Share Market Tips For May 2018

Kaveri Seed Company Ltd (NSE: KSCL) (Share Price: Rs.495): Avoid

Valuation: Undervalued stock as compared to industry peers with TTM PE of 15.29x.

Reasons to avoid: Expected price cut of cotton seed would impact company's top line by 5% and also margin can come under pressure due to high input and labor cost.

Drivers:Promoters have pledged more than 40% of their holdings. Interest coverage ratio is low. Operating margins are going down due to higher expenses. Being 60% product portfolio from cotton seed placed the company in direct impact. The company is looking forward to enhance in non cotton seed product but it will take some time.

Financial: The company posted weak numbers in Q4FY18. Revenue down by 52% QoQ to Rs 44 cr. EBITDA and PAT numbers were negative.

Uttam Galva Steels (NSE: UTTAMSTL) (Share Price: Rs.12): Avoid

Valuation:Poor valuation with negative earnings.

Financial: On YoY basis, the company has delivered negative earnings since FY14. Splitting year in quarters, the scenario is same as all quarters are in negative territory.

Adhunik Industries (NSE: ADHUNIKIND) (Share Price: Rs.60.5): Avoid

Valuation:Poor valued with PE of 116x.

Financials: Revenue growth is continuously down with stable earning, but operating margins are getting hammered with negative operating cash flows. Debt is on increasing side as well.

Housing Development and Infrastructure Ltd (BSE: HDIL) (Share Price: Rs.26.5): Avoid

Valuation: Undervalued stock with trailing PE of 7.8x.

Liberty Shoes Ltd. (NSE: LIBERTSHOE) (Share Price: Rs.202): Avoid

Valuation: Overvalued stock as compared to industry peers with PE of 59x.
Reasons to avoid: The company has delivered poor growth of 3.38% over last five years. The company has a low return on equity of 7.93% for last three years. Promoters' stake has decreased. The company has low-interest coverage ratio.
Financial: Quarter, as well as annual numbers, are on the falling side for the company. Lack of operational efficiency is hurting the company the most. Investors are trying to pull out their investment for the stock. Margins are falling continuously.

Ginni Filaments Ltd. (NSE: GINNIFILA) (Share Price: Rs.25.9): Avoid

Valuation: Overvalued stock as compared to industry peers with PE of 34x.

Reasons to avoid: The company has delivered poor growth of 1.43% over past five years. The company has a low return on equity of 7.62% for last three years.
Drivers: Promoters have pledged more than 40% of their holdings. Interest coverage ratio is low. Operating margins are going down due to higher expenses.
Financial: Quarter numbers are uncertain for the company. The case is nearly same for yearly results. Peers are posting stable growth numbers while the company is finding it difficult to survive in closed competition. Debt is on the growing side while repayment is slow and low.

Royal Orchid Hotel (NSE: ROHLTD) (Share Price: Rs.219): Avoid

Valuation: Overvalued stock with a troubled operational performance of the company.
Reasons to avoid: Earnings, as well as revenue growth, are in the negative territory. The company has delivered poor growth of 0.23% for last five years. The company has the return on equity of -0.89 for last three years.
Financials: On the YoY basis, the company is posting negative growth as far as the revenue and earnings are concerned. Cash flows are negative, too. The company lacks operational efficiency.

Aplaya (BSE: 511064) (Share Price: Rs.1.25): Avoid

Valuation: Overvalued stock as compared to industry peers with PE of 519x.
Reasons to avoid: The company has delivered poor growth over the years. Due to poor earnings, the company has low return ratios. Promoter holding is low at 9.57%.
Financials: Quarter numbers are falling for the company over the quarters. The case is nearly same for yearly results. Peers are posting stable growth numbers while the company is finding it difficult to survive in the close competition. Debt is on the growing side while repayment is slow and low.

UCO Bank (NSE: UCOBANK) (Share Price: Rs. 19.1) Share Market Tip: Avoid

Valuation: Overvalued stock with trailing PE of 451x as compare to closed peers.Reasons to avoid: The bank is stuck in legal war as CBI registered complaint against CMD. Investor need to hold stock with 2-3 years of vision to see recovery in bank
Financial: Numbers are poor for the bank. Bank is making continuous losses. Last couple of years were tough for the bank. Entire banking sector is in troubles now but UCO Bank is ahead in the list.

Lasa Supergenerics (NSE: LASA) (Share Price: Rs.83.5): AvoidValuation: Overvalued with negative earnings.

Reasons to avoid: CFO of the company Mr. Manish Chandrakant Bhosle resigned on 31st Jan 2018. High debt company. Weak Q3FY18 numbers.
Drivers: Weak pharma sector. Promoter's stake has decreased. The company has low-interest coverage ratio. Promoters have pledged 15% of their holdings. Volume is too low for good investor to survive.Financials: Earnings are negative. Ultimately company posted most of the return ratios, valuation ratios are on the negative side. Borrowings are on higher side and repayment is low.

Ginni Filaments Ltd. (NSE: GINNIFILA) (Share Price: Rs.27.8): Avoid

Valuation: Overvalued stock as compared to industry peers with PE of 34x.
Reasons to avoid: The company has delivered poor growth of 1.43% over past five years. The company has a low return on equity of 7.62% for last three years.
Drivers: Promoters have pledged more than 40% of their holdings. Interest coverage ratio is low. Operating margins are going down due to higher expenses.
Financial:Quarter numbers are uncertain for the company. The case is nearly same for yearly results. Peers are posting stable growth numbers while the company is finding it difficult to survive in closed competition. Debt is on growing side with repayment is slow and low.

Vardhman Holding (NSE: VHL) (Share Price: Rs.3814): Avoid

Valuation: Undervalued stock with trailing PE of 6.39x as compared to close peers.
Reasons to avoid: Low volume stock with uneven earning trend. In current quarter margins got contracted and earnings are down by 98% Q-o-Q.
Drivers: The company earns by investing in debt, equity and real estate asset which is in positive trend at present, still it is not reflecting in the company earnings.
Financial: In Q1FY18, net sales down by whopping 98% to Rs.3.91 crore Q-o-Q. EBITDA down by 98% Q-o-Q and 56% Y-o-Y. PAT of the company also tanked by 98% Q-o-Q and 61% Y-o-Y to Rs.2.63 crore.

Dredging Corporation India Ltd (NSE: DREDGECORP) (Share Price: Rs.610): Avoid

Valuation: Overvalued stock with PE of 433x.
Reasons to avoid: Interest coverage ratio of the company is low. Earning per share is about to touch zero levels. The company has delivered poor growth of 3.87% over last five years. The company has a low return on equity of 2.26% for last three years.
Financial: Numbers are falling down continuously. Revenue growth was down in FY17 while H1FY18 was poor as well. Numbers are falling like a house of cards. Profit margins are hammered last couple of years. Operational efficiency of the company is under surveillance.

Cineline India (NSE: CINELINE) (Share Price: Rs.78.5): Avoid

Valuation: Undervalued stock as compared to closed peers with PE of 20x.
Reasons to avoid: The company has delivered poor growth of -37.83% over last five years. The company has a low return on equity of 7.88% for last three years. Promoters have pledged 25.78% of their holdings.
Financial: Debt is on the increasing side while revenue is stable. Cash component is on the lower side. Quarter numbers were little uncertain while annual numbers were on the improving side.

Dr Reddys Laboratories (NSE: DRREDDY) (Share Price: Rs.2,140): Avoid

Valuation: Overvalued stock with PE of 32x.
Reasons to avoid: Promoter holding is just 28%. USFDA is adding troubles to pharma sector and most of the companies are under surveillance.
Drivers: Company has delivered poor growth of 7.37% over last five years. Due to USFDA troubles, investors are getting cautious and avoiding to invest pharma sector.
Financial: Numbers are falling down continuously. Revenue growth was down in FY17 and H1FY18 was poor as well.

Emkay Global Finance (NSE: EMKAY) (Share Price: Rs.154.5): Avoid

Valuation: Overvalued stock with trailing PE of 92x where industry PE is 59x. The stock is trading nearly 6 times of its book value.
Reasons to avoid: Financial numbers are not certain. There's a lot of uncertainty in the operational performance of the company.
Financial: Earnings nearly declined by 50% in FY17. Q1FY18 was significantly better as the company managed to cut down expenses and it ultimately reflected in earnings. But considering last few quarters, performance is under the shadow of a doubt.