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Market prefers December for fiscal closure
Deepak Singh Tanwar
Jan 20: A cursory glance at the major gainers in the last few trading sessions highlights one factor shared by these stocks: All the companies have their financial year ending in December. And the interest generated by these stocks is evident from the jump in their respective share prices.For instance, SmithKline Beecham Pharmaceutical has climbed up from Rs 500 to Rs 540 in less than two weeks. Another company from the same group - SmithKline Consumer Products - has also recorded a 10 per cent gain in seven trading sessions. Digital Equipments has moved up by 9 per cent in five trading sessions, Castrol by 8 per cent, Hindustan Lever by Rs 60, Lakme Rs 30. Bata, too, has has shown similar gains. As far as individual cases are concerned, SmithKline Beecham Pharma reported an impressive growth of 28 per cent in the first half (year ending December), but is expected to report a much healthier growth in net profit at about 40 per cent for the full year amounting to Rs 29 crore, while more or less
maintaining its top-line growth. In the case of Pfizer, which closed the year in November, the company is expected to record a 30 per cent jump in profits. The first-half results have already been encouraging. The company has also re-launched its leading cardiovascular brand, Amlogard, at a competitive price, and more such launches and re-launches are expected in the future. However, the rise has largely been fuelled on expectations that the parent would hike its stake in the company to 51 per cent. The stock has already moved up to touch Rs 435.Similarly, the demand for the shares of Digital Equipment is also clear. The government has revoked the special import duty of three per cent on computers and computer components. The computer industry, which operates on wafer-thin margins, would get further relief by this move as it imports most of its components. Besides, the company would continue to get support from its parent company, Digital Equipment, which has been doing quite well for itself. In fact, the
parent company's earnings rose by 134 per cent in the fourth quarter of 1997 to $74.8 million. Lakme has also managed to attract buying interest, partly on account of rumours that it will tie-up with a leading Korean cosmetic company. Besides, with the company becoming a sub-contract manufacturer of cosmetics for the joint venture Lakme Lever, the burden of excise duties would now be borne by the new company as the levy on excise duty has been changed from ex-factory to maximum retail price (MRP). Profits for the company in the first half were up by 20 per cent, and the trend is likely to improve further in the second half. Reckitt & Colman is expected to end the year with an earnings per share of Rs 10. However, on the expected earnings, a discounting of around 40 leaves very little room for further appreciation. The same can be said about Bata, which according to analysts' estimate, will close the year with a net profit of around Rs 17 crore, translating into an earnings per share of around Rs 3. At the
current price of Rs 165, the discounting of over 50 is quite high even by its multinational company (MNC) status. Other stocks which have been in demand are Nestle, Britannia and Castrol. However, there are exceptions. The shares of companies like Kodak India, Wartsila and ABB, all of which have a December ending, have failed to feature on the speculators buy-list. In fact, Kodak was available at its 52-week low of Rs 305. Warstila is also hovering close to its 52-week low. The company is expected to report a fall of around 80 per cent from the net profit of Rs 18.61 crore posted last year, and the same can be said about ABB.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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