis of Sasken Communication Technologies Ltd:
I do not understand IT companies a lot, however, when I analysed the financials of Sasken Communication Technologies Ltd, I noticed that it has been witnessing a decline in sales continuously from 2009.
Sales of Sasken Communication Technologies Ltd have reduced from about Rs. 700cr. in 2009 to Rs. 458cr. in 2014 and similarly, profits have also reduced. I prefer to invest in companies that have shown good sales growth in past while maintaining profit margins.
Analysis of Superhouse Ltd:
Superhouse Ltd has been growing its sales at about 13% per year for last 10 years, which looks good at first instance, but there are certain issues, which needs to be analysed before making any investment decision about it:
Receivable days of Superhouse Ltd have been increasing consistently from 60 days in 2011 to 150 days in 2014, which means that in 2011, the buyers used to pay Superhouse 60 days after the delivery but now they are paying after 150 days. It is a significant deterioration from a business operations perspective. There might be some disputes with customers that money is not getting realized or the company is booking sales ahead of time than it should.
Inventory of Superhouse Ltd is getting built-up faster than sales. Inventory turnover has been consistently decreasing from 5 in 2011 to 3 in 2014. There might be a situation where the accumulated inventory is getting obsolete and may not be useful for current products being manufactured.
Profitability margins are low at 4-5% PAT margin. At these low margins, the company may face challenges in case of tough business environments.
Hope it helps to highlight the issues that you need to delve deeper into before taking any investment decision about Superhouse Ltd.
“Suzlon Energy Ltd” and “Punjab National Bank”
Q: Sir, I have a question on two stocks in my portfolio PNB@xx/- share and Suzlon Energy Ltd @ xx/- when it was at its highest point. I am a long-term investor and can hold for a year or so. Can u advise on whether to exit or to hold?
Dr Vijay Malik’s Response
Thanks for writing to me!
Analysis of Suzlon Energy Ltd:
On analyzing the financials of Suzlon Energy Ltd, I notice that it is a loss-making company, which has not made any profit since last 5 years.
Suzlon Energy Ltd has very high debt levels and is not making sufficient money to pay interest on its loans as its operating profit is negative for the last 2 years. I think an investor can find many other better opportunities than Suzlon Energy Ltd in the market. I personally would not have invested in Suzlon Energy Ltd in its current situation.
Analysis of Punjab National Bank:
I do not find anything great about it. On analyzing its financials, I find that it is increasing its revenues year on year, however, its profits are going down. This is not a desirable quality of a good investment. If I see the amount of profits retained by PNB over the last 10 years and the amount of wealth created by it for its shareholders during that period, then I find that it has eroded shareholders’ wealth. For every Re. 1 of profits retained by it, PNB seems to have created only Rs. 0.80/-. Again not a good sign. PSU banks have been facing issues with respect to asset quality. I personally would not have kept my money in PNB and shifted it to some other fundamentally good stock, which has been showing good growth with sustained profit margins.
An investor can learn about the process of selecting good stocks by following the steps explained in this series of articles written by me:
I believe you would find a lot of useful information in the above link.
Hope it answers your queries.
regards,
P.S.
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Disclaimer
Registration status with SEBI:
I am registered with SEBI as a research analyst.
Details of financial interest in the Subject Company:
I do not own stocks of the companies mentioned above in my portfolio at the date of writing this article.
