Whenever the term ‘financial market’ is mentioned, people often immediately associate it with just equity (stocks). However, just engaging in these traditional avenues can make you overlook the immense potential that lies in the often underestimated segments of currency and commodities. Trading in currency and commodities can emerge not just as a challenge but as a lucrative potential opportunity to create wealth.
Naturally, you need to be armed with the right information before embarking on this journey. Let us take a closer look at some of the leading coffee, oil, and palm oil-based companies, exploring their stock ratings, prices, and key insights. Beyond the daily market fluctuations, we delve into the pros and cons, simplifying the complexities to equip you with the insights needed to turn challenges into opportunities within these market segments.
Tata Coffee – A subsidiary of Tata Consumer Products Ltd (TATACONSUM)
Tata Coffee is a wholly owned subsidiary of Tata Consumer Products Ltd – a public-listed company with a market cap of ₹ 1.07 Lakh Cr. This merger took effect on 01st Jan 2024. Established in 1922, Tata Coffee stands as one of the largest integrated coffee cultivation and processing companies globally and holds the distinction of being the largest corporate producer of Indian Origin Pepper.
Tata Consumer Products Ltd, part of the renowned Tata Group, is a popular stock in the consumer goods segment that has, apart from coffee, a vast range of food and beverage brands within its umbrella.
Price (as of 16-Jan-24):
BSE: ₹ 1,147.70, NSE: ₹ 1,147.30
To see the latest price of the stock, click here.
Samco Stock Rating:
4 stars – Good business and great market price.
Andekha Sach / Unseen Insights:
The most recent traded share price for Tata Consumer Products Ltd stands at ₹ 1,147.30, registering a decrease of -0.30% on the NSE. Simultaneously, its last traded stock price on the BSE is ₹ 1,146.70, reflecting a decline of -0.37%. The cumulative volume of shares traded on the NSE and BSE amounts to 1,075,235 shares, resulting in a total combined turnover of ₹ 124.25 crores.
Examining the medium and long-term market performance, Tata Consumer Products Ltd reached a 52-week high of ₹ 1,162.55 on 16-01-2024, and a 52-week low of ₹ 1,146 on the same day. Over the past month, the stock price has seen an increase of 21%, and over the last year, it has surged by 52.4%.
Pros:
- Strong Momentum: The stock exhibits robust momentum.
- Debt-Free Status: The company maintains an almost non-existent debt-to-equity ratio of 0.09. Given its debt-free status, equity shareholders face lower risk in holding the stock.
- Exceeding Growth Rate: The company is anticipated to experience commendable earnings growth in the upcoming years, contributing to shareholder value creation.
- Strong Shareholder Base: The company boasts a robust, long-term shareholder base, mitigating speculation and volatility in the stock. This stability is advantageous for long-term equity shareholders.
Cons:
- Low Sustainable RoE: The company’s sustained return on equity falls below the expected cost of capital, indicating a gradual erosion of value over time due to its inability to generate superior returns on capital.
- Low Return on Capital Employed: The company struggles to generate an adequate return on capital employed, hampering its capacity to deliver high returns for shareholders after factoring in taxes, interest, and other non-equity stakeholders.
- Capital-Intensive Business: Operating within an extremely capital-intensive business framework, the company faces challenges with a low Asset turnover ratio of 1.09. This not only adversely affects RoE but also diminishes shareholder returns. The capital-intensive nature further necessitates funding for business growth, either through increased borrowings or dilution of shares, both of which negatively impact shareholder value and returns.
- Negative Margin of Safety: The relative margin of safety for investing in the company is low, primarily attributed to a recent sharp increase in stock prices, raising concerns and caution for potential investors.
Bombay Burmah Trading Corporation Ltd (BBTC)
Bombay Burmah Trading Corporation Ltd, founded in 1863, is a distinguished conglomerate with a rich legacy, and one of the oldest continuously traded stocks in India. While the company has diverse business interests, it has earned significant recognition for its outstanding contribution to the coffee industry. Bombay Burmah is a key player in the coffee sector, known for producing and marketing high-quality coffee products. The company has a m-cap of ₹ 11,373 Cr.
Price (as of 16-Jan-24):
BSE: ₹ 1,631.75, NSE: ₹ 1,632.70
To see the latest price of the stock, click here.
Samco Stock Rating:
4.5 stars – Great business and great market price.
Andekha Sach / Unseen Insights:
The most recent traded share price of Bombay Burmah Trading Corporation Ltd stood at ₹ 1,632.70, experiencing a decline of -1.30% on the NSE. Simultaneously, its last traded stock price on the BSE was ₹ 1,631.75, marking a decrease of -1.33%. The cumulative volume of shares traded on both the NSE and BSE reached 218,586 shares, with a total combined turnover of ₹ 36.56 crores.
Looking at the medium and long-term market performance, Bombay Burmah Trading Corporation Ltd reached a 52-week high of ₹ 1,702 on 16-01-2024 and a 52-week low of ₹ 1,608.70 on the same day. The stock price has shown notable growth, rising by 20% over the last month and an impressive 77.66% over the past year.
Pros:
- Momentum Strength: The stock is currently exhibiting robust momentum.
- Excellent Cash Conversion of Profits: The company boasts an impressive cash conversion ratio, converting a significant portion of its operating earnings, amounting to 261.80%, into operating cash flow. This underscores an excellent working capital cycle, ensuring substantial cash flows for funding growth or distributing dividends. Such a positive trend is poised to enhance shareholder returns significantly.
- Strong Working Capital Cycle: The firm maintains an outstanding working capital cycle of 47 days, leading to lower investments in working capital and increased asset turnover. This not only reduces the capital requirements of the business but also positively influences Return on Equity (RoE) and cash flow generation. Such a scenario is particularly advantageous for long-term shareholders.
- High Shareholder Support: The company enjoys the support of a steadfast long-term shareholder base, effectively diminishing speculation and volatility in the stock. This stability is beneficial for the interests of long-term equity shareholders.
Cons:
- Low Sustainable RoE: The company’s sustainable return on equity falls below the anticipated cost of capital, suggesting that the core business will erode value over time due to its inability to generate superior returns on capital.
- Low-Interest Coverage: The company grapples with a notably low-Interest coverage ratio of 4.06 times. This indicates that a substantial portion of operating profits is allocated to servicing debt interest, leaving diminished earnings and cash flows for equity shareholders, which can have a detrimental impact on its returns.
- Highly Cyclical Industry: Operating within an extremely cyclical sector characterized by unpredictable earnings and cash flows, the company faces heightened stock price volatility and returns, negatively influencing shareholder returns.
- Negative Margin of Safety: The relative margin of safety in investing in the company is low, primarily attributed to a recent sharp surge in stock prices. This situation raises concerns about the safety net for investors.
Hindustan Petroleum Corporation Ltd (HINDPETRO)
- Hindustan Petroleum Corporation Limited (HPCL) – a Maharatna PSU – is a leading Indian state-owned oil and natural gas company. Although it was incorporated in 1952 and went through various mergers and transformations to become the entity it is today. HPCL operates across the entire hydrocarbon value chain, including refining, marketing, and distribution of petroleum and petroleum-related products.
- The company has a strong presence in various segments, such as refining, marketing, exploration, and production of oil and natural gas. HPCL owns and operates refineries in Mumbai and Visakhapatnam, contributing significantly to India’s energy landscape. Lately, HPCL has expanded its footprint in the renewable energy sector and continues to play a crucial role in meeting the energy needs of the nation. The company has an M-cap of around ₹ 63,685 Cr.
Price (as of 16-Jan-24):
BSE: ₹ 449.70, NSE: ₹ 449.90
Samco Stock Rating:
4 stars – Good business and great market price.
Andekha Sach / Unseen Insights:
The last traded share price of Hindustan Petroleum Corporation Ltd was ₹ 449.90 up by 0.07% on the NSE. Its last traded stock price on BSE was ₹ 449.70 up by 0.02%. The total volume of shares on NSE and BSE combined was 6,271,905 shares. Its total combined turnover was ₹ 284.33 crores.
Hindustan Petroleum Corporation Ltd hit a 52-week high of ₹ 459.4 on 16-01-2024 and a 52-week low of ₹ 448.05 on 16-01-2024. The stock price of Hindustan Petroleum Corporation Ltd is up by 18% over the last month. It is up by 78.85% over the last one year.
Pros:
- Strength in Momentum: The stock is exhibiting robust momentum, indicating a strong and upward price trend.
- Exceptional Sustainable Return on Equity (RoE): The company consistently generates a return on equity that surpasses the anticipated cost of capital. This signifies the underlying business’s capability to create and compound value over time by delivering returns above the industry average.
- Efficient Working Capital Management: With an impressive working capital cycle of 38 days, the company minimizes investments in working capital while enhancing asset turnover. This strategic approach reduces the capital requirements, positively impacting both RoE and cash flow generation. Such efficiency is particularly beneficial for long-term shareholders.
- Great Shareholder Foundation: The company boasts a steadfast and long-term shareholder base, mitigating speculation and volatility in the stock. This stability is advantageous for shareholders with a long-term investment horizon.
Cons:
- Challenges in Return on Capital Employed: The company faces challenges in generating sufficient returns on capital employed, hindering its ability to provide attractive returns to shareholders after accounting for taxes, interest, and other non-equity stakeholders.
- Negative Earnings and Interest Coverage: The company grapples with negative operating earnings and a -3.31 times Interest coverage ratio, indicating a scenario where the company lacks sufficient operating earnings to cover interest costs. The current practice of covering interest from capital and/or other income is detrimental to shareholder interests.
- Navigating Cyclical Headwinds: Operating in an exceptionally cyclical industry, the company contends with unpredictable earnings and cash flows. This exposes the stock to considerable volatility, potentially impacting shareholder returns negatively.
- Vulnerability in Pricing and High Competition: The company faces challenges associated with low pricing power and heightened competitive pressures. This vulnerability in pricing, coupled with intense competition, can significantly impact shareholder returns.
- Limited Margin of Safety: The relative margin of safety for investing in the company is constrained due to a recent sharp increase in stock prices. This poses challenges for investors seeking a buffer against potential downturns.
Indian Oil Corporation Ltd (IOC)
With a m-cap of ₹ 2.03 Lakh Cr, Indian Oil Corporation Limited (IOCL) is a leading Indian government-owned oil and gas company headquartered in New Delhi. Established in 1959, IOCL has evolved into one of the largest oil refining and marketing companies in the country. With a strong presence in the entire hydrocarbon value chain, IOCL is engaged in the exploration, production, refining, distribution, and marketing of petroleum products.
IOCL operates a vast network of refineries, pipelines, and marketing infrastructure, playing a pivotal role in meeting India’s energy demands. The company’s refining capacity ranks among the highest in India, ensuring a consistent supply of various fuels and petrochemicals. IOCL has also ventured into alternative energy sources, including biofuels and renewable energy.
Price (as of 16-Jan-24):
BSE: ₹ 143.65, NSE: ₹ 143.65
Samco Stock Rating:
4.5 stars – Great business and great market price.
The stock rating is subject to change based on various factors.
Andekha Sach / Unseen Insights:
The latest traded stock price of Indian Oil Corporation Ltd on the NSE and the BSE was ₹ 143.65, marking a 4.36% increase on both exchanges. The cumulative trading volume on both NSE and BSE stood at 50,623,194 shares, with a combined turnover of ₹ 718.64 crores.
In terms of medium and long-term market performance, Indian Oil Corporation Ltd achieved a 52-week high of ₹ 144.35 on 16-01-2024 and a 52-week low of ₹ 137.5 on the same date. Over the last month, the stock price has risen by 12%, and over the last year, it has seen a notable increase of 74.76%.
Pros:
- Momentum Assessment: The stock is currently exhibiting robust momentum, indicating a favorable market trend.
- Effective Profit-to-Cash Conversion: The company boasts an impressive cash conversion ratio, translating 82.79% of its operating earnings into operational cash flow. This signifies a commendable working capital cycle, facilitating substantial cash inflows for various purposes such as funding growth or disbursing dividends. This positive dynamic is poised to enhance shareholder returns.
- Stable Shareholder Foundation: The firm maintains a steadfast and enduring base of long-term shareholders. This stability significantly diminishes speculation and volatility in the stock, offering a beneficial environment for equity stakeholders with a long-term perspective.
Cons:
- Challenges in Financial Performance: The company faces obstacles in sustaining a healthy Return on Equity (RoE), as it falls short of the anticipated cost of capital. This discrepancy suggests that the core business may erode value gradually over time, hampered by its inability to generate superior returns on capital.
- Inadequate Returns on Capital Employed: The company struggles to yield satisfactory returns on capital employed, hindering its capacity to deliver high returns for shareholders, even after factoring in taxes, interest, and other non-equity stakeholders.
- Limited Interest Coverage: With a notably low-interest coverage ratio of 4.05 times, a substantial portion of operating profits is allocated to servicing interest for debtholders. This diminishes earnings and cash flows available for equity shareholders, adversely affecting overall returns.
- Highly Volatile Industry Dynamics: Operating within an exceptionally cyclical industry characterized by unpredictable earnings and cash flows, the company is exposed to elevated stock price volatility. This unpredictability is likely to have an adverse impact on shareholder returns.
- Feeble Pricing Power and Intense Competition: The business contends with weak pricing power and heightened competitive pressures, posing a substantial threat to shareholder returns. The susceptibility to competitive forces can significantly impact the overall financial performance.
- Reduced Margin of Safety: Investing in the company carries a diminished margin of safety, primarily due to a recent sharp surge in stock prices. This situation raises concerns about the prudence of investment decisions, underscoring the importance of careful consideration.
Patanjali Foods Limited (PATANJALI)
Patanjali Foods Limited, formerly known as Ruchi Soya Industries Limited, is a prominent player in the Indian agri-business sector with a distinct focus on palm oil production and processing. The company operates a vertically integrated business model, engaging in the cultivation, processing, and marketing of palm oil products.
The company’s diverse product portfolio extends beyond palm oil, encompassing a range of edible oils, soybean products, and other food items. As a part of the Patanjali Group – market cap of ₹ 57,930 Cr, the company aligns with the broader vision of promoting health and wellness through natural and Ayurvedic products.
Price (as of 16-Jan-24):
BSE: ₹ 1,599.00, NSE: ₹ 1,599.75
Samco Stock Rating:
4 stars – Good business and great market price.
The stock rating is subject to change based on various factors.
Andekha Sach / Unseen Insights:
The most recent trading session for Patanjali Foods Ltd witnessed its share price at ₹ 1,599.75, marking a decline of -2.22% on the NSE, while on the BSE, the stock concluded at ₹ 1,599, reflecting a decrease of -2.13%. The combined trading volume on both NSE and BSE reached 524,713 shares, with an overall turnover of ₹ 85.01 crores.
Assessing the medium and long-term market trends, Patanjali Foods Ltd achieved a 52-week high of ₹ 1,662.95 and a low of ₹ 1,586.10 on 16-01-2024. Over the past month, the stock has witnessed a 5% increase, and over the past year, it has shown notable growth of 36.33%. To delve deeper into the stock’s historical performance, it is advisable to review the comprehensive stock price history.
Pros:
- Solid Market Momentum: The stock is currently experiencing strong momentum, reflecting positive market dynamics and potential growth.
- Efficient Asset Management: The company adopts an effective asset-light business model, exemplified by a robust Asset Turnover Ratio of 6.00. This high ratio not only enhances Return on Equity (RoE) but also contributes to improved shareholder returns. Additionally, a higher asset turnover ratio is instrumental in minimizing dilution as the company expands its revenues and earnings.
Cons:
- Inadequate Return on Equity (RoE): The company faces a challenge with its sustainable Return on Equity, which falls below the anticipated cost of capital. This discrepancy suggests a potential erosion of value over time, as the business struggles to generate superior returns on capital.
- Underwhelming Return on Capital Employed (RoCE): The company encounters difficulties in generating satisfactory returns on capital employed, limiting its capacity to deliver high returns for shareholders, even after factoring in taxes, interest, and other non-equity stakeholders.
- Cash Flow Conversion Concerns: A noteworthy concern lies in the business’s poor cash conversion ratio, standing at a mere -21.40%. This indicates that the increase in profits has not translated into higher cash flows, resulting in incremental investments in working capital. Such a scenario works unfavorably for shareholders.
- Limited Interest Coverage: With a significantly low-interest Coverage Ratio of 5.28 times, a substantial portion of operating profits is allocated to servicing debt. This leaves equity shareholders with diminished earnings and cash flows, negatively impacting overall returns.
- Pricing Vulnerability and Intense Competition: The business grapples with remarkably low pricing power and susceptibility to intense competitive pressures. These factors pose a considerable threat to shareholder returns.
- Reduced Margin of Safety: The relative margin of safety for investing in the company is notably low, primarily due to a recent sharp increase in stock prices. This diminished margin of safety raises concerns for potential investors.
Godrej Agrovet Ltd (GODREJAGRO)
Godrej Agrovet Ltd, a subsidiary of the diversified conglomerate Godrej Industries Limited, is a leading player in the agribusiness and animal nutrition sector in India. Established in 1991, the company is engaged in various segments, including animal feed, crop protection, oil palm, dairy, and poultry. The oil palm business which was formerly under Godrej Soaps Ltd, was acquired by Godrej Agrovet in 1997. Today, the company is one of India’s largest oil palm developers with over 75,000 hectares of plantations and has a market cap of ₹ 10,857 Cr.
Price (as of 16-Jan-24):
BSE: ₹ 550.50, NSE: ₹ 551.30
Samco Stock Rating:
0.5 stars – Extremely poor business but fair market price.
The stock rating is subject to change based on various factors.
Andekha Sach / Unseen Insights:
Godrej Agrovet Ltd witnessed a last traded share price of ₹ 551.30, experiencing a decline of -1.54% on the NSE, while its last traded stock price on the BSE stood at ₹ 550.50, reflecting a decrease of -1.76%. The combined total volume of shares on both NSE and BSE reached 212,045, contributing to a total combined turnover of ₹ 11.78 crores.
In terms of medium and long-term market action, Godrej Agrovet Ltd achieved a 52-week high of ₹ 564.25 on 16-01-2024 and a 52-week low of ₹ 549.5 on 16-01-2024. Analyzing recent trends, the stock price experienced a marginal decrease of -1% over the last month but demonstrated substantial growth, rising by 19.33% over the past year.
Pros:
- Outstanding Return on Equity (RoE): With a return on equity surpassing the anticipated cost of capital, the company showcases a remarkable ability to generate above-average returns on capital. This not only signifies the potential for sustained value creation but also supports the compounding of value over time.
- Efficient Cash Conversion from Profits: Demonstrating an exceptional cash conversion ratio of 132.02%, the business efficiently transforms a significant portion of its operating earnings into operating cash flow. This proficiency results in an impressive working capital cycle, fostering substantial cash flows suitable for funding growth initiatives or facilitating dividends. Consequently, this positive dynamic is set to enhance shareholder returns.
- Robust Shareholder Foundation: Backed by a robust long-term shareholder base, the company enjoys stability in its stock dynamics, effectively minimizing speculation and volatility. This steadfast foundation proves advantageous for long-term equity stakeholders, aligning with their strategic investment objectives.
Cons:
- Momentum Weakness: The stock exhibits signs of feeble momentum, indicating a sluggish trend in its recent performance.
- Limited Interest Coverage: With an interest coverage ratio as low as 5.28 times, a substantial portion of the company’s operating profits is allocated to servicing debt obligations. This situation results in diminished earnings and cash flows for equity shareholders, presenting a downside risk to returns.
- Highly Volatile Industry Cycles: Operating in an exceedingly cyclical industry, the company faces unpredictable earnings and cash flows. This characteristic introduces heightened stock price volatility and returns, creating a potential adverse impact on shareholder returns.
- Weak Pricing Power and Intense Competition: The business grapples with a combination of weak pricing power and intense competition, leaving it susceptible to competitive pressures. This vulnerability poses a significant threat to shareholder returns.
- Limited Margin of Safety: The relative margin of safety for investing in the company is constrained due to a recent sharp upswing in stock prices, amplifying the risk associated with investments.
Conclusion - For more in-depth insights into companies and comprehensive stock ratings, visit Samco Stock Rating. Explore detailed analyses, market trends, and valuable information to make informed investment decisions. Samco provides a platform for investors seeking thorough research and data-driven stock evaluations.
Disclaimer:
This content is for educational purposes only and should not be taken as financial advice, stock recommendations, or an endorsement of any specific investment strategy. Investing involves risks, and individuals should conduct thorough research or consult with financial professionals before making investment decisions.
