时间：2022-10-07 09:00:24
Are shares of large companies which have been part of the main stock indices for years safe? Most people believe that they are. Facts, however, prove otherwise.
Money Today looks at stocks comprising the Nifty and the Sensex which have given negative returns over one-, two- and three-year periods despite the rise in the broader market. Let’s see if they still deserve a place in your portfolio.
RELIANCE INDUSTRIES (RIL)
RIL has given negative returns in the three years ended June. The key reason is falling margins in the refining and petrochemical business. The exploration and production business has also disappointed with steep decline in production and estimated reserves at the KG D6 basin, RIL’s most prolific field off India’s east coast.
While RIL has a lot of cash, analysts fear the company may use it for acquisitions that may dilute share- holder value. The company’s huge share buyback that is under way is expected to prevent any further sharp fall in the stock.
“I won’t advise anyone to buy the stock. I see it trading in the range of Rs 690-750 in the next six months,” says S P Tulsian, an independent financial consultant.
Gajendra Nagpal, CEO, Unicon Investment Solutions, says, “Margins from the petrochemical business will remain under pressure. The market is not convinced with the pile of cash on the balance sheet.”
BHEL
The state-owned company is beset with problems ranging from slowdown in order inflows to rising costs and competition from China’s power equipment makers. Most analysts have a negative view on the stock. But Tulsian is hopeful. “I don’t see any contraction in earnings in 2012-13. Even if there is a 5% fall, it is happen-ing for many companies. The main concern is order inflows, but BHEL has an order pipeline worth Rs 1,50,000 crore. So, it does not need to worry.”
The government plans to impose a duty on import of power generation equipment to protect the domestic companies from cheap Chinese imports. However, Royal Bank of Scotland said in a recent report that while this was a positive, it had come at a time when orders had been placed for 2013-17 and incremental order inflows had dried up.
LARSEN & TOUBRO (L&T)
The engineering and construction company has not done well of late due to slowdown in power, metal, hydrocarbon and railway sectors, besides high interest rates. The company’s margins are expected to contract by 50-75 basis points in 2012-13 but a high return on capital of 20-22% will support valuations, Kotak Institutional Equities has said in a note. Then there are media reports about stake sale in some projects.
However, analysts will watch the June quarter order book closely. “I will wait for the results to come to a conclusion but for now I am negative on the stock,” says A K Prabhakar, senior vice president, equity research, Anand Rathi Securities. “L&T has taken up huge projects like the Hyderabad metro which are long-gestation and capital-intensive. I will see if the management is able to expand the order book,” he says.
NTPC
India’s largest power producer has been hit by coal shortage, high fuel prices and capacity under-utilisation. Analysts do not see any upside over the next one year. “I am not positive on power utilities. There is a long way to go before you can look at them,” says Nagpal of Unicon.
Coal shortage and poor health of state electricity boards along with lower capacity utilisation have been weighing on the company. “I am negative on the stock as there is no visibility on easing of coal supplies. Fresh capacity will come on stream only in the next three years,” says Tulsian.
TATA POWER
The country’s largest private independent power producer is weighed by concerns over recurring losses at its Mundra ultra mega power project due to high coal prices and low coal mining volumes. But other aspects of the power business look strong. “The only thorn is the Mundra project, based purely on imported coal. I am not so negative on Tata Power and would look at a price of around Rs 116 over the next 6-12 months,” says Tulsian.
STEEL AUTHORITY OF INDIA (SAIL)
Low demand, high raw material prices and falling growth have hit the entire metal and mining sector.
One of the factors that investors were looking forward to was SAIL’s planned capacity expansion and modernisation. The company has announced a delay in commissioning of some facilities.
According to a Deutsche Bank report, SAIL has already invested Rs 40,000 crore, but investors are yet to see the benefits reflected in the company’s financials. Elara Capital said it did not expect huge volume growth in 2010-13 because most planned capacities would be completed later in the year. “SAIL has captive iron ore but not coal. The increase in raw material cost is because of coking coal. However, if investors have a horizon of two-three years, it is a good stock,” says Tulsian.
STERLITE INDUSTRIES
Part of the Vedanta group, Sterlite has been hit by slowdown in the metals and mining space. It is likely to be merged with Sesa Goa to form Sesa Sterlite. The valuations arrived at for the merger had a major impact on the stock.
After the merger, every holder of five Sterlite shares will be issued three Sesa Goa shares. This makes a case for buying the Sterlite stock, say experts. The shares of Sterlite and Sesa Goa were at Rs 97.50 and Rs 185.85 on June 28. One can take the arbitrage advantage by buying the Sterlite stock, say experts. “I am extremely positive on Sesa Sterlite post-merger as it will have a wonderful product mix of crude oil, ferrous and non-ferrous metals. While Vedanta Aluminium is a drag, it has been factored in the price. I see the stock as a multi-bagger in the coming years,” says Tulsian.
JAIPRAKASH ASSOCIATES
The stock of the infrastructure firm, which has presence in cement, construction, power generation, roads and real estate, has fallen 37% in the three years ended June 25. The company has taken huge debt for planned capital expenditure of over Rs 47,000 crore between 2007-08 and 2001-12. This, along with higher cement supply, falling demand for real estate and poor performance of the power sector continued to weigh on the stock. However, the company is looking to sell some assets to service debt, according to some media reports.
“I am positive on the company as it’s a conglomerate. Sooner or later the demand will pick up,” says Daljeet Kohli, research head, IndiaNivesh Securities.
A negative for the stock is the penalty imposed by the Competition Commission of India for cartelisation.
RELIANCE INFRASTRUCTURE
The Anil Ambani company has interests in nearly all segments of the power sector, roads and metro rail.
The outlook appears positive due to pick-up in execution of infrastructure projects, including Reliance Power’s Sasan and Samalkot projects. “Reliance Infra is a quality bet. We are hoping that the government takes some action to revive infrastructure activity, which will benefit the company,” says Nagpal of Unicon.
One reason for the company’s underperformance related to group and corporate governance issues. “If we keep aside the group, the company has built and developed good assets over a period. Assets like the Delhi airport metro and sea link will make money some day. Our target is around Rs 800 and we are recommending a buy at every dip,” says Kohli,
DLF
The real estate sector has not been doing well due to high interest rates. The stock of India’s largest realtor has lost over 28% in the last three years. Analysts say the company’s future depends on how efficiently it can sell assets and reduce debt. DLF is coming up with luxury homes in several parts of the country. The response to them will be a catalyst for the stock.
While the stock may spurt on news of sale of assets or development of luxury projects, one should look at it only if any of that fructifies and lowers debt. “I would advise investors to stay away. I find a clear disconnect between what they are telling and what they are doing. On top of that there is financial debt,” says Kohli.
BHARTI AIRTEL
Tight regulations, intense competition and sharp exchange rate fluctuations have hit the company’s performance. To top it all, most telecom companies have taken huge debt to buy licences and expand.
Bharti has taken huge debt and plans to expand in Africa and South East Asia in addition to India. “Bharti has diversified into African countries, which is a negative,” says Prabhakar of Anand Rathi Securities.
Regulatory issues like the fee for excess spectrum, re-farming and fee for renewal of spectrum will also weigh on the company, say experts. In addition, there is frequent imposition of penalties on telecom companies for violating licence norms. “The pain in the telecom sector will remain for the next 6-12 months. The return on equity is also down, which means people are aware that the growth is likely to be delayed. I would recommend an exit,” says Prabhakar.