Category: Personal Finance

State Bank of India (SBI)

With a minimum deposit amount of Rs. 1,000/- and thereafter in multiples of Rs. 100/- with no upper limit one can open a fixed deposit account at SBI for a tenure ranging from 7 days to 10 years. The account holder receives interest on a Term Deposit quarterly or at maturity from the date of issuance, including the principal amount. In the event of Term Deposits with terms of twelve months or more, interest can also be paid monthly, half-yearly, or annually. One can make a nomination in favour of an individual only and also can transfer his or her account from one bank branch to another. TDS is mandated by the Income Tax Act and hence the depositor can file Form 15G/15H to claim an exemption from tax deduction under the regulations of the Income Act. With effect from 08.01.2021, SBI has revised interest rates on its fixed deposits which are as follows:

Post Office Time Deposit Account

A single account, joint account for up to 3 adults, an account on behalf of a minor above 10 years, or an account on behalf of a guardian on behalf of a person of unsound mind can be opened at your nearest post office. This post office time deposit account can be opened by depositing a minimum of Rs 1000/- and in multiple of 100 with no upper limit for a deposit period of 1 to 5 years. The applicable interest shall be payable annually and on a 5-year time deposit depositors can also seek tax benefits under section 80C. The latest interest rates on time deposits of India Post are listed below.

Where should you invest?

Amid the record low-interest rates on term deposits of banks, it is not recommended to invest in fixed deposits for the long-term. The reason behind the same, under fixed deposit investments the risks that you need to keep in mind are rising inflation risk and interest rate risk. Inflation has a direct influence on your investments and currently State Bank of India (SBI), for example, offers a low-interest rate of 5.4 percent on 5-10-year FDs.

If you rely entirely on the income from your SBI fixed deposit account to pay your expenses, you will receive zero returns if inflation remains high between 5.94% and 6.1%. As a result, it is better to go for the Post Office Time Deposit account with an interest rate of 6.7% only if you have a long-term goal. Or else regular investors can also invest in Reserve Bank of India floating rate bonds, or fixed deposits of small finance banks or non-banking financial companies (NBFCs) for diversification and resulting in inflation-beating returns.

Whereas senior citizens can continue to invest in popular schemes such as Senior Citizen Savings Scheme (SCSS) or Pradhan Mantri Vaya Vandana Yojana (PMVVY) with an interest rate of 7.40% to beat inflation. Now there’s another risk to consider: interest rate risk, which is impacted by a variety of economic fundamentals as well as RBI policies.

A change in the RBI’s repo rate permits banks to raise deposit interest rates, therefore it’s a good idea to invest in fixed deposits for the near or short term. If you invest for the long term, you will not benefit from a higher interest rate if RBI hikes repo and reverse repo rates. And if you withdraw early, you will be charged a penalty, which implies an undesirable deduction from your relevant interest rate.

So it is better to invest in a fixed deposit for short term where RBI has kept the repo rate at 4% only. As of now, to witness higher returns both in short-term and long-term you can invest in fixed deposit schemes of government-owned companies which can give you an interest rate of up to 8% with a cumulative option.

Importance of EPS

A company’s earning per share, or EPS, is its net profit, or profit after tax (PAT), divided by the total number of outstanding shares. Although dividend payout is not directly tied to earnings per share, it is usual to notice that only companies with consistently stable or growing earnings per share pay dividends to their shareholders. Though dividends are very subjective, and many factors are taken into account before a dividend is paid, investors seeking dividend income should look at the company’s EPS before investing.

Analysts can use the EPS computation to undertake a fundamental examination of a company. A corporation with a greater earnings per share (EPS) is thought to be more prosperous and financially stable. Analysts use earnings per share (EPS) to assess a company’s financial health. It is frequently referred to as the value of a company’s bottom line.

Bharat Rasayan

Technical Grade Pesticides and Intermediates are manufactured by Bharat Rasayan Limited (BRL). BRL has production facilities in Rohtak, Haryana, and Dahej, Gujarat. The stock returned 92.28 percent over three years, compared to 61.01 percent for the Nifty Smallcap 100. The company’s EPS is 377.02, which is high and good for investors.

Bharat Rasayan has consistently generated good financial results, with a Net Profit growth rate of 40.8 percent CAGR over the last five years. In addition, the company boasts a great ROE of 31.9 percent for the year. Cost optimization and operational efficiency have also helped it increase its operating profit margins from 6% in 2010 to 19% in 2020. Given the company’s outstanding growth, it trades at a reasonable 27.5x P/E valuation.

Bayer Cropscience

In India, Bayer CropScience Limited manufactures, sells, and distributes insecticides, fungicides, herbicides, and other agrochemical products. The company has enough cash on hand to cover its contingent liabilities. In the fiscal year ending March 31, 2021, the company spent less than 1% of its operating revenues on interest charges and 8.5 percent on staff costs. Stock returned 21.52 percent over three years, compared to 70.22 percent for the Nifty Midcap 100.

On the financial front, the company has maintained a consistent performance, with a ROE of 19.1 percent in FY21. It has generated stable cash flows, with operational cash flows rising at a 27.24 percent CAGR from Rs. 206 crores in 2016 to Rs. 687 crores in 2021. Bayer is debt-free and has significant liquidity, having cash and cash equivalents of Rs. 1,210 crores at the end of FY21. The stock also has a P/E of 48.61x, which shows that the company is valued fairly.

PI Industries

The company’s yearly revenue growth rate of 37.67% surpassed its three-year CAGR of 25.94%. The stock returned 335.25 percent over three years, compared to 61.69 percent for the Nifty 100. PI Industries Ltd., founded in 1946, is a Large Cap business in the Pesticides/Agro Chemicals industry with a market cap of Rs 48,608.21 crore.

The domestic business is likely to improve over the medium term, thanks to a strong product line-up, a helpful policy environment, and a regular monsoon. Following the successful Rs. 2,000 crore equity injection via QIP method in July 2020, PI Industries now has a healthy financial risk profile and liquidity.

Gujarat Narmada Valley Fertilizers & Chemicals (GNFC)

Gujarat Narmada Valley Fertilizers & Chemicals Ltd., founded in 1976, is a Small Cap business in the Fertilizers industry with a market cap of Rs 6,301.45 crore. The stock returned 11.77 percent over three years, compared to 70.22 percent for the Nifty Midcap 100. Over a three-year period, the stock returned 11.77 percent, compared to 85.52 percent for the S&P BSE Basic Materials index. The company has good EPS of 60.21.

4 Agriculture Stocks With High EPS In 2021

Risk of investing in Agriculture Stocks

The Indian weather has been notoriously fickle in the past, with erratic rains across the country. In the event that rainfall is lower for a given year, farming activities for a specific crop or state may be reduced, resulting in a lesser need for fertilizers and pesticides for that year. Increased input costs, higher interest rates, excessive borrowing, larger cash obligations, a lack of adequate cash or credit reserves, and adverse changes in exchange rates in the case of company imports can all contribute to financial hazards.

Agriculture is one of the most important sectors in the country, with plenty of space for increased consumption; the sector requires tried-and-true products like pesticides, tractors, and current irrigation systems, among other things.

Disclaimer

The opinions and investment ideas offered by Greynium Information Technologies’ authors or employees should not be construed as investment advice to buy or sell stocks, gold, currency, or other commodities. Investors should not make trading or investment decisions solely primarily on information given on GoodReturns.in. We are not a qualified financial counsellor, and the material provided here is not intended to be investment advice.

1. Amrutanjan Healthcare: Buy for a target price of Rs. 970

HDFC Securities has a ‘Buy’ rating on pharmaceuticals company, Amrutanjan Healthcare for a target price of Rs. 970, i.e. an upside of 15 percent from the last traded price of Rs. 844 per share.

HDFC Securities’ take on Amrutanjan Healthcare scrip:

The company is among the oldest ayurvedic and OTC Indian brand. Focus of the company is on establishing a niche for itself with a product portfolio of affordable healthcare, personal and hygiene care products. Other than its flagship brand ‘Amrutanjan Pain Balm’, the company is constantly strengthening its product range and adding pain management products such as aromatic balms, creams and sprays for headaches, body aches. In the premium range, it offers sub brand ‘Roll on’ and also has come up with brand ‘Relief’ that solves congestion-related issues. The company also offers sanitary napkins under the brand ‘Comfy’ that is positioned as an affordable alternative for larger user base.

The company is working on expanding its distribution network in both semi urban and rural areas. It also plans to widen its existence in the e-commerce space and increase its contribution to 1.3% from the current 0.5% of the total revenues. As per the Economic Times Brand Equity (Most Trusted Brands) 2018 Survey, Amrutanjan ranked 33 among top 50 brands in the “Health and Personal Care” segment.

Valuation & Recommendation: Amrutanjan’s earnings grew at a CAGR 17% FY17-21. Going forward, we are positive on the future growth prospects and expect the company to be ahead of the category performance mainly in the OTC segment, views the brokerage.

“The company’s revenue and PAT is likely to record a growth of 17.5% and 16.7% CAGR over FY21-23E. Along with this we expect the company to generate consistent FCF with consistent high ROEs. The Comfy brand is expected to be the key growth driver for AHCL. We expect, “Comfy” revenues to grow at CAGR 28% while other OTC products are expected to grow at CAGR 13.2% over FY21-23E. However we feel that there is a scope for some upward valuation re-rating in the stock currently”, notes the brokerage.

What can investors do?

Investors are suggested to buy the stock in the band of Rs. 820-830 and further add on dips at Rs. 732 (26x FY23E) for a base case fair value of Rs. 900 (32x FY23E) and bull case fair value of Rs. 970 (34/5x FY23E) for a time horizon of 2 quarters.

Advanced Enzymes Technologies: Buy for a target price of Rs. 458.5

HDFC Securities is bullish on the stock of Advanced Enzymes Technologies and has set a target price of Rs. 458.5, an upside of 19.4 percent from the current market price of Rs. 384.

Brokerage’s take on the stock of Advanced Enzymes:

Advanced Enzymes Technologies is a leading player in enzymes and probiotics that play a crucial role in health and nutrition. Its products have applications in various other end-user industries as well. ‘Despite being a small player in a US$ 10bn+ industry, the company has more than 700 clients spread across 45 countries and a comprehensive product basket of 68 enzymes and probiotics and over 400 proprietary products’, notes the brokerage. The other players in the market include Novozymes, Danisco, DSM, BASF, etc. which together account for 75% of the market. The company has the highest market share in India and is among the 15 leading global enzyme companies globally.

“Demand for health and hygiene is on the rise and there is huge headroom for growth in Nutraceuticals, especially in USA. Enzymes are used across all food items, including bakery, dairy products etc. which are big segments”, says the brokerage.

“Largest product which is anti-inflammatory enzyme contributed to Rs 113cr, +10% YoY in FY21. Top-10 clients contributed to 38% of revenue in FY21. Despite losing its top client in the US which contributed US$ 5.5mn to revenue, US sales grew 12% YoY in FY21. Over the last five years, the company has enhanced fermentation capacity. Other than this, the company has superior R&D capabilities”, mentions the brokerage in its report.

Other key takeaways:

– Capital requirement over the next 2-3 years shall be minimal as the company currently operates at 60 percent capacity.

– The company holds a leadership position in the domestic healthcare and nutrition segments.

– The company lately revealed clinical breakthrough in the randomized controlled trials (RCTs) of systemic enzymes and probiotics to cater to the issue of ‘long covid’ fatigue symptoms.

– International sales account for around 54% of the revenue, with the US being a major contributor.

– “Enzymes industry has very high entry barriers on account of extensive R&D focus and long gestation period before getting registration approvals for products in USA and EU. Management said that the focus area continues to be on bio-catalysis for API, probiotics and also B2C business in nutraceuticals segment”, adds the brokerage firm.

– Advanced Enzyme acquired 51% stake in Sci-Tech specialties (SSPL) for a financial consideration of Rs 31.6cr in December 2020. The company plans to double its revenue over the next five years with operating margin in the broad range of 42-48%.

Valuation & Recommendation: The three future growth pillars of the company as suggested by the brokerage comprise of continued investment in R&D, expansion of its geographic presence and constant focus on inorganic growth opportunities. The brokerage estimates revenue/EBITDA/PAT CAGR of 16%/16%/17.3% over FY21- 23E. Company has net debt free Balance Sheet with cash & equivalents of around Rs 320cr as on Mar-2021. The company continues to look for inorganic growth opportunities impact of which is not included in our assumptions.

“We expect margins to remain more or less stable in the 45-47% range over FY21-23E. The enzyme industry is dominated by big MNCs like Novozymes, DSM Nutritional Products, BASF etc. However, at the same time smaller players like Advanced Enzyme are gaining ground in the segment helped by innovation and newer technologies.”, adds the brokerage report.

What should investors do?

The brokerage suggest buying the stock of Advanced Enzyme in the band of Rs 380-385 and add more on dips to Rs 332.5 for base case target of Rs 422.5 (23.5x FY23E EPS) and bull case target of Rs 458.5 (25.5x FY23E EPS) over the next two quarters.

Disclaimer:

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only.