Setco is a monopoly player in it segment with nearly 90-% market share after swallowing clutch auto much earlier. It's a terrific proxy to the growth of Tata motors and Ashok leylands of the world. The problem however lies in its inconsistency. The endeavour of the son in building stadiums also looked haywire. If it can sustain the numbers with that 200 bps improvement in EBITDA margins,company could find itself in a much higher level. .
Compared to First Quarter sales of Rs 73 crs second quarter has witnessed robust growth in sales at Rs 135 crs in all segments, alongwith reduction in costs resulting in significant improvements in operating margins. Overall improved cash flow, better working capital and reduction in interest rates has further contributed to improved performance. Against Net Loss of Rs 11.89 crs in Q1 FY 18, the company has made Net Profit of Rs 13.76 crs in Q2 of FY 18 .
Highlights: Overall Revenue has increased by 41% compared to Q2FY17 and 111% compared to Q1FY18.Post GST implementation from July ‘17, business across all segments has registered significant
MHCV production during the quarter registered an increase of around 60% compared to Q1 FY18 and
around 15%.compared to Q2 FY17.OEM sales during the quarter registered increase of 90% over Q2 FY17 on account of
i) build up of ‘in-transit’ inventory making up for loss of sales in Q1, ii) incremental sales of LCV, Tractor clutches and new products to Ashok Leyland.
Overall Aftermarket sales during the quarter registered an increase of 13% over Q2 FY17,
substantially making up for losses in Q1.Exports increased by 45% over Q2 FY17 mainly due to supplies of clutches specially developed for North American market as well as overall positive trends. Growth trend witnessed during Q2 FY18 is expected to accelerate in the coming periods on account of increase in OEM demand and exports as also sales of new products.
Operating Performance: EBIDTA margins have increased by 1.3% to 13.9% during Q2FY18 compared to 12.6% during Q2FY17 on account of :a. Increase in operating volumes.b. implementing price increases with all customers.c. Improvement in operating efficiency.d. Control over fixed costs. Other Income for the quarter includes Rs 453 lakhs as Finance Income on account of redemption of preference shares investments made by the company in earlier years.
Sales Outlook: To register growth of ~ 14%. OEM Sales to grow by ~ 10%. MHCV production likely to continue strong, positive trends witnessed in Q2. Major OEM customers are optimistic about the near future.Company’s OEM sales will increase by further ~10% due to new product sales to Ashok Leyland, LCV sales to Tata Motors and sale of clutches to farm equipment segment to leading OE manufactures in farm equipment segment. Opening of mining segment will further enhance OEM demand.OES/IAM Sales to grow by ~ 12%. Post GST implementation, Aftermarket sales have reversed the trend witnessed in Q1FY18. With new vehicles produced during FY15 / FY16 due for 1st replacement. Introduction of GST is positive for the company since it will affect the volumes of unorganized sector.Exports Sales to grow by ~ 40%.Sale of new range of clutches in North American market which has already commenced.
Profitability Outlook: Increase in volumes by around 15%, coupled with operational efficiencies and control over operating and fixed costs, is expected to improve EBIDTA margins in H2FY18 by 200 BPS. Finance cost is expected to come down by around 6% despite increase in turnover on account of improved cash flow, significant reduction in working capital deployment & reduction in interest rates (around 100 bps). Company’s standalone cash flow and balance sheet will significantly improve with redemption of entire preference shares of Rs 34.65 crores during the year.
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation.
The focus of management in on 3 project now
1) Assam – sub-surface onshore - Dirok block - phase 1 completed and started commercial sales in Aug’2017. Undertaken by JV where HOEC has 27% stake.Producing 10 mmscfd of gas and 100 barrel condensate per day from 3 blocks and supplying via 4inch pipeline with pressure range of 1500-1800psf from the Girijan sand. The potential from these block is upto 20mmscfd. Gas is bought by Oil India and condensate is sold to IOC.Undergoing expansion to add 3 more wells with deeper and laying 12 inch pipeline that will run parallel to 4 inch pipeline. This will be through the Tipam sand (extends upto 500km) which is most prolific contributor with high pressure range of 3500 psf.The production capacity will be increased to 36mmscfd of gas and 1,000 barrels of condensate from 6 wells effective 1 April, 2018.The plant is developed by Expro on lease and operate model where the equipments will be delivered in 40 containers of pre-engineered modules and then assembled at the site. HOEC has to provide only specifications and make land available. This will reduce the timeline to 27 months vs 5 years via traditional method as Expro started the work overseas even when environment clearance was under process in India.
• The total capex is at $82bn including $27bn for modular gas plant.
• Net Revenue to HOEC –
o Gas : 36,000mmbtu * $3.28 = $118000/day + Condensate : 1000 barrel * $50/barrel = $50000/day ,
o Total revenue : $168000/day less opex of $15000/day = net revenue $153000/day
o HOEC share – 1/3rd : net revenue $50000/day or roughly Rs1000mn / year from FY19 from 6 wells.
• Oil India is bearing cess on condensate and royalty on gas.With the last 3 blocks giving lead and indication for large amount of gas and condensate, HOEC is considering one more campaign for another 6 wells in Tipan and North Dirok.The development of this block will depend on how much gas can the market absorb immediately.HOEC is undertaking CSR activities along with the development of blocks which helps them win support from locals for the asset expansion.Risk : lower offtake of gas by the market
2) PY-1: Cauvery : onshore + offshore – 100% interest by HOEC – focus on reviving production from 2 wells
• Phase 1: Re-entry into 2 wells Mercury and Earth. Side track it and position it above the water levels to produce gas at total capex of $10mn to be spent by HOEC.Currently producing gas of 2.5mmcf /day and selling to GAIL. Plans to revive the well between Apr-Jun’18.From Jul’18 onwards the production is expected to increase to 10mmcf/day and at gas price of $3.68/mmbtu this will translate into PAT of Rs750mn as the operating cost is lower at Depending upon the success of two blocks HOEC will get strategic partner to produce from another 2 blocks that have fractured granite basement. Can approach Hurricane Energy, UK as it specializes in basement reservoir.
3) B -80 : Won the block in May’2018 in JV with Aban Offshore
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation.
Background: Future Lifestyle (FLF) is an unique player in the fashion industry, that is primed to gain leadership in building both fashion brands and fashion retailing in India. In addition to owning and investing in brands, company owns two unique retailing formats – Central and Brand factory. FLF also focuses on investing in fast-growing fashion companies and building a portfolio of fashion brands and have investments in companies, which own/manage fashion brands like Cover Story, Turtle, Clarks, Mother Earth, Tresmode, Mineral etc. Company’s own power brands include Lee Cooper, Scullers, Indigo Nation, John Miller, Jealous 21 and ALL.
Key meeting takeaways:• Out of its own 15 brands which do about Rs10bn revenue, FLF is focusing on 6 power brands, with the top 3 doing above Rs1bn being Lee Cooper, ALL and Indigo Nation. FLF has recently carved out Lee Cooper, which was valued at Rs10bn and diluted 26% holding.
• Among investee brands, which did Rs4bn of revenue, the key ones are Turtle, Clarks and Cover Story, with the latter two in an investment phase. Monetisation possibilities carry a significant option value for shareholders.
• Central sells 30% own brands with a blended margin of 10%, which can keep inching up by ~50bps every year. Central has been revamped three times in 8-9 years, in line with changing consumer preferences.Brand Factory sells 40% own brands with a blended margin of 7.5%, which can again inch up with operating leverage.
• On an overall basis, a revenue growth of 15-17% looks achievable, with 8-10% SSG and 1mn sqft of retail area addition every year.On store expansion, FLF is looking to have 60-65 Central stores by FY21, from 37 currently, and 100 Brand Factory stores, from 55 currently.
• Company expects a sustainable margin of 10-10.5% for next year and sees an opportunity of 10-15 days improvement in its inventory period of 200 days, coupled with some improvement in creditors’ period of 120 days. In recent 5-7 days shopping festivals organised by the company, there has been a strong 50% yoy growth in sales.
Courtesy: Systematix institutional
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is strictly not a recommendation.
In our meeting with the promoters of Time Technoplast, the management shared outlook in its various businesses like Industrial packaging, Composite Cylinders, HDPE Pipes and Batteries. The management expects revenue growth of 15% and modestly higher EBITDA margins in FY18 aided by increasing share of value-added products.In Industrial Packaging the company has in operations 29 mn products with negligible defect levels. The company has 20 production sites across India and all of these facilities are within 250 kms radius from client (Its competitor Balmer Laurie has fewer plant sites close to consumer centers) .
The company has a 70% market share in India in plastic drums.With approval from fourteen countries including India, TTL’s composite cylinder has good potential ( ~ 260 mn metal cylinders in India with 6% replacement). Despite the inherent advantages of composite cylinder, the product has not gained popularity among OMCs. Hence, the company is focusing on export markets. It expects to sell 0.7 mn composite cylinders and generate revenue of Rs 1.4 bn in FY18.The average realization per cylinder is at Rs 2200-2500 per cylinder.Till some time back, the battery business was overly dependent on the telecom segment, it has now fairly diversified with around 50% of revenues being contributed by non-telecom applications like Solar and Railways. This business is now operating at 50-55% capacity utilization and with is EBITDA positive.
In Q4FY17, the company has set up a 6000 tpa unit for making Multi Excel Cross Laminated (MOX) films. The management claims its product to be better than the one available in the market. The MOX film is mainly used in greenhouses and scores over the traditional films in terms of durability. In its first full year of operation in FY18, the MOX films unit should generate revenue of ~ Rs 800 mn. At full capacity utilization, this unit can generate revenue of Rs 2.0 bn pa and EBITDA margins are expected to be higher at 20-22%.
The company also reiterated its 2021 target of doubling ROCE to ~ 20-21%. As per the company’s five year target (FY16-FY2021) it plans to 1) double its revenue 2) debt to EBITDA to fall to 1x 3) ROCE to double from the current level of 10%.
Courtesy: Kotak conference
Background: Dhabriya Polywood Ltd is one of the most reputed exporters, manufacturers, suppliers and traders, offering products of home decor and interior. Dhabriya started operations in 1995, with the production of U/R-PVC profiles under the brand name “Polywood”. Over the years, company has gradually expanded the products base to include PVC section with various designs to suit the complete fabrication requirement of Doors, Windows, Partitions, False Ceilings, Wall Paneling, Pelmet, Kitchen Cabinets and other interior applications. Company has three manufacturing facilities (two at Jaipur, Rajasthan and one at Coimbatore, Tamil Nadu), through which the Indian market is being catered. It has a strong market hold throughout India, except for a couple of states, for which the company has made detailed marketing plans to strengthen its presence in the next one to two years. Dhabriya has over 450 employees spread across 3 manufacturing units and multiple branch locations.
Introduction of ‘Dstona:Company has recently launched a new product named ‘Dstona’, which is a composite of stone and plastic to be used for interior decoration. This would be a value-added product for the company, fetching margins in the range of 22-25%. Management noted that the product is gaining acceptability among customers and expects to gain huge traction going forward. It is currently selling nearly Rs5mn of Dstona product per month, which management expects to reach Rs30mn per month going forward.
Other key takeaways:Management guided for a revenue of Rs1,900mn by FY19 at 80% capacity utilisation level, from 55% currently.
• It expects the total capex in the near term to be ~Rs200mn, which includes an expansion plan of Rs100mn and an installation cost for rooftop solar panels at all plants worth 50mn.
• EBITDA margin: uPVC windows 15%+, PVC profile 15%. For windows, the current order book is 1bn.
• Post GST implementation, tax has reduced from 28-29% to 18%. The market is fragmented, with a lot of small players. Dhabriya Polywood is expected to benefit from potential elimination of unorganized retailers post GST.
1...Look for headwinds and tailwinds…with the right tailwind, the entire sector can give multi-fold returns.Many sectors in India have given 25x-100x returns with the right tailwinds.On the other hand,when there are significant head-winds,wealth destruction happens.
2..Look at promoter hunger.“We are in the markets to make money, not give integrity certificates”.The perception of the Promoter being a chor or not changes with the share price.
3..Look at opportunity size.If the size of the opportunity is big,a hungry promoter with good execution skills can make you buckets of money.On the other hand, if the market size itself is small, then its difficult for earnings and hence valuations to grow.
4..“Chalane Wale, Chal Base” – don’t buy a stock, just because a big name/broker is buying it.Don’t have false expectations that these big names will make the stock price go up.
5..Watch out for story tellers-Some managements are master story tellers…watch their quarterly results carefully.If they don’t walk the talk, then exit.
6..There are two types of people in the markets-“Jo paise gavake rota hain, jo paisa jeetke rota hain” i.e. investors have two regrets-regret of losses and the regret of booking profits too early.Always try to be in the second category. Leave money on the table, its impossible to get the very last dime.
7..Look for “insight information, not inside information”.More money has been lost on trading on inside information than anything else.On the other hand, after talking to management,trade etc, you get insights on the industry,sector,competition,emerging technologies etc, that can be very valuable.
8..Be a shana, don’t be a dedh shana” -Be smart, but don’t be over smart.Avoid leverage,avoid selling quality to go for optically cheap stocks etcIt’s an exciting time to be in India.As India grows from a $2.5 Trillion economy currently to $10 Trillion in next 20 years, more wealth will be created in India in the next 20 years as was created in the last 5000 years.Think about it.
We recently visited Kolkata to understand the prospects of the innerwear/hosiery industry in India and came back impressed after meeting the managements of Rupa & Co, Lux Industries and Dollar Industries, the next 3 players behind Page Industries. Although Rupa is trying to pick up pace after years of muted growth riding on international brand licensing arrangements, we thing it will be difficult. We would be more bullish on Lux Industries and Dollar Industries and find them much better placed to grow much faster and gain further market share. Would be happy to discuss the meeting takeaways in further detail.
1..Dollar Industries:Expected to end FY18 with a revenue of Rs1030 crs, the company is targeting to almost double topline to Rs2000 crs by FY23 organically with revenue growth at 15% CAGR and PAT expected to grow at 20% plus CAGR. In addition, there could be some inorganic growth as well especially in womens innerwear. Company expects the premiumisation story to continue with both their high margin brands Force NXT and Missy growing at 50% plus albeit from a low base which will pull up gross margins.On the ASP spends, the company wants to maintain its high trade incentives and schemes but is looking to cap ad spends at FY17 levels of about Rs90 crs for the next couple of years, which will drive up margins.Company is also trying to get channel financing arrangements done to reduce the working capital cycle.Company is quite confident of success in its recently commissioned JV with Pepe Jeans which should start contributing to profits in 3-4 years.
2...Lux Industries:Expected to end FY18 with a revenue of Rs1600 crs at a group level, the company is targeting to keep growing revenues at 20% CAGR and PAT at an even higher rate. Company is looking at various alternatives to bring the 2 unlisted promoter owned businesses - Gen X sportswear and Lyra womenwear under the listed Lux Industries which will make it the clear No.2 player in the industry behind Page.While both Gen X and Lyra are growing at 20% plus CAGR, even in the listed business, the premium Onn brand is growing faster than Page Industries at similar margin levels. With the advent of GST, the company is expecting a massive shift from unorganized segments in the economy segment and is therefore getting aggressive in that by making AMitabh bachchan the brand ambassador of Lux Venus.On the ASP spends, the company wants to maintain its spend at around 7-8% of sales for advertising and 5-6% selling expenses. Exports is a key focus area for the company and the company is looking to reach a share of more than 20% coming from exports.
3..Rupa and Co:After growing slower than the market for past few years, the company is targeting to pick up the growth rate especially at the premium end with a lot of efforts put on M Series and the the 2 licensed international brands - Fruit of the Loom and FCUK. Company has received strong initial success in FOTL and expects it to become a credible competition to the dominant Page Industries. Company expects to maintain its margins above peers given the premium pricing it enjoys and also better return ratios given the better trade terms it commands with the distributors. Although it is difficult to reduce the WC cycle under the current model, the company has started trying the direct distribution model in a few markets which can drastically change the financial metrics if successful.
Courtesy: Himanshu Nayyar
Quote:As you guys are aware to cater to our offline audience we have a magazine called Indian economy and markets which every month takes interviews of highly successful Indian Investors. Here's the published version.
Aveek mitra(AM)has been one of most admired market veteran over the last couple of decades. He has been a witness to several of market cycles. A humble,grounded versatile personality with an ocean of vast knowledge. Indian economy and research recently caught up with him to enrich our subscribers with his pearls of wisdom.
IEM)Put a brief about yourself. How you started,your background,what you do presently etc etc.
AM)I am a SEBI Registered Investment Adviser and run our web based advisory https://aveksatequity.com. I am investing in the Indian market for about 21 years and previously worked in India and abroad in senior positions for about 23 years. I am a full-time investor and adviser for last 5 years. Our advisory is focussed on long term wealth creation.Like any average academically educated Bengali middle-class family with no investment culture whatso ever, I waited till the age of 29 to make my first investment which halved in no time! It was made as per recommendation of a reputed broker friend and it was my only savings after almost 6 years of slogging in corporate. I was working in L&T then. You can say, I became a learner and serious about knowing the field of investment out of desperation to recover my lost capital! But quickly the field became a big passion for me in spite of my corporate job. But I must say, the investor in me, honed its skill when I started managing real business on my own since the early 2000 as head of a medium sized organization which grown in size over next 12 years. You can say, I worked inside a multi bagger company and it gave me some real insight about leading a business. I believe, it immensely helped me to be a better and better investor over the years from a very mediocre initial level.
IEM)What is the best investment advice that you would like to share with young investors?
AM)Here I assume investors mean the persons who want to enter the equity market to deploy their savings and are confused by the apparently bloated valuation; constant noise about market peak; too many contradicting opinions of optimists, not so optimists and downright pessimists.
To me the big picture is --- In spite of everything, Indian economy doubled in last ten years and whether we grow at 5% or 6% or 7% real terms, we would double the economy in next 8 – 9 – 10 years. So, the entire Indian market would be double the size than it’s today in next ten years. And note, we talk of GDP in real terms but SENSEX or NIFTY are quoted, corporate profits are quoted in nominal terms. You get your money in nominal terms and it’s your responsibility to protect and grow its value in real terms. I only understand equity investment, so my opinion may be biased but my advice to young investors would be have faith in India and Indian businesses. There is a synchronised global growth happening after almost a decade and India would be a major participant in global growth due to its size and population this time around.
We have many challenges, market may be volatile and also may come down from time to time. But directional uptrend would continue for many years. Directional uptrend is there for last 40 years so I find no reason why it would be otherwise this time around. Take help of good advice from whoever you feel like and you trust, and who knows investment than blindly following some tip or media news.
IEM) Does one need to be a quant whiz or mathematical genius to be good at value investing?
AM)I don’t really know what exactly is “value investment” in today’s context. There are multiple definitions. To me, generating absolute long-term return on investment year after year irrespective of market cycle is all that matters.I think a good grasp of finance and accounts is desirable and understanding of the business where one is investing is essential. I think it is ridiculous to think that maths or quant would give an edge in long term investing. In that case, computers / AI / Robots would be beating us hollow very soon. And I am certain this is not going to happen anytime soon. This can help in decision making manifold but in no way, take away the job of making “decisions”.
IEM)Is “value investing” a good investment strategy for long-term investment goals like income during retirement years?
AM)As I said I am not very clear of definition of “value investment” but if that means buying a business either anticipating its future growth or identifying that it’s present price is less than what should it ideally be then I think it very much sums up all types of investment. Anything else is either speculation or gambling or something I don’t know about.If we accept the above working definition, then I think it is the only way to increase and preserve your wealth and translate that into income in the twilight years of life. Here the underlying assumption is there would be no war or serious social strife or law and order problem which renders the market non-functional. And I think we can safely make that assumption. And if that assumption fails, all types of asset class would fail. In either case, investment done with prudence and patience can generate inflation adjusted income during retirement years provided you start early enough (latest by the age of 40).
IEM) What do individuals need to learn before they start practicing value investing?
AM)Here I have an opinion, I don’t know how will you take it. I don’t think everyone needs to learn everything. I don’t know anything about the profession of Medicine, Law, Plumbing or Carpentry. If I need help, I go to a doctor, lawyer, plumber or carpenter. Why can’t then I depend on a good investment adviser or a Mutual Fund or a person who knows the subject? No subject can be learnt overnight or without passion. And very few individuals can have the patience, perseverance and most importantly passion to be an investor. In that case it is always advisable to seek help and guidance.Also, everyone can’t be an investor …. Like everyone can’t be a singer or a painter or a marathon runner. It is better to give it to someone who is good at it than to try it oneself in a mediocre way. Ultimately an investor should look for how much he invested and how much return he got over 3 – 5 – 10 years period. At most he should measure performance of the manager managing his money. I honestly think a lay person does a great disservice to himself by trying things on his own.I may be biased here as I run an advisory myself. But it is my honest opinion.
IEM) Should individuals modify their investment styles in a bull market or a bear market?
AM)I think it is important to identify market cycles …. It is impossible to forecast precisely but unless you realize quickly the market and economic cycle you are in and unless you align your investment strategy accordingly, you would significantly lose out in generating the return on investments you expect out of your hard-earned money.
Imagine someone invested in IT and Pharma for last two years as a seemingly good value investment then possibly he would be repenting today. Conversely, if some one invested in Infrastructure or Metals in 2011 – 2014 period, possibly he is out of business today! So, in short, to me identifying market cycle as early and as quickly as possible, separates men from the boys.
IEM)Warren Buffett has often talked about “moats” or sustainable competitive advantages. Could you explain this concept along with some examples?
AM)I think enough is written about it and honestly, I have nothing unique to share. However, I do make a significant distinction between a “moat” and “competitive advantage”: To me moat increases with passage of time and competitive advantage decreases with passage of time. To me, moat is akin a “network effect” or a “positive reinforcement loop”. Take an example of Google or Facebook or Coke --- With every passing day it is becoming more and more impossible for competitors to dislodge them. If you know every code Google ever written or every marketing ploy Coke or Facebook ever deployed, even then you possibly cannot dislodge them in foreseeable future. I feel there are very very few companies with real “moat” in that sense. Only a structural shift in consumption pattern like preference for healthier food can dislodge Coke or disaffection to engage in meaningless banter can dislodge a Facebook.
Competitive Advantage erodes with the passage of time. Take example of China, it had a competitive advantage of large pool of cheap labour and shifted the entire manufacturing base within its border but with passage of time many factors start playing out like labour cost, environment cost, compliance cost etc which is shifting the manufacturing hub elsewhere. Or take the example of Indian IT services companies … English speaking, reasonably educated, cheap white-collar jobs … the mainstay of Indian IT services are facing serious existential threat within a span of 20 years as the arbitrage is going away. So, in one sentence, to me, Moat is synonymous with Network Effect or a positive reinforcement loop and Competitive Advantage is synonymous with Arbitrage Opportunity.
IEM)What are the essentials of due diligence when investing in any stock for the first time?
AM)I think promoter quality; nature of business and valuation are three most critical things. You can’t change the promoter and you can’t change the price market is offering you at a point of time. For the first, you need to use your investigation and networking skill and for the second you need to use your discretion of whether to buy or to let go …. I feel I have control only over the price I want to pay. And I feel at any point of time market offers 10 – 15 opportunities to buy at a great value. Don’t look into overall market valuation, look into specific business valuations. In bull market work gets tougher but not impossible or improbable. And business quality is critically important if you are comparing two companies selling at different valuation levels. A commodity trading business would always sell cheaper than a quality consumer brand. I guess all knows it but it is basis of determining business quality in one sentence.
IEM)What kind of stocks would you avoid buying because they are riskier than others?
AM) If I don’t understand the business I don’t buy. If the company has too many subsidiaries, I don’t buy. If I don’t understand the flow of cash within the business ecosystem I don’t buy. All my mistakes happened when I tried to act too clever or too smart. Nowadays I only invest in companies which are simple to understand or where I have access to experts who can make me understand the working of the business or industry.
IEM)Carefully learning from the mistakes of others is an effective way to accelerate the learning process. Could you share some of your mistakes & lessons over the last couple of years?
AM)I made several mistakes and even now make mistakes. It is impossible to try to be mistake-proof …. One type of mistake replaces with other type of mistake. When you are aggressive you make mistake of losing money. When you are conservative, you make mistake of losing opportunity.
I had several mistakes earlier (and even now) of selling a good company early. I think I always have a fear of carrying an overvalued stock in my portfolio. What I realize is an overvaluation for a quality business remains for a long period of time. Nowadays, I am little more cautious about it. But I also realize there is no point in fighting with one’s key weakness areas. I rather try to hone the areas of my strength. So, I always try to seek for companies to shift my portfolio from overvalued to reasonably valued but equally good bets. I am still learning this process.
IEM)Which is more useful, earnings yield or P/E ratio? Why?
AM)I have no faith in any ratio in isolation. “In isolation” is the key word. All ratios are useful in a specific context. I generate all possible ratios if required and also have made investments after analysing a business for just 30 minutes. When you are investing in cyclicals you look into PE in one way and when you invest into a consumer durable business growing at 25% but selling at 45 PE in a very different way. PE for a debt-ridden company infra company to be looked into differently in upcycle than in a downcycle. So deciding the context is most critical then if you are into the game you understand what are the things to look for and where to look for it.
IEM) With so much publicly available content, the information edge is no longer there. With so many highly educated & smart investors present, the analytical edge is also no longer there. So how can you be confident that your own assessment is correct while the market is wrong?
AM)To me, an investor should have a mix of arrogance and humility at the same time. The ratio of the mix is a matter of personal opinion. But unless both are simultaneously working inside you, it’s very difficult to be an investor for long time. Arrogant to go against the crowd and humility to accept and admit and act quickly if you found crowd is right and you are wrong. It is the toughest mental game. I claim no mastery over it but I have identified it as the key area to work on continuously and dispassionately. There is nothing like a perfect mix but the accept it as part of one’s personality is the key.
IEM)What are the key attributes of a great investor?
AM)Since I am no way a great investor so I really don’t know. All I know is there are 100 ways to make or lose money in the market. You need to decide how you want to make or lose it!!!On a serious note, an investor can be considered very good if he can generate consistent above average return on increasing sums of money over long period of time. An investor like me who don’t manage or advise billions of dollars, it is relatively easier as we can get in and out of stocks much more nimbly. Smaller size gives a specific advantage to us and that should be utilized to the fullest. Here we are at an advantage over a regular mutual fund.
IEM) For a relatively unsophisticated non-professional investor, what are the most under-valued asset classes today and what are the best funds or mechanisms to invest in them with a buy and hold mentality?
AM)I earnestly suggest all small investors and savers to participate in market in a way he is comfortable. Stock market is not gambling, stock market is not a path to get rich quick, stock market is not for excitement. It is a place where you can create your corpus depending on your investible surplus slowly over a longer period. And market would continue to give opportunities to make handsome returns if you are disciplined, hardworking and follow a process matching your personality. I earnestly suggest all small investors and savers to participate in market in a way he is comfortable. Stock market is not gambling, stock market is not a path to get rich quick, stock market is not for excitement. It is a place where you can create your corpus depending on your investible surplus slowly over a longer period. And market would continue to give opportunities to make handsome returns if you are disciplined, hardworking and follow a process matching your personality.
We are happy to close an eventful year where almost every single company " Tweeted" performed be it in terms of operational numbers or in achieving the desired stock levels. The process and the mantra remains to keep it simple. Often in markets one loses coz of irrational return expectations where its observed greed and complacency getting the better out of the investors.
The third quarters numbers would get unveiled from 3rd week of the fresh calendar year. We expect blockbuster performance from most of those companies. Be it the turnaround PVC player or Next Caplin,The Chinese compounder,Microcap satellite based Defense player,Indian Nielsen etc all should deliver great set of numbers. Sell your losers and do pyramiding on the winners.
We have always harped on the idea of playing big on allocations. It's like if you are sitting on something big,ensure you make the most out of it. A perfect portfolio should consist a basket of 10-12 stocks with great robust stories and backed by great visionary pedigrees.
We do expect a correction soon. The present delusional froth would definitely end some time. The suggestion would be to stay put on the strongest of stocks. Sure enough along the markets and the albatrosses,even they would correct. But the recoveries whenever happens would be way faster. Markets are slaves of earnings and if you have certain business ownership with super consistent earning visibility,they would rock the portfolio in due course.
You hardly need too many winners to get liberated early or satiate all your desires. Take the examples of Avanti feeds. We covered the stock at 9.60rs(split adjusted)for the first time hardly 5-6 years back.As you all know it recently touched a peak of nearly 3000rs. A massive 300 bagger within no meaningful time.Caplin,Minda performed extravagantly well.
We don't suggest to enhance your cash positions. 10-15% deplorable cash is always a good discipline though. Do make a habit of putting some money on a monthly basis. Just like you do SIP on MFs,do the same on our suggested core long term stocks. That's how the Damanis,the Jhunjhnulas or the Shahs made such crazy money. Don't be fooled with the catchy tags of 10k becoming 10kcrs and all. That's never gonna happen unless you are fortunate to own the next bitcoin kinda instrument.
No words on markets for sure. It's the individual companies which would make you rich irrespective of market conditions in the longer term. We wish all our members a very Happy,Lively and Prosperous new year. May you make much much more than your neighbours. Ha ha-Happy investing folks.
background: Cox & Kings is a travel conglomerate, with four business verticals, which are Leisure India, Leisure International, Education (Camps and trips) and Meininger (Hybrid hotels). Company also provides value-added services such as customising travel plans for NRIs, travel arrangements for trade fairs, providing private air charter services among others. Besides, it offers travel related foreign exchange and payment solutions.
Industry scenario: Leisure India, which is growing at 12-15% CAGR, continues to have a positive outlook, given improving consumer sentiments, pick-up in corporate travel, increased income from Pay Commission and OROP and any further positive policy measures like visa on arrival. The International leisure division, mainly driven by packaged tours to Dubai, should keep growing at 15-17%. Education and hotel businesses should remain high-margin & slow- growth businesses.
Key meeting takeaways:-
• Leisure India business will continue to be driven by rising outbound travel, especially in the business B2B, supplemented by retail packaged tours.The recently demerged forex business is awaiting NCL’s approval, while the company will be starting NBFC operations in 9-10 months, post attaining RBI’s approval, with a focus on holiday and overseas student finance.
• In the education travel business, Cox & Kings will continue to add 500 beds every year, with an investment of 10mn pounds.In the hotel business, the current capacity is 8,585 beds divided into 10% with large hotels, 10% with chains and 80% with mom & pop budget hotels, giving a blended room rate of 30 euros/bed/night. The current blended occupancy is 79%, giving an EBITDA margin of 25%.
• Company is targeting a 200bps margin improvement every year, leading to 2-2.5% annual improvement in RoCE.On the balance sheet front, it would be repaying ~Rs2-2.5bn debt annually, with the current net debt level at rs 28bn.
• Currently, there are no divestment plans for any business, although the company is looking out for a strategic investor in the education business.To summarise, there would be aggressive capacity expansion in the hotel business, the education business will expand in new geographies and efforts will be on to create a robust financial services company, post the demerger.
Courtesy: Systematix Institutional.
1..The company has completed 50 years of operations. The company is a major beneficiary of increasing penetration of luggage bags and back-packs in the country, improving living standards leading to increased air and rail travel and also the desire for travelers to have branded luggage.
2..Management mentioned that there is a strong correlation between air travel and demand for branded luggage.Typically the growth of luggage is 2x the growth of GDP of the country.VIP has a well-diversified product portfolio which caters to consumers across different demographics. The company’s brands like Aristocrat and Alfa cater to the mass segments while, brands like Carlton, Caprese and VIP cater to the high-end segments. The company is also targeting the youth through its trendy brand – Sky bags.
3..The company spends around 5-6% (percentage of sales) on ad spends to increase its brand visibility and management expects the trend to continue over FY17 to FY20E.GST of 18% is applicable now (reduced from 28% in November 2017) to the entire luggage industry which has maintained the indirect tax situation for organized players, but increased the tax burden of unorganized players.
4.. The 2 major categories of inputs - polypropylene (for hard luggage) and polycarbonate were benign for the company for the last 2 years. However, management indicated that the company has been experiencing increasing raw material trend which it is trying to contain by increasing prices and also by reducing other cost.
5..Due to increasing labour costs and other reasons such as strengthening of the Yuan vs. INR, the company has decided to reduce dependency on China in the long run and has setup a manufacturing facility in Bangladesh through its wholly owned subsidiary for manufacturing soft luggage. Management expects to increase soft-luggage sourcing from Bangladesh which is current at 5% with China at 95%.
6..Management expects the financial performance of the company to improve going forward.
1. Global growth will peak in 2018
2. Boom Shaka-Laka in Europe
3. Good Economics may not mean Good politics.
4. The everything bubble,in 1980 world financial assets was equal to world GDP-in 2017 world financial assets is 3.5 Times of GDP. Some bubble of past 2000 stock market bubble,2007 housing bubble,2018 housing bubble, fine art bubble, Bitcoin bubble etc etc.
5. "Peak Calm" in stock market.
6. Tech Rules the world..out of 10 top market cap cos 7 are tech in world.
7. Big dominates than ever before..big companies in respective sectors will get even bigger.
8. Indian three concerns - CAD, fiscal deficit, inflation.
9. Indian companies best in class..in last five years 51% of company (more than $1 bn value) doubled in value.
10. Peak Distraction.Smartphone addiction grips the world which is becoming counter productive.
“Management students may not like this. I am also a management student and both my kids are but let me tell you that management schools are doing a disservice by (overusing) DCF. There is nobody in the world who can predict what’s going to happen in 10 years. And I was a student, so I know how to “create value” — you change the terminal value and instead of 0.5% you will make it 2% growth and suddenly the value increases. So I don’t believe in this. I really do believe you have to get the back-of-the-envelope calculations right.”
"Who can predict what the market growth is going to be. If you tell me anybody who had predicted that the markets will grow like they have in India today. I don’t think so. If anybody could predict to me what is going to happen to the exchange rate which is another big variable? I don’t think so. Nobody can predict what happened to interest rates. So everything is variable and yet on that basis we make a fixed 10 year projection and do the DCF? I don’t believe in this and in my entire life I have never done it.”
Between October 1 and December 6, various infrastructure, construction and capital goods order wins. In the third quarter of 2016-17, this number stood at Rs 27,324 crore.Two major orders — Bharat Heavy Electricals’ win of Rs 20,400 crore power project in Telangana (This is being pegged as the largest single power contract ever awarded in India.) and Larsen & Toubro bagging the Rs 8,650-crore order for the Mumbai trans-harbour link — helped the overall order book growth.
Though the overall trend has been encouraging, not all have seen a similar growth rate on a standalone basis.However, there is hope of new orders coming in the last three weeks of December. “IL&FS Engineering and Construction has been successful in securing orders worth Rs 1,378 crore in the previous two quarters of this financial year. However, the order book growth for conventional power generation equipment remains lean.Power equipment manufacturers are also balancing their portfolio to meet robust demand in transmission and distribution, metering, transportation, renewable integration etc.Recovery in various sub-segments in capital good has not been at the same pace. Not too many changes have been seen in the transmission and distribution sector.
Ramco Systems: A renowned small cap veteran investor is highly bullish on Ramco systems. He opines," Ramco systems seems to be in the right place at the right time. It has an impressive product portfolio, an extremely capable execution team as evidenced by the 1000+ customers in 40 countries. The company has superb operational leverage pottential, as the product once created can be rolled out worldwide and across industries with minimal incremental costs. Ramco’s sales team has proven its worth by the aggressive acquisition of marquee customers across industries and geographies. A quick study of the Kano model of a product’s life cycle would suggest Ramco as a great takeover candidate for any IT company with deep and entrenched client relationships across industry verticals and geographies (Think Cognizant, TCS etc. that have an extremely strong and powerful sales force that can cross sell Ramco’s suite of products and reach clients before competition). Irrespective of whether Ramco goes it alone, or get acquired, given their futuristic product portfolio and an extremely competent management team, there is a very high probability that Ramco will be worth significantly higher than the current market price in the coming years".The Company silently has nearly doubled from its 52 week lows and with an expected good quarter ahead,stock is expected to remain in action.
Quote: PIIND seems to be on verge of resuming next phase of wealth creation cycle because of 6 reasons :
1) CSM business will resume it's high double digit growth rate starting next Financial year.
2) Proactive approach of management in domestic Agri - input space which will keep the company ahead of peers and will insulate it to a large extent from recent trend of MNCs increasing their direct presence in Indian market.
3) Unique JV based model adopted by management for domestic agri - input space will benefit CSM segment immensely over medium to long run.
4) Company has built a strong senior level team in Pharma segment over last one year with prominent industry guys enjoying high credibility having vast experience to work with innovators ; in addition it is attractively placed in terms of timing of foray in the segment as it can comfortably wait and choose it's acquisition target.
5) Company has a historical track record of 60 % EBITDA to OCF generation and with increasing contribution of CSM segment, EBITDA margins are expected to remain healthy at 21-25 % over foreseeable future. In addition, company is likely to end current FY18 at net cash surplus of around 300 cr. in balance sheet ex-acquistion.
6..Strong partnership - modelled ties with MNCs wherein they are equally dependent on company as much as company is dependent on them.
7..Relatively clear growth visibility wherein ~65 % of current consolidated revenue size is assured to recur every year for next 4 years (because of 1 bn. USD Order book which majorly possesses of take or pay contracts).
8...Negligible debt on books and net cash on BS to the tune of 12 % of current revenue size with a track record of serving even 2x D/E comfortably (in other words it simply means company possesses re50 % of current revenue size as warchest @ just 0.5x D/E, which is exceptionally attractive as it is in the hands of a dynamic management with a stated objective of profitable safe growth).
Courtesy:Rajesh Agarwal(ShareBazaar apps SEBI registered analyst. He doesn't own the company as a disclosure)
1..SEML is one of the lowest cost producers of steel (sponge iron, billets, ingots, TMT bars) and one of the largest manufacturers and exporters of ferro alloys in India.SEML has presence across the value chain, starting from mining activities to the production of steel. The broad segments where the company has a presence are steel, power, ferro alloys and mining.
2..At present it purchases iron ore from the market at an average rate of Rs6,000/tonne. Operating own mine would help the company to bring down the cost of iron ore to as low as Rs2,000/tonne.
3..SEML commissioned 24MW hydro power plant in Jashpur, Chhattisgarh and entered into PPA for a period of 35 years and a tariff of Rs5.04/KWH. With this operational hydro power capacity stands at 28.8MW. 96MW of hydro power projects in Sikkim, is expected to come on stream in FY19. Besides this, SEML is also working on setting up 53MW of addition hydro capacity in Chhattisgarh.
4..In order to consume excess/surplus power at its subsidiaries (SMAL), the company is planning to add one more ferro alloys furnace of 33MVA.
These are the promises to make.You can only learn and earn from markets provided you make a promise to yourself.Its a "Laxman Rekha" for you all.Its important to note and practice this in reality.
Btw:It's also a screen or a checklist.Before buying anything fresh do checkout whether you are adhering to the promises you made to yourself.
1)Won't buy penny stocks.
2)Will buy even a 25000rs stock if the growth story is intact.
3)Won't sell a profitable investment to average out a loosing one.
4)Would sell if something moves down by 35% in a strong market,would sell if something moves down by 45% in a weak market.
5)Won't do intraday trading ever.Even if I do it,would sell it the same day and won't carry it forward presuming it to be a long term investment.
6)Would maintain proper allocation.Wont be putting more than 5% in a single stock.As experiences grow,will increase allocation to higher limit.
7)Won't pay Short term capital gains tax to Govt unless there's a change in story or a much better opportunity prevails.
8)Won't buy on father in law's recommendation.Wont buy on listening to anyone.Would do proper research even if someone renowned issues a strong buy on xyz.
9)Would make a habit of reading atleast 1 hour a day.
10)Wont average down but would average when it moves up.
11)Would avoid low PE stocks.Would avoid stocks which are most fancied,which are talked by everybody.Would avoid stocks where the companies boast of their financials in print or electronic medium.
12)Won't buy which is making fresh lows everyday.Will be ready to buy if something is making highs everyday.Would be happy to buy something which has moved up by 10 times in the last 12 months,if the story looks good.
13)Stock market is vastly different from stamp collecting.It ain't your wardrobe where you can put fancy clothes with different colours.A plenty of you got a pathetic habit of buying or demanding stocks from different sectors.Its like you need to have a single stock from every possible sector.Whats the logic behind it?Thats a strict no no.
14)Stop looking for new ideas every week.Rather increase your conviction level on the ones you owning.
15) Avoid high debt,negative cash flow generating companies,companies where promoter holding is less than 40%.Companies which are priced at less than 100 and goes for stock splits also should be avoided.
16)Would never be leveraged or take debt to increase exposure.
17)Would sell a stock if its not letting you sleep at night.
18)It's important to be passionate and learn the best way to the truest form.Often I see people addressing companies by "Script" whereas it's actually "Scrip".Do put in Scrip before companies and script after films maybe?What say?
Rajratan global Wires: Lot of action is expected to happen in Rajratan global. The company has got approvals from Sumitomo and Bridgestone hence their sales have shoot up in Thailand markets. Current Thailand market is of 5000-5500 Mt size and company’s market share which was just 20% few quarters back has more than doubled its market share. It has further plans to increase its market share in that market. A high carbon wire is their major raw material.Currently 85% sales are contributed to Tyre Sector and rest is attributed to value added products. For tyre companies Rajratan’s products constitute around 3% of total expense hence they always prefer to go with superior quality products since it very important component of tyres . Overall Industry size is 1.2 MT and Rajratan Global wires constitutes only 5% of overall Industry hence there is big scope of improvement. Kisewires from Korea and Bekert from Belgium are the Global giants in this business.Entry barriers in this business are big since approval from Indian tyre companies take 4 years and Japanese companies take 5 years for approval. Company is expected to report robust numbers going forward.
1.. MIRC electronics ventured into TV manufacturing in the 80s with a collaboration with JVC of Japan. The company realized that a unique trait of Indian viewers was that they liked TVs that had good features and sound quality. Thus the company’s focus remained on providing sound quality meeting the requirement of Indian households.
2..The management noted that there is very limited differentiation in manufacturing of LED TVs as the entire industry including the likes of Sony, LG, Samsung etc are importing LED panels from China/South Korea.Similarly, the manufacturing industry for Integrated Circuits (ICs) and Microprocessors is also closely held by companies in Taiwan/China. Thus, most TV manufacturers in India are mainly assemblers. Given this, brand recognition, advertising and after sales service are the main success factors.
3..The company is drawing about 60% of its sales from urban centres and the balance from rural areas.MIRC’s products are present on various on-line shopping platforms like Flipkart, Cliq etc.With the fund infusion of Rs 1.44 bn (19.2 mn shares @ Rs 37.5 per share on preferential basis), the company now plans to invest in brand building and promotions.
4..The company is also planning to go aggressively on divestment of non-core assets including land (Wada) and building (MIRC house). . The company has 55 acre plant in Wada, out of which 25 acre is occupied by the plant while the rest can be monetized. The company is also open to monetizing its corporate building at Andheri East.The company plans to consolidate manufacturing at two locations one in Wada (ACs and TVs) and the other in Roorkee (for Washing Machines).
5...Apart from organic growth of its existing products, the company is also open for contract manufacturing of TVs/ACs/Washing Machines for other players. Its plant at Wada is operating at only 25% capacity utilization. The Wada plant is very close to the Mumbai port which is a key advantage.
Background:Incorporated in 1985, Mumbai-based Weizmann Forex (WEIZF) is a part of the Rs45bn Weizmann group. Over a period, it has emerged as a leading Money Changing (Forex - 98%) and Money Transfer (Inward remittance - 2%) services provider. In Forex business,WEIZF has the status of Authorized Dealer – Category II (AD Cat II) from RBI (authorised by RBIto deal in Forex for specified purposes) and provides Forex services to institutions (70% - exporters, importers, leisure companies) and retail customers (30% - travelers) in India. In Money transfer business (Inward remittance), it remits money abroad for the purchase of overseas tour arrangements, education, examinations, subscriptions and medical treatment.Apart from these core areas of business, to leverage its large network of over 200 own outlets and 5,000+ sub agents outlets, it also offers services (distributer) in the areas of Travel & Tourism and Insurance, which contributed Rs128mn to sales in FY17.
Expanding service offerings, building new business verticals, aim to double PAT in next 3 years:Apart from expanding products offering in forex business (multi-currency travel cards) and increasing tie-ups (recently joined hands with Money Gram, Express Money and UAE Exchange, Ria) to scale up its money transfer business, WEIZF is also aggressively working on its “Jaldi Cash” wallet business (new verticals) to capitalise on digitisation opportunity and in July 2017 appointed Sandeep Sharma from Airtel Money to scale up this venture. The Jaldi Cash division is expected to be merged with existing businesses, which has a network of over 13,000 agents and compete with Itz Cash (20,000 agents), Suvidha, Oxygen and Fino Pay tech.Currently, it is a cash profit company and valued at ~Rs500mn by Deloitte. With these developments in Forex (high growth after demonetisation) and remittance business, management aims to double the net profit in next 3 years.
Restructuring the process, building technology to improve branches/agents productivity:In 2016, WEIZF appointed Deloitte to restructure processes, including inactive branches to improve productivity at branches and agent’s level, and the effect can be seen in 1HFY18 performance of the company. It is alsostrengthening the management team to support the next leg of growth, building a technical team to streamline the process, increase productivity (utilisation) at brand and agent level -- increase the current average revenue per agent of Rs1.2mn to Rs1.5-2mn going forward, expects to reduce cost (by improving efficiencies) and lower the forex transaction time from a day to few minutes (approximately) in the next 2-3 years.
Hiving off loss-making wind power division will improve margins and profitability further:With a total capital employed of Rs370mn, the 7.2mw wind power business generated Rs26mn revenue with an EBIT loss of Rs79mn in FY17. Management is guiding to demerge this business (Karma Energy) from its group company by end of FY18, which will help to improve the overall margin and return ratios further.
Courtesy: Systematix institutional.
Background: Incorporated in 1985, Capital Trust Ltd is a non-banking finance company, with over 30 years in the financial services industry. In 2008, Capital Trust stopped its prior consultancy services and ventured into Microfinance. With the change in RBI’s regulations regarding NBFCs in 2012, Capital Trust started focusing on providing capital to the unbanked individuals in the MSME sector.
Focus on micro-enterprise: The company’s focus is on the micro-enterprise, where the loan size is in the range of Rs0.1-0.5mn. The business model while helping small businesses also banks on an opportunity to migrate the micro-finance borrowers to a micro-enterprise. Loans are given to male members of the family and inherit the benefits of joint liability group. While in MFI segment, the group may be of around 15 members, micro-enterprise groups are formed by 8-10 members. The standard product is of Rs0.105mn and unsecured in nature. However, a borrower can avail a higher amount post providing collateral, which is at least 2x the loan, known as secured enterprise loans (average LTV of 22%). Company also provides loans in the MFI segment through its subsidiary, Capital Trust Microfinance.
Demonetisation and loan waivers disrupt collection but new disbursements reflect strong trend: Akin to the micro-finance industry, company witnessed increased delinquency post demonetisation and loans waiver in UP (election). Hence, GNPLs increased to 12.9% and NNPLs to ~10.9%. However, of the GNPLs, 83% comes from UP, which now forms 48% of the AUM, compared to 74% pre-demonetisation. Capital Trust has written off loans of ~Rs300mn and expects further write-off of ~Rs150-250mn in coming quarters. Of the overdue, 38% cases are those where the company has received at least one instalment in the last 30 days.Overall, the management is confident on asset quality driven by (1) 99.1%+ collection efficiency in loans disbursed since January 2017, (2) reducing overdue payments from Rs680mn in June 2017 to Rs520mn in September 2017 and (3) increased recovery efforts.
Strong pick-up in disbursements, expanding reach: 2Q witnessed the highest-ever disbursements of Rs2bn and resultantly AUM growth was strong at 38% in 1HFY18. With significant opportunity available in the untapped micro-enterprise segment (Rs26tn - study by IFC) and expanding reach (company has recently started its operations in Bihar and Odhisa and plans to add its network in Gujarat, Chhatisgarh and Uttarkhand), Capital Trust expects to grow its AUM by 75% in FY18 and 100% in FY19. Further, we note that it is majorly present in central India, which is relatively lesser tapped by financing companies.
Other highlights: (1) driving best practices in running its operations. Company is able to attract best talents (six states head are from one of the best-managed MFI) and technology enables it to monitor portfolio on a daily basis, (2) the employee disbursing loans is also responsible for recovery and (3) company collects PDCs from its borrowers, thus allowing to enforce recovery and initiate prompt action, especially on willful defaulters.
Courtesy: Systematix conference
1. Parents tonnage stands at 1.3 million tonnes. They are global leaders and India Kingfa stands at an edge to all the competitors because of their strong parent support.
2. Guided for 100,000+ for CY 19 which at current realisation implies a turnover of 1050-1100 cr vs FY 17 turnover of 485 crores.
3. Margins should be at this rate for next few quarters and management is looking to improve them further.The present realisations are around 110rs. Once the Chakan plant goes operational and more engineering value added plastics get added the blended realisations would increase to 125-130(over next 2-3 years).Net margins are higher too.
4. On being asked about their future tonnage growth, management reinsured their 40% yoy growth guidance and assured for minimum 30% growth yoy (worst case scenario)
5. Reiterated that they will maintain qoq run-rate of 9-12% for oct-dec.They already crossed 5000 tonnes in october. Existing plant’s expansion will take care of medium term requirements and chakan plant will go on stream by July- September quarter fy 18.
6..On client addition, they are looking to get on board with all auto OEMs already existing in India and looking forward to get on board with few Chinese OEMs about to set shop in India. Remember, these Chinese OEMs are already parent’s client.
Quote:As you guys are aware to cater to our offline audience we have a magazine called Indian economy and markets which every month takes interviews of highly successful Indian Investors. Here's the published version.
In the kingdom of stock investing, there have been many folks who have come and disappeared within just a few years. Nonetheless, there are very few gems who have stood the test of time and have made an authentic dent in the universe of Stock investing. Coming from a very modest background, Abhishek is one such rare jewel who has been in the markets for over 15 years. After trying Technical analysis, Fundamental analysis, Options trading and several other schools, he believes that the sustainable way to wealth creation is buying and holding good business. In a conversation with Team Indian economy and markets, he shared his amazing journey and laid out his investment philosophy.
1.Indian economy and markets(IE&M): Could you tell us a little about your background, how you got interested in investing, and how you’ve evolved over time as an investor?
Abhishek Basumallick (AB): I am an Engineer and an MBA but in my opinion all the fancy degrees are immaterial when it comes to investing. My real education in investing started when I read a book called Rich Dad & Poor Dad which was given to me by a friend of mine. After reading the book I realized that if I want to make lot of money then it is imperative that either I become a businessman or an Investor. At that time, I was just 21 years old, with zilch capital, coming from a typical middle class family, with no business background, working in an IT firm. Thus I figured out that the easiest way to become an investor is to get into stock market. First thing I did was to start reading Economic Times and Business Standard every day. Also I devoured Investopedia.com and Fool.com. I started reading books such as the Warren Buffet Way, One Up On Wall Street, Beating the Street etc. I fell in love with reading so much that I have read over 1000 books on investing. I have been very lucky being associated with a lot of very good people, throughout my journey as an investor. After trying my hand at technical analysis, futures and options trading and several other schools, I’ve realized that the only sustainable way to wealth creation for me is buying and holding good business.
2.IE&M: You have seen a lot of cycles in the market. How has your thought process evolved with regards to investments during these 16 years?
AB: After reading about numerous successful as well as unsuccessful Investors, I realized that one really make money in markets by protecting the downside. The most important thing is to avoid permanent loss of capital. Now when talking about timing the markets, it’s almost impossible to do it. Trust me nobody can time the markets on a consistent basis. However, every year or two you might come across a market correction that would be a great opportunity to get in the market and hold. Along with investing our money to compound our wealth one should also invest our time and efforts to compound our knowledge. Both are equally important and both grows simultaneously. Also one needs to be present in the markets all the time to embrace the temperamental growth.
3. IE&M:,You are holding Supreme Industries from quiet a long horizon even after it has been a 70 bagger for you. How did you spot it and what gave you the conviction to keep holding it for so long?
AB: One thing which caught my attention was that the company was growing consistently at 20-25% and was trading at 5-6 PE. Other significant thing which I loved about the company was that their ROE and ROCE were consistently growing. For a plastic manufacturer, to have a 25-30% of ROCE seemed to be phenomenal. Also their margin expansion appealed to me. Management came across as very pragmatic and transparent in their annual report and other communication. It seemed like a perfect fit for my portfolio as it did pass through a rigorous checklist. Also during the turbulent times in the market it didn’t fall much which did give a boost to my conviction.
4.IE&M: How can one keep a track of the company in the sense that what would you look in say quarterly results to make a decision whether to sell or hold or add more of the existing position?
AB: The First thing I emphasize on is the scalability and growth of earnings. Are these earnings growth sustainable? Other thing I observe is that does the management walk their talk. Every quarter to six months, I check whether the initial thesis on which I’ve bought the company is still intact or not. I also wait for market to behave in an irrational way so that once I get my desired price I add more to my existing position. Keeping a track of your company is of utmost importance especially in such dynamic markets.
5. IE&M: It is always easy to figure out what to buy, but most people don’t get when to sell. So how do you make a decision to sell?
AB: It is essential to hold on to good business. I’ve seen a lot of people who sell the stocks just because it has doubled or tripled. They say things like stock has doubled so I’ll sell half and take my money out and I feel it reflects their naivety. Until the story and the initial hypothesis on which I bought the stock is intact, I would hold on to it. I wouldn’t sell a business just because it has given me X% of returns. Also at the first sign of danger, I would exit a stock. If I realise that my hypothesis is not playing out, I accept my mistake and sell. Second if I think that markets as a whole are much overvalued, I sell gradually. For example, one sign I’ve observed is you will find market related articles and reports on the first page of several vernacular new papers. That would be a sign to exit. However, let me tell you that I am not very good at selling and thus I try to avoid mistakes while buying the business in the first place.
6. IE&M: Naseem Taleb talks about the role of Skills and Luck in Life and Investing. We wanted to understand from you, what is the role of Luck in Stock market Investing?
AB: I believe in investing and in life luck plays a substantial role. There are different ways people look at it as in some call it ‘x’ factor, god, unseen hand, divine intervention etc. There are numerous variables which one does not know that controls markets. Market is a complex adaptive system. Lot of things can happen which is beyond our control. For example, a CEO or MD of your beloved company may meet with an accident or a natural calamity occurs etc. Evidently all that is not in our control. However, that being said one needs to focus on increasing your probability of being lucky by being disciplined. If you are following an Investing process or system than probability of being luckier is higher as you tend to eliminate several inherent risks by doing arbitrary things in the market.
7. IE&M: What would be your short advice to someone just starting out in the realm of investing?
AB: The first thing is simple, you have to read a lot. You have to read about industry, read about sectors. Focusing on any particular industry try to read about the competitive dynamics, output, key players etc. in that industry. Start reading annual reports and make it a ritual. Over the years you will gain an enormous amount of insights. Your objective is to understand the dynamics of industry rather than analyse each and every company. Also I would like to emphasize the importance of maintaining an investing journal. Write down why you are investing in a particular business. What you like about that company. Also write what would you do if it were to fall more than 30%, as in will you buy more? Or sell? One needs to have a clear view. Also write what you will do if the price would go up 100% in a short period. Buy more, re-evaluate etc. Writing is such a simple tool but majority of people don’t use it. Writing will eliminate a lot of stupid mistakes most people make in investing.
8. IE&M:We would like to know how you manage your time between your professional work and with Investing.
AB: First I would like to express gratitude to my family that they are very supportive. There are times that I cannot track markets due to work pressure but I’ve evolved my style as such I do not need to keep in touch with markets on a daily or weekly basis. For e.g.; I never paid any short term capital gains in last 4-5 years. My major holdings are for more than 1-2 year horizon. The longevity of holding period also influences the fact that I do not need to be in the market every day. I spend a lot of time reading during weekends. The benefits of having a job is that I have steady cash flows so I do not need to generate returns from market for my livelihood, which is very helpful when market goes through turbulent phases. The only disadvantage I see is I don’t get enough time for reading more and keeping up with a lot more companies which full time investors might be able to do, but then life is all about balance right ?
9. IE&M: Can you share your top five books?
AB: 1) One up on wall street by peter Lynch
2) Beating the street by peter Lynch,
3) Margin Of Safety by Seth Klarman
4) Poor Charlie Almanack
5) The Most Important Thing by Howard Marks.
Key takeaways from meeting with Vinod Kumar Gupta, CMD and Shashi Agarwal, CFO of Dollar Industries
1... Dollar Industries is one of India’s 4 largest hosiery brands turned innerwear manufacturer, the other 3 being Rupa, Lux Industries and Amul, all based out of Kolkata. The key brands of the company include Bigboss, Force, Missy, Champion, Wintercare and Force Nxt. The company did a turnover of Rs897 crs with 11% margins and Rs43 crs PAT in FY17. The company claims to be the first fully integrated innerwear manufacturer with operations from spinning, knitting, processing, cutting, stitching and packaging in its plants in Kolkata, Tirupur, Dindigul, Erode, Delhi and Ludhiana, which has led to a gradual uptick in gross margins.
2...The company is aggressively expanding its distribution network with 26 regional depots, 850 distributors, 80k MBOs and is now looking to tap into large format stores. In terms of sales mix, 44% comes from the premium brand Bigboss, 33% from mass/economy brands like Lehar, Commando, RKG, 2% from recently launched super premium brand Force Nxt, 6% from thermal wear, 6% from ladies wear brand Missy, 7% from Force sportswear and 2% from kidswear brand Champion.
3.. Over the past few years, the company has seen a 4-5% volume CAGR and consistent improvement in sales mix driving a 15% sales CAGR and the company intends to maintain the rate going forward.In addition to hiring Akshay Kumar as brand ambassador, the company is one of the most aggressive ASP spenders in the industry with a spend of 10% of sales or Rs90 crs in FY17 which it intends to continue to keep increasing its brand awareness especially for its super premium brand Force Nxt which is the focus brand for the company now.
4..The company counts its large bouquet of brands and complete backward integration as key USPs which sets it apart from competition.The company expects 15% revenue growth in FY18e, with volume growth of 9-10% and price growth of 5-6%. Also, the company targets revenue to be Rs 2,100 crs in the next 5 years from about Rs 1050 crs in FY18e.
·5..In terms of margins which are currently at 11%, company expects EBITDA margins to be 13% in FY18e and targets to achieve 15% in the next 3 years, led by multiple levers like further improvement in sales mix in favor of super premium products, further benefits of backward integration, GST-related tax credits and some reduction in ASP spends.
6..ROCE can improve further from already strong levels of 30% as future capex requirements are minimal and there scope to reduce WC cycle from 120 days currently.The company recently entered into 50:50 JV with PEPE Jeans for 10 years exclusive perpetual agreement. Purpose is to increase the sales & distribution of innerwear and loungewear (includes gym wear, track suits and sleepwear).The stock is currently trading at 58x FY17 earnings and around 30x FY19 consensus earnings for 22% ROCE and 26% ROE.
Selan Exploration Technology’s (Selan) oil production of 50,000 barrels in Q2FY2018 has shown signs of revival with double-digit growth of 32% y-o-y and 11% q-o-q but still remains range bound (oil production range of 40,000-50,000 barrels per quarter in last six quarters). Moreover, the production run-rate is also well below the company’s target of 1.25 lakh barrels per quarter. Selan’s stock price has run-up sharply by ~16% in last two months and is trading at ~20% premium to large domestic upstream PSUs on enterprise value/barrels of oil equivalent (EV/boe) basis.
2QFY2018 results: Selan’s Q2FY2018 revenue increased 42% y-o-y to Rs. 17.2 crore led by 32% y-o-y growth in the oil production (50,000 barrels) and 11% y-o-y increase in the oil price partially offset by 4% y-o-y appreciation of Indian rupee. Operating profit also increased 26% y-o-y to Rs. 10.2 crore due to increase in the revenues but was partially offset by higher operating expenses and employee cost. PAT grew strongly, by 97% y-o-y to Rs. 4.6 crore, on account of higher operating profit and 24% y-o-y decline in amortisation for development of hydrocarbon properties.
Outlook:We maintain our cautious view on any meaningful increase in oil production from Q2FY2018 level of 50,000 barrels and would rather prefer to wait for sustainability of oil production ramp-up trend over next few quarters to revise our long-term production assumption for Selan. However, on the positive side, higher oil price would result in lower write-off for hydrocarbon assets going forward.
Valuation:We have increased our FY2018 and FY2019 earnings estimates to factor: 1) higher oil price assumption of $56 per barrel for FY2018E and $60 per barrel for FY2019E, 2) marginally higher oil production and 3) lower write-off for development of hydrocarbon assets (in-line with higher oil price assumption). The sharp rally of ~16% in the stock price in the last two months largely reflects rise in the oil price by 11% to around $63 per barrel. Moreover, Selan is trading at EV/boe of $7.3/boe (based on proven reserve base of 5.3 million barrels of oil equivalents), which is at ~20% premium to large domestic upstream PSUs. Hence, we maintain our Hold rating on Selan with an upward revision in our price target (PT) to Rs.250.
Financial Chronicle(FC) from the stable of Deccan chronicle,recently interviewed The ShareBazaar App founders for some market related stuff. Here's the quintessence.
Your Stock picking strategy and advices?
Ans) Aside conventional stock picking metrics of good visionary promoters,scalable business and rich ratios,we do follow some patterns. The negative working capital pattern where the business operates on other people's money(OPM) or the suppliers money. Advances from customers is a good hint to go by.Companies which are the leaders in niche area with tiny market caps. Ones they grow and market realises them,you get huge multibaggers.Companies where there's a promoter change or where the new generation takes over,brings efficiency and multibaggers evolve.Companies which are either outperforming strong headwinds or about to face tailwinds in their side. The advice remains simple-Be yourself,read a lot and listen to everyone but stick to whatever works for you.
Q)What should an investor look at while taking investment decision?
Ans)Under the present environment where even albatrosses are flying high it's imperative one exercise caution and pay heed to margin of safety. Protection of capital is of utmost importance as its very easy to be complacent and get carried away with few flukes based on hearsays and rumours. Naive investors should stick to the larger caps companies with good past wealth generating track records. Any sectoral leaders with a great management would ensure decent double digit compounding in the next 5-10 years. You just simply cant lose from an Asian paints or a HDFC bank. Avoid companies which are out of your competence circle.Debt laden stories and companies with corporate governance issues should be strictly ignored. Apply common sense and make a habit of reading atleast one hour a day. World is changing pretty fast where most things are inter connected. If you stay updated with the happenings around,along with your wealth your knowledge would compound too.
Q) Your Views on current Indian economic scenario/market scenario?
Ans) In FY2017, Equity including mutual fund was Only 3.8% of total asset of Indian households. In January 2008 this ratio was about 5.6%. So we are like no where near the peak. After the demo shock a lot of money is getting migrated to equities and further as time progresses and financial literacy increases,more Indians would be further inclined to bet on equities. We recently read a wealth creation report by a top brokerage house which stated that India's GDP took 60 years(1948-2008) to hit its first trillion,next took 7 years(2008-2015), Third Trillion will take 5 (2015-2020),and Fourth Trillion will take 3 years (2020-2023).The Sensex has grew like 100x in 32 years, at 15% CAGR. India remains the favourite investment destination and nobody thus can ignore the fastest growing economy in the world. Over the next 10 years equities will beat other assets hands down provided one gets bit meticulous on their stock picking. A lot of great companies backed by superb pedigrees are on the cusp of inflection point. They will certainly ensure one becomes liberated early in life. Happy investing folks.
Q)I am planning to invest in a defense company called Sika Interplant. Why are the margins so low? Can you guys explain me the whole company in detail? It's clients,market size of its products,future prospects and what I can expect from it going forward? Ram Das,Balasore.
And) SIKA is a Public Listed ISO 9001 Engineering Company in Projects, Systems, Products and Engineering Services for Aerospace, Space, Marine, Automotive and Core Industries.SIKA has offices in Bangalore CBD and manufacturing facilities on Hosur Road, Bangalore. SIKA has offices at Mumbai, Kochi and representatives in other major Cities.Companys Largest customer is the government. Business is project related hence its always lumpy. There is a large component of imports in their business hence GMs are low.They're being guided closely by Dr Nair for biz forays and growth. Co will remain debt free and grow on internal accruals.They want measured grown rather than fast unprofitable growth. The promoter is the chairman of a related industry body and makes represents to govt on behalf of industry.There seems to be a lot of openness in the current govt to support industry but things could move faster. Co Plans to take revenues to Rs 100 Cr in the next 3 years. They are Happy to have Margins at current levels and continue this growth - but margins should expand. The Aerotek JV is a big deal- this is for an MRO activity for which all Indian aircraft is flying to Europe, hence no competition. It Can be for defence and civilian aircraft - they were approached by DRDO or HAL to get into this activity. The benefits to aircraft owners will be on cost and down time. Currently the downtime is approx a year, which could easily reduce by half.The same capability could be used for Aeroteks requirements in East Asia, their current European capacities are full.The market opportunity could be approx USD 20 m in the first phase with high margins. They have spent approx Rs 3-4 Cr to set up their facility for this biz, which is complete . They would expand this facility phase wise . Also this biz will be more annuity based rather than lumpy.Promoters son is ex- Goldman and understands shareholder value appreciation.They have large ownership and hence fortunes linked to the co's stock.
Background: Incorporated in 1986, Apcotex Industries is one of the leading producers of Synthetic Rubber (NBR & HSR) and Synthetic Latex (Nitrile, VP latex, XSB & Acrylic latex) in India. Company has one of the broadest range of Emulsion Polymers available in the market now. Apcotex’s major raw materials are Butadiene, Acrylonitrile and Styrene, which are petrochemical-based products. Apcotex has a plant in Taloja, Maharashtra, with a capacity of 55,000mt for Synthetic Latex and 8,000mt for High Styrene Rubber (HSR). Another plant is in Valia, Gujarat, which was acquired last year from Omnova, with a capacity of 12,000mt for Nitrile Butadiene Rubber (NBR) and 8,000mt for HSR.
Increasing share from NBR to augur well for the group going ahead:NBR is used in the widest range of products, though Apcotex has not been addressing to all applications. Hence, the addressable market for the company remains limited. It is estimated that the addressable market size for Apcotex is 40-45kta for the domestic market, of which company produces 8-9kta (~70% utilisation), while the rest is been imported. This represents ~20% market share for Apcotex. In terms of market penetration, company is the only player, post acquisition of OMNOVA in India, specialised in the manufacturing of NBR product. It is expected that the domestic demand for NBR could increase at a CAGR of 10-15% in the next 4-5 years. Growth will be largely driven by industrial capex.
Capacity expansion underway:Apcotex is one of the leading producers of synthetic rubber in India and has a significant global presence, as it exports products to most countries globally. Company is planning to spend nearly Rs600mn, which includes some debottlenecking of current capacity, which will include an addition of new equipments and an increase in productivity. Post this; total capacity would increase by ~6,000tn, a 40% increase from the current capacity. Management expects to complete these plans over the next 9-10 months. It is also working on the third phase of expansion, which is expected to be finalised by FY18-end.
Other key takeaways: Company plans to add new products in latex segment.Revenue guidance for FY18 is Rs5,000mn (net), with EBITDA margin in the range of 14%.Plans to double its existing capacity once debottlenecking is completed. This will incur an estimated capex of Rs1,800mn, though not finalised yet.
Courtesy: Systematix Institutional equities.
1..Last ~20 years stock performance, SBI up ~10x, HDFC up ~100x, HDFC Bank up ~1000x. That's the difference between ordinary and extraordinary. Only shows up in the long term.
2..The future massive multibaggers are going to come from those companies who solve climate change, or precision medicine to cure cancer. Water purification and defense should do great too. Keep hunting for them.
3..Was having a chitchat with our guru @Ajay_Bagga. The epitome of long term investing aka wealth creation. He invested 8000 bucks in Oracle during 1992. Today he gets dividend of 21 lakhs yearly from it.Equities rather good quality companies over longterm wd beat any assets hands down.
4..India's GDP at a glance. First trillion took 60 years(1948-2008),next took 7 years(2008-2015), Third Trillion will take 5 (2015-2020),and Fourth Trillion will take 3 years (2020-2023).The Sensex has grew 100x in 32 years, at 15% CAGR.
5..India's falling private sector capex in billion rupees (INR)
FY 2011-12: 3618
FY 2016-17: 1548
FY 2017-18: 694 (likely).
Q)I am planning to buy shares of Paramount Cosmetics India Limited.How its looking fundamentally to you? Abhiram Damani,Mumbai.
Ans)Paramount Cosmetics India Limited with its first brand Shilpa for Bindi’s, Kumkum and Kajal, known for its safe and hygienic products, claims to be one of the leading manufacturers of Indian traditional cosmetics.Under Shilpa brand- Paramount Cosmetics has broadened its offerings to Personal Care and Skin Care products with the introduction of deodorants for women, Skin Exfoliating gels and Moisturizing cream.It entered the men’s personal care and grooming category under the brand Instinct offering a wide array of deodorants, skin care, hair care and personal care products.According to its management," All through its journey, Paramount Cosmetics has had only one goal and that is to groom the beautiful people of India".It may have been able to groom the countrymen but shareholders are yet to rejoice much.It delivered 35crs of topline with a bottomline of 64 lakhs for the last fiscal 16-17. This year probably it would deliver stagnant numbers. Company has failed to scale up over the last 10 years with inconsistent numbers. Promoters own around 75% stake in the company.The company has been paying dividend of 50 -60 paisa per share for a while now.The company has a brand and if somehow it can capitalize on it,stock price may certainly rally as present fancy is on the domestic consumption plays.Thus take you decision based on its future numbers and management's action on the growth aspect.The company has a very tiny equity of 5crs which takes the toll on its trading volumes in the bourses.
1.. Current order book has 4-5 legacy and slow-moving private projects worth Rs3-4bn . Private residential continues to be sluggish at present. However, with RERA coming into effect, quality of projects and payment is expected to improve further. Private commercial segment is seeing some positive traction in terms of order inflows and tendering. Overall ideal mix of order book is expected to be 50:50 between private: public sector clients in coming years.
2.. Order pipeline includes – Mumbai metro 2B of Rs3.3bn, AIIMs Nagpur of Rs7bn, NBCC (Netaji Nagar) of Rs8bn, IIT Delhi of Rs2.5bn. AHLU expects orders to come in from the affordable housing segment. Region-wise focus will continue in East, West and North. AHLU will refrain from bidding in the Southern region.
3.. Competitive intensity has increased in projects, with ticket size below Rs3bn to 5-7 players v/s 3-4 players in ticket size above 3bn.? Kota BOT project is expected to incur a cash loss of Rs10-15mn in FY18, while it will turn cash positive in FY19. AHLU will invest further Rs100-150mn to develop the remaining area (~40%). It is looking to monetise this asset in the future.
4.. Gross debt stands at Rs630mn and cash is at Rs1.1bn. Management plans to pay a dividend from Fy19.?Capex guidance is Rs250mn/Rs500mn for FY18/FY19. Current gross block can support a revenue of Rs18bn, and an incremental revenue above Rs18bn will require a capex of 10%.
5.. Revenue guidance for FY18/FY19 is at 10-15%, with an average EBITDA margin of 13-14%.
They suffered in the last few quarters owing to sticky nil margins Govt orders,Demonetisation,GST etc. But in the recent quarter,Butterfly came out with stunning set of numbers.Sales net of GST vaulted to 202crs from 155crs yoy. EBITDA margins improved from 5.8% to 8.4%. Net profit came at a superlative 11.5crs vs 55 lakhs last year same quarter. Company is expected to close the year with 550crs of sales with a bottomline of around 28-30crs. Market was always hungry for a solid domestic consumption play and butterfly chipped in perfectly. Operating leverage would continue to kick in as it has a fixed cost model. It Requires only maintainence capex to hit a revenue bounty of 1000crs. With rich operating cash flows informed insiders expect more debt reduction which would further inflate profits. As per our knowledgable sources,couple of stalwarts notably Dolly Khanna and Mohnish Pabrai has acquired significant quantity recently. This are high profile but very conservative kind of investors. If they sees value at these levels wonder what could be the real value be.
Sinclair's hotel delivered September quarter sales of 8.4crs vs 8.7crs. Pat increased from 56 lakhs to 96 lakhs owing to its efficiency in managing operations. For half yearly,results are robust with sales of 25crs vs 22.5crs and a PAT of 7.8crs vs 3.9crs. The figures of the current quarter are not indicative of the full year’s working due to the seasonal nature of the Company’s business. Further, the Company’s hotels in Darjeeling and Kalimpong were closed from 15thJune, 2017 to 30th September, 2017 due to political unrest in the region. Normalcy has returned to the region and the Company’s hotels in these two locations have started full operations and seeing steadily increasing traffic now. It is expected that occupancy levels at these properties will soon reach the targeted levels.
The Company’s strategy of driving both tourist and corporate segments has paid good dividends and resulted in a steady increase in both occupancy as well as average per night realization per room and given a substantial boost to the food and beverage sales of the Company. The Company’s properties offer great value for money and are rated highly on the various industry and tourism websites.Sinclairs’ properties at Siliguri, Kalimpong, Ooty and Chalsa (Dooars) have become popular for weddings and large conferences and in order to attract more such business, the Company is building an additional 50,000 sqft of banqueting space in Dooars and Siliguri. The Siliguri facility of about 30,000 sqft will be ready by January, 2018, while the Dooars facility is expected to be operational by March, 2018.The Company is debt free and has substantial cash reserves, which can be leveraged for future growth.
Company was in the segment of Anti -Biotics. Now the focus has completely shifted from Anti-biotics to anti-malarial and antidiabetic products (lifestyle diseases). From last 6 months, company is working on Development of high margin formulations (molecules) through its holding Company Shivalik Rasayan.Company acquired additional land (build-up area of ~35000 sq.ft) adjacent to the existing Haridwar plant for continuous growth prospects. At present revenue comprises of 80% from exports and 20% from domestic due to binding agreement from Government of India till 2018 year end. Filed 25 dossiers in over five countries. Got Approval from Tanzania and Zimbabwe Government authorities for Bhiwadi plant.
On YOY basis for Q2, Revenues from operations spiked by 25.3% from 22.90 cr to 28.69 cr. EBITA margins spurted by 76.50% from 1.89 cr to 3.98 Cr. PAT increased by 133.3% from 1.15 Cr to 2.68 Cr. Operating margins increased from 37.68% to 40.23%. Further they have a vision to increase the same in coming quarters through specialised R&D on molecule development. They are looking to increase exports to 90% from present 80% level of its total revenues by increasing opportunities in Africa, Latin America, South East Asia etc. Employee expenses also shot up from 1crs to 2.64cr yoy as the company hired some top level cream guys to bolster growth.
Infrastructure sector was impacted in past few years owing to issues related to lack of order inflows, execution challenges, higher debt and higher working capital. These issues had impacted the valuation multiples also for the sector for a long period of time.
With large number of projects in pipeline for the sector and upcoming projects under Bharatmala programme, affordable housing as well as irrigation projects, we expect significant upswing in the order inflow and execution cycle of the companies. Also, we believe that infrastructure sector is in a much better position in terms of healthy order books, expectations of order inflow revival across other segments, improved margins, cleaner books owing to lower leverage as well as lower interest rates. Order inflow so far for the companies has also been ahead of expectations. Working capital cycle for the companies are likely to come down further going forward owing to higher customer advances, recovery of debtors and reduction in loans and advances owing to stake sale in subsidiaries.
We believe that sector is set for a re-rating with above parameters largely in place. Earnings recovery and surge in order inflows is also likely to aid the valuation re-rating for the sector. Stocks have already moved up sharply recently. We continue to maintain our positive bias for the sector with preference towards EPC companies like Simplex Infrastructure (BUY, TP Rs 668), NCC (BUY, TP Rs 134), KNR construction (BUY, TP Rs 322) and PNC Infratech (ACCUMULATE, TP Rs 198). We upgrade our rating and target price for Simplex Infra, NCC and KNR Construction to take into account the sharp scale up in execution and order inflow going forward.
Courtesy: Kotak sec
1..Completed 81 projects worth 1049 cr. and currently working on 7 projects worth 705 cr. Order book 366 cr. as of Sep’17 (executable over next 12 months). Quoted for 220 cr. worth orders and 2000 cr. worth projects in the pipeline (of this marine is 800 cr.), for which they are qualified and have the resources to execute.Expect to end FY18 with order book of 600-800 cr. Bharatmala and Sagarmala are also opportunities.
2..Have quoted for a Sagarmala project as a partner through some other player. If the other player wins the project, revenue will flow in for RKEC as well. Going through a partner as RKEC doesn’t have experience and expertise in roads.Major areas of work – marine, bridges. New areas of work O&G pipelines and roads.
3..Marine is 60-70% of revenue. With entry into new verticals, it may come down over time. At present working only on central govt. projects. Not taking private sector projects as they have had bad experiences in the past.Each order needs 10-15% of order value as capex. And this is depreciated over 5-7 years.
4..Technically qualified to execute 400 cr. worth of jobs currently.Currently had bandwidth to handle 7 projects at a time. Increasing bandwidth to handle 10 projects at a time – this will be mainly led by recruiting new employees and adding some equipments.
5..Pan India presence.Competition – ITD Cementation, Simplex, Afcons, Navayuga.FY18 revenue at 250-270 cr. FY19 revenue should be 350 cr. with 12-16% ebitda margin range. PAT at 6-8%.
6.. Current w/c limits with banks at 135 cr. Looking to increase it to 350 cr. by pledging promoter shares.Capex of 15-20 cr. on equipments mainly.Don’t need working capital as they can manage from mobilization advances and BGs. Once they enter new areas, they may need 10-15 cr. w/c.
7..Higher debtors as of Sep’17 due to GST transition. As of today, they have realized almost 55 cr. of the 67 cr. receivables that stood as of Sep’17.Ranks among top 10 companies in marine works in the country.Aim to achieve ROE of 20%+.Aim to position RKEC as a diversified player in their space.Net LT debt of 1.5 cr.Interim dividend of 10%. Will come out with dividend policy later.
Bull markets are a great time for fraudster promoters to make money. If you are a fraudster and also want to benefit from this bull market, here's a thread that explains how you can defraud shareholders and get rich.
1. Have a good story to catch investor's attention. Something like "only listed XYZ company" will help. Has zero value in terms of improving long-term cash flows of the business but is excellent branding for a stock. Change the name of the company to what's booming in the market.
2. Draw analogies to D-Mart or other businesses that investors love (next Page Industries maybe?). Doesn't matter if your business is nothing like the ones you are comparing it with.
3. Give aggressive guidance. 15% growth is pedestrian. Talk stuff like 1 lakh cr sales/loan book or 50% growth for next 10 years. Your stock should be a potential multi-multi-bagger. Claim that there is no limit to how large you can be.
4. Start making up the numbers. Only Revenue and PAT matters. So don't worry if the Balance Sheet has all sorts of large unexplained scary stuff. No one looks at the BS in a bull market.
5. Raise large amounts of debt from PSU Banks to fund fictitious capex. Will be easy as they only focus on Revenue and PAT. If needed give a cut of the loan as "commission" to the bankers.
6. Gold plate the capex to siphon out funds. Pay salaries and other operating expenses using siphoned cash resulting in even higher profits and market cap. No one questions absurdly low salaries or purchase of computers worth 20 lakhs per employee.
7. Have more than a 1000 subsidiaries, associates, joint ventures and related entities. The main auditor shouldn't audit many of them and must rely on your estimates so you have room to make up stuff. No analyst should be able to make sense of the money trail.
8. Also, don't worry if you have almost zero on-ground sales or operations. No one will check. Even the outlets you mention in the investor presentation don't really have to exist. Just don't do the mistake of providing store location links on Google Maps or your website.
9. When asked about lack of real-world presence, say analysts (a) don't understand our biz (b) are not looking at right place (c) are jealous of our success (d) want our stock to fall so they can buy (e) are shorting our stock and spreading misinformation.
10. Start advertising on CNBC and Economic Times. Why? Because your audience is the investor community. Doesn't matter if actual consumers have never heard of your products, the investors should hear about it every week.
11. Raise large rounds of equity to fund your 50% growth rate. This will be taken as a huge positive. Now you are again cheap on a post-money P/B basis! It's a bull market so everyone has forgotten that good businesses don't really require a lot of capital.
12. Publish fancy quarterly investor presentations, glossy annual reports with language that would wow even Shashi Tharoor, hold con-calls after every good quarter reiterating aggressive guidance.
13. Participate in every investor conference out there. Tell investors how undervalued your stock is and how you will continue to "surprise" positively.
14. Buy few shares of your own company. Investors will take your buying as a sure sign of a booming business. Doesn't matter if other related parties are selling. Follow the PP Waterballs playbook.
15. "Reward" shareholders with stuff like bonuses and stock split. Occasionally also announce a dividend or buyback. The biz doesn't generate any cash flow so use debt and equity raised to fund the dividends.
16. Announce de-merger of a part of the biz. Nothing creates as much value as a de-merger even if it makes no logical sense. Promise other value-unlocking measures.
17. Once stock has hit the roof, start selling your shares (directly or indirectly). Say the selling is for charity purposes or buying property or starting another venture about which you are passionate (like airlines or organic farming).
18. Pledge your stock as much as you can. Spread rumour that you are pledging stock to buy your own stock which will again be taken as a +ve.
19. Once you have squeezed out every rupee from debt and equity holders, it is time to shut shop. Report a big loss or even better just stop reporting the results. Blame lack of quorum for inability to hold results board meeting.
20. Pledges will be invoked, stock will crash. Announce that you are facing temporary cash flow problems which will be quickly resolved. Of course, they will never be resolved. After few weeks of panic, yelling, and abuse, investors will forget your company ever existed.
21. Wait for the next bull market. Repeat from 1.
Courtesy: Amit Mantri?
1..In general, mfi may be coming back into vogue for some time at least. They had invested in arman earlier, but booked out during demon. The uncertainty around it seems to be now getting cleared. They have very conservative,transparent and honest management. Their commentary had been bearish through demon time. Last 2 Qs however they turned bullish, and moreso quite aggressive in their Q2 press release.Worst seems to be over for them.
2..They had been growing well before demon and stopped disbursements in 2 months post it.Now looks like growth may resume.From numbers - h1 writeoff is 4.5 rs per share. Eps is 2.5. w/o will stop going forward.Aum grwoth since march is 54% and since September is 38%.Interest expense grew by 46% but revenue by lesser amount of 25%. Significant loans were given towards Q end where income will start reflecting going forward. However interest, provision (on standard assets 1%) and employee/branch expenses were already incurred hence depressing profits.
3..No. of employees and branches increaed by 45% and 52% over 30.09.16. Out of 3.13 cr write off in H1,Q2 was 1.2 and Q1 1.93. Big qoq improvement and they have said that all demon affected loans have been cleaned by collection eff is 99.84% in sepQ. Their msme business has just broken even and will start contributing to profits hereon.
4..In current setup they can do 120cr disbursement per Q in micro finance. They have reached 104 cr by September. They say Q3 is busiest for 2-wheeler loans. In Q2 they disbursed 23cr (22% yoy and 10% qoq growth). q3 last year was 26cr disbursement.
5..Msme was 12.4cr disbursement (0.39cr yoy and 10.6cr qoq, which was 4.9cr in mar Q).Yields on these are also around 20-25%.Their aum is 296cr and they are conservatively targeting to make it 1000 cr by 2020. For this year they took subordianted debt and it is sufficient to maintain their current growth rate and for fy18. They may have to raise debt or dilute later.
Courtesy: Vinay Ambekar(our inhouse research expert)
1..We are going very very aggressive on marketing, international exhibition (15 P.A.) and R&D related of things for sustainable future growth.Due to many developments, we were not able to give dividends. But after 1or 2 years there will be *tremendous growth* in our company.
2..In near time, R&D unit from Delhi is going to visit our plant. If we get that *approval*, it will beneficial to company from taxation point of view. They can also aggressively market their new energy saving fans after this.We are thinking of hiring experience guys from the industry to increase our sales.
3..Currently our domestic sales is 50 crores and export revenue is 10 crores. We want our export to reach at 50 crores.Increased Fans capacity from 2.5 mn to 5 mn.We Want to cross 100 crores revenue in next 2 years and 1000 crores in next 10 years (FY17 revenue is 57 crores).
4..There is no major impact of GST from taxation point of view but due to overall slowdown business has affected in Q1 and Q2. Voltas and blue star (who are our main clients) gave only 10% of normal order due to GST. DEMO & GST together have affected our revenue by roughly 10 crores.
5..We want to raise our stake.We have land available at Vasai valued at 4 crores. We have 20 crores LC available from banks. Whenever we will get big orders, we will utilise this.
Courtesy: Our guru and predator Vishal.
1. Sources in Madurai, Salem indicate that sales are still slow in the broader gold market.
2. Design oriented business models (in gold) continue to face challenges to increase margins based on design.
3. Supply chains are already extending. Gold coming in from other states (post-design). Strong balance sheets feeling confident of moving closer to JIT type inventory management.
4. There has been an uptick in pricing on the local jewellers front. However, it is not uniform and steady throughout.
5. The story of non-gold jewellery consumption in Tier II TN cities is still a story. Interviews with store managers indicate that the local demand is still for Gold, Gold and more Gold. Likely that Thanga will remain in Gold at >90%.
Part of Welspun Group. Welspun Enterprise is in the Construction & Contracting - Civil sector & Oil Exploration in partnership with Adani (35% share of Welspun).
Construction:Current order Book (after Q 2) is 4100 crore (Hybrid Annuity Model) and same includes 4 projects of more than 120 Km each. Further 6 Built Operate and Transfer projects under progress. Sold Energy Business to TATA s and deployed the Surplus Cash in Buy Back of 15.5% of Paid up share capital @ Rs 62. Meerut-Delhi Expressway completed by 70% till Q2 numbers and expected to be completed by March 2018 much before time. Due to fast pace construction, received appreciation letter from NHAI. Visibility of revenue for three years at least from present robust order book with no debt pressure. Looking to buy stressed Assets at very attractive valuations. Bought two HAM from MBL Infra (49% Stake) (30 to 40% completed project Saharanpur & Gagalheri BOT).
Oil & Exloration:5 Oil Blocks in JV with Adani. Revenue from first block expected in FY 2019-20 onwards.
Financial Service:Applied for NBFC license and confident of getting the same in Q3 of FY 2018. Surplus cash of Rs 200 Crore will be deployed in NBFC business which can be increased to 3500 crores subject to Board Approval.
Analysis on the Numbers:Debt Free Company with nearly 940 crores of cash available. Total income up 43% to Rs. 4,15.3 Crore from Rs. 2,90.8 Crore (YOY), primarily contributed by progress on the Delhi- Meerut road project. Profit before tax (before exceptional) more than doubled to Rs. 53.31 crore in FY17 from Rs. 20.35 crorein FY16. Profit after tax showed a considerable increase, growing to Rs. 43.27 Crore in FY17 from Rs. 32.82 Crore in FY16. Till Q2 total sales is Rs 373.09 (Cons.) and PAT is Rs 29.35 Crore. Confident to achieve 700 crore sales with EBITA of 20% and 10% PAT, valuations looks cheap at present level.
Courtesy: Nishant(our inhouse research team)
1. Premiumisation : Spreads on human labour are likely to continue their uptrend. Ajit has been working with individual acquisitions on how to increase the tech component as a part of individual services offered. For example, with Terrier, Capt. Ravi and team are trying to get 2 guards + tech to man a gate instead of 5 guards.
2. Cross-sell : Massive focus increasing share of wallet. Cross-sells are happening easier within industrial assets, HR, FM business verticals. IT temp staffing is a bit crowded for cross-sell. Thing to watch out for is on the ceiling of their cross-sell ability. Beyond a point, very hard to cross sell in IT temp staffing.
3. Watching out for : (a) How do DSOs change when labour is moved into more sticky contracts? What happens to OCF then?
(b) Funds for acquisition : Traditionally in the staffing business model, the OCF is used for M&A and working capital is arranged via Payroll financing. Have to see whether Ajit continues to use debt for acquisitions etc.Said he would not but used debt (Axis bank HK) to fund Comtel acquisition. What about sources of capital post the market boom?
3. Capital Allocation : Strategy seems to be working out really well at this in the cycle. Dilute at ridiculous EBITDA multiple and acquire at 8-10x EBITDA.
4. Valuations : Continues to remain lofty. Waiting and watching.
Courtesy: Aniket Krishna(Our in house research team)
See better sales in H2FY18; RERA to benefit organised players - because post RERA and GST implementation, market understands which developers have the ability to deliver. Real estate stocks have been big buzzers in the last few days. Is the RERA and GST related disruption behind the sector? The customers and bankers now know whom to approach. So this is the time when volumes for organized players will start picking up. Q3 and Q4 is looking much better in terms of traction in sales post RERA and GST. The real estate sales portfolio is a combination of residential and commercial sale, of which commercial is only 7-8 percent.The government is hell bent on seeing a pickup in affordable housing. The quality realty stocks thus should further continue their momentum.
1..Sales increased 19% yoy driven by 25% growth in exports. EBITDA margin increased by 190bps to 22.7% yoy due to increase in blended realn.Interest outflow down by 24% to Rs10cr.Pigments sales up by 11 %.Although despatches up 32% blended realisation has gone down for Indian manufacturers. Margin for segment remained stable at 14%.
2..Agrochemicals sales increased by 33% yoy driven by 44% increase in exports. Despatches up 10% and realisation up 13%. Margin increased by 400bps to 20%. Managemnet confident of retaining margin at current level. Capcity constraints in China has improved realisation of products which is sustainable.Utilisation up from 58% to 78%.
3..Chemicals sales increased 27% yoy driven by realisation growth.Despatched increased y 4% yoy. Margin gone up from 33% to 38% yoy.Utilisation at 84%.Company confident of maintaining topline growth rate of 15-20% and margin likely to be maintained at 20%.
4..Has planned capex of Rs540cr over three years in its subsidiary MFL. Company setting up Chloromethane plant at cost of Rs140cr likely to be commisioned by June 18. Expect to generate topline of Rs1.2bn.Planned to set up Hydrogen Peroxide and caustic soda expn at a cost of Rs4bn likely to comm. In June 19E. The project likely to generate topline of Rs3bn.
5..Co trading at 16xFY18E and 14xFY19E earnings and 8xFY18E and 7xFY19E EV/EBITDA.
Domestic business growth to remain healthy: For Q2FY18, domestic business (62% of Q2FY18 revenue) saw a significant improvement with revenue growing at 34.2% YoY to ?108 crore. The domestic markets are likely to perform better going ahead on account of CV cycle recovery due to uptick in industrial activity, evolution of hub and spoke model due to recently implemented GST, government’s focus on infrastructure improvement. Also, the recently announced road development project (amounting to an outlay of ?7 lakh crore) is expected to be a huge trigger for improved CV sales. Further, bounce back in tractor sales due to better monsoons and increased focus of the government on agriculture is likely to give additional push to the top line growth. The slew of policy reforms and CV cycle uptick is expected to drive domestic business growth at 16.2% p.a. over FY17-19E.
Better than expected recovery in exports business: In Q2FY18, exports (38% of Q2FY18 revenue) was a positive surprise with revenue increasing at 16.1% YoY to ?66 crore. GNA is now focussing on entering into SUV and LCV segment for both domestic and North America region and the commercial production is likely to be start in FY20. The new segment has a revenue potential of ?100/ annum.Also, the company expects market share gains in the exports market on account of new client additions. Given the recent development, exports business is likely to do better and we anticipate 13.6% CAGR in exports revenue over FY17-19E.
Risk factors: 1) High client concentration (Top 10 customers account for ~70% of FY17 revenue), 2)Currency fluctuation risk owing to significant exposure to exports
Recommendation:GNA is expected to gain significantly on account of CV cycle recovery (both domestic and export markets) and bounce back in tractor sales. GNA posted good result with overall revenue growth driven both by domestic and exports business. We increase our revenue growth expectations to 14.3% and net profit growth to 27.2% over FY17- 19E. EBITDA margin is expected to expand by ~70bps over FY17-19E. GNA currently trades at a 15.8x FY19E PE. Given the anticipated improvement in CV cycle recovery, slew of policy reforms on road infrastructure development (domestic front) and new product development, we maintain our positive view and Buy rating with a target price of ?400 valuing the stock at 18x FY19E EPS.
Courtesy: Centrum wealth
? In retail refining TAT, collection engine and distribution for retail assets with pricing linked with risk in many product segments now. SME remains as focus area as processes now in place.Housing loans grew by Rs90bn YoY of which Rs30bn was bought out from other entities. Rs5.0bn-6.0bn this quarter.
? Would conservatively provide on wage revision next quarter . Last year run-rate of 750mln/quarter. Looking at recycling the international investment book as most book kept in HTM and hence some juice of treasury gains from there as churn happens.
? NCLT based exposure* – 1st list exposure in 10 a/c of Rs76.72bn and holding Rs39.8bn provisions (provided Rs1.63bn in Q1FY18) with additional provisions required in Q1 was at Rs4.89bn. In 2nd list, Rs42.0 bn exposure carrying provisions of Rs14.73bn (37% PCR) and with additional provision required at Rs8.0bn.1st list PCR at 54% and would go to 64% post addl provisions and 2nd list will reach 60% after additional provisions.
? SMA-2 Rs140bn as of Sept’17. This includes stressed assets overlapping like S4A/5:25/SDR. Of this Rs60bn restructured at risk.Total slippages break-up - Agri Rs7.0bn, Retail Rs3.4bn, Corporate Rs6.5bn.Stressed exposure of max at Rs18.0bn on single a/c. Some embedded risks from solar/thermal tariff renegotiation, 2 telecom exposures which can bring in asset quality issues but has been factored in some of the already stressed assets.
? Targeting NNPA of 2.5% by next year as expecting NCLT based write-backs and interest additions as well in Q4FY18 and Q1FY19.Room to raise Rs60.0bn on GOI holding of 52% if no capital infused. BOB remains comfortable for next few quarters and will require only growth capital from GOI.
Warren Buffett: The ideal business is one that generates very high returns on capital and can invest that capital back into the business at equally high rates. Imagine a $100 million business that earns 20% in one year, reinvests the $20 million profit and in the next year earns 20% of $120 million and so forth. But there are very very few businesses like this. Coke has high returns on capital, but incremental capital doesn't earn anything like its current returns. We love businesses that can earn high rates on even more capital than it earns. Most of our businesses generate lots of money, but can't generate high returns on incremental capital -- for example, See's and Buffalo News. We look for them [areas to wisely reinvest capital], but they don't exist.So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It's an enormous advantage.See's has produced $1 billion pre-tax for us over time. If we'd deployed that in the candy business, the returns would have been terrible, but instead we took the money out of the business and redeployed it elsewhere. Look at the results!
Charlie Munger: There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested -- there's never any cash. It reminds me of the guy who looks at all of his equipment and says, "There's all of my profit." We hate that kind of business.We like to be able to move cash around and find it's best use. We'd love to have our companies redeploy cash, but they can't. Gillette has a great business, but can't sensibly reinvest all of the profit.We don't think the batting average of American industry redeploying capital has been very great. We knock other people doing what has made us so successful.
Q) I own 6500 shares of Modison Metals at 52 rs. Please give a brief overview about the company. Do you see any upside potential in the company? Shall I hold the shares? (Prem Doshi from Calcutta)
IEM) Modison Metals Ltd was founded in 1965 by Girdharilal Madanlal Modi, Rajkumar Mohanlal Modi and Sureshchandra Purshottamdas Modi.The company is an established manufacturer of electrical contacts made of silver and silver alloys for low, medium and high voltage switchgear industry. It makes contacts like pure silver, silver copper, silver cadmium, silver cadmium oxide (by powder metallurgy and internal oxidation), silver nickel, silver graphite, silver tungsten, silver tungsten carbide etc. These contacts are manufactured in various forms and sizes as per customer s drawings and specifications.Over the last 10 years, the company’s top-line has grown at a CAGR of 8% to INR 190 crore. Although, margins have been widely fluctuating but, going forward, with the introduction of new value-added products and higher contribution from the high-margin HV contacts, we expect the company to have better margins than FY17,as already being witnessed in first quarterly performances of June. What we like is, that, the company has consistently ended up with positive operating cash flow for last ten years; the company despite posting decent growth has not incurred major capex and played it safe. The company has been able to manage its short-term and long term borrowings well.Going forward, conservatively assuming that the company will achieve a turnover of INR 260 crore in FY19 with an operating margin of 15-16% (again on conservative basis, considering the commodities bottoming-out; any increase in raw-material procurement is likely to offset by the rise in contribution from high-margin products) which will enable the company to have a net margin of over 7%, thereby, an earnings of nearly INR 6 per share is not questionable. Given its high market share and less competition on account of entry barriers, the company can easily command a P/E multiple of 20x – showcasing a good upside potential from current levels of stock price. Further, promoters holding showcase creeping acquisition over the last few years,although quite tiny but gradual increase depicts a positive picture. Additionally, on a lighter note, having a look at the shareholding pattern, most of the public shareholders (not classified under promoter category) above 1% are Modis’ which further boosts our confidence. The company has consistently paid dividend for past 10 years.
1) Shiva Texyarn: KG as he is fondly known by in the investment circles is highly bullish on Shiva texyarn.The microcap predator opines,"Its part of banari Aman group lead by a visionary MD (vice chairman of ITTA) who is not interested in commodity products, has superb reputation built in defence industry (if the defence guys want any product, they approach Shiva first to make it). There's a demerger to increase focus on specialty segment, huge opportunity size available (already supplied orders for NBC suits and amongst 2 being approved for trial order for siachen). Company has a good brand and growth in quick dry, also trying to develop wulf brand for retail market, have appointed new people from golkadas exports for marketing and posses a very good R&D team".He expects the company to be a multibagger within the next few quarters.
2) MRSS India: An Ahmedabad based PMS manager is highly bullish on the company. He says it is one of the only market research player to be listed in Asia. The company is managed by a very enthusiastic and experienced management with wide experience from companies like Nielsen, IMRB, etc. MRSS have been growing 100% on a small Base, Singapore execution if turns well it could be even bigger or equivalent to the parent in terms of revenues. Company aims to do around 150 crs in next 2-3 years.Given the huge mkt size of 7000-8000 crs in India,Company can do wonders both in terms of operational numbers and rich stock price appreciation.
1) Inditrade capital: Lot of action is expected in the counter of commodity financer and MFI player Inditrade capital as the Company aspires to build a loan book of around 3000 Crores within a period of 3 years.The company to achieve that mammoth figure is banking on new initiatives such as e-warehouse receipt which are likely to boost commodity exchange trading in the country. It is managed by Sudip Banerjee who was primarily responsible for building Reliance money. With sectoral tailwinds backed up by an able and dynamic leader,Inditrade could well buzz big time in the bourses.
2) Butterfly gandhimathi: This is another company which market informed insiders believe it to be at an inflection stage. They suffered in the last few quarters owing to sticky nil margins Govt orders,Demonetisation,GST etc. The promoters in the past too lacked a good perception from the market participants and had allegations of siphoning off. Fair winds private equity which owns a significant stake has appointed their own guy as the CEO of the company. Butterfly promoters too have given him a free hand to operate.The perception is bound to get better now. Third quarters numbers are expected to be robust just like second quarte which will further set the trend for the remaining quarters.Company is expected to remain in action in the shorter to medium term duration.
Q) I own Ambika cotton since last 7 years. It's been a great multibagger for me. What's your take on the business of the company? I understand it may not be a multibagger from present levels but can I expect steady 15% kind of returns from it? Please help. (Raju patel from Vadodara)
IEM) Incorporated in 1988 in Coimbatore (Tamilnadu), Ambika Cotton Mills Ltd. is engaged in the manufacture of premium quality cotton yarn for hosiery and weaving. Today, the company has become an established player in the global yarn market with exports comprising majority of its revenues. The company makes both, compact ring yarn and eli twisted yarn, though, majority of the production is of compacting system. Oflate it has also entered the knitting segment. The company has four manufacturing facilities at Dindigul, (Tamilnadu) with a total spindle capacity of over 100,000; of which a high percentage of spindles are of compacting based system. Compact spinning is recognized as a revolution in ring spinning. This technology is claimed to offer superior quality and better raw material utilization. The company is said to be a whiz in the shirting segment and is considered to be the preferred client of all top quality shirt and t-shirts manufacturers across the world for its specialty cotton yarn. The company, over the years, has managed to carve out its own niche in the huge cotton yarn market by focusing on producing the specialty cotton yarn.Since the company has carved out its own niche,it remains isolated from the usual cotton and textile demand-supply economics of the country. The company also boasts of several exclusive things as compared to other players in the industry; the company does not carry much debt and inventory on the books along with very low receivables which is quite a trend in this industry. This loudly speaks out of efficiencies employed in the work, demand and quality for its products and efficient working capital management with low credits.During the last 10 years, the company has grown at a CAGR of 15% from Rs.140ncrores to Rs.528 crores while the PAT have grown over Rs.17crs to Rs.55 crs during the same period. Since, the cotton prices are hovering at low levels while the demand is likely to remain consistent in the mid-term, we expect company’s operating margins to remain to 20% plus levels. It should continue to grow its bottomline at 15-18% CAGR for next 5 years. You will probably achieve your returns target here.
One of the best pharma analyst of the country who picked 100 bagger companies like Caplin point during the initial stages is highly bullish on Alembic pharma.A midcap pharma company with exceptionally strong management which has previously delivered when they changed their strategy and opted to enter the US business. Their main US portfolio is simple generics with pending 40+ filings having 40% Para IV filings. These filings should materialize over the next 3-5 years.The main reason for looking into the stock is on account of another change in their strategy, as they are shifting their US based business model from simple generics to a complex generics portfolio and building a product basket targeting Oncology, Ophthalmology and Dermatology filings coupled with Injectable products also. They have commenced capex plan for a derma and Onco plant, Injectables plant and an Oral Solid Dosage facility.They have expanded their API capacity, doubling it. Capex to complete in H2FY19E. This would increase their US capacity from 1 plant to 5 plants. Filings for these products will come online from FY20E. The company is vertically integrated for majority of its products. This would make them adept to handle the structural transformation in the US and also give them the position into the complex space.Domestic portfolio is pretty robust with 40% portfolio in acute products and management should enhance focus on the chronic portfolio going ahead improving their field force productivity from current levels.He concludes,"I believe Alembic is an attractive bet to play on from a standpoint of a company trying to migrate from a medium sized player to a large player with diversified product and dosage forms in their kitty.
Started in 1986, Kamat Hotels (KHIL) has firmly established hotel brands such as The Orchid “An Ecotel Hotel in the 5-Star segment”, Fort Jadhavgadh and Lotus Resorts. Currently, the company has 9 residential hotels in 4 & 5 star categories. These hotels are situated in the prime locations in various cities like Mumbai, Pune, Bhubaneshwar, Konark and Puri, Goa etc having around ~1140 keys – a mix of owned, leased/licensed and managed. The focus of the Company is in positioning its hotels to the business segment in the mid to up market category.KHIL came out of CDR in the year 2014 and reported profits in FY17 after several years of losses due to heavy interest burden.
Key management personnel: Dr. Vithal V Kamat (CMD), Vishal V Kamat (Director)
Average occupancy: City hotels +80% / Resorts 65% - differs for hotels at different locations and season to season; Mumbai leads; good scope for improvement in Pune; Oct – Mar is the key season
Average cost/key: Mumbai ~Rs1.5-2 cr / Pune ~Rs1cr / Orissa Rs0.75cr.Margin: Rooms (50%-60%) / F&B (25%) / Blended (40%-45%) Vs 30%-35% Industry average.Eco friendly concept – requires little more capex but saves in opex
Capex:Require Rs150cr capital over Sep’17 – Jun’18 for rebranding, room additions.Work going on to renovate and convert ‘VITS’ Mumbai to ‘The Orchid’ brand; 50 rooms will be added to the existing 195 rooms; may need ~20cr bridge funding out of Rs60cr of total capex; ARR will expand from ~Rs4,500 to ~Rs6,500 at 80% occupancy level. Taking 2-star ‘Lotus Goa’ resort into a Boutique upscale beach resort. The Orchid Goa’ at Rs10cr capex; ARR will expand from ~Rs2,500 to Rs5,000; timeline - 4 months. Upgrading 3-star VITS Bhubaneshwar into Boutique city hotel –The Orchid Bhubaneshwar (Rs8-10cr); timeline – 4 months. Lotus Resort, Konark to rebrand to The Orchid Konark (Rs35-40cr); timeline 1.5-2 yrs. Mahodadhi Palace – to expand to 90 rooms from 25 rooms currently (Rs35-40cr); timeline 2 yrs
Going forward:While expansion in Orissa is on card, East India will be the next focus area for the company.Large Hoteliers have approached KHIL for tie-ups; talks are in advance stage with few.Funds raising for capex may not require immediately as company now has good cash flow visibility.Current debt position is ~Rs350cr in standalone book (~470cr in consol) which will go down gradually. Co has repaid Rs140cr of debt in the last 2.5 yrs and ~Rs30cr repayment is scheduled in FY18. Current rate of interest is Base Rate + 1%, which was 14% earlier.
Leading companies participated :Century Ply, Havells, Supreme Industries, Astral Poly, JaIn Irrigation, Bosch, Siemens, Whirlpool, Asian Granito, Somany Ceramics, Kajaria Ceramics, HSIL, Everest Industries, APL APOLLO.
Among unlisted companies leading names like Polycab, Prince Pipes, Prince Plastics, Ajay Pipes, RAK and tile companies from Morbi / Gujarat such as Simpolo Tiles (Rs1200 cr revenue), Varmora Tiles, Restile Ceramics (Rs300 cr revenue), Glacier Tiles (Rs200 cr revenue) , Nexio Tiles were present.
Demand outlook:Most Companies said demand has been muted led by slow real estate sector and muted dealer restocking post GST rates (due to uncertainty over rates revision). Most companies also faced elongated WC situation. Project business has slowed down considerably though retail, government demand is good. One leading tile company promoter said never seen such weak October demand since more than a decade.
GST:Most leading players across product categories high concurred GST rate @ 28% has been a deterrent.Competition from unscrupulous unorganized players has been rampant as high GST rate act as incentive to circumvent the tax system by dealing on cash basis. Exemption from carrying E-Way bill further intensified competition from such market players.Most Companies senior management though were hopeful that GST rates on cables, plywood, particle board, MDF, tiles, sanitaryware will be revised to 18% from 28% within next one to two months.
Display:Havells had good display of new generation LED lighting and solar lighting.Kajaria had largest variety of tiles and Kerovit Sanitaryware at display.HSIL too showcased large variety of sanitaryware and fittings across price points.Century Ply had big display of laminates, MDF, wooden flooring, ready-to-fit doors etc. The product quality of MDF has been well accepted by the market and the company started MDF billing since Sept 30 and sold over 6000MT (Rs15 cr) worth of MDF in 35 days mainly in Northern region. Now expanding into other markets. Also to launch pre-laminated MDF by December / January.
Astral Poly has expanded its adhesive and resins product range for multiple applications such as glass, wood, stone, tiles/marble, water proofing, construction chemicals, sealant, maintenance etc.Somany Ceramics besides wide variety of tiles showcased its expanding sanitaryware portfolio with over 50 models. It has dealer network of over 500 for sanitaryware / fittings and expanding.
Prince Pipes and fittings (five manufacturing plants, turnover of ~Rs1200 cr, dealer network of 2500) manufacturers all varieties of pipes : PVC, CPVC, Polyproplyne, HDPE pipes. The company has filed RHP for IPO. Another Company Prince SWR Systems (four plants Turnover Rs700 cr) is in to PVC, PPR, CPVC pipes.
Many tiles players from Morbi had excellent collection of tiles on display. Also unlisted players from Delhi, Haryana. Gujarat wood product companies were present with large collection of laminates and veneer.One modular and office furniture manufacturer said particle board is most widely used for institutional and commercial furniture followed by MDF. Plywood is requisitioned by a few large corporate customers.Overall mood across marketing persons and management seem to be positive expecting business to improve over next two / three months.
For investing in commodity stocks, my broad framework is NOT to delve much on the Commodity price. That will be reactive investing and hard to time especially with my timing skills. But the good things is price follows the supply and demand eventually. To me, entry and exit in commodity stocks has to be based on study of gap between capacity and its utilization in the industry. When there is evidence this gap is on course to start shrinking in near future, is a good time to consider investing. When there is evidence the gap will start increasing, is a good time to consider exiting.
Waiting for the Commodity's price to top out is too late. Ofcourse some handle on valuations is important. To me, commodity investing is about watching the supply side intensely. It's easier to see the larger picture from this angle and in time. Demand side is much tougher to predict.A lot of news keeps flowing about supply side consolidating or slowing.Shut downs, consolidation, over leveraged BSs implying no more borrowing possible to expand, etc etc. It takes its time to play out but the evidence keeps building. Keeping an eye on supply side is very remunerative.
Courtesy: Deepak Kapur(one of our humble mentor)
1) Zuari Maroc Phosphates Private Limited (ZMPPL), a 50:50 joint venture with Office Cherifien Des Phosphates (OCP) S.A., was established as a Special Purpose Vehicle (SPV) for acquisition of stake in Paradeep Phosphates Limited (PPL). At present, ZMPPL is holding 80.45% of the equity stake in PPL.PPL’s total revenue from operation for the year ended 31st March, 2017 was ` 3696.71 crores as against `4798.36 crores during the previous year.The Profit before Exceptional Item for the year ended 31st March, 2017 was 192.09 Crores as against 65.53 crores during the previous year. Profit after Tax for the year was ` 86.91 crores as compared to 65.09 crores in the previous year. Company expecting PAT 200cr this year.
2) They have expansion plan for zuari goa and mangalore chemical this year for capacity expansion.Clarity on purchase of land from subsidiary company - the company using land to educate farmer and growing crops on that.
3) Last year sales figure was low due to fall in price of urea and natural gas.DBT in fertilizer will apply from nov and dec in some states and will apply from jan 2018 in whole country as per gov officials right now with companies of industry later on direct with farmer.
4) As per management this year company will earn 33 cr from Mangalore chemicals, 2 cr from zuari specialty(crop business),2.5 cr from zuari agri science, 240 cr from zuari maroc 80% holding and zuarifertilizer can post 10 cr of loss from 113 cr loss last year when we combine this it can post around 267 cr profit by dividind this to outstanding shares of 4.16 cr shares the eps whould be around 64 on consolidate basis.
5) They said government is focusing on agriculture and if agriculture business will grow the demand of fertilizer will increase. We have confidence that things are changing which will big beneficiary for us.Company realized 3 cr from 27 cr and expecting that whole amount will realize in two year time frame as loss realize on supply of material which is not upto standard.
6) Clarity on purchase of nagarjuna share that the shares were bought from market that’s why have some variation in reported figure to exchange and annual report submitted to exchange.The clarity on tax payment that we have paid tax as per high court order and that is true.
7) Zuari global transfer land to zuari agro at 32 cr which have book value of 9 cr but the actual value of that land is around 48 cr as per management which they have bought for agri business development and education of farmers.The sales figure is low previous year because uera price fall from $ 20 to $7 which is highly depends on price of natural gas.
Courtesy: Our in house expert Nishant. Note only meant for sharebazaarapp.
1.The key points for the idea of Expansion are opening of additional 40 new branches this year which would sum up to 300 branches in FY 17-18 (majorly Bihar and UP).
2. As per the management, the breakeven point for the branches is 18 to 24 months.
3. After 12 years, DCB bank has announced dividend of 5% and submitted the Dividend policy to RBI.The recommended dividend will increase gradually year on year basis with profitability.
4.DCB is sound in technology upgradation and has launched the first Aadhar based ATM in India and have been awarded ‘Bank’s Data Centre’ in 2016
5. DCB has undergone various strategic tie ups for offering new product.
6.Its mojor focus is on Retail Banking as compared to Corporate Banking leading to efficient management of NPA’s.
7.In comparision to other players of the industry, Management Integrity and honesty of DCB is reflected with the fact that it is always the first one to publish its Results by getting the Financials timely audited.
8.As per RBI verification, the NPA of DCB matches with the NPA records verified by RBI.
9. There is a steady growth in the Financial Statements i.e Balance sheets, P&L, Cash flows.They target to double in forthcoming 3years
10. The Credit Rating agencies have accredited DCB : A1+ for Short term and A+ for long term, which is very good as per Industry norms.As per Industry standards, the company is managing at a lower rate of NPA of 0.79%, also it has managed very well in tough times by having ‘Zero’ Coporate NPA last year i.e no corporate defaulters.
Sometimes irrespective of stock prices you gotta admire and appreciate the intellect of entrepreneurs. In our cumulative stock market experience of over 20 years,we have never ever witnessed what just transpired in Uniply Industries. The brainchild of Keshav Kantamneni take a bow!!.We must confess we went in a tizzy after the first glance on its announcement. Check out:-
Year 2014 to till date scenario:Uniply Industries was in deep mess with promoters appointing Globality ventures(Investment Banking firm owned by Keshav Kantamneni) to find a buyer.Keshav all of just 33 years,was quick to spot an opportunity and he convinced the Uniply owners to sell it to him. On Words of the market veteran Mudar Patherya,"Before Keshav acquired Uniply , he researched. He worked on the shopfloor (with the erstwhile promoter's consent), comprehended the manufacturing process, spoke to employees, interacted with the trade, called customers, and examined global trends".The deal materialised with Keshav acquiring 36% in Uniply for 2.5crs. Uniply also had debt of around 113crs then.
With new promoters and their grand plans,stock price of Uniply rocketed from 12 to 150 in no time. In between he raised some funds and convinced the Likes of Ramesh Damani,Radhakishan Damani,Vallabh Bhansali etc to invest in it through private placement route at price of 100 bucks.
Company in its maiden year under Keshav turnarounded and made a tiny profit.Keshav further did two smart acquisitions through debt and equity funding. Acquired euro decor plywood(Engaged in plywood business)for 42crs and Vector projects for 64crs. Vector is into high end interior decoration. Uniply in early 2017 also acquired around 9% in UV boards for an undisclosed sum and made it an associate company. The old owners of Uniply,the Benganis owned Uv Boards.
When Keshav acquired the company in 2014,Uniply had revenues of 146crs and a loss of 3crs. Cut back to fiscal 2016-17-Uniply ended the year with consolidated revenues of 280crs and a Pat of 13crs. Company had borrowings of around 180crs.
Climax: Keshav is selling the plywood business of Uniply to its associate company UV boards for a total consideration of 300crs. Out of 300crs,UV boards will issue shares of worth 111crs to Uniply. It's a business to equity swap. Post the deal,Uniply will own 37% in Uv boards. With rest of the money,Uniply debt of 145crs will be gone. In short it will be a debt free company. The Trademarks of Uniply would be licensed to UV boards for a total fee of 75crs,to be paid equally over 10 years in advance at the start of the year. Uniply with Vector projects have also won projects worth 1050crs to be completed over next 12-15 months.
Quintessence: Keshav buys Uniply for 2.5crs. Keshav acquires euro ply,Vector projects and 9% in Uv boards through debt and equity funding. Keshav sells plywood business of Uniply to UV boards for 300crs. Keshav gets 37% and becomes new owner in UV boards as UV issues 111crs of shares to Uniply. Keshav makes Uniply debt free. Uniply will get 7.5crs royalty from Uv boards for next 10 years. Keshav with his Vector projects bags order of 1050crs.
Give Keshav a Cookie guys. Either this fellow will create massive massive wealth for himself or for himself and his shareholders. If past track record is considered,he well qualifies in the later category as post his charge at helms,Uniply stock price has moved from 10 to 365 before correcting bit to 280rs now.
First quarter numbers: Uniply delivered splendid first quarter numbers. Sales vaulted to 77crs vs 39crs and PAT at 5.8crs vs 1.8crs earlier. Numbers are not comparable as this are consolidated numbers. Plywood division and its interior decoration vertical posted PBT of 5.63crs and 3.2crs respectively.
Full year estimate and valuation: Since plywood business is sold to UV,we are only looking at the the interior division first quarter numbers multiplied by four quarters,we arrive at PBT of around 13crs. The royalty of 7.5crs gets added to the PBT too. So without even considering any growth in the profits for the remaining quarter,it would already be higher than the consolidated profit of last fiscal. The 1050crs present order book position presents huge revenue visibility for the company. Uniply's debt of 145crs would be gone too saving huge interest costs which would further inflate the bottomline. Since Uniply will also own shares worth over 100crs in UV,the EV would look further cheaper.
Conclusion: Uniply at Enterprise Value of around 550crs look very very interesting.Regarding whether it's a buy or a sell or a hold we leave that choice to you guys. You have read about him enough now. Needless to say one would seldom find such intelligent,visionary first generation entrepreneur with so much fire in belly.Young Keshav is sure to go places. Present prices suggest Mr market is bit confused. It would take more than a good reading of the last 3 years to fathom the potential of this company. Also there's a difference between bagging orders and execution, market is closely tracking and as the execution ability gets proven with time,stock will find more sanity.
Btw:It was our Special Diwali coverage on Uniply Industries(part of our Diwali magazine edition hence price and EV adjustments should be considered)
1..Large disbursement growth driven by LAP and SME-Company saw 51% increase in sanctions, which was driven by 248% and 108% increase in LAP and SME. These two segments now accounted for 30% of total sanction vs overall guidance of keeping them at 20% of overall book. Core Home loan growth picked up as well-Home loan sanction was 28% YoY and 11% QoQ, however, % saw a decline due to higher growth in other segment.
2..LAP and SME Book – higher than targeted as management. See this as a great short term opportunity-Combined LAP and SME is now 21% of total AUM vs mgmt. earlier guidance of not exceed of not exceeding beyond 20%. Management said that lot of business are converting into white and hence we are seeing lot of demand and we want to capitalise it.
3..Project finance book growth was muted - On YoY basis, disbursement was up just 9%, however, it is now 15.1% of total AUM and mgmt. target is not to exceed 16% for project finance. Incremental growth in core home loan was driven by affordable housing - Management said that large part of incremental growth came from affordable housing, as of Aug, 6,000 cases has been pending at NHB for subsidy totalling to Rs100cr.
4..Balance transfer run-rate has slowed down-Balance transfer rates have come down from 18-20% to 8-12% as we are becoming more agile. Large growth in non-interest income-Non-interest income increased to Rs1,11cr vs Rs38cr YoY and Rs55cr QoQ. Management said that increase in processing fees (from Rs26cr to Rs61cr) and increase in insurance commissioning (Rs8cr to Rs25cr) was the primary reason for overall increase.
5..Full year guidance-Disbursement guidance 30% YoY and AUM guidance 20% YoY. Margin remained flat- Margins were flat YoY and QoQ at 3.05%, which was bit surprising and asked by few analyst also that why despite changing product mix, margins are not improving.
Quote: We recently met the Management of Oricon Enterprises to understand the recent event; following are the key takeaways from the BSE notification and our conversation with the Management.
Note: Oriental Containers Ltd. (OCL), a 100% subsidiary of Oricon Enterprises Ltd. (OEL) has proposed to transfer its closure business to its subsidiary company Oricon Packaging Ltd (OPL), following which OCL will sell 51% equity shares of OPL to Italian company, Pelliconi C & SPA (Pelliconi) at an Enterprise value of Rs.419.40 crores. On completion of the transaction, OPL, will become a joint venture company with Pelliconi with 51% stake and OCL at 48.80%.
1..Pelliconi is one of the world's leading manufacturers of crown corks, metal and plastic caps for the beverage industry. Pelliconi C & SPA was incorporated in 1939 in Italy and is registered by Italian Chambers of Commerce and Industry. The Pelliconi Group has production plants in Italy, Egypt, USA and China having aggregate annual production capacity of over 29 billion metal and plastic caps for the food and beverage industry. OCL is a leading closure manufacturing company in India which manufactures several varieties of closures. It has plants at Murbad and Goa with aggregate capacity of 17 billion closures.This association will provide OPL an access to new technologies to manufacture Maxi P. Maxi P is the latest closure being used by beverage industry more particularly beer industry. The association would also help the joint venture in expanding the market.
2..On a different note, in order to consolidate its corporate structure OEL has proposed to merge its wholly owned subsidiaries OCL and Shinrai Auto Services Ltd. During August, 2017, the company had announced sale and transfer its Toyota dealership business of Shinrai Auto Services to Madhuban Motors Pvt Ltd as a going concern on a slump sale basis for a total consideration of Rs.28.35 cr. According to the Management, Shinrai Auto Services Ltd. doesn’t have any business and merger would help them get some tax-benefits and would ease some complications.
Following the restructuring, OEL will broadly have the following businesses:
3..Existing business of trading and manufacture of pentane & others;the Management doesn’t have much focus on these businesses but through these OEL owns a 17 acre land at Khopoli which can fetch them some handsome gains due to its vicinity to the proposed international airport at Navi Mumbai.
4..The planned manufacturing unit to manufacture preforms for beverages industries in the state of Odisha with the expected investment of about Rs. 100 Crores in two phases.The allotment of land has been completed and the orders for machineries have been placed. The Management is aiming at Rs.100 cr turnover by March, 2019 and another Rs.100 cr in a year or so. This upcoming plant is in proximity to Coca-Cola which is also going through a substantial expansion currently and Coca-Cola currently being the leading client of the company may get ready business for the company. The foray into Odisha will also fetch them unexplored market – access to a huge untapped market for preforms. According to the Management, 16 of the Indian states don’t have any pre-forms manufacturing facility and they will eventually hold a substantial position in this space too. Further, the scalability potential for the business is good, particularly when the company would be sitting on huge pile of cash.
5..1 Acre land in Worli, Mumbai, the Management is in talks to get a deal for this land as well. Considering the rising demand for commercial spaces in this area, and recent association with Indiabulls on the project BLU, the company might fetch another good deal for this additional piece of land where the current corporate office is situated. 2 Acres land in Worli, Mumbai for which JDA has been signed with subsidiary of Indiabulls Real Estate; the deal still has scope for further improvisations in terms of tenure, incremental area in case if it goes commercial.
6..48.80% Stake in OPL, the JV with Pelliconi;the global leader will not only help the JV providing a boost to the exports but also will get the crucial technologies like Maxi P without any consideration or arrangements like royalty and all. According to the Management, only two companies in the world, Toyo (Japan) and Pelliconi have such technologies. Further, the huge international brand name of Pelliconi will help the JV to strengthen its relationship with existing key clientele like Coca-Cola.
7..64.29% stake in United Logistics Limited;India's largest marine logistics company handling dry cargo operating at various minor ports across few states. According to the Management, the cut down in coal imports had led to slowdown in the business, however, the consistent demand and incapacity of Coal India to meet the demand will again lead to rise in coal imports with an anticipated action in power sector. Meanwhile, USL has added a couple of additional floating cranes to reach 3 units. In addition, the business has forayed in Sri Lanka in order to diversify and make-up for the current erosion in the domestic business.
8..Going forward, the company will get ~180 cr from the sale of their 51% stake in OCL; earlier, in March, 2015, the company had bought back 70% stake from Mauritius based OC Holdings for Rs.105 cr. The company doesn’t have any further capex plans for next couple of years. Earlier, during June 2016, the company had received Rs.310 cr from Indiabulls for the Joint Development Agreement they had signed. The company further expects to receive incremental approximately Rs.380-400 cr from the deal in the due course of time. With no significant capex lined up as of now except for the Odisha plant and huge cash position building-up, it presents a number of opportunities like inorganic growth, buyback, special dividend, etc.
Courtesy: Sushil Finance
1..In spite of GST effect and severe price competition from PSU Oil companies, the company successfully posted gross turnover of INR1901.17 crores VS INR1778.36 crores, higher by 6.91%, YoY.Also, the company registered 6% growth at its PBT figure, YoY basis.The Company’s effective tax rate stood at 34-35% as on March 31, 2017.Balmer Lawrie reported higher interest cost expenses in FY 2017 as compared to last year. However, the total finance cost came lowe at INR322.44 lakh VS INR306.11 lakh last year on the account of lower bank charges.The increase in the total interest expenses was due to the new debt raised on capex for new plants and capacity expansion.
2..The company is setting up its Multi Modal Logistics Hub project at Vizag in partnership with M/S Vishakapatnam Port Trust.The project will attract INR300 crores as capex and the project will be completed by March FY2018.Currently the company comes under the Indian Government’s MiniRatna segment. The management plans to enter Navartna companies in the next two years.
3..Balmer Lawrie does not expect any new orders from the Government of India’s initiative of integrating oil companies going forward. As per the norms, the order will go for all the MSME companies in India. So no major benefit is expected form the move.The Company’s logistic segment achieved the highest ever topline and profit before taxes growth of 13% during the FY2017.
4..The Company’s lubricant and Industrial packaging business are expected to gain traction. Although the company did not provide any guidance but plans to invest to add capacities.Balmer Lawrie sources its 94% of its raw material domestically, whereas imported 6%.It is exposed to both interest risk and foreign currency risk,so any volatility in these two could hamper the company’s financial performance.
1..Due to demonitisation last year completely shattered peak season of Oct-dec, and thus resulted in lower sales being down from 460 crs in FY16 to 360 crs in FY17. Under unit II they set up manufacturing water tanks and cpvc pipes and it became operational just before demonitisation (Plant has been expanded).15cr has been spent last year in modernisation and automation of the existing plant which would result in operational efficiencies in coming years. The same can be seen in Addition to Fixed Assets under Fixed Assets chart.
2..Current overall capacity is 80k MT and runs at 100% during peak season of from Oct-Dec. However overall utilization can be max 60-65%. However in Q 1 (2017-18) numbers significant improvement in plant utilisation has been seen. from 60-65 % to further upside of 5%.
3..Due to GST, Lot of destocking have been done by dealers and that affected the sales for a month or so.Demand is improving and they are hopeful it will pick up during peak season of Oct-dec. All govt schemes and housing for all will create significant demand for pipes n fittings going ahead as per the management.Replacement of PVC with CPVC the major revenue contributor.
4..Volatility has been seen in PVC resin prices and due to that there would be inventory gain/loss depending on the price movement. Dumping from China is increasing. But the monopolistic market will subdued the effect.Sustainable operating margins are 9-10%, in a good year can do around 10%.
5..Their main strength is agricultural pipes and fittings, in CPVC pipes they are going slow as they are seeing tough competition there. Current capacity is around 1500MT.Normal capex is 5 cr every year.They are looking to buy a plant in South and also planning to shift some products in their Pune subsidiary plant to cater to Maharashtra and neighboring places, which would save logistic cost.
6..For FY18 they are hopeful to do 500+ cr kind of turnover (Surpassing FY 2015-16 turnover) as they see demand improving and with good monsoon next year they said thay can easily cross 600 cr mark. Ebitda margins can slightly improve from here. On a 600 cr revenue in FY19 with around 8-8.5% ebitda margins they can easily do 22 cr PAT. Substantial Debt reduction will be done in coming years. Looking on the basis of 2020 Profits will substantially inprove from present level and will achieve 36 to 40 Crore mark on PAT.
Courtesy: CA Nishant(Our in house research expert. Note only meant for sharebazaarapp)
1..Part of the Alembic group which is into pharmaceutical.Company primarily into agrochemical and specialty chemical business.Phosgene manufactured by the Company and used as raw material for end products which are subsequently sold to customers across industries like pharmaceutical, paints etc.
2..Current capacity utilisation at 70 - 80 %. Share of domestic sales at 84% vs export of 16%. Efforts on R & D for new products, 10 to 15 products in the pipeline in the next 2 - 3 years.Increasing margins with long term contracts.Ambitious plans to expand steadily over the next 2 years both upstream and downstream.
3..No plans for buyback, to utilise the reserves of Rs 76.5 cr for future growth. EBITDA of 20% maintainable.Focus on profitable business to improve bottom line. Primary competitor is Atul Ltd.- enough business for both to survive.
4..Total CAPEX of Rs. 17 cr in FY 17 out of which Rs. 15 cr was in windmill which helped in reducing utility cost by almost 50% in FY 17.Regular CAPEX to continue in FY 18 for upgrading the plant. CAPEX of Rs. 70 cr as per the feasibility report would take 3 - 5 years as the Company is in the process of obtaining approval from GOI for addition of capacity of phosgene which is a licensed product as it is made from carbon monoxide which is highly dangerous.
5..Company a very small player in the global market of phosgene as companies liker Bayer etc. have their own phosgene plant. Phosgene not a licensed product outside India. Company to build strength by technology, contacts and people.
They have 4 competitors --- L&T; Navayuga, Afcons and ITD Cementation. Their focus is sub Rs. 400 cr orders where they have eligibility based on experience and balance sheet size. They expect there would be many opportunities in this segment and L&T may vacate this space.
The margin is expected to remain around 13% - 14% at EBITDA and about 6% in PAT level and expect to achieve a revenue of Rs. 500 cr in next 2 - 3 years. The people requirement would go up from present 287 to 320 maximum to achieve Rs. 500 cr turnover. Their administrative cost of 30% include all contract labor and administrative overhead and all other expenses. It would hover around that level or max come down by 2%.The cash in books is tied to BG of 75 cr. They have 20 cr LC, 120 cr BG and 15 cr CC limit and need to provide 15% bach margin for BG. Going ahead since the company is listed and company can be rated, BG margin may come down from 15% to 10% and their pledging of shares may also act as guarantee freeing up more cash. Company said 10% mobilization advance and bank limit are enough for starting the work and hinted that other companies waste the mobilization advance by diverting funds to other needs and non-project specific purposes which they never allow in RKEC. It helps them in keeping tight leash on project schedule and hence project milestone payment. The other company Narem Enterprise helps them in making some material in house and help them have control on quality and delivery schedule.
Based on above info,RKEC at 260 cr market cap and minimum 30 cr PAT in two - three years and 30% + ROE may be a company where downside is protected.
Courtesy: Aveek Mitra
Key business USPs:-
1) Asset light model: Scalable solution for customer. Flexible customized solutions. Working capital requirement is very low - as low as 2 working capital days.
2) Large captive customer in form of MM for 8 years. Because of that were able to garner 1000+ business partners, which company now uses to service other businesses. It's a Technology heavy business.
3) Engagement with Business Partners:Categorise business partners in Gold silver Bronze categories which are decided based on SLAs in terms of operation and total volumes catered.Additional benefits offered to Gold BPs. Operates Business partner engagement cell to educate staff of Business partners Continuous driver training.
4) Technology - a key USP: Capex primarily in technology, material handling equipment. Technology and control tower is a key differentiator for company. Provides end to end truck, track and trace option (time management, minimize idle time, maximize truck utilisation), Dispatch planning (optimize truck planning, capacity utilisation), value added services.
1) Vanilla transportation contracts are annual contracts based on rates and volumes given to the company
2) Value added service/infactory logistics - 3-5 year contacts.
3) Annual inflation built into contracts
4) Prices customers based on volumes offered and quantum of saving sharing with customer.
5) Fuel escalation clause both in customer and vendor. Formula is based on percentage/absolute increase decrease of fuel.
1) Profit difference between MM and non-MM customers not shared at the meet.
2) Business segment wise warehousing boasts of higher margins vs transportation.
3) In SCM segment, Transportation:warehousing mix at 86:14% vs Industry comp at 89%:11%. Targets to take warehousing mix higher with GST related benefits for industry. Profitwise mix would stand at 60%:40%.
1) No conflict of interest with other Auto OEMs. Infactory logistics for Mahindra group has provided expertise for working with other clients in Automotive vertical (works with VW and Ashok leyland.)
2) Consultancy fees: Expect pending fees of Rs 9cr in FY18 (last year of such fees).
3) Inorganic growth - may look for any opportunity that complements business possibly in technology startup space. Likely in India only.
4) Competitive space: DHL, TVS Logistics, Tci, Bluedart, Small time land owners who operate regional warehouses - expected to get impacted with GST benefits.
5) Seasonality - not really between the quarters.
6) Advance Tax issue in Balance sheet expected to go away. Currently, 2% of transport revenue is paid out as advance tax, this number could fall to 0.5% of transport revenue in future.
7) Customers: Have 180 Non-MM customers. Top 25 contributes 70% of Non-MM business.
Cabinet approves Bharatmala project - Phase 1 to develop 40000km road projects by 2022
1..The Union Cabinet has approved the biggest ever highway development plan to develop and expand approximately 83,000 km of roads at an investment of Rs 6.9 lakh crore by 2022.
2..The Government also approved the Phase 1 of Bharatmala project to develop and expand approximately 40,000 km of roads at an investment of Rs 3.5 lakh crore by 2022. The project involves constructing 24,000km of fresh highways. The project includes construction of feeder routes alongside national highways.
3.. Bharatmala highway project includes connecting border areas, improving international, port and coastal connectivity besides improving highway corridors connecting key economic and commercial hubs.
4..Around 80% of Bharatmala will be based on a government funded, EPC model while the rest will be a HAM mode.
5..It is believed that NHAI will be empowered for approving Bharatmala projects in order to ensure faster clearance for projects.
6..Only BOT projects requiring viability gap funding will need CCEA approval. Currently, all highway construction projects above Rs1,000cr need CCEA approval.
Positive: The approval of mega highway development plan provides multi-year awarding visibility for NHAI as the NHDP programme comes to an end with balance awarding of 10,000km.Key beneficiaries : Dilip Buildcon, Sadbhav Engineering, KNR Construction, PNC Infra, NCC, Ashoka Buildcon, IRB Infra etc.
1.. A mixed quarter – implementation of GST led to sluggish growth in July and August while September saw recovery in sales growth. The company’s retail channel is now completely GST compliant; it has stopped transacting with retailers that do not have a GST number.
2.. The increase in raw-material costs in Q1 continued to dent until July; mid-August onwards, costs have been stable. Has not taken any prices hikes after the ones in March and May. Future price hikes will depend on market conditions and raw material prices. As of now, the management expects raw material prices to stabilise.Indirect tax rate after GST has remained unchanged; there have been no major inputtax-credit advantages.
3.. The unorganised sector is trying to become organised. The company has not seen a major change in the competitive landscape. In Q2, Nepal, Bangladesh, and Oman saw good growth while Egypt was impacted by currency devaluation. Ethiopia was hurt by unavailability of forex.
4.. Capex for FY18 will be Rs 12bn, which will include Mysore and Vaizag plants capex of Rs 10bn. These plants will be commissioned in FY19. Tax rate for FY18 stands at 33%.
1. Proposed injection of Rs 2.11 lakh cr as recap bonds in capital-starved PSBs will act as a force multiplier for their growth needs. It will help in accelerating their tepid credit growth which was constrained due to lack of adequate capital and arrest loss of market share verses well-capitalizsed private sector banks & NBFCs.Ideally the govt should structure the bonds as zero-coupon bonds with a very long maturity of say 15 to 20 years and a one-time bullet repayment at the end of the maturity period. This would impart the bonds a characteristic similar to equity capital and provide much-needed relief to banks from providing for annual interest payments.The infusion must strictly be in line with objective performance- improvement criteria. Markets would certainly give a thumbs up to this bold initiative and kickstart a virtuous cycle leading to rise in PSB share prices. This in turn would make it easier for them to raise equity capital from the market.
2. Govt's Rs 14 lakh cr capex plan over the next 5 years in key infrastructure sectors like roads, power, railways, digital and housing will have a significant multiplier impact on aggregate demand and employment.Sectors such as Construction, Engineering/ Capital goods, Cement, Steel etc will benefit from this massive capital spend.
3. Highly stretched working capital cycles was a key impediment for growth for a majority of MSMEs. Both access and cost of capital was holding back these large employment generating enterprises. By forcing large PSUs to register themselves on TReDS platform and clear their dues to MSMEs within 90 days it will address one of their biggest concerns. Govt should follow this up by appealing to all Industry bodies like CII, FICCI to ask their members from the private sector to follow suit immediately
Courtesy: Author is Ajay bodke (CEO & Chief Portfolio Manager PMS Prabhudas Lilladhar )
• The MD, Mr. Krishna Murthy took a positive stance on the overall Chemical business outlook of India.According to him, Indian chemical business is fast catching up with the global front in terms of volume of supply and demand. India is placed within top 10 countries on global stage, both in terms of supply and demand, and with world demand for speciality chemicals increasing and Indian products finding a niche for themselves, Indian story can be expected to move up the ladder and our company is expected to greatly benefit from the same.
• Directing towards the results, Mr. Murthy highlighted the reasons for weak results over the previous two quarters being GST issues and significant forex loss on account of forex fluctuation. He said that Company had been facing cash problems and had its working capital cycle effected due to adoption of GST. Suppliers had been asking for advance payment and that resulted in destabilization of the cash cycle. However, he said that these problems were all a thing of past and once The Company gets adjusted to the cycle, it will be easier for the company to cope up with it.
• To cope up with the problems of forex loss, he said that the company can’t control foreign exchange fluctuation, but what it can do is reduce the dependence on foreign supply. The company has been hence taking steps regarding the same by arranging for procurement of raw materials within the country and also going back in the vertical supply chain by producing the raw materials for their consumption by themselves.The company also laid down capex program for the same, which is almost finished and is expected to result from the next quarter.
• The MD further aided the reason for –‘ve growth in the current financial year due to fierce competition from Import. On this front, company is said to have been paying attention to minimize the effect by filing a plea to Government of India for imposition on anti-dumping duty. The GOI is to hear the case in the near future. The company expects the case to be in its favor, and that can say bottom line growing up by 10% straight away.
• The result of the extensive capex made would be seen from third quarter onwards, with increase in the production.The company is expecting INR 650-700 crore revenue in the current fiscal and is eyeing INR 800 crore of revenue in the next fiscal. Q3 and Q4 revenue is expected to be 200-225 crore each.
• The company has introduced value added products to its force and is expecting a revenue of INR 200 crores out of it and a conservative margin of 10% out of it. The value added products will be 3 chemicals adding to its current fleet of products.
• Regarding the subsidiary, MD said that the development is good and the demand has been exceeding supply. The company, infact, looking at the bright scope of subsidiary is looking to change the product mix (From 40% export & 60% domestic in the last fiscal to 60% export and 40% domestic). INR 90-100 crore of sales can be expected every quarter going forward from the subsidiary.
• The Company at present faces no competition from Chinese market as the products they produce are produce elsewhere in USA, Turkey, etc. but not in China.The company is expecting good results out of Barium products as now the contribution is increasing from it.
• The directors are considering giving up preferential dividend to infuse cash in the company. However, no decision has been taken in this regard.Overall, The MD seems very optimistic about the future course of The Company and he said that the same will get reflected in the financials of The Company from Q3 itself.
Courtesy: Ankur Gupta(One of our sharpest inhouse predator)
1..In an effort to increase its competitive advantage over peers, V2 is looking to get into private labels to cut the procurement costs by about 10% for 50% of its portfolio which is core/basic products. The company will procure the cloth and get it stitched on job-work basis to save about 8-10% cost after factoring in the cost of financing and logistics.
2..The company is looking to increase its store network by a minimum of 20-25 stores every year and still expects a base sales per sq ft month of Rs 1000 with an aspiration to reach a number over Rs 1200 on a base of over 100 stores in next 3 years.
3...In addition to taking up the average selling price per piece from Rs 260 currently to Rs300, the company expects sales efficiency to improve on account of the various inventory management, merchandise planning and space planning tools the company is deploying across its stores.Company expects significant leverage on the head office costs once it reaches an optimum retail space of about 1.5 mn sq ft from about 0.5 mn sq ft currently.
4...Against current metrics of Rs 1000/300/100/55 of revenue/gross profit/EBITDA/PAT per sq ft per month, the aspiration is to reach Rs1250/375/175/100 respectively.At current metrics, ROE is 25% and the near-term objective is to deploy the recently raised money of Rs 760 mn and current year’s cash flows at an equal or better ROE.
5...After setting up a strong talent pool and providing them ESOPs, the management feels it is now ready to get on an aggressive expansion at the front end.Another big competitive advantage is the strong control mechanism which will ensure micro-level tracking of inventory and the automated technology-driven operating procedures which will ensure best retail operating practices.
6.. V2 is one of our top picks in the space where we expect a 36% revenue CAGR, 50% PAT CAGR over FY17-20e currently trading at 15x FY19e EV/EBITDA and 27x P/E.
1..Western india plywood is a more than 50 year old company with many specialised products.Company is well known for its high corporate governance and quality products.Makes highest grade hardboard and Plywood, used in aircraft and in luxury cars.Q1 was bad because of GST de-stocking.
2..Company has a good R&D set up and specialised products.They do 20% export and major domestic clients are railway,hyundai etc.Factory is situated in a 40 acre land and manufacturing set up alone worth 400cr against the marketcap of 50 cr.
3..Last year was a bad year because of multiple headwinds like demon,railway order cancellation etc.Management is very conservative and sleepy nature and have no immediate plans for value unlocking.Expecting to do 110 cr sales this year.
4...LIC is holding good qty,they will trim their holding in near future and it will improve the liquidity.Few more additional points on western.Demo notes were converted to pulp in their factory,this alone shows their high promoter integrity.
Courtesy: Shanid(Our Inhouse research member)
1) Expanded capacities did not reap any benefits due to low demand (because of gst)
2)Cotton is the major raw material used by the company and they believe that going forward cotton prices will soften , which will strengthen their margins .
3) Currently our company has the largest capacities in our sector.
4) Company has setup up its own fire brigade by internal accruals so as to fight frequent fire breaks in their Ahmadabad pant (As cotton is very sensitive towards fire), they are taking all the measures.
5) GST is very beneficial to us , as we are organised and have many unorganized competitors, hence we will benefit from it in long run though we got short term pain.
6) No planning for any capex in the coming quarters as they have sufficient capacities in place to server the expected demand.
Courtesy:Rushikesh(Inhouse research team)
1) Company is exporting to 50+ countries as of now, have 2 different plants, both of them located in Ahmadabad.Company has 80 Scientists working in R&D presently 1500 people permanent and 700 non permanent workers.
2) Company has put 2 windmills (in Rajkot and another in Porbandar) , all done by internal accruals , they are producing 60lakh units/year and doing a saving of 4CR per year. 62Cr invested on them in last 2 years.
3) 21 applications for patent have been put by the company out of which 4 got approved and another 21 are in process.Company is paying tax in MAT format.
4) Management expects that Gujarat plant will be more viable in coming quarters because of GST. Recently received an award from government msn.
5) Vision- Will set R&D for developed countries and planning for USFDA approval plant. Already bought 2 lands for the same purpose and they will come up within 1-2 years if all goes according to plan.
6) Margins were unstable because of GST , as goods were returned to the company, from stores for the period of may-june. Management expects coming quarters to be good, with stable and consistent margins.
7) On my 1 request to the management, they sent me for industry visit, I should tell that it was great experience , They showed me each and everything and explained each and every process in detail, it took about 3 hrs for the visit. Management is very kind and listens to shareholders suggestions very closely, I suggested company secretary that their AR is containing very less resources(Abt management experience , their future vision, their plans, capex requirements , revenue breakup etc), to this he agreed and noted my requirements and even told me that they are planning to hire staff to prepare their AR from next year in which they have planned to make it very informative, include all the useful information required by the shareholder, improve AR quality etc. Many points were discussed on that note.
Courtesy: Rushikesh(Inhouse research member)
1.They are targeting sales to reach 900 cr with 12-13% EBIDTA in 2 years.Current is less than 50%,optimal is 85%.They said with the existing capacity company can touch 1000crs of turnover.Existing customers/dealers can give them business till 600crs. Big B factor can help the company to reach to 1000crs top line. Also they said that any increase in RM price is immediately passed on to customers.
2.Incremental focus on 2 states AP and UP as they believe smart cities project is onky really taking off here.Company expects Dealer enrolment to grow at 20%.Dealer margins and terms will be status quo even though new funding is for working capital.
3.Company expects cost savings by shutting down 5 out of 9 factoies including Baddi.Expects realisation of 15 cr to cut debts. All machinery will be shipped to other locations.
4.No capex plans in the near future.Banking big time on Amitabh effect.Marketing campaign on air going live from October.Cost will be staggered and confidential. Duration of contract is 2 years.
5.Debt reduction by calendar end targeted to 180 cr.Huge inventory liquidation also planned on account of shutting of factories and possible remelting of useless inventory. They will continue with the large range of SKUs since it believes in full range offering for competitive reasons. Looking at 7% moulded furniture and rest 50:50 plumbing and irrigation.
• NCL Industries reported almost flat profits of Rs. 54.73 crores for FY17. Total Income saw a decent increase of 12.95% to Rs. 865.73 crore for FY17 Vs. Rs. 766.51 crore for FY16.
• Co witnessed improvement in capacity utilization and sales during the year contributing to the company’s healthy performance. However, for the second consecutive year the operations of the Energy Division were adversely affected due to bad monsoon resulting in only 7.91 million units of hydel power generation compared to 12.89 million units in the previous year.
• In the Cement Division : The company plans to spend Rs. 180 crore for expansion of their clinker capacity from 1.60 MTPA to 2.60 MTPA and cement grinding capacity from 0.96 MTPA to 1.71 MTPA at Simhapuri in Telangana. Company commenced the production of the clinker unit.
• In the Boards Division : The company plans to spend Rs. 35 crore for setting up a third Board’s plant of 30,000 TPA capacity at Simhapuri in Telangana. The company has commenced the production of the boards unit.
• NCL Industries has crossed the milestone of Rs. 1,000 crores of gross turnover during the year 2017. Company remains positive on the outlook for the rise in demand for cement in the country on account of the government initiative in the field of housing and infrastructure.
• Company plans to raise an amount not exceeding Rs.250 Crores by issue of Equity Shares by way of QIP in order to pay off the expensive high interest debt taken by the company in order to help them exit the CDR mechanism in 2016. The management said that this exercise would dilute the promoter holding from around 50% to around 40%.
Courtesy: Jagdish bhai(Our inhouse research team expert)
Quote: This is Pankit shah here. I met you guys during Mumbai share bazaar app meetup. I enquired about Shiva agro and you replied that it's good company, go and meet the management.I Was inspired by the way you guys work. So I actually visited Shiva global AGM on 29th September at Nanded. Here's my note:-
1.Targeting 7/- e.p.s. this year FY 2018.Own all the lands of every factory. Have lot of idle land near factory area. Market value of that will cross 80 cr.No term loan. Only working capital loan is there. Aim to be debt free in 3 years.
2.Management wanted to give dividend last year itself, but bankers were not comfortable. Management is confident of giving dividend this year.Recently started manufacturing water soluble fertilizer and planning to get into production of growth promoters.
3.Currently working at nearly 50% of capacity, so no need of expansion. Doing good in soil conditioner segment. From 49 lacs in 2016 to 6.6 crore in 2017.Karnataka received good rain in last 15-20 days. Dams are full now. It will help Belgam unit to perform better because there were drought from last 2 years.
4.Currently working with 300 dealers.Keeping dealers meet regularly and almost 75% dealers are ready for DBT.Received good advance in seeds business this year.Deepak marivas son Mohit marival has recently joined the company. He is chartered accountant with work experience in EY.
5.Management wants to reach 70% holding stake in 3 years. From current 55%.Management is not fully focused as they were planning to buy stake in some logistics company for regular cash inflow.Seeds business is shaping well. Expecting 15 to 20% growth this year.The business consists more of family members. Lacks professionals.
Note:Met a fertilizer dealer in nanded to get an idea of quality and demand of product.Brand is popular in that area but it will not stand against biggies like coromandel etc.Management was really happy seeing people attending all the way from Mumbai.We were 3 of them.Deepak marival personally took us for factory visit.
ShareBazaar app team: Brilliant work Mr Shah. We feel so pleased that we could inspire you. Keep up the good work. Guys as you can see our readers have started contributing too. The intention is to cover as many companies as possible to help retailers get information which they were always depreived off. Do mail us folks if you happen to attend companies and AGMS at firstname.lastname@example.org. Happy investing.
• Alphageo reported a substantial increase of 334% in the net profits from Rs. 11.63 crore during FY16 to Rs. 50.55 crore for FY17. Total Income too recorded a substantial increase of 240% at Rs. 308.09 crore for FY17 Vs Rs. 90.45 crore for FY16.
• FY17 has been a remarkable year for the Co which was awarded contracts for acquiring 2D Seismic Data under the National Seismic Programme of Government of India worth Rs. 1300 crores (excl taxes) from ONGC in addition to a contract worth Rs. 102.42 crores from Oil India Limited.
• Management clarified that the recent approval given by CCEA for undertaking and documenting the 2D seismic data for 48,243 Line Kilometer (LKM) amounting to Rs. 3000 crore includes the Rs. 1300 crore order received by Alphageo from ONGC.
•The value of orders to be executed stands at Rs. 1200 crores. These orders’ completion date is December 2019 and hence there is earnings visibility for the next 3 financial years at least. The company has succeeded in procuring all the required equipments and personnel for all its projects, hence the company would now see free flow of cash from revenue earned. The overall working capital for the company is around 2 months.
• Mgt said that their main objective is to sustain and maintain the current growth rates and having realised that seismic is not going to keep supporting this growth the company needs to look at various options for diversification. The management is mostly focusing on opportunities that are niche and which utilise the company’s strengths in operations. Co has recently bid for Aerial Geophysical surveys which is a very niche segment. The international operations for the sector remained subdued due to the fall in crude prices however the company plans to give more stress to international operation in the coming years.
• Mgt said that Aerial Geophysical survey activities have been quite limited so far. These are predominantly used for Hydrocarbons and also for mineral exploration. This is a completely different vertical which would need a completely different set of equipment and a new set of operations. However, the option to either lease them or buy them will be decided later by the management and relative capital expenditure would then be incurred.
• Till recently there were no Indian players who were capable of doing this kind of activity. The Phase I tenders of the Department of Mining are out valuing around Rs. 135-140 crores, Alphageo has bid for these contracts and it is pretty likely that they will get them. The Phase I consists of 15% of the total activities.
• Company is now focusing on increasing their capacities and hence have not bid for any contracts after being awarded Rs. 1300 crore contract from ONGC as it felt that bidding for new projects would distract management attention and dilute priorities.
• When asked about the effects on the surveys due to the uncertainties going on in the North East, the management said that these activities would normally start in November or December. The management said they have dealt with such unrest in the past and hence do not see any problem in executing the order.
• The resolution to raise a Rs. 300 crore is more of an enabling resolution. The company is looking at opportunities for growth which would require the ability to immediately utilize capital. Hence, this resolution would provide easy compliance which would allow the company to raise funds whenever there is a need. As such there is nothing fixed or no specific plan to raise the loans as on date of the AGM.
Courtesy: Jagdish bhai(Inhouse research member)
1) Gst has affected their sales and management is expecting to benefit a lot from GST in the coming quarters.
2) They have expanded in places like South Africa , Russia and 7 different geographies.
3)The company launches 5-7 products every year and are now planing to accelerate it by spending more in their R&D, and focus on value added (high margin) products.
4) They have launched new product in Malaysia, Aquastirke VCF, which is a non toxic and ecofriendly mosquito killer liquid, it is seeing good demand in Malaysia(management is optimistic about their new product) and management is in process of taking permission from Indian government to launch the same product in India, but it will take some time.
5) Management feels that India will see even more demand for their new product(Aquastrike) as our country has more mosquito problems(Diseases) than Malaysia . But this might take some time, they are currently in process of the same.
6) Company has no big capex plans going further, and if needed then they will do it from internal accruals(because of less requirement of capital ).
Courtesy: Rushikesh(Inhouse Research team)
1.Mail today is operating at breakeven level.100% owned by tvtoday. 50 journalist from print . Content advantage,supporting tv content also No digital no magazine . Will merge in tvtoday.Tax loss of 300 crs accumulated. 100 cr benefit accrued over 5 years. 2.5 lakh reader category A reader .
2.News channel: Subscription is less then 20 cr combined. All competitors went free to air. Only news channel which is free and paid somewhere . Next year the subscription revenue loss is over hence can see 10 % revenue growth.Got 40 million additional viewers due to FTA.
3.Aajtak inventory 18 minutes fully used .Rate upside possible and average rate is 6000 per 10 sec . Second guy is half the rate .Aajtak makes the money rest is all breakeven.Digital AajTak adv model non subscription.Digital revenue should be 30 /40 cr. Currently it owned by tvtoday but run by living media .Only transfer of net profit which ranges between 0 to 3 cr. Digital business is in Investment mode.
4.India today inventory used is 13 minute can go to 16 minutes. Times now is Rs 6000 per 10 sec.They get Rate avg is 2500. NDTV loosing revenue , hence redistribution of revenue. Hopefully they get the benefit
5.New channel: speaker cost / distributor cost ( is normally 30 cr ) non entertainer . Not decided till trai order comes on distribution. To Expand inventory new channels.National channel cost 70/80 cr .Regional channel cost 30/40 cr with 2 year gestation ,They have advantage of content. Buy back is possible but only after expansion plan.Delhi AajTak and TEJ has scope to grow. Living media not loss making and merger not on cards .
6.Sony was their agent nad they were part of bouquet. Now it has to be sold separate can't be bundled. Radio Sale migrated to phase 3 . Lockin gets over in march 18 .Allowed to sell after permission. Board so far not interested in radio.Regulatory hurdle over .Hence renewed and migrated by paying 80 cr for 15 cr.Will breakeven at operating level .
1. The company started in 2006 with a small capital of Rs 2 lakhs a proprietary firm and became private limited in 2008 and in 2017 became a public limited company via the IPO in 2017.? When company came with an IPO they were debt free and cash rich then why the IPO? As post IPO they shall now be able to go beyond 400-500 cr revenue execution as post IPO Bank Guarantees were lot easier and flexible. In a BG of Rs 100 cr they ask for 40% margin of which 10% is FD and rest 30% as mortgage.
2. The company is now capable of doing all works like civil, mechanical, plumbing, interiors & design build. So PSP is a one stop shop for all kinds of work which helps to get clients along with their repeat orders. Now with their fantastic execution track record many even MNC companies have done enquiries for project work. Some projects PSP can execute at par in terms of quality with likes of L&T and SP group.
3. Company is targeting newer regions within Gujarat like South Gujarat : work for a Ceat plant at Halol, for another company at Vapi etc. Also out of Gujarat Company is going selective and executing on orders from companies like: International Food and Fragrance Institute, MRF tower in Goa, Grasim Tower in Goa, Brigade Enterprises in Bangalore along with their GIFT City project.
4. Company proudly mentions that they received orders worth Rs 505 cr in Q2 FY17-18. These orders are like design and built for Zydus Hospital at Dahod, BSE Brokers Forum at GIFT City, Karnataka Federation Dairy in Madiya District, Delhi: Interior project work for BJP Kendriya Karyalay etc.
5.As on March2017 company had order book of 729crs+172crs as on June 2017 so total of 901crs out of which they executed Rs 155 cr so left with Rs 746 cr + Rs 505 cr won in Q2. So a total of Rs 1251 cr as on date. (Assume Q2 run rate of execution same as Q1 from this number). Company has lined up bid worth Rs 3038 cr for various type of orders which are in and out of Gujarat. Also from the IPO proceeds of Rs 151 cr to the company so far only 44 cr has been used for working capital and capex. Rest can still be used as per newer project needs.
6. To conclude the company is extremely well placed for solid execution, well capitalized and shall execute orders at healthy margin. Company is bottom lined focused and shall make sure they execute timely and earn good margins.
Courtesy: Parthiv( Inhouse research team member)
Annat Jain is the founder of Acropolis Capital Group, a private equity firm that invests in India. He writes:-
Recent weeks have witnessed an enormous amount of hand-wringing in the press about India’s economy. These articles share a common thematic trajectory: they start with a recitation of statistics that highlight a slowdown, lay it on the doorsteps of demonetisation and GST, and in the grand tradition of the blood-sport which is Indian politics, either use these statistics to settle personal scores, or, as in the case of the political opposition, use it to prepare oneself for 2019 with nervous glee. None of this hand-wringing is accompanied with any insight or solutions beyond the obvious.
The fox knows many things. The hedgehog knows one important thing.
In a now famous essay written when he was an Oxford Don in the 1930’s, Isaiah Berlin classified people into foxes and hedgehogs as a means of making a distinction about people and the different ways in which they confront reality. Foxes, according to Berlin, may know many things, but a coherent worldview is beyond their comprehension. The hedgehog, however, knows one great truth, and steadfast in its pursuit, remains unreconciled until he/she reaches it.
This parable is perhaps the best way to understand Narendra Modi and his actions surrounding the economy. Modi is the hedgehog who knows what India needs to do to become prosperous, but importantly, is also willing to act upon it.Indeed, PM Narendra Modi may be the only politician in contemporary Indian history who has undertaken structural reforms out of choice rather than, like our ex PM Narasimha Rao in the 1990’s, being compelled to do so.*
Structural reform is thankless: costs are borne upfront, and rewards come later. (The currency for this transaction is political capital, and Arun Jaitley has paid the most for his role as the able knight who is the face of such change.) For years, it was the very absence of these structural reforms that armchair foxes have bemoaned. Now that the reforms are occurring, the foxes are coming out of the forest, and unwilling to pay the price, claim that these are ill-timed, ill-conceived or ill-executed.
Through his decade-long executive leadership of one of India’s richest states, Modi knows what the foxes don’t: First, that there’s never a right time to make a hard choice, and second, the slowdown is the result of a fundamental fragility of the Indian economy baked into India’s economic foundation at its creation: the government’s overwhelming role in the economy.
Modi is seeking to eliminate this fragility by recalibrating the entire engine of India’s economic growth methodically: Jaitley’s increasing of the states’ share in the divisible pool of union taxes in 2015, digitisation/demonetisation of the economy in 2016, the GST in 2017, Piyush Goyal’s work in the power sector over the last three years, Nitin Gadkari’s ongoing work in transportation, all are transformative and quantifiable contributors to the structure of the economy, and designed to create a robust and higher equilibrium for the Indian economy from which it can propel itself higher.
That these reforms are happening without any taint on any senior politician of the government is in itself a first in India’s modern history. The republic was lucky to survive through years of pillage under the Congress, and if it were nothing else but just that the BJP is taint-free, we would still have much to be thankful for.But Modi’s toughest test is yet to come. Just as Modi fought the culture wars and reshaped our national discourse on identity and nationhood for all time, and just as how he is transforming India’s foreign policy through a new Modi-doctrine, he must now dismantle the greatest vestige of Jawaharlal Nehru’s and Indira Gandhi’s legacy: the socialist superstructure that is the curse of India. Only when he is finished, will he have succeeded in his undeclared personal ambition: to bury Nehru and Indira Gandhi forever.
To do so involves treating the economic organisation of a society not merely in transactional terms, but as a moral issue inextricably linked to individual rights and dignity, and moving wholeheartedly towards the only economic system that provides for such: a free-market system adapted to help those on India’s economic margins.In doing so, he would do well to reduce his reliance on ever wiser economic councils and bureaucrats, but follow his hedgehog instincts which have yielded such sharp results in foreign policy and India’s culture wars. (As an aside, I note with some amusement a lesson from my first class in economics with Professor Jagdish Bhagwati: “India did so badly in the 50’s and 60’s not because it had too few economists, but because it had too many!”)
This then, is the call to arms. In addition to a dogged focus on anti-corruption (a necessary issue for 2014 but insufficiently ambitious for 2019), Modi needs to speak to the country in civilisational terms about the manner of its economic organisation, and seek the mandate to put the nation on the path to double-digit growth for decades to come.In practical terms, and as a first step, it requires the sale of the government-owned banks and PSU’s in their entirety. Not re-capitalisation, not mere NPA-resolution, not partial-disinvestment of loss-making PSU’s etc. A complete sale. These are giant black holes that destroy capital, or at best, use it sub-optimally. Modi cannot rebuild a nation without removing the termites from its foundation.
By seizing the time still available in 2017-2019 (and perhaps for five years thereafter), Modi may still live up to his own revolutionary declaration of 2014: “Government has no role in business”. Modi may represent the last best hope for the Indian economy to achieve true greatness. If Modi doesn’t do it now, India will be condemned to this middling, snakes-and-ladder growth pattern for another several generations.If not Modi, then who? If not now, then when?The hedgehog knows.
• The revenue of the company was growing at a CAGR of 11.34% over the last five years. The proportion of revenues derived from premium brands increased from 3.90% in FY2013 to 9.25% in FY2017 which shows the company’s competence is enhancing portfolio premiumness. 63% of its revenue comes from northern, eastern and western parts of the country.
• Raw material cost as a proportion of revenues declined from 64.27% in FY2013 to 42.81% in FY2017.Lux strengthened its EBITDA margin from 6.29% to 12.39% over the last 5 years. Lux profit from every rupee is invested in brand spending and it has increased from 5.74% in FY13 to 7.76% in FY17.The company invested around an aggregate INR277 crores (around 8% of annual revenue) to strengthen its brand building over the last five years.
• The company continued to maintain ROE of around 30% over the years.The products of the company are exported to around 50 countries over the world largely comprising Middle East, Africa, Australia and Europe.In 2016-17, the company commissioned its Dankuni facility to manufacture 5 lakh pieces a day spread across 11.48 acres which had a capex of INR83 crores.
• The company has six manufacturing units across five locations in India– 1 in Tirupur, Tamil Nadu, 2 in BT Road, Kolkata, 1 in Dankuni, Kolkata, 1 in Dhulagarh, Kolkata and 1 in Ludhiana, Punjab.The company is ranked 1st in producing innerwear in volume terms and Indian exporter of innerwear respectively.The Dankuni manufacturing facility which was commissioned during the second quarter of the fiscal has achieved 78% utilization and projects it to increase to 85% by FY18. The facility accounts for 35% of its overall manufacturing capacity. The unit is integrated across the knitting, processing and cutting functions.
• Lux has a manufacturing capacity of 1825 lakh garment pieces a year (14 lakh pieces per day) across six manufacturing facilities.It enjoys 14-15% market share of the organized men’s innerwear market in FY2017.The company was awarded with ‘Star Export House status’ from the Ministry if Commerce and Industry.As on 2016, the size of the Indian innerwear market is pegged at INR15870 crore, where women’s innerwear market accounts for 60% share and rest by men’s innerwear
1. Company has began manufacturing 12 new company single herbs and these herb are to be used in developing other food and nutrition segments product. This new products lead to volume growth.
2. Because of Ayush Primium mark company able to secure order for end manufacturing. In past company has been focusing only doing job work.
3. Company's long term view is to cater large space including export market where opportunities are huge. Looking into this company's manufacturing plant operates international standard practice and certificate and registration. Company is also working for standardisations of ayurveda and recognising ayurveda as system of medicine worldwide to cater export market.
4. Company had already filed patent application for OJASVITA. Approval expected in this financial year.
5. Company is leaving no stone unturned to see that every aspects of retail opportunity to get across through.
6. This year company's focus is to get maximum sales from existing products and establish OJASVITA as house hold main stream brand.
7. Through marketing initiatives by way of sampling reaches to consumer across the India to increase sale of OJASVITA. Company's product Chocolate and malt chocolate drinks have seen great acceptance and recall from regular customer.
8. Company has very strong board of management have diverse quality in the area of marketing, finance, production, organisation building capability and in depth knowledge of the area in which company operate.
9. Company has developed enough capacity to meet future demand and capacity is also scalable.
10. Association with Sri Sri Ayurveda is great push for the Company. From this year onward sri Sri Ayurveda see aggression in market place.
11. Going forward management expect much more quantum jump in volume growth as market is picking up.
12. There are negative cash flow because of company expanding into Main stream FMCG company.
In short management was very confident to take small companies at respected position in long run and generate huge wealth for share holders.
1.Pokarna reported a PAT of Rs 69.70 crores, an increase of 36.11% YoY. The EPS stands at Rs. 111.79.Co sought shareholders’ approval to sub-divide Equity Shares from FV of Rs 10/- to Rs 2/- .Co reported a 20.15% de-growth in the Granite segment and the Apparels segment reported a 11.35% growth in segment revenues for Q1FY18. Granite segment recorded profits of Rs. 32.91 crores and the Apparel segment reported a loss of Rs. 6.71 crores.
2.Despite the headwinds in the form of demonetization and challenging industrial scenario during FY17,company managed to report strong bottomline growth mainly on account of the management’s focus on profitability and high margins. The granite industry remained under pressure due to lower realizations and excessive supply. Co shifted its focus to the customized ‘cut-to-size’ segment where margins tend to be higher.
3.In future plans, the management plans to expand the capacity of Quartz surfaces by 130% with an estimated investment of Rs. 325 crore to become the largest manufacturer and exporter of premium quartz surfaces. Co entered into an exclusive contract for supply and installation of premium Quartz surfaces with the best ready-to assemble furniture maker in the world, IKEA. IKEA has plans to open 25 stores across the country with first store being in Hyderabad with planned investment of Rs 1000 crore in each store with plans to increase their focus on the kitchen models. Currently Pokarna has begun working on the mock-ups in the Hyderabad store of IKEA which is set to open later this year.
4.When asked about the rise in the Chinese’ market share from 9% to 40% in the last few years, the management said that since this market was price sensitive China had the benefit of selling products at a cheaper price. However, they also said that Pokarna and the Chinese products have a different customer base and a different market for both their products. Pokarna enjoys the advantages of a strong Brand Value and repeat customers. Management said that the quality of Pokarna products is far superior than the Chinese products. Co continues to focus on innovation and new ideas.
5.Regarding the delay in starting their new facility, the management said that the land which was earlier allotted to them by the state government in Telangana is now being used for government purposes and hence they have to continue looking for a suitable land. Once the new facility starts the company has plans to breakeven in 2 years.Co continues to gain market share in the UK. Further, the company is in the final stage of acquiring a TFT Certificate of the Final Grade 1 which would result in increasing in acceptance in the European and the American Markets.
6.Post the expansion plans, the company’s peak debt would continue to remain at Rs. 320 crore. The current debt of the company shall be repaid in around 4 years and the new borrowings are to be repaid in approximately ten years. During the year, Co commenced operations in their new quarry ‘Creame Cashmere’ while the requisite approvals are sought from environmental ministry in respect of other 4 new quarries.Outlook for the granite business remains positive in the medium to long term. Heightened competitive intensity may impact volumes, realizations and profitability in the near term. Outlook for the Quartz segment continues to remain positive.
Courtesy: Jagdish bhai( Inhouse research)
1.Market big enough to support growth vision of company. And it's growing at 15%. Confident of achieving 100% growth for next few years (organic+inorganicb2b).Confident of maintaining the 30% ebitda margins going forward. Gaining market share steadily from biggies like nielsen, gfk, ipsos. Traditional /digital share may remain 70:30 going forward for co.
2.Exploring airport biz (clients like delhi airport and changi ), agri space and IoT. Stressed on the need of inorganic growth going forward. Looking at atleast one acquisiton possibly every year. Acquisition candidates are small debt free companies which mrss can buy for 3 advantages - new verticals/skillset,geographical reach, client base. A possible acquisition candidate for next year already identified and is into airport biz (passenger satisfaction).
3.Market probe acquisition was done keeping in mind the geographical reach and new verticals. No successor to Mr. TR Rao (founder of mpa-77 years old) so MRSS got the Singabore biz at a throwaway price. Cost restructuring underway in mpa (reducing the officespace, tapping high margin fmcg and cons durable clients, etc,) to bring singapore margins closer to india levels - within 12 months.
4.Market probe primarily into govt. contracts....now started pitching to private clients . Reiterated they want to be the largest independent market research agency in Asia in another 2-3 years (topline 150-200 Cr).Bonus shares 1:1 approved. Preferential issue 15000@500 to sarang approved.
5.Doubled remuneration for MD and Chairman. Women director shwetambari rao appointed. She is ex nielsen specializing in m&a. Aim to be dividend paying from fy18. Negligible effect of GST.Ratio of repeat business is increasing
Courtesy: Shiv(Inhouse research member)
KTIL is deep in debt because of the loans taken for the Kesar Multimodal Logistics project. Everything hinged on how much and how quickly this facility could add to the top and bottomline of the company.Chairman AS Ruia admitted at the AGM that he was unable to make any projection as to how much the company could earn during the current financial year. The project mainly depends on revenues from handling the goods rakes rather than the warehousing business. One of the speakers pointed out that KMML would earn around Rs 6 lakh per rake handled by it. Last year 90 rakes were handled by this facility.
Management could not forecast how much this would go up. Mr Ruia said the situation is very fluid at Pawarkheda. Business scenario has changed after soyabean which was produced in large quantities in MP was not moving by train. However the ban on quarrying in different parts of India has resulted in demand for sand from MP which was being sent by train. IMHO the big risk here is that environmental concerns could result in sand quarrying being halted in MP as well which would be a major setback for KMML.
Despite, the facilities being constructed more than a year ago, the management is still trying to convince customers to use the facilities at Pawarkheda. Trident was spoken of as a customer which was using the rail transport facilities. Other companies are being wooed but most are still resistant to shifting from their present arrangements.Ruia said management rejected an offer by an international cargo carrier to turn KMML into a sole service provider for itself.
Management has shelved plans to set up a food processing park at Pawarkheda and will use this for warehousing instead. I think this is another big setback because loans are available for food processing park at lower interest rates.Second phase of KMML has been postponed. No further progress in setting up new liquid terminal facilities in Kandla.Meanwhile interest on debt is ballooning and the revenues and profits from the core liquid terminal business is under severe pressure due to competition. In the chairman's speech Mr Ruia said existing clients at the liquid terminal facility were resisting price increases and were asking for price to be reduced.
This was reflected in the first quarter results announced shortly after the AGM.Unlike in the past, the management released the results after the AGM as apparently it wanted to do control the damage. I was told by officials that the board meeting was extended and would continue post the AGM.Meanwhile the Kilachands, the company promoters, have moved backstage leaving the management to the board of directors led by chairman A S Ruia . He admitted as much at the AGM that he was holding the fort because of his close ties with the Kilachand family. He is the oldest surviving director of Kesar Enterprises and KTIL which was demerged from the former some years ago.
None from the Kilachand family were on the dais at the AGM though Mrs Khiladhand is on the board of directors. Rohan Kilachand was among theaudience. He had quit as Executive Director to pursue higher studies.He is a non-executive director now.Some of the share-holders who attended the meeting wondered whether the profits from the terminal business would suffice to pay the interest incurred on the loans to set up KMML. Some even felt that KMML may have to go in for debt restructuring.With uncertainties mounting, I have chosen to play defensive and protect my capital. Hence the exit.
Courtesy: Shiv(Inhouse research member)
1) Gst has caused problems in recent quarters but company will benefit, by a lot going forward.
2) Opened hotels at 3 new locations-Udaipur, Jaipur,Mumbai(Already known fact via con-call, but Mumbai hotel not yet functional-till date due to issues in OC-(I think occupancy certificate))
3) Quarterly results declined due to expenses incurred in their new hotel(Delotel-Mumbai) but revenue flow has not yet started from it. And secondly due to the problem which they faced at hotel Vijoya in Puri in previous quarter. They had canceled the lease agreement with the hotel owner, as they found out that the owner was having a criminal record. Now they have strengthened their lease policy so as to avoid such situations going forward.
4) Revenue breakup stands as same reported in AR, but a decrease in Room catering segment because of gst. It has been hit worse among other segments.
5) Their online portal will come soon , they are working on it, just delayed because of work related to GST.
6) Management told that they are ahead of their scheduled plan on expansion and will complete them before time. All funded by internal accruals.
7) No plans on equity dilution going forward , as they are self sufficient by cash(for capex requirement ) and 2nd being asset light.
8) No plans for loyalty or customer membership, as management believes that they are just for companies benefit and no customer will ever benefit from the same, hence management does not want to provide any membership plans/packages going forward. On the contrary discounts will be offered for shareholders.
9) Currently having 65% of occupancy rate and ARR-Rs3700
10) Going forward management has planned to lease only those hotels which have average 50 rooms.(Below 50 room hotels are not profitable for byke)
11) Management said that at current point of time they have repaid all of their long term debt and are standing on 0(zero) long-term debt.
12) They said that there are nearly no competitors to us as those who have copied our business model are currently in loss. This is because Byke only caters rooms in peak season where as other do it for full year.This is where we stand out and will continue to run ahead of our competitors as we are the first to implement this business model in India and also successful in it. We understand our business very well than any body else.
Courtesy: Rushikesh( Inhouse research)
Key takeaway from the AGM-
1)FY 17 sales volumes were affected by a) demonetization b) Change in emission norm from BS-3 to BS-4 c) GST implementation.
2) Company has planned a capex of Rs 1000cr over next 2-3 yrs on programmes relating to Electric Vehicles, technology upgradation from BS-4 to BS-6, new product developments.
3) R&D as a percentage of sales to increase from around 3% of sales to 7-8% in next 4-5 yrs.
4) Management is trying to reduce raw material consumption to sales by technology upgradation and innovation.
5) Currently upgradation of machiney and equipments is taking place across all the plants.
6) New platform of existing products to be launched, Tractors in Q1FY19, Trax- Q2FY19, Traveller in Q1FY20.
7) Management continue to explore new business opportunity with both new and existing clients like BMW & Mercedes.
8) Force Motors first Electric Vehicle is under trial run. Management highlighted that its pre-mature to spend large capex on Electric Vehicle plant, capex will happen more at the R&D level.
9) Electric vehicles has around 400 parts compared to around 1000 parts in a car now, may effect auto-ancilliary companies in long run.
10) Management sounded confident in the growth in the engines business. Luxury car segment in India is at a nascent stage and has lot of scope for growth.
11) Worldwide people are using more of shared mobility which may have an impact growth of passenger car segment.
12) The company plans to build a dedicated facility at existing premises of Chakan for producing engines (for power generation & rail application) including spare parts for Indian & global market for Rolls Royce under the recently entered Joint Venture.
1..Footwear segment (35-38% of rev) which was sluggish in FY 17 was further hit by DeMo - things are improving & this year should definitely be better than last year with double digit growth. Auto OEM (both domestic & exports) is looking better than last year as well - Mayur has signed up with 3-4 new customers & supplies for 13-14 new car models - difficult to put a number for additional revenue at this stage
2..PU Plant - Land has been purchased in Gwalior, MP for the same - expect to begin construction from Aug-2017 - expect to start trial run by Dec 18 - looking to start with 1-2 lines & would gradually scale it to 6 lines depending on demand.
3..Mysore plant - Given that almost 80% of Mayur's domestic customers are based in south - it's looking to start a production facility in Mysore - Land should be finalized within a couple of months for the same,construction should take another 12-15 months - expects 20-25% growth in biz just by being near to the customer - more flexibility / lesser time for availability of goods / lesser need for stocking at customer's end.
4..Customer addition - Close to signing mercedes as a customer; expects to close the formalities by Dec-17 but revenue would flow from mid-FY 19 only.Planning a capex of Rs 150 crs for FY 18; 30-35 crs should be eligible for TUF subsidy; no equity raise planned.
5..PWC has been appointed as stat auditor from this year. Consulting firm (Most probably EY) has been hired to further improve the processes using TQM/ TPM.Looking to beef up & professionalize top mgt by hiring an HR head & COO.
Courtesy: Ankit Sharda(Our inhouse research group member)
From what I understand, the company has huge cash flow problems - even to the extent of delayed salary payments. Operations are sustaining just on a day to day basis. The closing down of the Singapore unit came as a little breather. However problems continue to loom. Its operations are severely stressed. Banks are not extending further credit to the company in the event of payment defaults.Stock prices had gone up on account of private placement - from the levels of 22 rupees odd, to the current 40. The run-up of the markets has been rather sweet to the company.
Do have a look at number of management exits over the past one year - rather alarmning. Management is arguably weak and primarily family run. They have had a history of having differences with and intolerance towards professionals. The company is run mostly by the senior Mittal and his two sons - Shalabh and Adip.Kiran vadiya is the only apparent professional there, who was roped in from JBF recently. The head of the shipping division - Captain Kowshik also recently quit.
A surge in coal prices is one thing that can do some good to the company - though not a convincing enough reason to buy a stock of this pedigree, especially when you have so many other options in the open out there.Might think it to be a biased view, but would suggest to go through the numbers and not rely on chairman's prospects. It's his job to sell his company to us.
Markets arent always rational and stock prices can go here and there, but its a touch-me-not company in my opinion. Mr Kapil Garg was advising the company till last year. Now that association is history too. He's presently running a company called Oilmax and its listed subsidiary - Asian Oilfield. Do have a look over that company rather if you're looking to bet in somewhat same space.
Courtesy: Mridul(Our latest prized addition to our inhouse whatsapp ShareBazaar app research group). Note exclusively meant for ShareBazaar app.
1.Fluidomat Ltd. makes Fluid Couplings.Fluid Coupling is a Power Transmission Product.It is a Capital Good & not a consumable.Fluidomat has supplied more than 900 Scoop Control Couplings and several thousand constant fill fluid couplings on variety of applications in all sectors of industry including Coal base Power Plants, Steel, Cement, Paper, Chemical & fertilizer industry, PetrochemicalIndustry,Underground & Open Pit Coal and Mines, Harbor Handling and Nuclear Power Generation Plants in India and Abroad.Majority of the Revenues of the company are from the Power Sector.Sales growth of the company is dependent upon the Capex in these industries.
2.Market Size is Few hundred crores in India and several times more internationally.Huge export potential for the company.Main thrust is on the Domestic Market, though the company has expectations in Australia, Indonesia, Malaysia & Brazil(from the mining sector). The company has appointed dealers in these geographies.
3.Clients are ABB, BHEL, Braithwaite, Burn Standard, CIMMCO, Chemical Construction, DEMACH, DCIPS, ELECON, EPIL, FFE, Fuller KCP, Flakt, Flender, HEC, HDOL, HSML, INDURE, Krupp, Kirloskar, Kraft Engg., L&T, MAMC, MBE, Metso, MECON, Naveen, Oilex, Penwalt, Promac, Reitz, Sayaji Iron, Techpro,Thermax, TLT, TRF, Walchandnagar Industries, Warman etc.
4.Approvals from the Consultants:Fluidomat Fluid Couplings are approved by all leading industries and consultants in the country. The consultants include ACC, BHEL, Birla Tech Services, DCPL, Desin, HOWE India, Holtech, Jacobs, MECON, MN Dastur, NTPC, Tata Consultants,Tata Projects, Samsung, Doosan (Korea), Hyundai (Korea), Alstom (France), Sulzer (Germany) etc.Its also got a tie up with flow serve (Spanish company).They too have requirement for these couplings.Price Range of company products = Rs.12,000/- to Rs.80 lakhs.
5.Competitors are Premium Energy Transmission Ltd., Elecon Engg. Ltd. & Voith (German). Apart from Voith,all others have rented tech.Main competition is from voith.Voith’s pricing is 3 to 10X of fluidomat for same products.
6. Service cycle:FC can last for 25-30 years also,typical replacement cycle is 10-12 years.In government departments specific budgets are allocated,hence they tend to replace their couplings earlier at 5-6 years as if these budgets are not used they are extinguished.There is no unorganised sector in Fluid Couplings due to the hitech nature of the product.Also Fluid Couplings are very crucial products and reliably is a big factor. If it fails then the whole plant comes to a standstill.
7. The company does not require much capex.Land and building are excess.It can grow to Rs80-100 Cr turnover by adding only CNC machines.Capex could 1-2 Cr per annum.The company has started manufacturing FCs for fans used in boilers. It is now supplying the same to BHEL. Voith is the only competitor in this segment. The company entered into this segment five years ago based on indigenious R&D.
8.Fluidomat has also concluded designs for less than 110 MW boilers.It will enter this market soon.Working capital requirement for company's business is 3-4 months.Cycle is long as until the entire order is ready inspections don’t start(Debtor Days thus being 100).The company does not face issues on account of bad debtors as it supplies very critical equipment.The company is vertically integrated.It has its own foundry and fabrication facilities.
Courtesy: One of our sharpest microcap predator Keshav Bhai. Note exclusively meant for ShareBazaar app. The ShareBazaar inhouse research team is a strong battalion of 1500 members now. Expect more amazing contents in the coming days. Happy investing folks.
1.Chemicals shall stay an integral part of our economy as India has 638000 villages and more than 22% of population is still below poverty line. So with government policies focused to improve the overall economy structure Chemical industry shall play a vital role and so shall your company.It has started a major focus on retail markets and brand building. For now around 150 cr of sales in this segment without any profits or slight loss but this shall change with scale going ahead. Retail can be big for your company in Agrochemicals and Polymers.
2.Despite a capex of around 175 cr Company reduced debt from Rs 300 cr to Rs 150 cr. Maintained a D/E of 0.08. Focus shall remain on efficient working capital cycle.Capex projects under stabilization stage and shall reap fruits from Q3/4 FY17-18.Missed the Rs 4000 cr revenue target but confident all the major capex of Rs 600-700 cr shall help achieve this goal within next 2 years. Some product approvals from customers take slightly longer so also a delay in seeing fruits of capex.
3.Except for Atul Brazil rest all subsidiaries grew steadily.JV with Akzo Nobel for production of monocloroacetic acid (MCA) in India shall be one of the best facilities in the world for which the raw material shall be supplied by Atul and good part of the finished product shall be consumed by Atul for Herbicide 2,4-D , rest shall be sold or exported by Akzo Nobel. In terms of project size it’s a 2 phase capex 1st phase 30,000 ton then 2nd phase 30,000 ton. Current only other capacity in India is of max 10,000 ton. So this shall be huge & biggest plant in India. 50:50 JV.
4.Spent Rs 38 cr on R&D for improvement of existing products and new product development. But this has a long gestation period. Contingent liability figure in the AR shall reduce this year.Weak Q1 FY17-18: Raw material inventory was of higher cost then end product prices like Paracresol went down which in turn impacted margins of aromatics. Prices of crude derivatives like Toluene and Benzene were not entirely favorable along with currency headwinds impacted the margins in Q1. But Q2 shall show improvement and Q3/4 shall be a strong pick up. Also slight impact due to GST& stabilization issues.
5.China a main competitor in Paracresol type products but costs of manufacturing in China inching up so that shall help stabilize the prices and thus margins. Plus your company has focused a lot on zero discharge policies and environmental factors so that shall go a long way to help. Environment related closures in China helpful to Indian companies. Current capacity utilization at 60-65% which shall go up going ahead and aim to be at 80-85%.
6.Management aims to keep margins at 20% + or – 3% going ahead. Also margins shall be stable as the company reached close to 4000 cr topline and full utilization of capex takes places. Why AMAL was not merged? Amal had Carry Forward loss of Rs 30-40 cr. So to take benefit of that loss plans for merger. But now Amal is doing well on its own and has already reduced Rs 10 cr of Carry Forwarded loss so better off on its own.
Courtesy: Our inhouse research member Parthiv Bhai. Note exclusively meant for ShareBazaar app.
1.They reappointed their MD and executive director, management looks optimistic to maintain their margins of 38-40% going forward. Q2 might be flat or below average but Q3 and Q4 (Fy18)will be good(on account of one gov order shift from Q2 to Q3). Pramoter stake decreased by 3.6% in last quarter on account of personal use by chairman's family(Bought new house for their children)They are expanding to South Africa in next 3 yrs, setting up a new plant. Would require 14Cr capex for the same and in return they would get 50% back as royalty.
2.Currently they are into 100%(Revenues wise) B2B business and are planning to shift their focus to B2C(Goal to achieve 70% B2B and 30% B2C in a span of 5 years). This is being done so as to mitigate and lower the risk of future order flow- like tender\order from government might dry out in future or is very much regulatory business right now, hence due to this company has made this decision.
3.Pat might be impacted for next 3 years as all the resources have to be supplied to the new South African plant from here, but once the production starts(will start in 3 years), revenues will increase.
4. Company is doing many promotional activities right now so as to increase their B2C business which according to the management will slowly increase. Promotions are currently being done in almost all metros-mumbai, pune, haryana . 50 Distributors have been appointed currently for quick growth in B2C business.According to the management B2C business shift is the long term survival plan, both market and competition wise.
5. They currently have 4 main competitors but management has told that all the companies have higher production cost and cupid is the only company which produces the same quality products at the lowest cost.Current order book is of 103Cr in Fy18, and orders still coming in, they are also expecting an order from Indian government soon.Any capex requirement (if any)will be for promotional purpose and for the new South African plant.
6.They are also planning to acquire a small pharma company which meets their requirements- like is currently producing a product which is related to female empowerment and is related to their main product line and at the same time will have good margin growth in future. They are still searching on this front.Currently 75% of the total Indian government order are given to HLL(their biggest competitor) and only 25% to the private companies. Last year all the private companies have challenged the government that this is not fair. Still the case is pending, and company is expecting a positive decision on this front soon.
7.New products are ready to be launched, but will be launched not before march fy18. These products are- Hand sanitizers, vaginal vipes, second generation female condoms. All these products have high margin 35-42% .Currently having 3 years contract with UNFPA from heron to supply male and female condoms globally.Company has seen some declines in order flow(from US) due to trump's play.
Courtesy: Rushikesh(one of our youngest whatsapp sharebazaarapp research group inhouse member)
a. Management expects volume growth to pick up in 2HFY18, led by pick-up in infra spend due to upcoming elections in Gujarat.
b. SIL will continue to see strong volume growth, led by higher sales to Mumbai market by way of coastal operations post the acquisition of two ships from China.
c. SIL expects profitability of its core units to improve meaningfully, led by improved utilization of present operations on account of increased sales to Mumbai market.
d. Commencement of WHRS of 13MW by FY18-end would further reduce power and fuel cost.
e. Significant savings are likely to be achieved as SIL plans to change its product mix to 45% PPC as against current levels of 35%.
f. SIL is planning to increase its capacity from current levels of 4.1mt to 8.2mt by FY20 at a capex of Rs 12.5b of which Rs 8b will be through debt and Rs 4.5b through internal accruals.
Courtesy: Jagdish bhai( Our inhouse whatsapp research group microcap predator)
1.Pace of construction of rural roads jumped to average 117km/day vs 97.29km last yr. Target to construct 57K km of roads in FY18 at average 156 km/day.
2."Stressed Assets Higher Than The Net Worth Of Indian Banks" Says McKinsey. Some of the PSU banks are bound to go burst with pathetic asset quality.
3.There's Housing Crisis(Pakka houses) in India. Estimated shortage of appox 19m households. If not tackled, approx 889m Indians will live in slum by 2025.
4.Mission Ganga Cleanup:Sewage from 118 town:4800mn ltrs/day. Functioning capacity to treat sewage:1017mn ltrs/dat.
5.India Employment Imbalance: Number of Jobs to be created in 2017-2022:6.5mn per year. Number of people entering workforce:23mn per year
6.Before IPO: Promoter has vision and investor has money.After ipo:Promoter has money and investor has vision
NEW PROJECTS - The Management has envisaged an increased demand for various I. V. fluids in India in the future considering the development of health related instruments and steady population increase.
Addition of 100 ML products to our ‘Aquapulse’ Brand:We are in the process of implementing a project that will add 100 ml Eurohead products to our portfolio. Based on feedback from our Marketing Team and due to the fact that our Eurohead 500 ML was received well we are confident of expanding our reach in the Euro head Category with this project.We expect the project to be operational in H1 FY19.
Our Competitive Strengths - Diverse Product Portfolio -Wide sales, marketing and distribution network -Wide range of fill volumes-Experienced management team and well qualified senior executives Adoption of superior technology for manufacturing sterile injectables. Our contract manufacturing and institutional sales business stabilizes our revenue stream -Targeting new domestic and export markets -Wide range of Sterile Injectable Products. The recent growth of Pan India hospital chains presents a significant opportunity for us to cater to their infusion requirements via our ‘Aquapulse’ brand.
We expect to grow at market rates in the near future. The various cost cutting measures will also lead to expansion in operation margins. We also have had success in penetrating high end customers such as Pan National hospital chains. Expansion in the higher end of the value chain will lead to expansion in margins also. We have also begun the process of expanding and consolidation of our product portfolio to optimize our throughput. We expect all of these to have an impact in H1 of FY 2019.
RIGHTS ISSUE OF EQUITY SHARES - In view of expansion of the existing facility to manufacture LVP in Eurohead bottles and to meet General Corporate Purposes, the Board of Directors has decided to raise funds up to 18 Crore subject to receipt of necessary approvals from statutory authorities,as applicable, by way of issue of equity shares of the Company to its shareholders on a rights basis.
Our Take: Company is on an inflection point and with recent 5X addition in net block it's well placed to enter in the top league. As the above note says it's further expanding which speaks about the demand in this segment.The Annual report snippets are self explanatory. This is one stock to watch out for the next 2-3 years. Rights at 84rs looks very compelling for the shareholders.
•D’mart is raising Rs.10bn by way of debentures as the company can use the IPO funds of Rs 3.6bn for construction and purchase of fit outs for new stores but cannot purchase land from that money, D’mart believes that due to stress in the real estate market it can use this opportunity to buy land for future store expansion.
•Store opening in Q4 at 14 stores was accelerated as bunching of store opening happened in Q4, the construction of stores usually slows down in Q1 and Q2 due to monsoon because of which store opening in Q4 always remains high.
•Of the Total 131 stores 113 are owned and balance 18 are on lease.D’mart is looking to open 20-25% of the new store addition in new geographies, though these store in new areas are margin dilutive, however D’mart believes that it is necessary to open pilot store in new areas for increasing geographical reach. D’mart also believes that since these stores in new areas are very few it won’t be margin dilutive to a great extent.
•D’mart has opened 40 D’mart Ready stores, the avg store size is between 200-500 sq.ft and all of them are on lease. Dmart ready is right now run on pilot basis and is only operational in Mumbai. The initial traction from these stores has been reasonable as D’mart is experiencing initial Inertia from consumers in the pick up model.
•D’mart has started private label in FMCG space in Coffee and Toilet soaps, however the contribution to overall sales in negligible and is a non focus area. GST impacted sales for 15 days of July however business is now back to normal, at present the company is not able to quantify any positive benefits from GST
Courtesy: Our whatsapp inhouse research team.
1.FOREX: Revenue break-up 50% airports & 50% non airports. Overall growth of 18-20% easily manageable for a long time. Forex is a highly underpenetrated business, having huge appetite for growth & many capital providers for that business. India has around 23 million travelers and in over 10 years around 100 million shall travel. So a massive upside in this business. Also the quality of PE money that we got in forex business and they tend to invest for 6-7 years before even thinking of an exit.
2.HFC: Only 2 states for now & 3rd would be Maharashtra by end of the year. Even if the company can focus on these 3 states a huge scope for growth in AUM over next 5 years. The company just needs to execute its strategy well. Target market shall be tier 2-3 cities with loan size of Rs 3-15 lakhs. Also relatively less competition as loans also given to non salary class to whom banks and other financiers are reluctant to lend.Major part of these markets have unorganized lending practices.
3.INSURANCE: For now company with its network of clients is better off as a distributor of various insurances of health, life, general etc through many providers. It’s a business with very good growth potential and has decent fee based income.
4.MFI: Company is looking to expand its book in MFI via an inorganic route and then scale that business.Won’t overpay but look for deals in around 1-2X P/B range. Digitization would be key to growth of all business verticals of Centrum. Company prefers to be a technology company selling financial services.
5.If GDP can grow at 6-7% Centrum is very confident to grow its lending business by atleast 3 times the GDP growth rate along with maintaining the quality of the book. Huge untapped market in rural non salaried class. Aiming at huge market share from unorganized lending to organized. It’s just that a lot of focus of the company would be on proper execution of that strategy. Only 22% of MSME is financed by formal institutes.This covers 40% of GDP & 45% of exports market. So Centrums strategy to start with SME lending is to eventually move to MSME lending via a solid digital platform.
6.DEFENSE LENDING: See a huge scope of growth in this vertical over next 5-10 years. Company is working towards NSE listing.
Courtesy: Parthiv Shah(our inhouse whatsapp group research predator)
1. FY17 earnings were impacted by Corex discontinuation in Dec'16 (FDC ban), NLEM related price cuts (negative WPI of 2.7% & revision of ceiling prices), new additions to NLEM (Zosyn) & transfer of 4 brands back to Abbott.Sales from newly launched Corex-T (Codeine+Tripolidine) is expected to be ~ Rs 350 mn in FY18E (Pfizer guidance).
2. Old Corex (Codeine+CPM) sales was Rs 1.86 bn in FY17 (was discontinued in Dec'16). For FY16, Corex sales were at Rs 2.45 bn.Two key brands from AstraZeneca viz. Meronem (licensed from Pfizer Inc, sales of Rs 1 bn in India) & Neksium (acquired for Rs 750 mn from Astra, sales of Rs 250 mn) would help to mitigate Corex discontinuation impact in FY18E.
3. 18% of current sales for Pfizer come from product under price control (NLEM). These include key brands like Folvite, Mucaine, Amlogard, Minipress, Zosyn.Vitamins and Minerals segment (key brand, Becosules) contributed ~ Rs 2 bn in FY17.
4. At its Goa plant, the company manufactures hormone and contraceptive products. Remaining products are outsourced from 34 contract manufacturers in India.Deal for sale of Thane land has been signed and received Rs1.5 bn as advance.Going ahead the company plans to launch 2-3 new products a year.
1..Dairy division accounted for 70.76% of revenue and 23% from value added products.One major event in the last FY was the slump sale/Demerger of the retail business from Heritage Foods. The decision to restructure was in line with the decision to focus more on the diary segment. *Retail business was then sold to FRL for a consideration of Rs 295 cr in an all-stock deal. Heritage Foods in turn was allotted 1,78,47,420 shares of Rs 2 each.*
2..Heritage Foods acquired dairy business of Reliance Retail Ltd (RRL) in a slump sale. This acquisition enables the company to geographically diversify into States like Punjab, Uttarakhand and Rajasthan and to gain strong synergies in markets like Mumbai and Delhi-NCR. Breakeven of Reliance Dairy unit could be around Q4FY18.
3..Co set a mission of reaching the Rs. 6000 Cr revenue by 2022, and aims to enhance the contribution of value added products from the current levels of 24% to 40% over the next five years.Co expects to clock a CAGR growth rate of around 25% in the next five years to reach the revenue target.
4..Over the next 5 years, Co plans to set up five processing plants each with an investment of Rs. 20-30 Cr, which would enable the company to handle 30 lakh litres of milk per day by 2022 as against 18.90 lakhs at present.Co plans to foray into beverages segment with the launch of Ready to drink Tea to widen its’ portfolio of value added products and brighten its’ growth prospects.
5..Co recently set up a JV with Novandie SNC, France with an investment of Rs 16 cr. to manufacture and market fruit and flavoured yogurts and western style desserts. Commercial operation of this JV is expected during 2018.Management indicated that it has a capex of Rs. 100 Cr every year till 2022, including 5 green field facilities, to achieve its ambitious target of Rs. 6000 Cr revenue by 2022.
6..Co proposed to achieve revenue of Rs. 6000 Cr by Geographical diversification, Deeper penetration into Tier-II/III towns, Creating more capacities, increasing manufacturing, marketing in value added segments and acquisitions/inorganic growth opportunities.Co is rebranding itself, and has set 1% of revenue as marketing expenditure.
7..Curd will continue to remain highest value contributor in Value added segment in the medium term as well, and company has plans to penetrate into untapped potential markets for Curd.Co said that Milk procurement would likely improve from October on account of reasonably good monsoon, and currently *Heritage sells its’ products with a premium of around Rs. 1-2 to its competitors.
1. Company into design and manufacture of plastic moulded furniture like chairs, baby chairs, dinning tables, stools and teapoys in a wide range of attractive colors. Current manufacturing facilities at Daman, Ernakulum in Kerala and Ongole in Andhra Pradesh.
2. Established a subsidiary Prima Union Plasticos SA with 90% stake in Guatemala, Central America with a capacity of 3000 MTPA. 1st phase with a capacity of 2250 MTPA commenced production in March 2017. New distributors added. High growth in FY 19 with target turnover at Rs 20 crores as against current turnover of Rs 10 crores. New machines to be added in due course.
3. Capacity at JV Prima Dee-lite Plastics SARL Cameroon, West Africa increased from 4500 MTPA to 8500 MTPA. Enhanced commercial production started in Jan 2017. Good demand from Africa and export to nearby countries.Commercial production at the new Greenfield plant in Ongole, Andhra Pradesh with a capacity of 1500 MTPA started in Feb 2017. This would cater to states like Orissa and others*
4. Focus on more expansion in India specially Northern India & abroad. Focus on growth in deep pockets within India. Small CAPEX of around Rs 7 crores in FY 18. Domestic capacity at 11500 MTPA with 80% capacity utilization, Cameroon at 8500 MTPA and 3000 MTPA in Central America.Overall growth of 10 - 15% in turnover in medium term. 30 - 40% growth with EBITDA of 29% achieved in Africa to be sustained in future. Exports at around Rs 17 crores out of total turnover of Rs 88 crores in FY 17*
5. New products like crates using roto moulding manufactured from Ongole plant. Scope for manufacturing of furniture, ice-box, road barriers, water tanks etc. in future. Orders for supply of garbage bins under Swachh Bharat Abhiyan (SBA).Walmart has approved Company’s chairs which are being supplied at a particular store. Repeat orders given to the Company. Possibility of supply to other stores and locations*
6. Increase in orders from government institutions with orders worth approx. Rs 5-6 crores from government institutions in Ahmedabad for regular chairs. Orders under SBA and government institutions in addition to current order book.Consolidated Sales target for FY18 Rs 150 crores and growth of 25% in FY 19 against Rs 127 crores in FY 17*
7. Export sales in USD except those in EURO in Africa. Marketing on local level through radio channels etc. during festive season. Challenges faced due to demonetization.No effect of GST as tax rate at 28% in line with pre-GST tax liability except in states where VAT was less as compared to current taxes under GSR.
8. Shift from unorganized to organized sector possible owing to GST. Almost all dealers GST compliant. Organised dealers started pickup in July'17 post GST and market growing.Restocking to being in Q2 FY 18.Logistics major cost component.Plastic products a localized market.Major competitors being Neelkamal, Wimplast and Supreme Industries.Debt of around Rs 10 crores as against cash balance of Rs 9.2 crores.
Courtesy: our whatsgroup inhouse research member the genius Vishal kothari.
1. Strong 1QFY18 closing order book of Rs 41bn with ~27% from international market. Consolidated revenues for 1QFY18 stood at Rs 3,584mn (+10% yoy), consolidated EBITDA was at Rs 460mn (+10% yoy) and PAT at Rs 215mn (+27% yoy).Order inflow for 1QFY18 remained strong at Rs 7,130mn which led to strong 1QFY18 closing order book of Rs 40,620mn. Out of total order book, international orders are of Rs 11,000mn (~27% of total). Out of international orders of Rs 11,000mn, O&M orders are worth Rs 3,000mn and rest is ETC.
2. Out of total order book of Rs 40,620mn, ETC order book is at Rs 22,000mn, civil order book is at Rs 9,400mn and O&M order book is at Rs 9,220mn.Domestic ETC business remained very low while international ETC business is picking up with projects coming up in Nigeria and Bahrain. The company is continuously tracking opportunities in domestic ETC business.
3. Debt for 1QFY18 is in line with 4QFY17 number. There is good development on working capital side; uncertified revenues of Rs 2.0bn in Mar’17 have come down to Rs 1.6bn in Jun’17 and those customers have gone for certification due to GST. For FY17, Noida workshop contributed Rs 50-60mn of revenues and the company is targeting Rs 300mn of revenues from it in FY18E. In 1QFY18, Rs 40mn contributed by Noida workshop.
4. The company is targeting Rs 25bn of order inflow for FY18E. And revenues growth guidance is ~15% for FY18E. In FY18E, the company should receive Rs 800mn of retention money back and there will be addition of Rs 550mn so, retention money should come down by Rs 250mn.
5..Looking for opportunities beyond power sector. The company has looking for opportunities beyond power sector. One such diversification is Railways in which the company could get orders worth Rs 2,600mn and project is going well. Apart from that, the company got one project in T&D sector worth Rs 780mn and will go selective it that sector.
6. On the domestic side, the company is focusing on the Oil & Gas sector for ETC and Civil works. All the Oil & Gas projects need to be converted to Bharat 6 standards from Bharat 4 standards by 2020. These will be huge opportunity going ahead and the company is trying to qualify for the business.
7. On the FJD business side, 122GW of projects have been identified for FGD and out of that tenders have been called for 27 NTPC projects which has installed base of nearly 21GW in 2 lots. These FGD opportunities will come up and on each unit it can be of Rs 500mn-Rs 700mn. The company will target couple of FGD projects this year and it is in discussion with one Spanish company for partnership.
8..Planning restructuring of the company with 7 Strategic Business Units (SBUs). The company is planning restructuring and simplification of business to grow further. Power Mech has two focus business areas: (i) Industrial Services: Operations & Maintenance and reconstruction of power plants for both domestic and international markets. (ii) Construction: This will include ETC and Civil construction. Civil construction to be further divided into (a) Power related Civil and (b) Non-power related Civil. Non-power related civil will include Railways, Roads, and Irrigation.
9. On the electrical vertical side for T&D, the company will be doing 11kV to 33kV to 66kV to 110kV to220kV up to 400kV where there is no qualification and looking for domestic and foreign partner for work.
10. On the International overseas business, after Middle East, the company is planning to expand into Africa in bigger manner and looking at two projects there. The company also has the spare parts work shop at Noida and supply spare parts to the power plants. Another subsidiary is Hydro Magnus where the company has order booking of Rs 250mn.So, the company has identified 7 strategic business units (SBUs) and planning to appoint head of each SBU who will be responsible for development of that business area.
1. Manufacturer of insulated enamelled wires and other insulated electric conductors. Largest manufacturer of winding wires in the country.Share in revenue from power sector, auto and industrial equipment being 20% each; consumer durables 10-15% and balance from other sectors
2. Volume growth of 8% and 5% value wise in FY 17.1/3 rd of revenue from job work.Major raw material being copper which is procured domestically from Vedanta and Hindalco as well as imported depending on the price. Change in copper prices not have major impact on profitability as the same is procured on the customer's account
3. 90% of sales is to OEM. Company biggest supplier to auto manufacturers among competitors. GOI Rural electrification program a big boost for growth of the Company. Company regularly participates in international exhibitions to enhance product visibility and exposure in international markets*
4. Benefits of GST in the long term as it would lead to consolidation from the unorganized to the organized sector in the next 5 years.GST rate of 18% applicable with no major change from the previous tax liability under excise and VAT.
5. Total market size of Rs 8000 -9000 crores (2,00,000 tons) with share of organised sector in the range of 50-60%.Company has significant plans of capacity expansion and modernization which would increase profitability.
6. CAPEX plans to be announced shortly. It takes 9-12 months for being operational post CAPEX. Vision to set a global benchmark. Company's products used for generation of power from fossil fuels as well as from renewable sources. Exports decreased by 10% in FY 17 on account of tariff discrimination which is in the range of 2 – 10%.Major competitor – Ram Ratna Wires.Wires is a low value added industry.
Courtesy: CA Prashant Shah
1. Management expects at least low double-digit growth in volumes in FY18. ATA expects the growth momentum to continue in export markets in FY18. Company exports to six countries in Africa and three in Latin America and expects to further consolidate its position in these markets.
2. Electric 3W was launched in Bihar and Gujarat in 1QFY18 though volumes remain insignificant. It plans to offer E-rickshaws to all of its dealers across the country over the next one to two quarters. The electric 3W market is dominated by unorganised players; management estimates an aggregate market size of ~120k pa.
3. E-rickshaws can travel up to 80kms on a single charge and it takes around seven to eight hours to fully charge the battery; battery life is ~8-10 months.? A small inventory of BSIII vehicles remain in the channel (versus 3k vehicles in the previous quarter). ATA does not expect any additional costs to clear its BSIII inventory, as these vehicles can be upgraded to BSIV.
4. Capex plan for FY18 would be evaluated in 2HFY18, as current capacity utilisation is not optimal. Company incurred Rs450mn till date for capacity expansion at Ahmedabad, while Rs1bn of capex is yet to be incurred.
Courtesy: Systematix Equities
Jefferies: Indian hospitals need to alter their business model to focus on affordable healthcare and patients outside Tier-I cities to sustain the rich valuations. The premium segment is slowing on rising competition and narrowing supply-demand gap with margins under pressure too. In this context, NARH and HCG (we initiate with Buy) appear best placed given their growing presence outside Tier-I cities. We initiate on APHS with Hold as growth/margins challenges may endure.
Narayana and HCG preferred picks: The Indian hospital sector is trading at 17x FY19E EV/EBITDA on expectations of 20% EBITDA CAGR over FY17-20E. We initiate on HCG with Buy and Apollo Hospitals at Hold. We retain Buy on Narayana.Narayana, in our view, with its focus on affordable care, looks the best placed to address the large latent demand. We expect it to report 25% EBITDA CAGR over FY17-20E; retain Buy with a PT of Rs390.
HCG's hub and spoke model and oncology specialization has allowed it to profitably expand outside Tier I cities (c40% beds outside Tier I). It has also shown strong execution, achieving breakeven in most new centers in c12M. With large expansion phase coming to close, we expect it to report 27% EBITDA CAGR over FY17-20. It is trading at a discount to peers at 15.7x FY19E EV/EBITDA and we initiate with Buy and PT of Rs325.
Apollo - While we expect 19% EBITDA CAGR over FY17-20E for Apollo, we estimate its core hospital business EBITDA to grow at 11%. Its key markets are seeing increased competition. While the company is working on improving payer mix, this limits growth over the medium term, as the large market is not targeted. With the stock trading at 17.5x FY19E, we initiate at Hold with a PT of Rs1,150.
1. ECC segment losses dent 1QFY18 margins. 1QFY18 sales stood at ~Rs 1.83bn (-1% yoy), EBITDA at Rs 219mn (-28% yoy) and PAT at Rs 143mn (-12% yoy). EBITDA margins were lower at 12% due to losses in the ECC segment which reported 1QFY18 revenues of only Rs 120mn. 1QFY18 order book stands at Rs 7.06bn, of which metering order book was at Rs 4.30bn and ECC order book at Rs 2.76bn. ECC order book comprises two large orders in the state of Uttar Pradesh (UP).
2. Current debt is Rs 1.76bn, of which Rs 140mn is long-term debt.Positive trends in metering Industry with tenders for smart meters coming up. Metering industry has turned positive as of now post a decline in FY17.Growth is clearly visible with smart meters tenders also coming up ahead. Recently, EESL floated 5mn of smart meter tenders on behalf of Haryana and UP governments. Management highlighted that demand for smart meters exists across all states, and not one or two states.
3. There was some disruption in July due to order revisions because of GST (18% vs.~15% tax earlier).Post that, transit to the GST regime was smooth.? On the exports side, the company is targeting Singapore, the Middle East and African countries and seeing good traction in these markets.
4. FY18E metering revenue guidance at ~Rs 7.25bn.There are pending tenders for 25mn meters in the market, which should be finalised in the next 3-6 months; the company has a market share of ~25%. Of 25mn,smart meter tenders are pegged at 6mn..
5. From 2QFY18E, ECC revenues will be higher and EBITDA margins should be ~10% for the ECC business. The company has guided for FY18E meter revenues of Rs 7bn.
1...Buy from manufacturer and sell to reseller only.Have 750 employees, 45 warehouses all on lease, 45 branches, 30 brands, 10,000 resellers and reach in 800 cities.Top five customers contribute 60% of revenue, company has policy of maximum 30% revenue from single customer .85% of revenue comes from IT (Computers, Laptops, Printers, networking devices etc) and 15% from mobility.
2..In mobility working capital cycles are shorter and have exclusive contract for particular area.They have 55 service centers,which have better margins of 12-15%. This business is very small can contribute upto 12-15Cr, so will add around 1-1.5Cr in bottom line.
3..Credit cycle-IT 21-90 days,Mobility 15-30 days. Their 100% debt is secured, but bad debts are lower than premium paid, in case of bad debt will get only 85% of covered amount due to industry norms.
4..Expecting growth of 25-30% Yoy, have target of $1 billion revenue by FY2020. Scale of operation will increase with increased proportion of mobility,working capital will decline. Co will add more vendors to increase reach to newer cities. Gross margins will not increase, but due to increase in efficiency bottomline will increase.
5..Inventory write off. Some company have return policy some dont have. Sold products are sold at discounted price and difference is compensated by vendors.Few brands are doing direct sales e-commerce or their own sites, but 90% of the sales are through distributors
6..Margins are similar across India but lower in case of sale to ecommerce. GST will benefit,can reduce infrastructure will see in next 3 months.
7..Have 100Cr of cash. Have to keep cash for new business. They are in talk for Apple accessories which will require around 70-80Cr of cash.Talking with other 2-3 brands also.Have around 700Cr of limits available.
8..There is partly consolidation in the industry, no new player is coming. In compare to last 5 years, margins have gone down but will not go down from here.
Courtesy: Shankar( Inhouse whatsapp research group member)
Micro-finance no longer a new concept in India and it become a traditional business in India. Regulatory framework is also in place since last 3 years which make the industry matured and also bring transparency.Till date industry is dominated by 71 NBFC-MFI and newly converted SFBs (Small Finance Bank).
A lot of people/investors may think that industry is getting crowded even though we are able to reach just 4-5 Million households whereas more than 250 Million households are residing in our country. Further current statistic also shows that out of our total micro-finance portfolio only 31% portfolio is representing agriculture and allied portfolio. This data itself shows the inability of the MFIs to reach rural areas where 68% of our population is residing.
Gross Value Added (GVA) at current prices for agriculture and allied sector is estimated at INR 23.82 lakh crore representing lowest shares 17.32%. To change the status,significant infusion of capital is essential in agriculture and allied sector. Hence micro-finance institutions (MFI) can play a significant role in rural areas and can be a growth partner of our country. Therefore MFIs need to shift their focus from urban areas to rural areas.
A number of people/investors have also a perception that there is a huge competition and the scope for the differentiations would be limited in micro-finance sector. Yes it’s true that competition is increasing day by day and therefore MFIs should have clear marketing strategy to cope up with the situation. It is also true that the scope of the differentiation is also limited in terms of product feature as you can play only with price, tenure and may be with ticket size. Use of technology may bring efficiency and transparency but may not create a big differentiation. So what the MFIs will do to bring differentiation and segregate them from other players?
To bring differentiations we need to go back to the basic theory of the marketing and should analyze the need and profile of our customer. If we analyze the need and profile of our customer revealed that-
The need of the MFI customers is a continuous in nature and people need to take loans from MFIs throughout a generation. It’s not like us where we are taking loans only 2-3 times in our life cycle.People are not bothering much about the cost of borrowing in terms of interest but installment amount and the frequency of the payment would be more important for them. Whereas in our case cost of borrowing and tax rebates are important factor to choose a loan product.Efficiency in the loan processing, simple loan documentation, assurance for getting further loans and behavior of the field staff would also be relevant factors for a MFI customer.
Apart from financial assistance households also need a lot of supports in other areas which may include financial literacy, trusted option of savings, assistance in income generation activities, support in quality education, basic healthcare support etc.Considering the outcomes technology can play a significant role to bring efficiency in processing loans, reducing operation cost, arranging financial literacy program etc.However technology may not able to bring long term differentiation for any MFI. Further as scope of the differentiation in terms of product would be limited MFIs need to focus more on their ancillary products/services which they can sale/provides by using their distribution network.
Actually most MFI has a huge distribution network and this network can be leverage to sale/facilitate different products/services. The scope of differentiation is huge as a MFI can chose more than 100 products/services to leverage their distribution network. However while doing so the need of assortment and analysis of customer profile would be important to select a particular product/service as random section of product/service may increase the overall credit risk for the MFIs.
At the end of the day conclusion is to- MFIs should come out from the cell of another financial company and should project them a larger distribution network through which different needs (financial as well as non-financial) of the households, residing at the bottom of the pyramid, can be fulfilled. Till there is a enormous opportunity for the growth and business in the sector if we will opt an integrated approach.
Note: We have 1424 inhouse experts now for the ShareBazaarapp. The dream is to cover each and every listed small and midcap company. With your support and blessings we will do it. Happy investing folks.
1)Company has shown massive turnaround in the defense battery business. FY 18 also looks good in terms of order book and execution of defense batteries.
2)As on date pending orders are around 50 cr and more orders of around 20 cr in pipeline looks likely unless any government delays.
3)Lead Acid battery is undergoing tough times. Management has decided not to take LAB orders at any rate.Not worth sending overheads on distributors and then get stuck in receivables. So management shall wait for atleast cost + basis private label work as and when it comes.
4)Bankers are very supportive for working capital needs due to the turnaround. Going ahead plan to start repaying debt once sufficient cash flows are generated. Also company aims to reinstate dividends.
5)Company can do around 13-15% EBITDA margins for FY18. Q4 margins were high due to execution of high margin orders. Margins vary as per the order in terms of naval, airforce etc
6)Company is working on some specialized batteries which are still under approval stage. Government and different channels takes time for approval post which ordering etc. But company is confident these new segments of batteries in defense shall help to add more revenues and better margins. (Company did not disclose which segments due to confidentiality).To conclude FY 18 shall be a lot better than FY17 and good turnaround is expected.
Courtesy: Our inhouse research member Parthiv Shah. Note exclusively meant for the users of ShareBazaarApp.
Q) One of our sharpest microcap predator MR Vinay ambekar(VA)has been tracking Bodal Chemical for quite a while now. We asked him regarding the factors to consider before investing in the company.
VA) Hi – since you asked specific to Bodal, I will not cover the industry related factors.I will be tracking the following:
Percentage of basic chemicals (BS) being used in Dye Intermediates (DI), which is currently 45% and % of DI being used in Dyestuff (DS), which is currently 40% - these percentages should be in an increasing trend.Price of their products fluctuate due to external/global factors, and hence impacts their profitability. But if these 2 percentages are increasing QoQ, then it is a sign that atleast, internally, the company is on the right track in terms of increasing the share of their more value added products. If realisations of DI and DS are supportive, then margins should keep on expanding. However, if price realisations fall, then profit margins may fall, but that should not be seen as a negative if the trend of volume shift (from BS to DI to DS) is positive.
The above shift will also indicate how their expansion is progressing, which should be monitored. Increase in DS capacity from current 17mtpa to 25mtpa by mar’18 is the 1st leg. Thereafter from 25 to 41 over 3-4 years, but that’s a little way off. Right now there are no plans to increase DI capacity, which is good. But if they announce, then the reason should be very strong as to why they are doing this, and whether they are doing this at the expense of DS capacity expansion. Maybe their 2nd leg of DS expansion may need some more DI capacity which is fine. But that should happen only after say 2 years.
They have stationed the 58% owner of Trion in USA to market their water treatment products. Progress of that should me monitored. It will be better if they can increase their stake in this company from current level of 42%.They have taken 70% stake in SPS and they have said that it was very inefficiently run and that they can double the volumes and margins using their expertise. This should be montitored because SPS can meet their increased requirement of DI which they will need to feed their DS capacities.
LABSA and Liquid Dyestuff which are high margin products – sales and profits from this should be tracked. LABSA production has already started, so how are they ramping it up. Liquid dyestuff production is in trial run. A quick completion of this can give a new line of profitable product to the company in its core related field but diversify its risks away from textiles into paper and other areas.
ROA levels (not monitoring ROE and ROCE because the E is very low due to past accumulated losses - however if you are mathematically inclined, you can track incremental return on incremental equity and on incremental capital employed). ROA will be a quick dirty measure which should show increasing trend.
And most important, whether they have the necessary pollution control measures (Effluent treatment plants etc) to take care of all the above expansions (somehow no one has asked them about this in their concalls and broker reports), but if pollution control board does not give them permission to expand, then the entire thesis collapses. Currently they have the largest ETP of 1mn litres capacity. Whether this is enough.
1..Loan book at the end of 1QFY18 at INR650mn.Target for 2QFY18 is ~INR1b. Growth in the last quarter was relatively less as funding from banks didn’t hit the India Home Loans account. In 2Q expects to disburse ~INR400mn.Asset quality in FY17 was at 2.71%, the same in 1QFY18 was at 1.5%. The reduction is on account of the absolute GNPA amount coming down. At the end of FY17, 22 files were GNPA the same at the end of 1QFY18 are 15.
2...Capital Raise: Looking to raise capital in FY18. Likely to happen in 3Q or more likely in 4Q. Planning to raise INR500-800mn. Promoters also want to participate in capital raise and are looking to invest ~INR100-120mn in the capital raise exercise.Additional funding from SBI (INR250m at 10%); AU Bank – INR50m; SIB –INR50m; Kotak-INR50mn at 9.75%; Federal Bank ( These are sanctioned amounts, not necessarily draw downs)
3..Have started operations in Jodhpur. Dividend at 10paise/share will continue and would like to increase the same on the basis on company’s performance.Non-housing book as of now is at 20% of the total book. 5% is LAP (~INR30mn) rest is developer finance (~INR90m).Most of the disbursements in 2Q, to the tune of INR300m would to housing loans in government schemes. HLs yields are at 11-13% and LAP yields are at 18-20%
4..Risks: Limited field investigation capabilities. Relying more on the fact that government flats- property papers are in place; post that personal interview of the borrowers, in case of married couples- interview of both husband and wife.
courtesy: Harsh(Our inhouse ShareBazaar app research expert). Note exclusively penned for Sharebazaarapp.
On a consolidated basis the net sales have reported a marginal reduction at Rs. 5562.04 Cr for FY17 Vs Rs. 5758.92 for FY16. Company repaid Rs. 231.88 Cr of loans during FY17 resulting in a reduction in finance costs by 22.70%. The operating profits of the company have seen a slight fall at Rs. 454.60 Cr
Management said that:
1. The implementation of GST would lead to transparency in business. Further, the shift from the unorganised to the organised sector would benefit the H & R Johnson (India) and RMC Readymix (India) segment as these segments face severe competition from the unorganised markets on the basis of pricing.
2. RERA resulted in developers facing difficulties with the registration and compliance. However, RERA is beneficial to the company as it would lead to quick recovery of their receivables because as per RERA the funds for a certain project must be utilised into that project only. Further, the government's ‘Make In India’ and the ‘Housing For All’ campaign followed by Affordable Housing being granted an infrastructure status would result in initiatives and tax benefits to developers.
3. The second half of the previous year was severely impacted due to demonetization. Further, Satna received a very heavy monsoon this year but fortunately the company’s plant did not suffer any damage. The selling price per bag in Satna is Rs. 280 and the company’s profits would be around Rs. 75 per bag.
4. The company’s efforts in consolidating their product line and reduce logistic costs in the Cement Division resulted in savings in the operating costs. Prism Cement acquiring stake in BLA power has resulted in a fall in cost of cement production. The use of Pet coke has further reduced the costs. The company’s agreement with ECO Cements has resulted in the Company optimising transportation costs and enabling it to tap the growth in the Eastern markets like Bihar.
5. Ban on sand mining coupled with the ban overloading the trucks were severe headwinds in the Q1FY18. The company has a capacity of 52.19 tonne Cement and Clinker and this segment could witness a growth of 15% on the back of new products launched.
6. TBK segment would benefit from GST as the sector preference would shift from the unorganised to the organised sector. However, due to uncertainties regarding the implementation of GST dealers had resorted to destocking and the last 15 days of the June quarter the dealers did not give any fresh orders.
7. The RMC segment witnessed a 1% fall in the turnover because of the uncertainties surrounding the implementation of RERA. The order book for the road segment has increased sharply. The management sees a 10% growth in the current year and a 20% growth next year onwards on the back of reduction in cost.
Courtesy: Jagdish bhai(Our inhouse whatsapp group member). Note exclusively meant for the Sharebazaar App.
ITD Cementation Ltd (Q2 CY17): Weak performance; outlook remains strong - IIFL
ITD Cementation (ITDC) delivered weak Q2 CY17 numbers with topline de-growth of 41% on the back of slow order execution. The margins, however, continued to show improvement and rose by 156 bps yoy to 11.2%.This was primarily due to sharp decline in sub-contracting expenses. During the quarter, finance cost declined marginally as Company continued to improve on its working capital position. Significant improvement in contribution from Joint Venture (JV) led to PAT doubling to Rs.207 mn. The Company has received massive order inflows during Q2 CY17 and its total order book currently stands at ~Rs.82 bn (~2.7x CY16 revenues). In addition, the Company stands L1 in orders worth ~Rs.24 bn. With the strong order book, the focus now shifts to execution. The expected pickup in execution would lead to strong topline performance in the coming years. Improvement in operating performance and higher contribution from JV to be key drivers of earnings growth over next few years. The focus on cost control and debt reduction would further aid bottom-line performance. We lower our estimates to factor in the weak quarter performance and slow progress in certain orders. We maintain our Accumulate rating on the stock with a revised target of Rs.162.
1. Among top 3 largest producer in conductors and Specialty Oil in the world. Supplies conductors to all top 25 global turnkey operators and leading utilities. Preferred supplier to over 80% of its specialty oil customers in India.60% market share in power transformer oil and 40% in distribution transformer oil in India. Among largest bare overhead aluminum conductor manufacturers in India, market share of 23%.
2. Orders by key T&D has increased by 35% in Q1 which will turn in orders of product manufacturers like Apar.TBCB (tariff based competitive bidding). Visible projects by UDAY scheme. Health of DISCOMS is improving a lot. Under UDAY, losses of state discoms have reduced 22% to Rs 40,295 crore. Of the 27 states and union territories that joined the scheme, 23 are exhibiting improvement in aggregate technical and commercial loss reduction or narrowing of gap between power costs and revenue. Improving health of the discoms will have a positive impact on T&D infrastructure spending.
3. June, July has been affected due to GST. GST successfully implimented.More clarification needed from Govt. on some process. Plans for FY20 might be achieved in FY19 for conductors. Order book as on June 30, 2017 is at Rs 1,162 crore compared to Rs 1,519 crore as on March 31, 2017. Target of September closing 1500cr order book projected.
4. Chinese players benefited from lower Aluminum price in last quarter. From July the price is narrowed so it will be positive. Key competitors no longer has the CST benefit after GST. Due to which real improvement seen in September for Apar.
5. Products selling to Defense sector which is out of GST bracket.Optical fiber at 50% capacity utilization for optical fiber. Got order from BSNL. New UAE plant running at 50% utilization. Only player in UAE. Target is to increase the capacity utilization to mid 60s in this year.
Demand greater than AFL could supply: AFL was short on feed capacity by ~15000 MT in the last quarter, if it had the capacity, AFL could have roped in another ~Rs 1000mn of sales in the quarter.
Feed capacity addition: AFL is putting up additional capacity of 1,75,000 MTPA in AP. The capex will be Rs 500mn and it shall be operational by Mar’18
Sustainability of margins: Current EBITDA margins are exceptional due to weak RM prices but given the kind of volumes AFL is doing, 15% EBITDA margins in feed may be sustainable ( vs 10-12% in previous years)
New processing capacity: Additional capacity of 15,000 MTPA is under trial operations now , commercial operations shall start by end of August . AFL expects 40-50% utilization of this additional capacity in first year of operations.
Exporting to end users: Though there are lot of processing companies, but major players like AFL export directly to end user restaurants and retailers like Walmart. There are no re-exporters in their value chain
Market size: Total feed manufacturing capacity in India is ~20 Lac MTPA but the requirement is ~11 Lac MTPA. Industry is over capacitated but most players are not able to utilize even 50% of their capacity
Market share in feed business: AFL current market share is ~43% and they are aiming for 50-55% share in next 2 years.
Depesh Kashyap | Equirus Securities
1. Agrochemicals division was struggling for 3 years due to poor monsoons and intense competition. Their formulation products for pharma werent doing well either because of issues in pharma sector. They don't have any innovative products so wasn't easy for them to make money in that environment. This year they are seeing better traction due to good monsoons and better demand. Managment said agrochemicals division has bottomed out and will see 20-25% growth this year and 35-40 Lacs profit.
2. Main story is all about the subsidiary 3B blackbio. Their entire focus is to grow this stuff. They now own 97%.Will soon own 100% as the other partner is bankrupt. They did the JV for tech transfer and access to European and latam markets. The owner of that Spanish company is now dead so Europe and latam not easy.So focus right now is on India and then eventually African markets.
3. Company said competition in India is low as the quality is very poor from Indian companies. Their quality is comparable to global counterparts. Global companies have good quality but products are expensive. So they have been able to replace some global companies in supplying to global companies like quest diagnostics and core diagnostics.
4. They expect to grow at 100% this year. Expected growth for next 4-5 years could be 50% cagr. This year 3b can do 6-8 crore revenues with 1.8-2.2 CR PAT. They expect to scale up to 15-20 CR in the next 3-4 yrs.Margins from fy17 levels will go down 4-5% as they don't expect to sustain these margins. They need to invest a lot in good marketing people and hire professional mgmt to scale this company.
5. They have been growing at a measured pace despite high demand because they need funds to grow.Current cash flow generation is not enough. Still they have been investing whatever they make into the business only. Even agrochemicals profits go here.
6. Maybe at some point of time I presume they can do a SME IPO of the subsidiary or sell some stake at better levels. With such high growth rate and considering the prevailing raging bull market,3B will definitely be able to command more than decent valuations.
Courtesy: Hemant Bhai again(our mentor cum one of the sharpest microcap predators). Article exclusively meant for the #ShareBazaarApp.
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation.
1. One of India’s largest manufacturers of folding cartons, and India’s largest standalone converter of paperboard manufactures folding cartons, printed blanks and outers, litho-lamination, plastic cartons, blister packs and shelf-ready packaging. Ventured into the flexible packaging industry, with capability to produce printed cork-tipping paper, laminates, sleeves and wrap-around labels.
2. Only Indian packaging company to have offset plants in all four geographies of the country. Packaging for tobacco, liquor, food & beverages, FMCG, pharma and other industries. Speciality Packaging Unit in Haridwar is equipped with an 8 colour UV press from KBA, Germany with pioneering new cold foil technology which is also equipped to produce corrugated cartons as well as “CEKA” liner cartons*
3..Share of export in revenue stands at 17-18% and balance being domestic sales. The only standalone packaging company in India to have gravure printing technology. Whisky cartons constitutes significant contributor. Company is in top 2 carton makers. Major challenges faced due to demotisation, liquor ban on highway and rupee appreciation. Organized sector much smaller than the organized market.
4. Growth of 5% during FY 17, declined for the 1st time in 27 years. Developing European market by supplying to FMCG companies and cake boxed to offset challenges of rupee appreciation in future.
5. Management foresees a stable growth and has a satisfactory outlook. Average growth of 15 -20% on account of CAPEX done in FY 17. Reduction of debt from current Rs 200 crores to Rs 150 crores.No major CAPEX in FY 18, to utilize capacity available on account of huge CAPEX in FY 16 and FY 17
6. No major GST impact as the tax is passed on to the customer. Consolidation from unorganized to organized possible. Reduction in raw material prices. GST on raw materials is 12% while on finished product is 18%.
7..Total installed capacity post CAPEX is 100,000 tons which can generate a revenue of Rs 1000 crores. Current capacity utilization at 60-65% and focus to improve to 75-80%.
8..Additional equity infusion of Rs 24 crores from DSP Blackrock Core Fund, VEC Indian Special Situations Master Fund and VEC Strategic Value Fund.
9..Many customers added in FY 17 major being Philip Morris (Marlboro cigarettes) for India and Bangladesh markets. Company trying for outside India markets also. Other being Dabur, ITC food division, Modi Industries, Reliance Jio, Depro, Kuber etc.
10..Company started supplying to Patanjali who also has plan to start its own packaging plant.Major entry barriers being requirement of huge CAPEX, challenging nature of business, people and relationships.Major competitor being Parksons packaging and ITC (manufactures for in-house consumption)*
11. Design centre caters to value addition for the customers. Top 20 customers contribute to 80% of the revenue and top 5 cater to 35-40%. Maximum revenue from a single customer not over 15%. HUL being the largest customer*
12..Largest segment contributing to revenue is FMCG being 35%. Advantages of multi-locational plants and scale. Colgate serviced from 3 plants. Listing of shares on NSE possible.Flexible packaging market much higher than carton market.
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation.
1. Company is now being managed by Abhishek Patel, MD who took over the control of the company 2.5 years back. Company is now being transformed from a lala company being run by old munshis etc to bring run by professional management.
2. They ran at full capacity in fy17 and hence the topline growth was limited.But due to price negotiations with clients,price increases are directly flowing to the bottom line hence margins are constantly improving.
3. They used to do job work for some clients which has stopped completely now, which also led to a bit of decline in topline but this also led to margin improvements.
4. They paid off a bit of debt last year leading to reduced financial costs.
5. They have recently expanded capacity by purchasing few new machines. New capacity can lead to increase in topline by 35%. This will lead to small increase in debt as internal accruals not yet enough to fund the expansion. Management is looking to expand further capacity in future by purchasing old machines from plants being shut down instead of buying new machines.
6. They have two main areas of business right now. 1) making bags for packaging for paint companies like Asian paints and other fmcg companies. 2) shade net. They have set up r&d teams to expand into other areas. Sister company of rishi tech has worked on some meditech products which will be launched through rishi from q3 onwards.
7. They are targetting to use all their new expanded capacity this year. So internal target is to increase topline by 30% and bottom line by 40% due to continued improvement in margins. Targetting 130-140 cr revenues and 8% net margins within 3-4 years(yet to see how they deliver).
8. MD feels there is immense scope for growth by expanding into more products and geographies as their base is still very small.
9. They have increased their stake by 5% through conversion of warrants. They want to increase their stake every year by sebi permissible limit.
10. Overall, it's a story to watch as to how it unfolds. MD is taking all the right steps to guide the company from a lala company of 2 yrs ago to a more professional run company. Base is small and it's early days to judge.
Courtesy: Hemant Gupta( one of our favourite mentors)
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any article is stricltly not a recommendation.
Business background: Shankara Buildpro is one of the leading organized retailers of home improvement and building products in India based on number of stores, operating under the trade name Shankara BuildPro. Company was founded by Mr Sukumar Srinivas, an alumnus of the Indian Institute of Management, Ahmedabad, and a first generation entrepreneur, currently having 33 years of experience in the building products industry. As on date, company operates 112 Shankara BuildPro stores spread across 9 states and 1 union territory in India. It caters to a large customer base across various end-user segments in urban and semi-urban markets through their multi-channel sales approach, processing facilities, supply chain and logistics capabilities.Company’s operations are strategically suited to benefit from growth in housing demand which is continuously growing owing to increasing customer involvement in home solution decisions. It operates in three segments –
Future growth strategy:
Enhancing product offerings - Company expects to increase the product offerings in product categories such as electrical and decorative paints. It would also focus on building strategic relationships and strengthening existing relationships with suppliers and manufacturers of home building products to enhance the product offering.
Inorganic acquisitions - Company has in the past successfully acquired and integrated certain companies such as CRIPL for roofing solutions and VPSPL for tube and strips processing. This has enabled it to backward integrate its business operations and strengthen the value chain. it also intends to continue to explore such business opportunities, including through inorganic acquisitions, and foraying into new product verticals, depending on market conditions and emerging business opportunities. This would enable it to expand its product range and its customization capabilities
Scaling retail presence through addition of more stores - Company has 112 Shankara Buildpro stores spread across 9 states and 1 union territory and total area under retail presence now stands at 0.401 mn sq ft. Company plans to take the total number of stores to 200 by 2021. Company’s retail operations are spread across Andhra Pradesh, Goa, Gujarat, Karnataka, Kerala, Maharashtra, Odisha, Tamil Nadu, Telangana and Puducherry. Currently, Karnataka constitutes a significant proportion of 52% of revenue mix across states. With expansion in stores, company targets to achieve cash breakeven at store levels within a year of the store being set up. Retail segment sales also has higher margins and hence this will help in improving margins going forward.
Focus on building brand - Currently the spend on advertising is limited and in order to increase the brand visibility and higher customer recall, company would inch up the spend in branding going forward.
Outlook:Company expects to increase the number of retail stores to 200 by 2021 and retail stores have higher margins as compared to other segment sales. So it expects revenues to grow by 15% going forward with improvement in operating margins to 7-7.5% going forward. With efficient working capital cycle and lower leverage, company expects net profit margins to improve from current levels.Company is present in a niche segment of providing one-stop solution for all the home improvement needs. With enhanced product offerings, increase number of stores and investment on building brand, company expects to maintain the growth trajectory.
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation.
1. Global scenario for now looks stable in terms of steel production forecasts for FY 17 and 18.
2. India could outperform on an overall basis in terms of steel production and consumption due to various government incentives. Domestic procurement of steel policy in railways, defense, power etc could help domestic steel makers over next 2-3 years. But all depends on domestic demand.
3. Biggest risk to Indian Steel companies and also Kalyani Steel : China manipulating the prices of ore and coal. Due to anti dumping duties and MIP by almost all nations where China dumps steel, China is now making these country’s steel producers have an increase in cost of production via higher ore and coking coal prices which in turn makes them increase prices of end products which above MIP levels makes China start dumping again. Not helpful especially to companies like Kalyani Steel as we don’t have captive coal and ore mines. Also there are limitations to cost optimization one can do.
4. But despite these risks company is trying very hard to create a moat around its business via better utilization rate, faster cycle turns, max debottlenecking and enhancing capacities by 5-10% with speedier turn times etc (Asset Sweating). Also trying for a road map of new product approvals which shall help reduce competition and help and try sustain margins.
5. Company has decided to stay in a very prudent financial health as global customers worries if financial health of suppliers not in the best share. The company has acquired land and got some clearances for expansion, but in view of the current uncertainty the management shall take a call on a later date. Also management believes any major greenfield capex shall have a gestation period of 3-5 years for any material +ve impact on the financials. So management moving ahead very prudently in this aspect.
6. Regarding captive raw material the company had hired consultants for Iron ore & coal mining. But the auction prices were way ahead of what company & the consultants though fit & would have drained the financials. Also company needs relatively smaller mines as requirement of ore is lower as compared to bigger players like JSW Steel who also have beneficiation plant which Kalyani Steel does not have. So company has to go very selectively in terms of which mines to bid for, especially mines with high grade of ore.
7. Company has 3 Blast Furnaces and 2 are always in use. The 3rd one company uses only for Pig Iron and that too if the market is conducive for it.? Company has a subsidiary Lord Ganesha mine which was purchased for around Rs 100+ cr. Since last 5+ years management is waiting for its clearance. Having a hard time tackling its clearance with Karnataka Government on the same. Has around 6-7 Million Tones of good quality ore.? DGM a subsidiary was set up with a view to conduct R&D activities as Hospet was not the best place for it. No major initiatives have come out of DGM as yet.
Courtesy: Parthiv Shah(Our whatsapp group inhouse member)
Disclosure: All articles in Sharebazaar App are strictly for educational purpose. It does not represent view of Sharebazaar Team. Any company named in any aticle is stricltly not a recommendation.
1. Focussing on back yard poultry. It means small farmers which have 7 - 8 chicks and 1-2 sheeps. Targeting Orissa, Jharkhand and Chattisgarh for this. Potential - 6 to 8 million chicks.
2.Though the market size of the animal health products worldwide is pegged at around $30 billion, the Indian market is a mere $700 million. In the wake of a resurgent interest in the health and longevity of cattle following the Centre’s diktat to ban cow slaughter, there is immense scope for growth. The company, thus, is busy promoting awareness on large animal health in the hinterlands and is simultaneously exploring possibility of new product launches.
3. It is also working with GALVmed, a British-based NGO supported by the Bill and Melinda Gates Foundation to market its thermostable Newcastle disease vaccine in India. The two partners are aiming to create a sustainable distribution network, which is linked with Hester’s current network?
4. GST effect - prices drop by 20%. Greenfield project to be planned in Tanzania. May have to raise debt for this(Didn't disclose how much)
5. Hester Biosciences now is one of India’s leading animal healthcare companies as also the country’s second largest poultry vaccine manufacturer.Profitability is higher in diagnostic kit but market size is vey low.
6. Looking at Europe market for diagnostic kit(not sure whether for importing or exporting) .Brucella has lot of potential. Indian govt is also looking to eradicate this.
7. Company confident of posting decent double digit growth for next many quarters. At an inflection point with the whole market dynamics changing and expanding at a rapid speed.
1. Definitely saw more sell side analysts and youngsters in the AGM this year. Investor perception is changing indeed. This reminds of the debate at the AGM 4 years ago, when one of the business owners went on a long rant regarding the poor quality of investor communications that our company had. So the next year Ajay Piramal told a few people after the AGM that they are thinking about that suggestion and may increase investor focus in terms of communication. However, he mentioned that it will take some money. Of course the next shareholder complaint was, "But why are your wasting money on all this?" !!! So overall, can see this mini project at work.
2. Going into Housing Finance and approvals 'should' be in place by August'17. Asked Mr. Satwalekar regarding the timing of this allocation. Ajay Piramal normally sells into Euphoria. DS said that their bottom-up approach to the market was perhaps the competitive edge.
3. Ajay Piramal was very pleased with the distribution network in pharma. 4 lakh plus touchpoints now. Every year he has focussed on this single point. My own understanding is that he thinks of this 'distribution' has a the core asset around which he can buy and sell brands. This growing distribution system has a faster investment cycle for building brands. There is some operating leverage which he seems convinced on.Interesting.
4. His view on NBFC vs Bank debate : He personally believes that building a liability side in the lending business is a choice between the upfront capital expenditure to build a strong liability brand versus your ability to get competitive rates as a borrower. His own take was that Piramal has very well liked by the best creditors in the market and thus he can get money at competitive rates and at the moment doesn't feel that it is worth investing in building a lliabilities side brand for a lower cost of blended capital.
5. Ajay Piramal's take on market valuation of Piramal : Towards the end of the AGM a gentleman asked him about his own stake and why doesn't he raise it given that SEBI allows him to do so. AP replied by saying
(a) He thinks 50%+ is high enough.
(b) Even if he wanted to buy it , he couldn't afford to at the present price (insert laugh).
I particularly found this comment insightful. Considering that 5 AGMs ago he was vocal regarding the value in the company.
6. For sometime now I have been hearing stories regarding the asset quality at Shriram Transport. Ajay Piramal now seems to have developed the capacity to suffer in this bet of his. Is willing to stick it out for he still believes in the value that is there. My own take is that, even he screwed up in this deal , it is okay. I knew he would make individual mistakes in allocating capital. The best do so. The key was that he would come out on top at a portfolio/business level. Remembered that element of my own thesis today.
7. Nothing else really caught my attention this year. I now pay little attention to what he plans to do, because over time even he doesn't know what he's going to do over the next 12 months. His is a true opportunist and that's what I am betting on.
Courtesy:Aniket Krishna(Our whatsapp group inhouse research member)
Q)Why JM Financials has a buy on Bajaj Corp?
Ans) Bajaj Corp’s 1QFY18 earnings report remained weak with sales down 3.6% - steeper sequentially (4QFY17 sales declined 1.9%). Its flagship Bajaj Almond Drops’ (BAD) volumes fell 6.6%; EBITDA and adjusted net profit declined 14.5% and 10.5% respectively. The weak performance was completely attributable to GST led destocking, significantly in the wholesale channel; this is also corroborated by the sharp growth in net-realisation (4.1%) despite absence of any hike in retail selling prices (wholesale channel deals largely in lower priced SKUs). The company has thus far refrained from taking any price hikes as it expects the impact of GST being largely neutral on profits; there could be some near-term pressure from RM costs inflation, though. Key positive takeaway from the result was the retail volumes of Bajaj Almond Drops which grew at a healthy 12.4% rate signalling a possibility of consumer demand witnessing a sharp improvement – this augurs well for Bajaj Corp’s volume growth trajectory, which could recover back to double-digit growth level as seen in the past. The stock quotes at a steep 45%+ discount to the sector’s forward multiple (ex-ITC) and a recovery in volume momentum would be the much-needed catalyst for stock performance.
In a limited overs cricket match, an asking rate of 8 runs per over is considered a bit too high. But whether the team chasing should panic or not will depend on the stage of the innings. Chasing 8 runs per over with 9 wickets in hand & 10 overs remaining may not be such a daunting task as chasing 400 runs in 50 overs.However, to win, the chasing team still needs to score those 80 runs in 10 overs.
Similarly in stock market P/E of 24 or 25 (current P/E level) is considered expensive. But whether investors should panic or not depends on the stage of the earnings cycle. Such P/E level at the peak of the profit cycle (after strong earnings growth in preceding years) could be a reason for panic but if you are at the bottom of the earnings cycle (with almost no or dismal earnings growth in preceding few years - which is where we are currently in terms of earnings cycle in India), it may not warrant panic. However, we still need to have corporate earnings growth in at least mid teens range for investors to make good returns over the medium term.
Also, given the high asking rate, the team chasing 80 runs in 10 overs with 9 wickets in hand could easily lose a few wickets while chasing the score. Similarly given a P/E ratio of 24 or 25, a 10-12% short term correction cannot be ruled out.
Last week we celebrated NSE 50 index crossing 10000 for the first time. Newspapers are filled with index targets over the next few years and guesses about when it will hit 20000! IPOs are listing at large premium, everyone has started believing that it is time to invest now and brokers’ offices are busy again. This is the time to remind ourselves of a few things about the bull market.
"Very early in my career, a veteran investor told me about the three stages of a bull market. Now I'll share them with you. The first, when a few forward-looking people begin to believe things will get better. The second, when most investors realize improvement is actually taking place. The third, when everyone concludes things will get better forever. Why would anyone waste time trying for a better description? This one says it all. It's essential that we grasp its significance. "Howard Marks
"The further you get away from a bear market, the greater the number of people who have convinced themselves they can handle the downside – until the next time, of course. In the interim, if the indices are performing well, then you can bet that many investors – individuals and professionals, alike – are going to feel pressure to do whatever they can to ride the bull." Steven Romick
"In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond." Warren Buffett
"In a bull market, it is advisable to restrain one's greed. There is an old wall street saying "The bulls make money, the bears make money. But what happens to the pigs?" You can't make 101 percent. You shouldn't even strive to make 100 percent. Your goal should be 66.6% of a big move. Get out and then reinvest in something that has been newly studied" Roy Neuberger
"Common stocks should be purchased when their prices are low, not after they have risen to high levels during an upward bull-market spiral. Buy when everyone else is selling and hold on until everyone else is buying—this is more than just a catchy slogan. It is the very essence of successful investment" J Paul Getty
"During 'bull' markets, many investors tend to give themselves too much credit for favourable results and to give insufficient credit to the positive environment that played a large role in creating the results. This can lead to overconfidence on the part of the investor and resulting mis-assessment of risks" Ed Wachenheim
In the past few years, the Government of India has initiated many new projects and investments in the
irrigation sector. The focus of the Government is on rural water management, which will be fulfilled only when there will be proper infrastructure for the transportation of water to the end-user. This factor will remain as one of the major drivers for the growth of PVC pipe industry in the country along with the expansion of housing sector and increasing replacement demand for CPVC. The PVC pipes and fittings market in India is projected to register strong growth of 15% CAGR in FY15-19E and is expected to reach ` 391 bn in FY19E as compared to ` 225 bn in FY15.
Indian Industry Scenario:PVC Pipes segment of Indian Plastic industry has performed exceptionally well in past few years, since it has crossed the mark of ` 9,000 Crores. India's Plastic market is growing at a steady rate of 12%. PVC commands plastic pipe market by dominating over 84% share of the market. In areas like Soil & Waste Drainage over last few years, PVC pipes have significantly made their presence felt and plastic piping systems continue to gain ground. In bigger cities, PVC has captured a large portion of the market. Plastic PVC pipes are the most suitable and poised to replace cement pipes. In areas like roof, gutter drainage, PVC pipes have vital role to play. In the building and construction section, PVC pipes has a total market of around ` 2,000 crores which forms 31% of the current market. New area for penetration of PVC pipes is Roof gutter systems which have a total market share of 5%, i.e. ` 1,200 crores. India's Irrigation demand is significant and the demand for quality PVC pipes remains firm.
P.S: Watch out for companies like Amulya leasing(Apollo Pipes),Kriti Industries,Kisan Mouldings,Dutron Polymers,Captain Pipes etc.
One of our inhouse research expert Priyan met with the management of the company recently and here's his crisp meeting notes:-
Company reported subdued numbers for the first quarter.While commenting on company’s performance, management said, the first quarter has been significant disruption on account of transition to the GST Regime.
Further, company expects good set of numbers in coming quarters due to trade to start re-stocking once initial GST hiccups are out of the way. Company also expects to reap benefit from GST in long run due to market shift from unorganised market to organised market.
The company is Firing on all cylinders. 20% minimum Turnover growth and Return on equity of 25% even for new business or any value chain integration.
Increasing share of manufacturing from current 40 percent with plans to go upto 60-65% over next 5-6yrs. This also coming from higher share going forward of complex and high value products.
2 brand new manufacturing units in Uttranchal and Sikkim with 10 year tax holiday will give the leg up.Rebranding and Digital push for much higher cunsumer connect.
Nineties in India saw BFSI dominated by Non Banking Finance Companies (NBFCs). These were active in raising term deposits; extending lease, hire purchase, bill discounting to mid size corporates and SMEs; facilitating IPOs through their merchant banking services. These were also pioneers in providing retail loans for automobiles, commercial vehicles and two wheelers. There were no mobile phones, social media and credit bureaus then.
However we saw these NBFCs sunsetting (with a few exceptions) as the banks rushed in to dominate this space. The last decade and half has witnessed banks - especially SBI and private sector banks - building huge retail franchise and fuelling rapid growth of GDP. Banks made those NBFCs irrelevant.
Aren't we noticing silent but sure footed reemergence of NBFCs? They are treading into waters where no one's swum before. These NBFCs seem to be creating new opportunities in retail credit - even micro credit less than 6500 bucks. They are using data, generated in copious quantities by smart phone wielding, social media flocking, card swiping, interconnected millennials. They mine this data to lend money in real time when a consumer wants it and where she wants it. This time let's hope these upstart startups will stay here longer.Happy investing folks.
The manner in which cats & dogs are rising indicates the return of uninformed gullible retail investors in the market. Large number of penny stocks,the likes of Guj NRE Coke, Nagarjun Oil etc etc are moving in upper limit with huge volumes. Going by historical facts, there could be a sell off. This I call the Albatross-A bird which flies along with the wind and falls back to its place when the wind stops.One thing is for certain though, market sell off or not it doesn't matter as good companies would move up,consolidate for some time before moving up in the northward trajectory again. Craps would move up in staircase and fall back on escalator. So selection becomes very important. Another point which I keep on repeating is kinda,"no need to be adventurous"-It's way better to be in cash if you ain't finding opportunities". We as a matter of fact keep adding to our old positions rather than stretching out for new stories. Happy investing folks.
Demonetization: no change in business due to this because of underwriting policy of business. ECS went up 400% & become more digital
GST: welcome move by govt. no change in business due to this
We are growing company & investing a lot in business. Profit go up significantly over period of time.
We have no interest for SFB & MFI business. Even not interested in insurance business, better to distribute insurance policies and getting commission.
Due to conservative management , they kept high provision on books. Despite write off- growing 30 to 40% annually.
HFC business can grow 70 to 80% over few years
ROE continue to grow over period of time. May achieve ROE 17 to 18% by four years conservatively.
Courtesy:-Our Inhouse Research Predator group
Vidli Restaurant Ltd. engaged in the hospitality business and runs chains of restaurants through franchise operated outlets. Presently company is operating 61 outlets (2 own, 4 employee managed and 55 franchise outlets) across geographies. The group is known for its brands "Vithal Kamat" and' Kamats'. VRL has recently launched Ready to eat snacks (Chivda and Bhujia ) in 4 different variants which they will sell through their outlets and also through distribution channel, Company plans to launch 8-10 more variants till end of this year which will include gift hampers for Diwali and other festivals. Mrs. Vidhi V. Kamat is Managing Director of the company and Mr.Vikram Kamat is Chief mentor to the company, both of them are Hotel management professionals and have more than 10 years of experience in running Branded hotels and Restaurants.
Business-VRL have outlets at all major locations on highways across Maharashtra, they have outlet at Delhi Airport, at Railway stations in Mumbai and at various malls in Mumbai and Pune. They have started outlets in Gujarat, Rajasthan, Delhi, Punjab and Manali too. Presently VRL’s operations are categorized into family dining (1500-200 Sq ft), khaojao(500-700Sqft ) and Kiosk models(65-100 Sq ft). VRL supplies all the Ingredients and Raw material for making the food items at their outlets. The key objective of procuring and supplying the raw material is to get benefit of large scale purchases and controlling the quality and hygiene; Due to this the consistency in taste is also maintained across outlets.
ROI for the franchisee owner comes around 30-40% and operationally they break even from the second month itself, due to this there is a healthy enquiries for the new franchisees and so is high stickiness.
An outlet would be at breakeven position even if that operates at 80 customers per day with average spending per customer of INR 100 to 150. VRL predominantly has a presence in Maharashtra and In the last one year has worked tirelessly on system and processes. Now company is aggressively planning to increase their presence in other states. Earlier company was servicing majorly the south Indian food items but due the huge demand now they have added main course items to the menu like chola masala, Rajama Masala, Paneer butter masala , Dal makhani and others.In the Trial run of 3 months the outlets where the main course items were introduced have shown increase in sales by 50 -60% .
Industry outlook -According to FICCI the combined F&B service market is worth INR 309,110
crore in the year 2016 with the CAGR of 10% is expected to touch INR 498,130 crore by 2021. The sector is dominated by the traditional segment. Indian origin and multinationals have not optimally penetrated the market so far and provides very large opportunity for organized players.
Key shareholders:Girik Capital advisors holds 8% stake
Jignesh madhukant Mehta – 2.9 %
Nirbhay mahawar (N Square capital) – 3.55%
FINANCIAL HIGHLIGHTS :VRL Recorded a Total Income of Rs. 621.24 Lakhs during the year ended 31st March 2017 vis a vis Rs. 441.32 Lakhs during the year ended 31st March 2016 i.e growth of 41%. Recorded a EBITDA of Rs. 100.75 Lakhs during the year ended 31st March 2017 vis a vis Rs. 67.17 Lakhs during the year ended 31st March 2016 i.e growth of 50%. Recorded a Total Income of Rs. 345.06 Lakhs during the half year ended 31st March 2017 vis a vis Rs. 248.61 Lakhs during the half year ended 31st March 2016 i.e growth of 39%. Recorded a EBITDA of Rs. 60.15 Lakhs during the half year ended 31st March 2017 vis a vis Rs. 28.82 Lakhs during the half year ended 31st March 2016 i.e growth of 109%. Served Approx 13.30 Lakhs Customers. VRL and is cash rich company with cash & cash equivalent in balance sheet of INR 5.4 crores.
QSR food chain Faaso’s has a valuation of 1500 crores when it is operating 130 outlets presently.
VRL is on track to open 250 outlets by the end of fy 2020, at that stage due to its asset light and high operating leverage business model the company may command a premium valuation.
Risks factors –1. Labour intensive model. 2. Successful addition of outlets outside their core Geographies. 3.Company has to implement Transparent Billing & Revenue collection system as cash transactions are involved. 4. Road map for centralized warehousing and supply management outside core Geographies.
Courtesy: Vijay Rawat(Share Bazaar apps whatsapp research group)
Interest rates in India during last three years have fallen by almost 250 basis points if one goes by the yield on 10 year government bonds. From 8.90% in April 2014 the yield has fallen to approximately 6.50% currently. We think it has a potential to fall by another 50-100 basis points, if not more, in next 2 years given fiscal discipline of central government. The fall in interest rates could be a trigger that would help Indian economy takeoff in medium term. It should also help corporate profits return to its normal level leading to much faster earnings growth rate. Corporate profits as a percentage of GDP has fallen from approximately 7.8% in 2007-08 to less than 4% in 2016-17. Return of normal corporate profitability would take markets to higher levels by driving corporate earnings.
Companies which would benefit most would be the ones which are not facing debt problem and cater to discretionary consumer demand and industrial investment.Overall consumer demand should see significant increase as the lower cost debt becomes available to them. The consumer demand in housing, auto and durables should ultimately aid in private capital expenditure thereby reviving animal spirits in the economy. The companies which have a debt problem are unlikely to do well and may see huge equity dilution as loans are converted to equity at terms favorable to lenders. That would also be positive in long term for overall economy.
Corporate Debt Blues will Disappear: There is a crisis like situation in large corporate loan markets in sectors like power, telecom, steel and infrastructure. The amount of bad and stressed loan amount is huge. This was largely due the fact that some companies took too much debt for projects which turned out to be unviable. May we also suggest that there was crony capitalism at play here? Just 12 insolvent accounts that have been sent by RBI to insolvency courts accounts for 25% of the total toxic assets. The period from 2007-2015 saw a huge increase in interest costs, much of it because of inefficient allocation of debt to cronies. For BSE 500 companies (excluding Financials, trading and oil PSUs) in decade to 2015 while revenue grew at 19 %, interest costs increased at 28% resulting in net profits growing only at 10%. During last five years corporate profits have stagnated. Interest burden is a major reason for the same.
There is not going to happy ending for companies under restructuring. However we can expect that losses would be booked by banks and assets would be sold. This would release capital and with further infusion of capital either by government or markets or both banks might be in better position to lend. Though, one cannot be too sure about PSU banks ability to lend in future. Meanwhile private sector banks and NBFCs would continue to gain market for PSU banks share improving credit availability. They should make up for much larger incremental share of the market. That would be more efficient for the economy. As a percentage of GDP corporate debt in India is around 50 % compared to 170% in China and there is a significant scope for increase. If more of lending is done by private sector it is likely to be more efficient.
Transmission of Fall: Though interest rates in terms of 10 year bond yields as well as repo rates have fallen we have not seen a similar fall in interest rates whether for consumer or for healthy part of corporate sector.According to RBI governor Urijit Patel till February out of 175 basis point (bps) cut that RBI has done during this round of rate cutting only 85-90 basis points has been passed on. Since then there has been further passing on of the cuts however there is still a significant scope for further fall in lending rates at the level of financial institutions. We also think that RBI itself would cut the repo rates further by 50-100 basis points in next 12-18 months.
Longer dated loans are especially affected by reduction in rates. A 20 year home loan becomes about 15% cheaper at 8% rate of interest compared to 10%. This triggers two kinds of demands. One, demand for refinancing of older loans which saves money for existing loan borrowers. Two, fresh demand as homes become more affordable for new buyers. Auto loans have also become more affordable. Housing and auto demand would help many sectors of economy improve capacity utilization paving way for further investment. Household debt to GDP ratio for India is around 10% which much lower than countries like Malaysia (70%), China (36 %) and Thailand (70%). With lower interest rates loan uptake can be much faster than GDP growth.
The fall in interest rates would also help project financing of companies easier as interest costs become more manageable. India has one of the highest rates of interest that makes financing debt riskier for companies. Compared to a prime lending rate in India of about 9% in China lending rate is around 4.5%. So on average Indian companies are spending twice in interest costs. That makes many projects unviable. A reduction in rate thus costs would help finance private capital expenditure. That would be the last missing piece for economy to take off.
The oil industry faces a straight race between a supply shortfall and peak demand. If prices persist around $45pb for a significant period, then production is unlikely to grow to the levels required to starve off a shortfall by 2020, as prices below $50pb will be unable to support the investments needed. And if investments do not pick up, then the industry will get one last boom before peak demand arrives.
The definition of an oil boom in this new paradigm is one where prices exceed $60pb. Such a boom becomes more likely if the extended OPEC-led cuts succeed in bringing inventories down to the 5-year average. Yet, it would only take a 1 – 2 million bpd supply disruption for prices to rally, a prospect that can’t be ruled out considering the current state of global affairs. Of particular concern is the unrest in Venezuela, a country that analysts now say is primed for a Soviet-style collapse, putting its 2.5 million bpd supply at risk.
Barring any disruptions, there remains only a 3-year window for an oil windfall, as once the policy actions by China and India take hold, the deployment of EVs will begin to adversely affect oil demand by 2023.Afterwards, the falling costs of batteries, efficiency gains, fuel-switching and the spread of self-driving technology and ride-sharing services, will all combine to bring about peak demand between 2025 and 2030.
At the same time, the industry will experience a shift as oil will be increasingly valued as a chemical feedstock and less as a transport fuel. Organisations need to take concrete steps to position themselves for the coming upheaval and avoid the kind of collapse that has been experienced in the coal industry. Multinationals like Shell and Total have made shrewd moves by divesting into renewables and participating in initiatives like the Climate Leadership Council. Such activities must accelerate to enable such companies to hold onto their leadership positions in the global energy landscape.
Engineering companies, service providers and equipment manufacturers also need to leverage their expertise by taking bets that will boost their chances of survival in this new landscape. Amid change lie enormous opportunities – energy storage (such as compressed air storage), industrial CCS (for refineries, petrochemicals, steel and cement) and biotechnology (as an alternative route for chemical feedstocks) – are just 3 areas out of many that will experience exponential growth in the coming decades. As the world moves to a greener and sustainable energy system, the time has arrived for the companies that led the way in the 20th century to break the mould, and evolve from being oil companies to become energy companies.
FRAUDS Committed by Dr Kannan Vishwanath, ex MD of Dr Datson Labs Ltd, former name Aanjaneya Lifecare Limited ( herein after referred as DDL ).An expose by Joginder Kanaujia. List of fraud are as follows:-
(1) DDL had 15 patents which Dr Kannan got registered with Controller General of Patents, however, only 12 were registered in the name of DDL rest three were registered jointly in his name and his father Mr Kashi Vishwanathan, though these were intellectual property of DDL.
(2) In 2011 / 2012 it was decided by him to buy Apex Drugs, Hyderabad based unlisted company for DDL for an amount of Rs 250 Cr by taking loans from Banks and as approved by them as per Dr Kannan. He paid an amount Rs 80 Cr by cheque as advance to Apex Drugs and further gave them Rs 50 Cr worth of DDL shares.Later it was stated that that deal was cancelled as banks backed out. Till date there were no efforts made by him to retrieve this amount from Apex Drugs, may be because of his personal interest. My request is that Rs 130 Cr with interest be retrieved from Apex Drugs and credited in the a/c of DDL.
(3) Fair Success (HK) based at Hong Kong was incorporated in 2012. I have not been able to find out who was its promoter, it appears he was close associate / relative of Dr Kannan. In 2013 it was bought by Dr Kannan for DDL for a sum of Rs 250 cr, proceeds of first FCCB, In reply to my mail DDL office intimated me that it has been bought because of 15 patents Fair Success ( HK ) had. It started operating as 100 % subsidiary of DDL wef 29 July 2013. On further scrutiny of patents it was found that these patents were same which belonged to DDL. That means these were sold to Fair Success (HK) before it was bought by DDL. For how much amount Dr Kannan sold these patents is mystery but estimated amount could be around Rs 250 to 300 Cr. This amount was not credited in the a/cs of DDL and hence siphoned off, could be in his / his relative / close associate account abroad. A very serious fraud and needs further investigation. Again my request is that this amount be retrieved and credited in DDL’s a/cs.
(4) May 06, 2011 – Aanjaneya Lifecare entered into the capital market with an IPO of 50,00,000 equity shares. Issue Price: Rs. 234 Per Equity Share, Issue Size: Rs. 117.00 Crore. Aanjaneya Lifecare was subsequently named as Dr Datson Labs Ltd. It is alleged that Dr Kannan Vishwanath misused some of this money.As per Annual Report FY 2013 – 14, Dr Datson Labs had two world class R&D Centres at Mangalore and Bangalore.Subsequently what has happened to them is not known. Have they been sold and if yes where is the money from its proceeds?
(6) Dr Datsons office was alleged to be fraudulently registered by Dr Kannan Vishwanath on his name using backdated stamp paper wef 2011 and in Jun 2015 it was transferred on his father / mother’s name.
(7) Dr Kannan Viswanath has started (backdated) Hong Kong base company Windsonn Exim Limited. Its board members as per its site are, (i) Dr Kannan Viswanath MD, (ii) Mr Arthure Kibble, based at UK, (iii) Dr. Rajendra Kamat, and (iv) Ing Alex Eens (President). Patents belonging to Dr Datson Labs are shown as belonging to Windsonn Exim Limited also. Is it possible for two companies to hold same 15 patents?
In these frauds Dr Kannan has been assisted by his father, Mr Kasi Vishwanathan. Dr Rajendra Kamat, ex Non Exe Chairman, CFO and Company Secy werwe aware of it by virtue of their posts. Also Mr Kishore Iyengar, a close confidant of Dr Kannan Vishwanath is alleged to have been deeply associated in all the fraudulent activities of Dr Kannan Vishwanath.
Gufic Bioscience is a specialized pharmaceutical company based out of Mumbai promoted by Choksi family in 1960s. It has presence in different segments of pharmaceutical sector including some presence in Ayurveda (which was a diversification by Mr. Jayesh Choksi). Gufic in 1990s was a strong pharma company (probably bigger than Sunpharma, at that point in time!) with products in the APIs and Formulations. It strength can be gauged from the fact that its brand Mox (which was sold to Ranbaxy) was very well known in the market. Same was the case with Zole(Miconazole Nitrate). It currently has established its expertise in the speciality injectables area with specific focus on lyophilisation products. Gufic Bioscience is one of the largest manufacturers of Lyophilized injections in India and have a fully automated lyophilisation plant. The product includes Antibiotic, Antifungal, Cardiac, Infertility, Antiviral and proton-pump inhibitor segments. Being historically a pioneer in the lyophilized segment, Gufic has long time partnerships withseveral large MNC & Indian pharma companies to manufacture their products in its manufacturing facility. After the sale of such great brands, Mr. Jayesh Choksi was unable to create a focused brand based organization. With unnecessary diversification into OTC products, Ayurveda and other FMCG products, it got relegated to the side-lines.
Conclusion: We are fascinated by the management of Kriti,it's way of conducting efficient operations and vision for the next 10 years. Company should deliver over a 25% consolidated growth this fiscal which should see it crossing 500crs comfortably. PAT are expected to rise disproportionately as contribution from value added products and high margins segment starts.
We asked one of our Share Bazaar app member to pen an analysis on Intense technology,exclusively meant for the App. Here's " Thestocklady" with his analysis on the recent quarter numbers by the company. He keeps a low profile and hence has requested us to refrain from posting his name.
1)BSNL revenue yet to kick in. This would have added an extra 25cr to the q4 numbers but unfortunately supreme court put a spanner in the works saying do aadhar based migration.
2)The migration instead of FY2017 will happen in FY18. The amount of migration revenue will also increase.
3)There has been a increase of 1.65 cr in employee cost ( 22% ). In my estimate, part of this would be driven by esop related expenses, and partly by additional manpower hired for the bsnl mandate.
4)Finance costs have dropped by 70%, which show that the company is able to run its operations with any borroing support.
5)Tax incidence is 30% in q417 compared to 7% in q416.
6)If the employee increase would not have happened , and tax paid as last year , we would have ended up with 419 lacs as PAT, a beat both qoq as well as yoy.
7)Company remains cash rich with 20cr cash in hand ( almost 10 per share )
Investing in intense for me was always being part of a long term strategy to share the upside of a true blue IT product company from India. As such, there is nothing in this result which will make me change my mind.
1. Balasore with quarterly capacity of 40k tonnes just showed 345cr topline. So just around 87k/tonne realization??. Imfa showed rough realization/tonne of around 102k/tonne. He must be kidding:)
Emmbi Industries posted a solid quarterly performance where top-line has shown roughly 13% growth YoY and 14% growth QoQ. Operationally, it has done even better where EBITDA margins have expanded from 12% YoY and 11.36% QoQ to 13.4% this quarter. Quarterly EPS stood at 2.31 vs 2.09 YoY and 1.35 QoQ despite higher tax expense (EPS would have been higher by 0.40 at applicable MAT rate).
Management “has walked the talk” in their focus on –
1. Introducing value added high margin products which have resulted in EBITDA margins at current level from 7-8% level 3 years back.
2. Reducing interest cost from over 13% to below 11%.
Key takeaways from the recent con-call post Q4 2017 results-
• Pre Expansion capacity was 18,000MT. Capacity utilisation stood at 92%. Company has undergone 2 expansions –
'Dedicated Pond Lining Manufacturing Unit (3,600MT)
'Dedicated Food & Pharma Packaging Unit (2,400MT)
This takes total capacity to 24,000 MT and capacity utilisation to below 70%. This takes care of capacities required till 2020 that means no further capex for next 3 year except for maintenance capex (roughly 5 Crores per year.). The management has reiterated that they aren’t looking for any further debt till a really great business idea comes in its mind. Also their philosophy is to build capacity, reach a 90-95% capacity utilisation and then go for a capex to bring it down to 70% level and keep doing it over years.• The company is predominantly a B2B company. However, recently the company is focussing on developing B2C business. The company has created 2 brands for its B2C business –
o “Jalasanchay” for water conservation.
o “Krishirakshak” for crop protection.
The company has also started a distributor level brand – “Dr.M” where the distributor is required to undergo 15 days training from the company. This will enable them to help farmers with technicalities of the product.
• In previous interviews, management has clearly said that the focus is on replacing low margin products with high margin products. This quarter, they have introduced one such product – “Emmbi Aluminium Liner – Coffee Aroma Lock Technology” – this helps in locking the aroma & freshness of coffee and can also be used for a product which needs a leak proof packing. This product helps in maintaining the freshness & quality of the inner product for a longer time.
The focus of the management is to create products & processes which are hard to replicate and differentiate them from competitors.
• Newfound focus on automation ensures optimal utilization of manpower. This,combined with continuous training and up-skilling ensures lower attrition.
• Management is clear that any new business has to be ROCE accretive. On being asked if they have any timeline in mind for a magical 1,000 crore top-line, they clarified that they have never thought it this way. It will come someday but any additional business has to be ROCE accretive.
To conclude with numbers –
? Dedicated Pond Lining Manufacturing Unit at 100% capacity utilisation will fetch a top-line of 100 crores and the product carries roughly 16-18% EBITDA margins.
? Dedicated Food & Pharma Packaging Unit at 100% capacity utilisation will fetch a top-line of 40 crores and the product carries roughly 16-18% EBITDA margins.
? Phasing out low margin products and replacing high it with high margin products will improve the realisations/MT of the company. However, it’s tough for now to quantify the same.
? No capex for next 3 years will help them reduce their debt which will further add to EPS.
To conclude, interesting times ahead for Emmbi and it has the potential to be a real compounder.
Indian Diagnostics Industry and What Needs to be Done
Company is set to have a watershed year in the present fiscal of 2017-18. There are a lot of triggers aside the turnaround one which market anyway craves for. GST will pave the way for migration from unorganised to organised sector which would be a boom for Kisan mouldings. Company is also very strong in Uttar Pradesh, with the present loan waiver in the state-Its set to witness robust demand.
Company has a Solvent division(Adhesives in its segment) which is a negative working capital business and comes with 30% Ebitda margins. It does a turnover of around 25crs. Company sees good potential in the segment and has hired a senior team to scale it up to 75crs within the next 2 years. Selling of its non-core assets which got postponed owing to demonetisation may finally see its vindication in the next few weeks. Company has also launched its Water tanks division which has been an instant hit in the market. Overall, exciting times are ahead for the company.
Working capital should only include inventories, receivables, other current assets (including cash) required for running the business at current levels of business volumes. Cash which is surplus to running the current scale of operations (whether kept as cash or parked in investments) should be excluded. Care should taken about seasonality. In some businesses, because of their seasonal nature, the need for cash grows during certain months of an year and then falls. In such situations if seasonally surplus cash is parked in investments, it should still count as a working capital item.
One should deduct current liabilities pertaining to amounts due to vendors (but not for fixed assets), advances from customers and other payables for running the operations. Items like provision for taxes, proposed dividends, debt due within next one year should not be considered for computing working capital.
I use this definition of working capital for estimating the working capital intensity of a business. I do this by comparing the average working capital needed in a year with net revenues of that year. More insights are often found by looking at the trend of working capital intensity over a number of years.
If, instead of measuring working capital intensity, one is testing short-term solvency, then all liabilities which are due within one year (e.g. short term debt, payables for fixed assets) should be counted and all cash items including investments should also be counted. I hardly use this version of the ratio, however, because I focus on exceptionally well financed businesses and there are other ratios to figure that out.
Read books from successful investors.
Stop watching TV News Channels.
Nobody knows the future, so stop asking.
Money is only one of the types of Wealth.
Crazy people of like nature enforce yet conceal each others' craziness. Find your craziness and tone it to saner proportions.
Mean reversion is an enduring truth of market.
Average common man will buy more in peaks and less in trough.
Excesses in under and over valuation is an enduring theme.
Find High Growth Companies in Low Growth Industries.
Stop Finding companies in High Growth Industries.
Find out the type of investor you are, someone who buys on borrowed tips of one who researches on their own.
Find market leaders in small niches, not #3 or #4 players selling cheap.
Thinking in 3-5 year time frames and not 3-4 months / quarters.
Understand the business, competitive forces and ability to predict future of the business.
Stop thinking solely in PE terms.
Stop playing greater fool game.
Bet on four stocks at a minimum, don't over concentrate, don't over diversify.
Think independently. You will outperform the majority.
When there is no company worth investing in the country, go all cash, to go out of the country.
Get rich slow-but-sure, don't buy lotto, don't play in casino, don't gamble, don't leverage.
Maximise money per hour of research, no point buying into a position requiring active monitoring. The person who makes 100 million from stock market by investing 1 hour per day wins over the person who makes 100 million by investing 6 hours a day. Time is finite and limited. Learning and knowledge is infinite.
Make money and stock market both your slave, make money and forget about them.
Never retire, work incessantly.
Money is means and not an end. Money is a slave to free you from your daily routine.
Show you have the creative potential and do something that nobody has ever done.
Have more creative ambitions in life than earning billions, you are more than your body (thankfully) that needs to be fed on money supplied goods and services alone and very soon you will enter a dimension where money will not work. How soon ? Likely before 2500 weekends.
Gradually drift into a field which you are passionate about, otherwise you are a big disservice to yourself and the society in a profession that is not your passion.
Buy damaged stocks, not beaten down companies.
Learn from own and others' mistakes.
Explain your picks to yourself with four convincing reasons.