http://valueinvesting-wealthvidya.blogspot.in/
Brief Analysis Report
Rural Electrification Corporation Ltd. Value Investment Analysis Report 20th November 2016
Basic Filtering Criteria:
Critical prima-facie Observations: 1. PE Ratio: Rural Electrification Corporation (REC)’s PE Ratio is 2.29 is very attractively below the ideal 10. 2. Price to Book Value Ratio: Very attractively placed at one third the maximum recommended 1.50 times the book value at 0.45. 3. Distance from 52 week low: On this parameter the scrip is NOT in the attractive zone – it is very near the 52 Week High. 4. Dividend Yield: Again very attractively at 12.86% compared to the recommended minimum four to five percent and above. In light of the above highly favorable conditions, Rural Electrification Corporation (REC) shall definitely be accepted for further study.
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ A. Company Performance Profitability Analysis REC Profit and Loss Account
Brief Analysis Report
March 31' 2012
March 31' 2013
March 31' 2014
March 31' 2015
March 31' 2016
10,337.59
13,518.86
17,017.98
20,229.53
24012.88
25.20%
30.77%
25.88%
18.87%
18.70%
6,378.80
8,006.25
10,038.46
11,844.61
170.97
105.68 151.84
264.70 129.91
802.96 133.94
1096.18 143.19
52.55
77.51
52.27 58.35
25.00 64.69
47.32 105.47
0.00 172.74
441.49
3.27 6,716.21
3.75 8,434.72
4.21 10,590.07
6.76 12,961.01
3,621.38 171.48
5,084.14 79.81
6,427.91 103.21
7,268.52 158.52
3792.86 975.83
5163.95 1346.33
6531.12 1847.42
7427.04 2167.17
2817.03 3624.65
3817.62 5087.89
4683.70 6432.12
5259.87 7275.28
Profits) %
35.06%
37.64%
37.80%
35.96%
Depreciation EBT
3.27 3621.38
3.75 5084.14
4.21 6427.91
6.76 7268.52
19.67 8030.00
35.03%
37.61%
37.77%
35.93%
33.44%
171.48 3792.86
79.81 5163.95
103.21 6531.12
158.52 7427.04
36.69% 975.83 2817.03
38.20% 1346.33 3817.62
38.38% 1847.42 4683.70
36.71% 2167.17 5259.87
116.66 8146.66 33.93%
27.25%
28.24%
27.52%
26.00%
(Rs. in Crores)
Net sales % age rise (+) or fall (-)
Cost of sales: Interest, Finance & Other Charges Bonds Issue Expenses Provision for Contingency Personnel Expenses Foreign currency fluctuations Provision for Bad & Doubtful Debts Other expenses Prior Period Items (Net) Depreciation Total cost of sales Operating profit after interest Other Income Profit Before Tax Provision for taxes Profit After Tax (PAT) EBDITA (Operating Profits) EBDITA (Operating
EBT %
Net Non-Operating Income FINAL PBT FINAL PBT % Income Tax PAT PAT %
14282.35
19.67 15982.88 8030.00 116.66 8146.66 2455.24 5691.42 8049.67 33.52%
2455.24 5691.42 23.70%
Remarks: 1. EBDITA margins are Excellent. 2. The company has been in consistent profits since 1990-91 except for the year 1992-93. This is record of 25 years out of last 26 years. 3. Under the profitability parameter, consistently good margins urge strong recommendation for inclusion.
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ Balance Sheet Analysis: REC Profit and Loss Account
Brief Analysis Report
March 31' 2012
March 31' 2013
March 31' 2014
March 31' 2015
March 31' 2016
2,500.00 339.65 14502.37 17,342.02
2,480.00 227.43 19116.40 21,823.83
2,540.00 257.96 18583.73 21,381.69
734.00 453.71 24811.40 25,999.11
6460.77 858.42 30595.39 37,914.58
76,553.68
90,960.38
1,10,162.30
1,31,168.32
138783.85
61.78 26.19 76,641.65 93,983.67
188.45 80.25 91,229.08 1,13,052.91
173.69 442.24 23.52 1,10,801.75 1,32,183.44
107.32 1007.09 36.16 1,32,318.89 1,58,318.00
47.54 1295.46 10.09 1,40,136.94 1,78,051.52
987.46 13757.46 14,744.92
987.46 16466.92 17,454.38
987.46 19682.00 20,669.46
987.46 23869.57 24,857.03
987.46 27905.94 28,893.40
1,08,728.59
1,30,507.29
1,52,852.90
1,83,175.03
2,06,944.92
5311.48 47.16
1484.26 47.16
1192.94 47.16
522.90 438.66
1864.08 149.41
Other Current Assets Total Current Assets
12,155.88 17,514.52
13,567.57 15,098.99
13,939.25 15,179.35
16,666.43 17,627.99
44491.08 46,504.57
Fixed Assets: Net Block Capital Work In Progress Total Non Current Investments Long Term Loans Deferred Tax Assets Other Non Current Assets Total Non-Current Assets Intangible Assets
68.24 7.92 76.16 710.43 89985.31 10.05 429.8 91,135.59 2.32
67.59 8.75 76.34 613.45 114574.53 9.51 130.76 1,15,328.25 3.71
69.67 9.71 79.38 1,660.63 135898.97
72.50 7.39 79.89 1,174.81 164213.78
253.05 76.84 329.89 2202.14 157796.82
32.12 1,37,591.72 2.45
77.13 1,65,465.72 1.43
109.26 1,60,108.22 2.24
1,08,728.59 14,742.60 172.50 1.01 6.37
1,30,507.29 17,450.67 (6,724.84) 0.69 6.48
1,52,852.90 20,667.01 (6,202.34) 0.71 6.40
1,83,175.03 24,855.60 (8,371.12) 0.68 6.37
2,06,944.92 28,891.16 8,589.99 1.23 6.16
5.20
5.23
5.36
5.32
4.85
(Rs. in Crores)
Liabilities: Short-Term Borrowings Short Term Provisions Other Current Liabilities Total Current Liabilities Term Liabilities Long Term BorrowingsSecured Deferred Tax Liability Long Term Provisions Other Term Liabilities Total Term Liabilities Total Outside Liabilities Net Worth: Ordinary Share Capital Reserves & Surplus Net Worth Total Liabilities Assets: Cash And Bank Balances Short term Investments
Total Assets Tangible Net Worth Net Working Capital Current Ratio Total Outside Liabilities/ Tangible Net Worth Total Term Liabilities/Tangible Net Worth
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ Brief Analysis Report Highlights: Many liquidity and solvency ratios appear poor. But these ratios cannot be applied just mechanically to a term lending institution like Rural Electrification Corporation, which meets payment obligations from recoveries of loans. Therefore there are no negatives as far as balance sheet analysis is concerned and REC can be included.
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ Dividends Distribution of net Profits Let us study the dividend distribution pattern of REC: Profit After Tax Dividend Dividend as % of PAT
Brief Analysis Report
March 31' 2012
March 31' 2013
March 31' 2014
March 31' 2015
March 31' 2016
2817.03 1784.12
3817.62 2775.30
4683.70 3370.01
5259.87 1270.79
5691.42 2034.26
63.33%
72.70%
71.95%
24.16%
35.74%
The above table shows that the company has been generously distributing about 25-35% of the net profits as dividends. On this count the company performance very good. Uninterrupted Dividend Payment History Dividend(%of Face/ Nominal Value of Share)
Announcement Date
Effective Date
Dividend Type
27/05/2016
22/08/2016
Final
51%
05/02/2016
17/02/2016
Interim
120%
28/05/2015
09/09/2015
Final
27%
10/02/2015
18/02/2015
Interim
80%
26/05/2014
02/09/2014
Final
17.5%
30/01/2014
20/02/2014
Interim
77.5%
28/05/2013
28/08/2013
Final
23/01/2013
08/02/2013
Interim
23/05/2012
04/09/2012
Final
25%
16/01/2012
30/01/2012
Interim
50%
24/05/2011
30/08/2011
Final
40%
28/01/2011
11/02/2011
Interim
35%
19/05/2010
24/08/2010
Final
35%
17/12/2009
04/01/2010
Interim
30%
25/05/2009
03/09/2009
Final
25%
04/02/2009
26/02/2009
Interim
20%
15% 67.5%
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ 28/05/2008
08/09/2008
FY 2006-07
Final
Brief Analysis Report 30% 23%
Besides the above table, which shows uninterrupted dividend payment for the last 10 years, the company’s old annual reports indicate that another nine years, that is since 1997-98 the company had maintained dividends. This makes it a total uninterrupted dividend payment track record of 19 years. It is also seen that from old annual reports that REC did not pay dividends for five years from FY 1992-93 to 1996-1997. In the year 1992-93 the company incurred a loss. On the dividends front Rural Electrification Corporation has impeccable credentials. Dividend Yield: Dividend Yield, is a combination of both the company’s dividend policy and performance as well as market condition. On this count a yield is very attractive at 12.86% compared to the minimum recommended 4-5%. This shows that not only the company is handsomely distributing dividends but also that the price of the share is not unreasonably high to pull down the yield. Five-year price graph:
The graph above shows that the stock price of REC having dipped to about Rs.75 in June 2016 (on the back of severe hammering inflicted by the market on banking finance stock for high levels of Non Performing Assets (NPAs), has recovered steeply and is not in any specially favorable condition.
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ Five years returns (price rise):
Brief Analysis Report
Besides the price graph, the five years return of +48.79% indicates that the price of the scrip has appreciated that much in the past five years and therefore there is no special advantageous condition here.
Distance from 52 Week Low: 52 Week Low: Rs.76.12 52 Week High: Rs.140.90 Current Market Price (CMP) on 18th November 2016: Rs.132.50 Distance from 52 Week Low is 74% which is not favorable. In fact it indicates that it is just 26% less than its 52 Week High. This means that the CMP is very near the highest price of the scrip in the last one year. However please note that there is still opportunity for price increase from the present level of Rs.130 as we ourselves have bought this share at Rs.200 levels.
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
http://valueinvesting-wealthvidya.blogspot.in/ Brief Analysis Report Final Conclusions: The above brief analysis proves that Rural Electrification Corporation is without doubt a wonderful company and brand. PE Ratio of 2.29 is very low and the company’s earnings will recover the investment in just 2.29 years. Price to Book Value Ratio (P2BV) of just 0.45 means we are able to buy the net assets of this wonderful company at whopping 55% discount! The EBDITA, EBT and PAT margins are very good. The company is consistently profitable for many years into the past. There are no adverse observations from the balance sheet angle. Even though the market condition parameters of five year price graph and distance from 52 Week low and five year returns do not bestow any special privilege, the market of the scrip is reasonable as shown by low PE and P2BV ratios. Final Investment Advice: Rural Electrification Corporation (REC) is a wonderful company that will lend grandeur to any value investing portfolio and a must include at the current price levels.
Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.
