Hi I have a doubt in the financial results of DHFL FY16-17 , there is an exceptional item of 1,969.43 crore in the income statement which added to EPS. Due to to the stock value has moved up good. But is this movement permanent? DHFL will not have this exceptional item this year which may lead to poor result. What is the exceptional item. will that exceptional item give any income this year. Kindly help on how the valuation can be done on such profits.
How do you know this? Do you have inside information from the company?
You have to check their Annual Report for specific year you are referring to under Notes on Financial statement [precisely Note 32 in Annual Report for FY 17]
This is where you need to start first
Hi @Mani_Kanta,
1- DHFL has been in an uptrend not primarily because of this exceptional item (though it might be a contributing factor) but because of the strong rally that NBFC companies (e.g. Bajaj Finance etc.) have seen last year.
2- Exceptional items, by their very nature, are one-time events and the market doesn’t anticipate these items to be repeated in the subsequent periods. Therefore, the market is will not be disappointed if there is no new exceptional items to report this time around.
3- The basic principle of technical analysis is " market discounts everything". Anything that has already been reported or is out there in the public has no bearing on the price going forward. What really matters is any surprises (positive or negative) in the upcoming financial results .
4- Instead of worrying about the financial statements, I would worry about the general market sentiments towards NBFCs going forward. One one hand, the PSU banks have disappointed the investors and hence there is a case to be made for money to start flowing to NBFC companies. However, on the other hand, the valuations of the overall sector are inflated as it is and hence beaten down sectors such as IT are finding more investor interest. So, I would be closely watching how the sector performs in the next few months.
5- You can find the details of any exceptional items from the annual reports (just search for the phrase"exceptional item") . Here’s what I found:
http://www.dhfl.com/wp-content/uploads/2017/06/DHFL-Annual-Report-FY-2016-17.pdf
Hope this helps…
~Neha (www.VRDNation.com)
1 Like