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WORDS OF JESUS CHRIST.

Behold, I stand at the door and knock. If anyone hears my voice and opens the door, I will come in to him and eat with him, and he with me. Jesus Christ

10 Jun 2018

SHARE MARKET--What is the future of Sanwaria Consumer? Can it be a multibagger?



Sanwaria Consumer is a food processing company based out of Madhya Pradesh. It was incorporated in 1991 and since then has been in the business of manufacturing and selling of rice, edible oil and staple food products like Pulses, Sugar, Soya and other multiple edible products. The company is expanding aggressively and its topline and bottomline reflects the same. The focus is on providing economically priced products to tier 2 and 3 towns and the rural areas which provides the company immense growth potential.

Financials
Sanwaria consumer has a 1000 crore+ market capitalization and trades at 14.65 Rs (CMP)with a P/E of 10 presently. In the last 2 years, the stock has rallied from 2 Rs to a high of 33.4 Rs on Jan 1, 2018. Thereby, it has already given multibagger returns for investors in the past. The annual EPS for the financial year 2018 is 1.36 which has more than doubled from FY17. This looks like a great growth story. But, the credibility of the company seems to be in question.
Beware of this multibagger
But a recent event would make any rational investor question the discrepancy in the financials. The company released its unaudited Q4 FY18 results on April 11th, 2018. The Profit after Tax shown in the same was around 35 crores INR with the quarterly EPS of 0.48 Rs. The results were excellent when compared to Q4 of FY17. Despite that, the stock failed to impress and kept falling from the levels of 21-22 and has now come down to 14.65 Rs.
After a gap of almost 50 days, the company released the audited Q4 FY18 results on 30th May, 2018. The Profit after Tax was shown to be much lesser at 21.77 crores INR with the quarterly EPS of 0.30 Rs. In these two reports for the same period, there is a difference of 14 crores INR between the PAT figures reported. The images for both audited and unaudited results are shown below for reference. The links of these reports from the BSE site are also mentioned at the end of this article.

Audited Results – 30th May, 2018

Unaudited Results – 11th April, 2018
What should be done ?
In a recent interview, Mohnish Pabrai said that one needs to be extremely harsh in picking stocks at this time. In multiple stocks like Dilip Buildcon, PC Jewellers, Manpasand Beverages, etc. , the growth story has remained intact. But one bad news or discrepancy was enough to wipe off investors’ money. Hence, one needs to be extremely cautious in stocks where they see even a hint of discrepancy. Sanwaria Consumer also seems to have a similar problem and retail investors should stay away from it for the time being.


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