Ace investor Rakesh Jhunjhunwala is sitting on a profit of over Rs 30 crore from his investment in Ion Exchange stock since the beginning of this year. On December 31, 2018, Ion Exchange stock stood at Rs 372.4. Jhunjhunwala held 8 lakh shares at the end of December quarter valuing his stake at Rs 29.79 crore. Till the end of June quarter, his shareholding remained unchanged. Ion Exchange share price stood at Rs 668.95 on June 28 this year (June 29 and June 30 were Saturday and Sunday). That amounted to a profit of Rs 23.72 crore (Rs 53.51 crore minus Rs 29.79 crore) for the big bull during the first two quarters of this financial year.
Jhunjhunwala sold 25,000 shares of the firm in the September quarter which brought his holding to 7.75 lakh shares or 5.29% stake in the water and environment management firm. Value of his holding for the September quarter amounted to Rs 51.84 crore. Its share price hit an intra day high of Rs 759 on BSE today resulting in a profit of Rs 6.98 crore (Rs 58.82 crore minus Rs 51.84 crore) since the beginning of September quarter assuming the big bull's shareholding has not changed in the current quarter.
He is sitting on a profit (Rs 23.72 crore plus Rs 6.98 crore) of Rs 30.7 crore in Ion Exchange stock this year. Share price of Ion Exchange has gained 102.03% in the last one year and risen 101.68% since the beginning of this year. The small cap share has gained 1.1% in last one week. It closest competitor VA Tech Wabag has lost 34.22% since the beginning of this year and fallen 32.04% during last one year.
Jhunjhunwala bought the Ion Exchange stock for first time in December 2007 quarter. He held 2.53% stake or 3,19,000 shares of the firm in the end of December quarter.
Strong financial performance
Of late, the company has reported strong financial performance pushing the stock higher. It reported a 127.24% rise in net profit to Rs 25.36 crore for the quarter ended September against Rs 11.16 crore profit in the corresponding quarter of previous fiscal. Earnings per share rose 127% to Rs 22.19 in Q2 of current fiscal against Rs 9.78 in September quarter of last fiscal.
During the first half of current fiscal, the firm clocked 82.27% rise in net profit to Rs 39.06 crore against Rs 21.43 crore profit in the same period of previous fiscal. Total income for six months ended September 2019 rose 50.03% to Rs 747.39 crore compared to Rs 498.16 crore total income in the corresponding period of previous fiscal. The firm has price to earnings ratio of 12.76 compared to industry PE of 18.27.
On the other hand, its peer VA Tech Wabag has PE ratio of 9.15. PE ratio is calculated by dividing the market price of a share by earnings per share. If a stock has PE ratio of 25, it means one needs to invest Rs 25 in the share to earn Rs 1.
Ion Exchange has a healthy price to book ratio of 2.68 compared to P/B ratio of 0.98 for VA Tech Wabag. P/B ratio compares the price of stock (market value) to its book (accounting value). Ideally, price to book value of a stock should be higher than 1 but lesser than 3.
A stock having book value higher than 1 is considered overvalued and conveys that the market is willing to pay more than each rupee of book value. Book value of a company is measured by the difference between total assets and external liabilities.
By Aseem Thapliyal