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Talking stock: Sell RNaval, buy Lupin

Every week, an expert selected by ET answers queries from our readers on equity investments.

ET CONTRIBUTORS|
Jan 01, 2018, 08.58 AM IST
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Considering the enterprise value vis-a-vis its investments, properties and inventory of its assets, you may hold Peninsula Land with a target price of around Rs 42.
By G. Chokkalingam
Founder & MD, Equinomics Research & Advisory

Every week, an expert selected by ET answers queries from our readers on equity investments

I hold 800 shares of Reliance Naval Engineering at an average price of Rs 53 and 500 of Genus Power Infrastructures at an average price of Rs 53.5. Should I hold or sell themRs —Vijay Vittal

Sell RNAVAL in phases on further rise in stock price, considering its balance sheet stress and quantum of losses it is making in its operations. You may sell Genus Power if it rises beyond Rs 75 as its valuation is stretched.

I have 300 shares of Lloyd Electric at Rs 250 and 50 of Symphony at Rs 1,445.Kindly advise what should I doRs —Ajay Kumarseth

You may hold LEEL (new name of Llyod Electric) as it has emerged as almost zero-debt company (net of cash) after selling consumer durable business and remaining two business segments also have some unlocking potential. You should sell Symphony as it trades at stretched valuation of nearly 60 times current year expected earnings.

I hold 300 shares of Peninsula Land, 200 of RBL and 500 of Tata Power. What should I do with themRs — Yashwantpangarkar

Considering the enterprise value vis-a-vis its investments, properties and inventory of its assets, you may hold Peninsula Land with a target price of around Rs 42. If you are a longterm investor, sell RBL Bank and buy South Indian Bank – while RBL with a business size of over Rs 70,000 crore trades over Rs 21,000 crore of market cap, South Indian Bank trades just around Rs 5,700 crore of market cap despite having a business size of over Rs 116,000 crore. I believe this valuation gap would be narrowed down substantially in the next 1 to 2 years. Hold Tata Power as unlocking potential from its investments and low PE of around 12 on current year’s estimated earnings could enable the stock move beyond Rs 100 in the short term itself.

I hold Shakti Pumps at Rs 445 and Sun Pharma at Rs 505. Also, I have recently entered in Autoline Industries. Please recommend whether to hold or sell. —Sailesh Shah

Shakti Pumps trades at exorbitant valuation of around 50 PE on current year’s expected earnings. Rise in material prices also may pressurise its margins, hence sell the stock on further rise. Both Lupin and Sun Pharma are beaten down stocks, but relatively speaking, Lupin looks more attractive in terms of valuation. While Lupin trades at 2.8x Enterprise Value to annualized sales, Sun Pharma trades at 4.6x. Shifting from Sun Pharma to Lupin. Hold Autoline Industries till the company unlocks value from its surplus land bank.

I have 150 shares of Maksans pharma which I had purchased at Rs 100. Please suggestRs — Himanshu Sekhar Sarangi

You purchased this stock within 3 years after it jumped more than 25 times from its low of around Rs 3. Please take this as a lesson, and in future, identify potential multi-baggers based on valuations rather than blindly chasing stocks that have already become solid multi-baggers. Now, hold this stock for some recovery.

I have shares of Steel Exchange India. Please suggest. —Ankur Dutt

Sell it. The company seems to be under tremendous stress – sum of inventories and receivables, and borrowing each more than the annualized current year sales.

I hold 65 share of Lupin at Rs 933. What should I doRs — Ritu Yogesh

I believe Lupin will clear all regulatory hurdles in the next 18 months, and it could go beyond Rs 1,200 within 12 to 18 months. Buy more shares to reduce your average cost.

Please send your queries on Stocks to et.stocks@timesgroup.com; Mutual Funds to et.mfs@timesgroup.com Tax to et.tax@timesgroup.com Insurance to et.insurance@timesgroup.com Realty to et.realty@timesgroup.com
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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