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GAIL Q2- Net profit up 131% despite high LPG prices| Is it worth investing in?

by 5paisa Research Team 12/11/2021

GAIL is India’s largest gas marketing and transport firm and they also own a petrochemical plant. The company is owned by the Government of India.

GAIL’s Q2 displayed an EBITDA of Rs.34.8 billion, a 44% quarter-on-quarter (QoQ) increase. This can be attributed to very a very strong marketing segment as the LNG prices doubled in this quarter, to $18/mmbtu. GAIL has a long position in several long term LNG contracts and it disposes almost 2-2.5mmtpa internationally on a yearly basis, to mitigate the risk.

There was a huge jump in the Q2 profits due to the natural gas marketing returning to black. The segment posted a pretax profit of Rs.1079 core which is in sharp contrast to the Rs.364 crore loss that was reported last year in Q2.

The company’s net profit doubled to Rs.2,863 crore (Rs.6.45 per share) due to this as this segment started making money for the company again. The net profit 131% higher than Q2 FY21. The revenue from operations increased by 57.65% to Rs.21,515.30 crore. The natural gas transmissions segment was more or less flat.

The petrochemical business witnessed a profit of Rs.364 crore. The EBIT was up 163% QoQ to Rs.3.6 billion. The sales volume was up by 2%. The transmission segment saw an EBIT increase of 14% QoQ to Rs.10.4 billion.

The LPG segment was a great disappointment as the growth is 17% below analyst’s estimate. The sales volume is 1% lower than last quarter. The LPG/LHC production has been 20%-50% lower. As the company diverted by-product propane to the petrochemical segment as feed stock and this led to a lower than average realization for LPG. It can be noted that the LPG prices have increased recently and have been firm recently.

According to the Chairman and Managing Director Manoj Jain, the capex for GAIL in the first half of the year was Rs.3180 crore mainly on petrochemicals, equity and pipeline.  Analysts are worried about the FY23 due to a cascading effect. As winter is nearing, the international gas prices have already started increasing and this will negatively impact the feed stock costs for petrochemical and LPG. This will in-turn lead to the petrochemical profitability decreasing significantly.

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Will Gold halt its recent up move or begin a fresh secular up-trend? Find out now!

Will Gold halt its recent up move or begin a fresh secular up-trend? Find out now!
by 5paisa Research Team 12/11/2021

Recent times have been quite volatile for the Indian markets. After gaining nearly 20 per cent from the July 28 low, the Nifty at the moment is trading nearly 3 per cent down from the all-time high. Moreover, from the past few trading sessions, volatility has hit the shores for the Indian market amid alarming inflation rate in the US, and corporate results. In times of such uncertainty, one needs to turn their attention towards the precious metal for stability.

The probable reason for the increase in gold prices is the high inflation numbers from the US and China.

The gold price is at the highest level since mid-June 2021 in the Indian market. It has been observed that gold acts as an ideal hedge during the falling market and keeps the value of the portfolio intact. Gold shot up around 3000 points since October. Furthermore, it has outperformed the Indian benchmark indices on an MTD basis. Investors across the globe are shifting to safe-haven owing to much hotter-than-expected inflation in the US. The October consumer price index (CPI) jumped 6.2 per cent, the highest monthly rise in the last three decades. Hot inflation numbers from the US and China has created buying interest in Gold in recent times. Owing to this, traders and investors are seeking to hedge their assets against the unpredicted volatility of the market.

On Friday, gold futures traded flat at Rs 49,200 per 10 grams. From a technical perspective, Gold is just trading below its resistance of Rs 49,750-50,000. The level of Rs 49,750 is resistance defined by the horizontal trendline, while the level of 50,000 is a big round number, hence, it would tend to act as a resistance level as well. Hence, once the level of Rs 49,750-50,000 is taken out on a closing basis, expect a further extension of this up-move. However, considering the volatility in the global markets and the domestic market, the good news is that the wedding season is around, and the yellow-metal would be in limelight. Talking about wedding season, as per the estimation by a traders association Confederation of All India Traders (CAIT) in Delhi alone they expect over 1.5 lakh weddings. And, we believe it’s just a matter of time that the yellow-metal breaches this strong resistance level and scales to new swing highs.

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Maharashtra Seamless is on the verge of giving trendline breakout

Maharashtra Seamless is on the verge of giving trendline breakout
by 5paisa Research Team 12/11/2021

The stock of Maharashtra Seamless Limited has given a downward sloping trendline breakout as of October 04, 2021, and thereafter witnessed a strong upside of 55% in just 10 trading sessions.

After registering the high of Rs 544.90, the stock witnessed a throwback. During this throwback, the volume was mostly below the 50-day average volume, which suggests its routine decline after a robust move. The throwback is halted near the 38.2% Fibonacci retracement level of its prior upward move (Rs 312.65-Rs 544.90).

Since the last couple of trading sessions, the stock is oscillating in a narrow range. Due to the narrow range, the Bollinger band has been contracted significantly on the daily chart, which is an early sign of the explosive move.

Talking about moving averages, the stock is comfortably placed above its key moving averages and they are in the desired sequence, which suggests the trend is strong. These averages are edging higher, which is also a bullish sign. The stock is 7.16% above the 20-day EMA and 21.50% above the 50-day EMA. The stock is meeting Daryl Guppy’s multiple moving averages set up rules.

The 14-period RSI on the daily and weekly timeframe is in bullish territory. Furthermore, in the recent sideways to corrective mode the RSI never breached its 60 mark, which indicates that the stock is in a super bullish range as per RSI range shift rules. The daily RSI is on verge of giving positive crossover while the daily stochastic has already given positive crossover.

The Average Directional Index (ADX), which shows trend strength, is as high as 33.22 on a daily chart and 41.23 on a weekly chart. Generally above 25 levels considered as the strong trend. In both time frames, the stock is meeting the criteria.

Currently, the stock is on verge of giving a downward sloping trendline breakout formed by swing highs from October 19, 2021. Any sustainable move above the zone of Rs 530-Rs 535 will lead to a sharp upside in the stock. On the downside, the 20-day EMA will be the major support for the stock.

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What is the best investment option for conservative investors?

What is the best investment option for conservative investors?
by 5paisa Research Team 12/11/2021

Conservative investor can invest in debt mutual funds as they offer the benefit of stable returns as well as diversification.

In India, various investment options are available where an investor can park his money and fulfil his financial goals and commitments.

Every individual has a different risk appetite and different investment horizons. An individual with a higher risk appetite can invest in equity directly or equity-oriented funds, individuals having moderate risk appetite can invest in hybrid funds or can invest directly in equity or debt instruments in proportion and lastly, conservative investors who have a low-risk appetite, can invest in debt funds or can invest directly in debt instruments.

Looking at this requirement mutual funds offer various types of schemes to investors under categories such as equity funds, debt funds, and hybrid funds.

In this article, we will focus on debt funds schemes.

Debt funds are fixed-income funds that are less volatile than equity funds. These funds invest in debt instruments like commercial papers, government securities, treasury bills, corporate bonds, and other money market instruments. The debt issuer pre-decides the interest as well as the maturity period. Investors with a lower risk capacity choose to invest in these types of funds. Ideally, the portfolio of every investor should consist of some proportion of debt for the stability of the portfolio. Out of all investment options available for conservative investors, debt funds are best as they offer diversity.

What should investors know before investing in these funds?

Risk: Debt funds are riskier than any other fixed deposits as these funds consist of interest rate risk as well as credit risk. Fluctuations of interest rates cause changes in the value of the fund. The interest rate and value of debt funds (NAV) have an inverse relationship. Likewise, credit risk means the risk of default.

Returns: Debt funds offer higher returns than fixed deposits but lower returns than equity. The net asset value (NAV) of the fund fluctuates with the change in interest rates. When the interest rate increases, the NAV of the fund falls whereas, when the interest rate falls, the NAV of the fund rises. Therefore, they are suitable in the falling interest rate phase.

Expense ratio: The asset management companies charge fees for managing the fund and this fee is known as the expense ratio. The expense ratio is the percentage of the fund's total assets. It affects the returns of the fund.

Investment horizon: Debt funds offer terms such as -

Short-term investment horizon: Investors, who wish to invest for a shorter period such as 3-month to 12-month, should opt for liquid funds that allow investing for a shorter time horizon. The typical tenure for the short term is 2-3 years.

Medium-term investment horizon: Investors, who are ready to invest their money for 3-5 years, can invest in dynamic bond funds, which offer quite a high return than fixed deposits with the same lock-in period.

Therefore, the longer the investment horizon, the greater is the returns. 

Taxation: Any capital gains arising on these funds vary depending upon the holding term of the investment. If any capital gains arising are less than three years, then it will be short-term capital gain, which will be taxed as per Income Tax slabs. If capital gains arising are more than three years, then it will be long-term capital gain, which will be taxed at the rate of 20%.

 

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Adani Enterprises: A multibagger with a high growth potential

Adani Enterprises: A multibagger with a high growth potential
by 5paisa Research Team 12/11/2021

Adani Enterprises Limited has a diversified business portfolio spanning coal trading, coal mining, oil and gas exploration, ports, multi-modal logistics, power generation, and transmission and gas distribution. It is a largecap company with a market capitalization of Rs 1,85,961 crore. It has a PE of 183 while the sector PE lies at 227.79 indicating that the company is not overvalued. Despite being its sector leader, the company has tremendous growth potential and has aggressive futuristic plans.

Adani Enterprises have a higher than industry revenue growth. In the last 5 years, revenue has grown at 2.77 per cent YoY, vs the industry average of 1.12 per cent. and consistently increasing market share over the last five years from 48.11 per cent to 52.22 per cent make it investment-worthy. Almost 75 per cent of the stake is held by promoters which shows that they believe in this company. The foreign investors hold about an 18 per cent stake, while the remaining is held by the domestic institutions and mutual fund houses.

From a technical perspective, Adani Enterprises has been scaling newer highs since the 2020 crash. It has given a whopping 355.45 per cent in one year and 8.5 per cent in a one-month period when the indices were bleeding. Adani Enterprises has been trading strongly for the past nine trading sessions with above average volumes. The stock has a beta value of 1.42. The stock, being highly volatile in nature, is trading in a broader range of 1350-1700 for a few months. The RSI is going strong at 66 showing bullishness and the positive movement indicator +DMI is positioned much higher than its -DMI indicating that the trend is gaining momentum. It is currently testing its all-time high levels of 1700 and any closing above it will mean that the uptrend is likely to continue. The stock is certainly attractive, traders and investors should closely watch this stock.

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ZEEL announces its quarterly results, stock trades flat amidst good results

ZEEL announces its quarterly results, stock trades flat amidst good results
by 5paisa Research Team 12/11/2021

The due diligence is in progress on the proposed merger with Sony Pictures.

The media and entertainment giant Zee Entertainment Enterprises Ltd, popularly called ZEEL, often entertains shareholders and enjoys the buzz. In just the last three months, the stock has appreciated by over 61% on the back of the merger with Sony Pictures Networks India. The company came out with its quarter ended September results on 11 November 2021, after the market hours.

The reported Q2FY22 financials were pretty strong. The consolidated net sales stood at Rs 1,979 crore which witnessed a decent 11.5% growth on a sequential basis, and nearly 15% growth on a YoY basis. It reported EBITDA of Rs 403 crore which too soared by about 21% on a QoQ basis and nearly 37.6% when compared to Q2FY21. The net profit number jumped by 27.4% on a sequential basis to reach the Rs 266 crore mark, which also witnessed steep growth of 185% on a YoY basis.

ZEEL has been the trending company on Dalal Street since it announced its merger with Sony Pictures in September. The stock went from Rs 186 to Rs 310+ on the announcement of the merger between ZEEL and Sony Pictures. However, this merger has led to a heated fight between Invesco and ZEEL. Invesco was looking forward to a strategic merger with Reliance Industries (which owns Network 18), but instead, ZEEL merged with Sony Pictures. Invesco, which is the largest shareholder of ZEEL (17.5%) has filed a request for EGM and demands the removal of current MD and CEO, Punit Goenka, the hearing of which will be announced soon by the Bombay High Court.

Zee Entertainment Enterprises Ltd is a global media and entertainment conglomerate present in television broadcasting, movies, music, live entertainment, etc. It has evolved from being an Indian Television broadcaster to a global content company. It offers 46 domestic channels and provides over 2.4 lakh hours of content. It has the highest market share of 18.4% in India in the broadcasting business.

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