State Trading Corporation of India (STC) has been in the news for some time now. First there was the announcement of the proposed bonus issue; the share price scaled new highs. The Board announced that the bonus was postponed. Then on 31st October, the company declared a 1:1 bonus and all finally heaved a sigh of relief. The stock price of the company has been moving up and down like a yo-yo. From Rs.134 in March 2007, the share touched a new high of Rs.1736 on 19th November 2007 and it is currently quoted at Rs.998.
STC is an international trading house owned by the Government of India, which has a 91.02% stake. The company trades in almost all the countries of the world. Its areas of operations are exports from India, imports into India, domestic trading and market support operations. These include foodgrains, bullion, hydro-carbons, minerals, metals and fertilizers.
Though there has been a run-up on the share price, the financial performance of the company for the second quarter ended 30th September 2007 has not been good. For Q2 FY08, the company posted a sales of Rs.3,533.39 crore on which its total expenditure exceeded the sales at Rs.3538.39 crore. It was the other income of Rs.35.82 crore which helped it post a profit. On a q-on- basis, EBIDTA was lower by 5.20%, PBT was down 18.15% and net profit was down 38.70%. OPM was at a pathetic 0.87% while NPM was lower at 0.30%. A company which posts a turnover of over Rs.3,500, having profit margins less than even one percent, does not seem like a very good thing.
So why is the share price soaring? The low floating stock has made the share price highly speculative. Plus the constant, on now-off now bonus issue made the stock susceptible to wide fluctuations. Despite that, STC is a huge conglomerate and the basic fundamentals remain sound. You can book profits on the pre bonus shares and lower your investment cost.
