A rainbow among dark clouds

The domestic product growth of the first quarter is 5.6%, still there is a silver streak

The objective of this column is to seek that silver streak in an otherwise grey cumulus (how else can you politely describe 5.6 per cent gross domestic product growth of the first quarter?).

These, m’lord, are some of my humble findings: 

Virinchi Ltd: An earnings before interest and tax (Ebit) of Rs 5.75 crore in the June 2016 quarter transformed to Rs 14.35 crore in the June 2017 quarter; this is despite an increase in depreciation from Rs 3.55 crore to Rs 8.13 crore; a steady interest outflow of Rs 4.73 crore, now indicates an interest cover in excess of 4.0. The best part of the story: Its flagship hospital enjoys attractive operating leverage, which means as utilisation rises, the bottom line and RoCE (return on capital employed) pass-throughs could be quicker. 

Orient Cement: This appears to be building into an interesting play. Appraise the numbers of the past four quarters: Ebitda (earnings before interest, tax, depreciation and amortisation) movement from Rs 19 crore to Rs 48 crore to Rs 79 crore to Rs 123 crore. Interest outflow has declined from Rs 36 crore to Rs 33 crore across the terminal quarters. Even as the delta is widening, there is a case for higher capacity utilisation across the next few quarters on the one hand and the acquisition-led benefits kicking in thereafter. A couple of observations may be worth the stock picker’s attention: The company has discovered a new animal spirit; the aggregate capacity goal the company had outlined for 2020 has been largely achieved three years ahead of schedule. The one company that set a similar pace was Dalmia Cement and see where it has gone.

Dilip Buildcon: I have been wary of infrastructure building companies on the grounds that most work for bankers rather than shareholders. The one company that could make me rethink is Dilip Buildcon for the sheer heftiness of its recent numbers: Revenue increased every single of the past four quarters – from Rs 916 crore to Rs 1,664 crore; Ebit has more than doubled from Rs 105 crore to Rs 238 crore; depreciation has increased from Rs 54 crore to Rs 65 crore; interest outflow has increased from Rs 96 crore to Rs 111 crore. The deduction: Interest outflow increased Rs 15 crore in the past four quarters; Ebit strengthened to Rs 133 crore. Baby, there is something happening here, I keep telling myself.

InterGlobe Aviation: The economy might not have done well but you won’t get that inkling from InterGlobe’s numbers. Ebit increased every single quarter of the past four quarters: Rs 238 crore to Rs 678 crore to Rs 697 crore to Rs 1,201 crore. Interest moved from Rs 76 crore to Rs 77 crore in the past three quarters; other income jumped Rs 30 crore (depreciation declined Rs 20 crore). I am waiting for the September quarter numbers. 

Phillips Carbon Black: I have written so often on this company’s capacity to consistently surprise that someone could well turn around to say I have a vested interest (which I don’t). So, please track the quarter-wise sequence of this company and salivate at the thought of ‘If I had only bought this stock 18 months ago…’

The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed.