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Saturday, February 16, 2013

Questions and Answers on Jubilant Foodworks, Kirloskar Electric, Kesoram and Transformers and Rectifiers!

Question: I have one query regarding Jubilant Foodworks. I am holding the stock from 750. In last one month it has corrected almost 25% from 1397 high. Can further investment can be done at current levels, or wait for further fall? Since fundamentally it’s an excellent bet, but still trading at rich valuations of 54-55 PE. Please suggest.


Jubilant Foodworks is a concept stock, and these stocks when they are in market’s favor, do not seem to mind valuations. The stock is currently trading at a huge 7250 crores market cap and 55 PE ratio and still trading very strong!

Jubilant Foodworks operates Domino’s Pizza brand with the exclusive rights for India, Nepal, Bangladesh and Sri Lanka. The Company operates 515 Domino’s Pizza Stores and is the market leader in India for the organized pizza market with a 62% market share and 70% + share in the pizza home delivery segment.

Dunkin’ Donuts was the second global brand that the company launched recently. Firm has 7 Dunkin’ Donuts restaurants in India and is poised to grow this number. Dunkin’ Donuts is the world’s leading brand for Donuts, baked goods and coffee, bagels and muffin categories.

Looking at charts, stock received good support at 1025 levels from where a good double bottom has formed on EoD charts. 1250 is next resistance and can be achieved in few days time. However, if 1025 breaks, one can see lower levels of 730 as well. So, further investment is slightly risky though one can hold the stock with 1025 Stop-Loss.

Question: I have many shares of Kirloskar Electrical bought at a price of 312. Now, the stock has fallen to unimaginable levels. What do I do? Can u please help?


Kirloskar Electric Company (KEC) is one of the leading Indian electrical engineering companies and was established in 1946. KEC produces more than 70 products under eight product groups for core economic sectors such as power generation, transmission & distribution, transportation, and renewable energy.

KEC comprises nine manufacturing locations and 34 sales offices spread across the country. They also acquired a German firm Lloyd Dynamowerke (LDW) which will strengthen their business.

If you see the last 5 quarter’s revenue details, top-line has been stagnant at around 200 crores per quarter and EPS has been inconsistent a bit. Probably declining profitability is one of the reasons that stock price has been stagnating as well.

Promoter shareholding has been consistent at 49.29% and firm is now trading at low market cap of Rs 105 crores, so it is severely undervalued like lot of other midcap and smallcap firms in the markets recently. There is no need to sell your holdings at a loss, though high price range of 312 is unlikely to appear, you can look at averaging when the firm gets back to a decent growth path. Price level of 68 is possible in next 12-18 months.

Question: Plz advise me on the following stock. I am in deep loss.

I have 1000 Kesoram Industries @ Rs.162 per share. Now, the stock has fallen to 105 levels. What do I do?


Currently Indian Stock Market is divided in two distinct groups. On one hand you have companies such as large caps and top Nifty firms like ITC, TCS, HUL etc which are beyond their all time highs, and on the other hand, you have forgotten midcaps and smallcaps which are trading at their 5 year and 10 year lows. Market seems to have adopted a risk-off approach for smallcaps and most of the investment money is serially getting invested into only the handful of top 50 stocks, ignoring the next 500 odd good quality scrips.

Kesoram Industries is the flagship company of BK Birla group and is a ninety year old firm doing business in variety of segments such as Cement, Tyres, Tubes, Rayon, Paper, Pipes and Heavy Chemicals. The firm has not been profitable from past two years, which has taken a toll on its share price and market cap, which sits at a lowly Rs 465 crores for a firm with over 5000 crores of annual revenues.

The firm has huge debt of Rs 4000 crores and is trying to reduce its debt to a more reasonable level. Promoter shareholding is less at 27%, though private corporate bodies are increasing their shareholding from 10.6% to 13.9% in recent two quarters. Firm has been a regular dividend paying entity as well.

Technically speaking, 84 is a recent support and it can be revisited as well. Next set of resistance levels are at 145, 175 and 235 which can be revisited in next 12 months time-period.

Question: I have 200 Transformers and Rectifiers @ Rs.256 per share. I am in deep losses in this stock. Please advice.


Transformers & Rectifiers has a good position in Indian Transformer Industry as a manufacturer of a wide range of transformers. This firm also exports to developed countries such as Canada and UK, in addition to catering to the domestic Indian market. T&R has the capability to develop world class power, distribution, furnace and specialty transformers and boasts of world class infrastructure at Changodar, near Ahmedabad. Firm deals in Power Transformers, Distributor Transformers, Rectifier, Furnace and Reactors as well.

With Dec, 12 results, the firm is back in profits, though slump in revenue was evident in past 2 quarters. Firm has clean balance sheet with low debt, and best part is very high promoter holding at 76.82% which is hallmark of a great company. Current market cap at Rs 133 crores is very low for this firm and current price is a good price for you to average and hold for longer term.

Technically speaking, stock is gapping down and should get support at Rs 101, below which there is no support evident. One should see levels of Rs 125, Rs 175 and Rs 210 in next one year.

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