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Archives : Stock Tips

Sunday, April 19, 2015

Starting Techno-Funda Tutorials in Android App and Stock idea:-Ambika Cotton Mills ltd

Quote:As promised last week,here's the note of Ambika cotton.

Techno-Funda Tutorials:-

We are going to start the techno-funda tutorials in the app from May.To know more about it mail here:sharebazaarapp@gmail.com.

Soumya will take care of the technicals and I will try to make you learn what I have learned over the last 12 years.I remember visiting several cybercafes which charged 70 bucks per hour,back in 2003.Whatever pocket money was gathered,got "invested" in learning the aspects of the game.Dividend takes care of the living and hence there's little motivation to work more.Inflation may compound at 8% but tax free dividend too ain't inferior with 20% yearly growth.So if I could teach even a few passionate ones the fundamental aspects,that will be a satisfaction booster.


Need a demo of what will be taught?Lets prepare the analysis in couple of ways.One for the nerd and the other for the geeks.Simple note for the simple investor and an interesting note for the professional investor who invests for living.Thanks to Saurabh,Saumya,Ujjal da,Dibyajit and Keshav for helping me with the inputs.



Stock idea:

Scripscan:Ambika Cotton Mills
Traded in:Nse-Bse
Avg buy price:895rs
Target price:1350
Return percentage:50%
Duration:9-12 months

Note 1:

1)ACML operates in a niche segment which is estimated to be only ~ 10% of total yarn market by volumes.

Note:Cotton yarn is boring commodity but ACML seems got a differentiated model.Manufactures for the premium shirt manufacturers.Hell yah it's the market leader,he'll yah it's a monopoly.No comparable peers.

2)Debtors days of less than 5 or receivables of just 5crs on nearly 480crs of sales.

Note)Can be two aspects:
A)Unlike other commodity yarn manufacturers who first manufacture yarn & then look for customers, ACML it seems only manufacturers against orders.

B)It exports over 60%,it surely will take more than 4 days to reach to its clients.That hints at "advance payments from largest premium manufacturers of the world".

Quote:The bargaining power will be with the manufacturer."So pricing power is certain".

4)Since we are talking about premium and largest,ACML's customers ought to have stringent processes for quality compliance.Inventory days at 80.

Note:Thats a moat out here.Not any xyz can take its market share just like that.
Inventory days ought to be higher as it imports raw material from Egypt,USA.Operating cycle just at 3 months vs over 8 months,five years ago.

5)ACML's Debt has reduced from a peak of 280crs. in FY08 to 70Cr. without dilution, & the co. is expected to become debt free by FY15 end.

Note)Debt reduction with higher sales,great going.Debt free to boost NPM.Higher payout too.

6)Opm peaked at 29% in 2011,present Opm at 20%.

Note:Related to cotton prices which saw a high of 165 cents per pound in 2011 to just about 80 now.Still it's at 20% Opm vs nothing of peers which got royally banged.It ain't a commodity obviously then.

7)Capital turns up 150% in 5 years from 60 paisa in 1 re to nearly 1.5rs with same 1 rupee.

Note:Company seems sweating its resources big time.Ones cotton prices starts to outperform,Opm will rise which coupled with higher capital turns will boost the ROIC.ROIC already at a respectable 17% which itself is a moat as per Dorsey.

8)Opm at such higher levels also due to captive power.Power is the 2nd largest cash expense & the co. has 27MW of captive Wind Mills which​ is boosting the margins.

Note:Higher margins but on a capital employed of 90crs.That ain't your ROE booster.

9) ACML's sales have increased from 40Cr. in FY00 to 477Cr. in FY14 & has never declined in the 14 year period.EBITDA declined only once in the past decade in FY12 due to forex losses.

Note:Impressive achievement which market couldn't fathom as it always perceived it to be a boring commodity player.Things to change as perception changes but ya susceptible to forex losses.

10)Debt free-Internal accruals,Tuf subsidy?Return ratios down?

Note:Promoter seems want to keep the co. debt free & incur all future capex only through internal accruals, despite availability of TUF subsidy as norm, which might pull down the Return ratio.

11) During the past 5 years, cos. dividend per share has increased from 2/- in FY09 to 12.5/- in FY14.​

Note:That's called increase in commitment towards the minority shareholder.Will increase more as mcap increases(psychology) and as it becomes debt free.Market perception to change slowly from boring to not really boring to hell yah wow(experience).

Misc stuff/Anything am missing?

Note:Reduction in Working Capital in 5 years - from 45% of Sales down to just 8%.Positive EVA generator,AltmanZ score of 2.49 vs 1.14.Still not in safe zone but will get better with time.Spindle production capacity has grown from 42k spindles to 110k spindles in last years at 11% Cagr. Revenues per spindle has increased at a healthy cage of 9% in the same period(20.7k to 43.4k).ACML's scrap sales at 8% vs at max 4% for other cotton yarn manufacturers.​This is probably because ACML rejects the cotton that others might have used, as its yarn is used in premium garments.

Promoter and Foundation:

Note:Chandran grandpa at 64,fit guy,can still run the show.Daughters on board.Can run the show?

Moat certificates?
Note:Supima,oeko-tex,GOTS.Not available to many.

Retail investors Psychology/Market perception nature?

Note:They ain't interested anything about 1000 as pensive guys got gusto only towards penny priced craps.Markets will give it it's deserved due,from oversold 5 PE to double digit multiples slowly.Stock to be steadily chased.MF's,HNI's to get in.Opportunist/Chartists to get in.

Put together:Ethical visionary promoters+Holding margins inspite headwinds+scalability+Monopoly with pricing power+debt free+high cash flows+ robust ratios+Higher payout+20-25% cagr for eternity with higher margins+too cheap valuations and low floating stock.

Conclusion:ACML is a high quality co with good clean,visionary promoters, which is wrongly being valued as a commodity yarn manufacturer, thus, the stock is ripe for a re-rating.


Note 2:-

Company & Business Overview: 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 nearly 60% of its revenues. The company makes both, compact ring yarn and eli twisted yarn, though, majority of the production is of compacting system. The company has four manufacturing facilities at Dindigul, (Tamilnadu) with a total spindle capacity of 110,000; of which 100,000 spindles is 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.

Industry Overview: Now before we go into analyzing the company, just have a look at the current developments in the industry. India is the world's second-largest producer of textiles and garments and accounts for about 22% of the world's spindle capacity. It also has the highest loom capacity with 61% of the world's market share. The industry contributes ~14% to the country’s industrial production and 4% to GDP; and it is expected to expand at a CAGR of over 10% to reach USD 223 bn by 2020-21. At the same time, the exports have had a smart growth over the last few years. In the overall basket of cotton textiles, cotton yarn has shown a tremendous growth of ~29% (as compared to fabrics and made-ups) increasing from USD 3,535 mn in FY13 to USD 4,503 mn in FY14.

However, according to Directorate General of Foreign Trade, the cotton yarn export is following the declining trend for the last several quarters on account of weak demand from China, which is the largest importer of India’s cotton yarn. The stocks started piling up in the spinning mills, though mills have yet not reduced the production. In April 2014, China has terminated its old cotton procurement policy and now shifted to a direct subsidy based policy, under which, farmers would sell the cotton at the market prices and in case the market price is lower than the government set target price, the difference i.e. subsidy would be directly paid to the farmers; this shift towards direct subsidy would make cotton available at market rates to mills in China, thereby, reducing the dependence on imported cotton as well as imported cotton yarn. Now, the import duty on cotton and cotton yarn in China can be a key determinant of cotton yarn exports from India. According to a report of ICRA, The demand for cotton yarn continued to remain healthy with cotton yarn production increasing by ~9% to 3.9 MT, during FY14, thereby, substantially increasing the capacity utilization levels.

Point to note:Now, talking about the raw material, cotton & cotton prices; India is the second largest cotton producer of the world, just next to China. The cotton prices have already come under pressure due to higher stocks and the world cotton industry may witness fifth consecutive surplus season thereby giving no sigh of relief for the cotton producers & suppliers and at the same time, any worrying factor to them who use it as a raw material. The best thing is the demand for yarn and textile from the country is growing and is set to grow higher. We have recently seen the boost in businesses of companies like Pearl Global Industries, Orbit Exports and others. A rough idea about the current demand and supply economics about cotton can be looked at through the following article.
(http://www.thehindubusinessline.com/industry-and-economy/agri-biz/india-set-to-emerge-as-worlds-largest-cotton-rower/article6379920.ece)

Financials & Valuations Outlook: Since the company has carved out its own niche and is involved only in the manufacturing of specialty cotton yarns primarily made from the imported raw material, 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 previous fiscal, the company spent nearly Rs.29 crores towards modernization of Unit-I and implementing EHT facility ensuring dedicated electric supply exclusively to support the operations of Unit – II, III & IV; and also pre-paid the loans to the extent of Rs.17 crores. During the five years, spanning FY09-FY14, the company has grown at a CAGR of ~21% from Rs.184 crores to Rs.477 crores while the Earnings Per Share have grown over 8x from Rs.16 to Rs.82 during the same period. Since, the cotton prices are hovering at such low levels while the demand is likely to remain consistent in the mid-term, we expect company’s operating margins to resume to 25% plus levels. At the existing growth,we expect the company to report top-line of Rs.710crores in FY17 and Rs.850crores in FY18; at an operating margin of 20%(most conservative estimate),we get an operating profit of Rs.170 crores. The company will soon be debt-free and depreciation could be Rs.40 crores at max. So, this has all the potential to show an earnings per share of Rs.170 after taking out corporate taxes.This company has tremendous book-data unlike any other company in this area – better return ratios, low debts, efficient working capital management system, etc.At 8x you get your target price.





Share bazaar app:-

Dear Friends,

I am delighted to inform you that our app "Share Bazaar Your Market Guide" has been launched for everyone on Android Play Store.

Quote: Its heading towards 10000 rich downloads in less than a month.Thanx a great deal for appreciating and liking it so much.

To download the app:

1. Search - Share Bazaar Arun - on the Android Play Store

OR

2. Go to the following link:

https://play.google.com/store/apps/details?id=ams.newsfeed.activity&hl=en

This is a gift from me to all the stock market participants to keep them updated. Enjoy and keep compounding.Also do give your reviews and ratings about it.

Friday, March 27, 2015

My Share Bazaar App/How to make 1cr with just 3 lakhs and stock idea:-Kokuyo Camlin Ltd

Dear Friends,

I am delighted to inform you that our app "Share Bazaar Your Market Guide" has been launched for everyone on Android Play Store. To download the app:

1. Search - Share Bazaar Arun - on the Android Play Store

OR

2. Go to the following link:

https://play.google.com/store/apps/details?id=ams.newsfeed.activity&hl=en

This is a gift from me to all the stock market participants to keep them updated. Enjoy and keep compounding.Also do give your reviews and ratings about it.




From 3 lakhs to 1cr in 10 years:-

Want to be crorepati in 10 years?Just got 3 lakhs in portfolio?Feel that amount is not suffice to make so much?Check out how you can retire in just 10 years.

1)The first task you need to do to achieve that goal would be to simply relax.Forget all the stress and the surrounding miseries.Vow to yourself of not repeating those incessant gambling and short term trading blunders.Take oath of not giving a single penny to the corrupt govt in form of short term capital gains taxes.Force your greedy broker to shut shop and sell agarbattis in some noisy,stinky crowded local trains.Breath deeply with closed eyes and imagine the colour,the odour of 1cr.Are you ready to start the 10 year journey?Lets proceed buddies.

2)You need to find 10000 bucks at your disposal to help you to gain that much.That amount is actually the secret weapon of satiating your wealth desires.Just make sure that's there.Cut your expenses,stop fooling yourself with those unrealistic riveting movies which will enrich the producers at cost of your moist eyes.Travel in bus in place of ola cabs.Abolish pizzas,eradicate fancy outings.So finally the 10000 monthly bucks looks seemingly ready in your vicinity.

3)Be passionate and try to love the subject.Read my blog archives,the strategies.My experiences,what worked what didn't.Everyday ensure you are loyal to the subject.Put 2-3 hours daily.Can you really achieve something if you ain't crazy about it?Be in complete love,treat it like any other sexy lady you craved for in the earlier years(most of my members are kinda 30+,hence visualising  the past crushes(crashes often)would help,younger folks you may remain in the present).

4)Embrace reality.Accept it with both hands,if your future multibagger moves to 13rs from 10 in a period of 12 months.The whole gimmick of 1cr is based on a 10 year CAGR of 30% with help of 10000 bucks monthly SIP.Stop plundering my mailbox with silly questions of something not moving.Be patient,let the amazing stories unfold.Stock prices multiplies.Ones something starts the journey,100 becomes 200,200 to 400 and it's keeps complimenting the figures with higher multiplications.

5)Buy only high quality companies.Stop checking into penny priced dubiously managed companies operated by fly by night operators in camouflage of promoters.Your cohorts or mates barking in public forums with insider infos are part of that ignoramuses which probably owns 5 shares ,bought at the highest rates,looking to unwind the next day with dreams of quadrupling his fund every other fortnight.Either befriend them or make those the source of your daily dose of entertainment.

6)Stop putting all your eggs in the same basket.Make a portfolio of 12-15 stocks.Even 10 will do.A concentrated portfolio is needed to make wealth.A more diversified portfolio is meant for wealth preservation and a concentrated portfolio is all about wealth creation.That adage comes from the Oracle of Omaha,the greatest investor ever to graced Mother Earth-Buffet Grandpa.Now this ain't for everyone.Recall my 5% logic?You can only opt for it if you can relate yourself to markets.If you are experienced,few years would help.You need to understand the businesses simply.Ride the horse being the jockey.My stock market tutorials in the forthcoming app would help a great deal to understand the aspects.

7)Make someone a Guru.Anybody who is experienced with wealth generation record will help.Read him,follow him,make him your idol.Now please don't consider me a guru.A few of my critics take the guru tag of my blog much seriously than I ever fathomed.It so happened in 2007 when I was about to start blogging,a movie called Partner released which showcased the protagonist as Love guru.That was all I needed,the catchy tag also helped in scoring high through the SEO.I am just one of you with much more man hours experience,lot more blunders and bit more passion than peers.Just your average joe ,putting daily 12 hours in knowing the unending,mysterious wealth generating machine known as stock markets.If you ask me about my guru,there's none actually.I listen to all and adept to what seems feasible.

8)Never hope against hope of making much with albatrosses.A lot of you guys sleep with utter craps and associate yourself with the irrelevant myth of hardly getting anything if disposed.Sell them,even losses helps a lot.Try to learn from it and promise of not repeating the mistake again.Put those pennies in those high quality stocks where you have  conviction and confidence.Don't just delay.Get rid of them the next trading session itself.Also reinvest dividends even if they ain't much.Every penny counts in stock markets.It would again be prudent to note that your's truly just had all of thousand bucks when he first entered the arena of stock markets.

I don't want to lecture more.Its high time the words are taken seriously and put in act.If any doubts or query persist,call me or my competent guys.Meet me,visit me in my home.My door is open for all of you.





Recent call to members.Readers its time for you guys to act as there's still quite a bit on the table.

Stock idea:-

Scripscan:Kokuyo Camlin Ltd
Traded in:Nse-Bse
Buy range:63rs
Target:95rs
Percentage returns:50%
Duration:9-12 months
Portfolio allocation:5%

Company Overview: Anybody who studied in Indian primary and secondary schools during the last couple of decades would definitely recognize brands like ‘Camel’ and ‘Camlin’ without needing a reference. The company manufactures and sells a wide range of products such as artistic materials, hobby colours, scholastic colours, scholastic stationery, office products, drawing instruments, writing instruments, office stationery, adhesives, notebooks, office supplies and writing instruments. Founded as a partnership firm named, Dandekar & Co. in early 1930s to conduct the business of fountain pen ink, stamp inks, adhesive paste, gum, sealing wax, chalks, etc, the firm finally incorporated as ‘Camlin Private Limited’ in 1946. The company got listed on BSE in 1988; in the year 2011, Kokuyo S&T, a Japanese corporation (which has been listed on Tokyo Stock Exchange since 1971) engaged in the business of stationery, acquired a majority stake in the company.

Business Overview: The company now has one of the largest product portfolios in the industry spanning over 2000 SKUs manufactured at plants located at Gangyal & Samba in J&K, Taloja, Tarapur and Vasai in Maharashtra. In addition, the company building a state-of-the-art facility at Patalganga Industrial Area; spread over 14 acres, is likely to be completed in 2016. The Management believes that this facility will become the foundation for their next phase of growth and will help them gaining leverage in terms of economies of size, scale and scope. The 80 years old business now carries a strong brand recognition, an extensive supply chain network and caters to wide range of products, primarily categorized into (a) school and education products (b) fine art and hobby products and (c) office products. They do in-house manufacturing of water colour cakes, water tubes, poster colours, wax crayons, oil pastels, plastic crayons, sketch pens, wooden pencils, scales, sharpeners, colour pencils, erasers, math sets, dissection boxes, engineering boxes, other technical instruments, note books, mechanical pencils, hi-polymer leads, fountain pen and its ink, artist oil colours, artist acrylic colours, canvas rolls, canvas boards, artist water colours, oil sketching papers, drawing inks, brushes, painting mediums, glass colours, fabric colours, powder colours, fabric glue, artist poster colours, white board markers, permanent markers, highlighters, ball pen, gel pen, stamp pads, refills, paint markers, cd markers, carbon papers, glue sticks and gum. In the organized market, the company competes with Hindustan Pencils Limited, Faber Castel Limited, Sundaram Multi Pap Limited, Navneet Publications (India) Limited and Cello Writing Instruments.

Industry Overview: The Indian stationery industry is highly fragmented, fiercely competitive and mostly unorganized; less than a fifth of the industry is non-branded local manufacturers.The industry is primarily divided into two segments office stationery and school stationary; according to the annual report, the school stationery segment is estimated to be around Rs.9,000 crores annually, whereas the office stationery segment is estimated to be in about Rs.5,000 crores annually; while on the product-wise segmentation, it has three segments namely, computer and daily use, writing instrument and notebooks and paper. With the government’s focus on education sector which remains the need of the hour in a rapidly developing country like India, the scope for growing stationery business is immense. In addition, the industry is well positioned to be benefited from the country’s favourable demographics with one of the youngest populations, fast-growing middle class. With the interests of government and private players, the number of schools, colleges and universities has been increasing consistently. Nevertheless, with such huge scope being offered and presence of unorganized market, with not much entry-level-barrier, the industry witnesses new entrants on a daily basis. In-line with the ongoing transformations in the stationery industry, the company has taken a long-term and strategic decision to build up capacity, capability and competency.

Financials & Valuations: In the industry which is so widely fragmented and primarily unorganized, the company has grown steadily over the last decade. It has grown at a CAGR of ~10% in the short-to-medium-to-long term from just Rs.200 crores in FY04 to nearly Rs.470 crores in FY14. The company has maintained an operating margin of 7-9% from FY09 to FY11.However, with the surge in the raw material prices which makes more than a third of the sales, the profit margins had eroded over the last few years. The company depends on raw material suppliers for dyes & pigments, wood, plastic containers, chemicals, metal containers, paper products etc, the prices of which fluctuates a lot. The recent dip in the commodity prices is likely to benefit the company in order to improve profitability. With the anticipated improvement at the operating level, the bottom-line losses will be wiped out.Meanwhile, the company remains virtually debt free along with the proceeds worth of Rs.103 crores from the rights issue which is being utilized at the Patalganga facility. Going forward, we expect the company to reach a top-line of Rs.750 crores by FY17 (during the current year, the growth has already accelerated to 15% driven by new additions to its product-line. The company in order to hive-off the impact of seasonality has plans to introduce whole new range of office stationery; and the new facility impact from FY16) and assuming a very much possible EBITDA margin of 9% gives us an EBITDA of Rs.68 crores, leaving away Rs.20 crores towards the interest and depreciation and another Rs.10 crores for taxes, we will be left with a net profit of Rs.38 crores that translates into an earnings of Rs. 3.79 for FY17. Assigning a PE multiple of 25x, we gets a target price of Rs.95; a 50%% upside from current levels.

Risks: Fierce competition, raw material risks, price fluctuations takes away all the profits.

Outlook: We remain encouraged with the industry and the stationery business which presents huge opportunity in our country where the consumption of paper is minimal in comparison with other countries. Where there is a huge massive chunk of population getting ready for the education. In addition, the company’s endeavours to polish the brand, building up capacities, capabilities and competencies makes our conviction reach higher.


BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Wednesday, March 18, 2015

My 27th Birthday tomorrow and launching of the Share Bazaar App

Guys it has been a great blogging journey for me since the last 8 years.The blog has got tremendous response and accolades from all over the world.It has been visited over 2.5 million times since its inception.I am quite determined of doing the same work of guiding you people till eternity.Anyways being my well wishers and admirers, I feel great to let you folks know that I am turning 27 on 20th of march,i.e,tomorrow.Though am  yet to receive any birthday gifts from you folks(just kiding),here's the Birthday Treat for you all.Do bless and stay blessed folks.

The much anticipated "Share Bazaar App" got finally launched yesterday.Will be open to you all on playstore from 22nd of March.Its only available on ANDROID as of now.Even your amazing articles would get posted there.Its your APP.

Check out the 9 pictures:-
http://tinyurl.com/k2q9cls 

Sunday, February 15, 2015

Dhanuka Agritech Ltd:-The next bluechip in the making

 Recent recommendation to paid members:-

Stock idea:-

Scripscan:Dhanuka Agritech Ltd
Listed on:BSE (507717) & NSE (DHANUKA)
CMP:Rs.520
Target:Rs.806
Expected Returns:56%
Investment Horizon:12-18 months
Portfolio Allocation:5%

The importance of ‘crop protection industry’ for an emerging country can be understood through these factual statements well mentioned in the annual report:

a) mammoth population of which a major segment is deprived of food,
b) second largest farmland, but, with lowest yields
c) Rs.2,50,000 crores worth of crops is destroyed every year by the pests.

Thus, the crop protection industry plays a very crucial role in the primary need of the country; ahead of any other thing including construction, infrastructure, transportation, logistics, etc.

Company: Dhanuka Agritech Ltd., a 30-year old company, commands a moderate market share of 6% of India’s plant protection chemical sector, but it has outpaced the industry for the last four consecutive years. The company is indulged in manufacturing and marketing of agro-chemicals like herbicides/weedicides, insecticides, fungicides, miticides, plant growth regulators or stimulators in various forms – liquid, dust, powder and granules; that entails a range of over 80 brands of Dhanuka products. It has a pan-India existence with its nationwide presence, a network of more than 8,000 distributors or dealers, over 40 warehouses spread across the country; selling to over 75,000 retail spots scattered throughout the country. The company which has technical tie-ups with leading 4 American, 5 Japanese & 2 European companies reaches out to more than 10 mn farmers, their target customers, with its eco-friendly high-quality crop-care products. The company has manufacturing facilities at Gurgaon (formulations), Udhampur (liquids and powder), Sanand (country’s second largest installed capacity for granules facility and one of the leading dusting powder facilities of the country). The company also expects to commission an automated Rs.50 crores plant in Rajasthan to treble its powder and liquid manufacturing facility during Q4 FY15; with an installed capacity of 25,500 KL of liquids and 7,100 MT of wettable/soluble powder.

The company has a state-of-the-art, a Ministry of Science & Technology, Government of India recognized R&D center at Gurgaon and another one at Jalundhar with a strong, reputed team of over 30 senior scientists; having liaisons with Indian Council of Agricultural Research, State Agricultural Universities, National Agricultural Research Institutes, Krishi Vigyan Kendras, Central Insecticides Board & Registration Committee. Moreover, the company, besides engaging prominent professionals, also engages over two thousand ‘Dhanuka Doctors’ as per need temporarily every year, for working closely with farmers on the field including field demonstrations, educational campaigns and group meetings, circulation of product & technology literature and workshops & seminars.

Business: The intensive marketing network and innovative marketing strategies penetrating the rural interiors, improved farm income, rising awareness about the cost-benefit tradeoff of agro-chemicals, wider range of products along with the solutions for almost all problems related to crops and international technical tie-ups have led the company to register healthy growth over the last few years. The factors such as guaranteed minimum prices which have rejuvenated the farmers’ interest in agriculture has resulted the price-rise for the majority of crops in the past four years giving thrust to rural incomes. According to the data provided by the company, India is world’s lowest consumption levels of agro-chemicals; Indian farmers consumes ~0.5 kilograms per hectare as compared to much higher consumption in other countries such as Japan (above 10 kgs), Netherlands (above 8 kgs), France and Italy (above 4 kgs) and Germany, Austria, US and Pakistan (above 2 kgs). In addition, though India has higher percentage usage for insecticides, the country lags behind in fungicides (16% as compared to 26% globally) and herbicides (20% as compared to 48% globally). The rising farm labour prices are lifting herbicides demand thereby replacing manual weeding and Dhanuka with the strong herbicides portfolio would be the biggest beneficiary.

Growth & Outlook: Over the past 3 years, the leading agri-company’s top-line has grown at a CAGR of ~15% to Rs.738 crores in FY14 while the profits have grown ~22% annually maintaining a return on equity of ~29%.During the current year, the Management expects ebitda margins to expand 50-100 bps on account of higher excise refund duty from Udhampur unit and restricting the advertisement budget however, monsoon has been bad this year especially in critical crop growing areas like Punjab and Haryana. Accordingly, the agrochemical industry is facing a challenging time and growth might be subdued. Nevertheless, the leadership position, the widely penetrated distribution network, the stable profitability, virtually debt-free status, low working capital requirement, healthy operating cash-flows and consistent dividends makes it an absolute long-term investment candidate. The Modi Government’s thrust on Agriculture gives a silver lining to the future prospects of the companies like Dhanuka Agritech. We also remain optimistic as the company has launched a couple of new products this year and is all set to launch a few more in FY16 and FY17 which will start contributing materially to the top-line in coming years.

Recommendation:Going forward,we expect the revenues to grow at a CAGR of ~15% to cross Rs.1,100 crores in FY17 and considering the same margin profile, on a conservative basis, despite having scope of a further improvement we expect the profit after tax to be around Rs.144 crores. Assigning a target-multiple of 28 we derive a market cap of Rs.4,034 crores reflecting a 55% upside from current levels, suggesting a target price of above Rs.800 over the next 12-18 months.


BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Friday, January 23, 2015

Tutorials and Anuh Pharma Ltd:-The Small cap pharma gem

My past experiences/Tutorials:-

1)A couple of my members expressed their concerns regarding recommendation of known stocks.They felt as some brokerages have already identified them,its no point recommending it again.What the F is that?Mywork is not to titillate you guys recommending sexy unknown names but all the efforts are meant to provide returns which would be superior to other asset classes or of  peers.Desperate complacent times call for high quality and safety.Times are such where a single mistake can squander your portfolio.If something is of high quality and posses great potential,forget others and buy it truckloads.

2)Often you people skip stocks which had a stellar move to punt on stocks which are hitting fresh lows.Another reason why retailer looses often.An upmove in a stock gives a lot of clarity which is warranted as its all about making risk free money.If you guys can glance through the past recommendations, you would find probably 90% of the stocks are recommended after they have doubled,tripled,quadrupled.Now that's weird right?Sounds too odd?I will tell you the reason.Lets look at few examples.

a)Canfin homes moved to 235 in one week from 160 and bang the recommendation followed.I still remember a lot of members left it to opt for something else as it moved 50%,all in a matter of 5-6 trading sessions.They weren't comfortable with it.So what made me recommend the counter?Canfin was perceived as a lethargic company with no future even when the dynamic MD,Mr Llango was executing strategies to rewrite a new scripture for the company.It may have moved 50% in a week but for the last 16 months, prior to that week, it remained in the range of 140-160,inspite of tailwinds and a violent bull market.All was needed a break free rally and numbers which inevitably followed.Canfin recently hit 700.

b)Premier explosives moved from 140 to 206,recommendation arrived.The company had a great story always but people including your's truly had concerns regarding the promoters as they wrote off some 11crs investment in Georgia few years ago(the easier way to siphon off funds).Few renowned "but hard to convince investors" came and the perception changed.Premier in less than a month,moved over 50%.What will you prefer?I could have never suggested it at 140 as the doubts galored.Isn't it better to skip a doubtful unconvincing 50% for unlimited upsides backed up by conviction and confidence?

c)Even after knowing the amazing story and potential of Kitex,I gave it a pass at 160-200 bucks owing to related party transactions.Tried to talk with the management and they never obliged.Not only me but a lot of HNI's and analyst mates had loads of doubt about the company.Stock moved to 300 and the management clarified everything with huge patience.Answered awkward questions in the most soothing fashion.Doubts got eradicated,stock hit 600 yesterday.What will you prefer?Kitex with doubts at 200 or kitex with high conviction at 322?Oh,very recently, they even appointed 'Ernst &Young as their auditor".

d)Take the recent case of Kesar Terminals.Am tracking it for a long time.Conviction never came as even when the whole sectoral logistics PE went to over 30,even after below averagely managed companies like Patel integrated traded at 50 PE,this KTIL traded in single digit multiple.My research guys contacted Mr Sant khare many a times but he refused to meet or divulge any details.Few of the HNI investors including my associate went to the facility,talked to the relevant guys and stock doubled as conviction followed.PE expanded and stronger hands came.Debt issue though lingers but even a 20% equity dilution will give it 50crs,so that issue got addressed too.Members as you see there's a lot of interesting aspects which one needs to take into consideration before the recommendation.

e)A lot of  members clamour for new stock ideas ignoring the old ones.Look at what happened this week.Shilpa medicare moved from 600 odd to hit 900.Fluidomat rocketed to 315 from 210.Kitex,repco hit fresh life time highs.The secret to win from markets remains the fact of buying quality early and then accumulating more as it moves higher,provided the story is intact.I did make sound about Poddar developers and my liking towards it.The first instance I bought,it had all of 32 volumes a day,out of which your's truly swallowed 30 shares at around 200 bucks.Simply couldn't recommend it as there were no volumes but it was of very high quality.Advances from lower middle class customers amounted to 102crs when mcap was less than 100crs.Am talking about the scenario of 5-6 months ago.Within no time,it more than doubled to 500 rs and I bought a bit more.I suggested you guys to keep it in radar and look to add at 700 levels.Scrip came near 740rs only to settle higher at around 1000.This week some renowned Fund got in and look at it,1500 bucks and counting.If you own some high quality stocks with backing of visionary management,investors would ensure it gets most crazily valued in due course.Why?Simply because stock market is a place where quality is of so little,it just get bid higher and higher.

My story:Many years ago,a bankrupt counter called Symphony interested me a great deal.Its present or past was awful but it had a vision,an amazing futuristic thought,had the fire in belly.Somehow the conviction never came and I gave it a miss.It went from just 4 to 28 bucks.I took a very tiny position and the company went up to 70.With each upmove, it hinted about its bright future and started delivering interesting numbers.Mr market started fancing it but since marketcap was too low, institutions or MF couldn't get in.I bought a bit more at 100.Stock went to 300 and I recommended it to guys,hardly a couple of years back.I bought it again at 440.Stock stands at 2000 bucks now.Imagine, If I would have let it go simply because it moved from 40 to 300 in 2 years,would you guys have availed 7x in it?There's no wrong in buying high as long as the story is intact.Its so futile to vandalize your portfolio by opting for losers at the cost of amazing high quality winners.





Quote:Anuh pharma is an old recommendation which got suggested to members at 270 odd during July 2014.Found it today,having the feel to put in the open blog for the benefit of you folks.Modified few lines and here you go.

Stock idea:-

Scripscan:Anuh Pharma Ltd
Bse code:506260
Cmp:360rs
Target Price:450rs
Return percentage:25%
Duration:9-12 months

Company Overview: Founded by Mr. Sevantilal Kantilal Shah in 1960, Anuh Pharma is a foremost Active Pharmaceutical Ingredients (API) manufacturer based in Mumbai and a part of SK Group which is a leading importer, exporter, distributor and manufacturer of bulk drugs, chemicals and pharmaceutical formulations and one amongst Eskay Fine Chemicals, Eskay Specialty Chemicals, SK Age Exports, S Kant Healthcare and SK Logistics.

Business Overview: The company is one of the largest manufacturers of macrolides, a kind of antibiotic drugs in the country.Among the macrolides,the company manufactures antibacterial erythromycin base and several other variants (primarily recommended)for throat infections by ENT specialists and General Physicians); it is the largest producer of erythromycin salts in the country. The company also makes higher macrolides including azithromycin, roxithromycin and clarithromycin;quinolones like ofloxacin; chloramphenicols and over a dozen corticosteroids. The company also offers an Anti TB Drug called as Pyrazinamide. All these products are being manufactured at the company’s Tarapur facility near Mumbai. The company also owns a state-of-art integrated laboratory to carry out research and development activities; this facility was acquired from a Spanish company in April, 2012. The R&D facility includes a chemical synthesis lab, an analytical development lab and a kilo lab with the view to cater to Contract Manufacturing. The R&D facility will help the company in intensifying their research & development activities with a view to enlarge the bulk drugs portfolio. All these things have helped Anuh Pharma to carve out its own niche in the world of APIs. The company is looking at different opportunities in untapped markets and also across a value chain. Today, the company is known for its Government recognized ‘Star Export House’ status; governed by cGMP, the company enjoys World Health Organization’s (WHO) version of GMP (Good Manufacturing Practice). In addition, the company has also filed several Drug Master Files (DMFs) submitted to European Directorate for the Quality of Medicines & HealthCare (EDQM) & US Food & Drug Administration (US FDA) which could create immense opportunities for erythromycin’s exports to US and Europe, going forward. The company has been exporting one-third of total production to over 57 countries and the company recently received approval from COFEPRIS (Health Authority of Mexico) GMP certificate for three of company's erythromycin products.

Financials & Investment Rationale: Over the last ten years, the top-line has grown from Rs.54 crores in FY04 to Rs.266 crores in FY14 at a CAGR of above 17%, however, the profitability was badly affected primarily on account of significant increase in the raw material costs, from 74% in FY04 to 84% in FY13. Nevertheless, during FY14 the gross margins regained substantially and the operating margin and net margin also showcased a significant improvement. The Management broadly achieved the revenue guidance provided in the Annual Report 2013 (it’s incredible that the Management provided a precise figure of Rs.277 crores for the full year in these uncertain times). The company is debt-free and enjoys robust return ratios. The company has reduced its dependence on macrolides and antibiotics, as less than 74% of revenues came from antibiotics as against over 92% in FY10 as the contribution from ‘other chemicals’ increased from less than a crore in FY10 to above Rs.67 crores in FY13. Interestingly, the company’s market capitalization was Rs.202 crores in April, 2006 when FY05 top-line was Rs.52 crores and net profit was below Rs.5 crores, today, it is available at Rs.300 crores when top-line has grown nearly 5x and net profit multiplied 4x.

Outlook & Valuations: The FY14 Sales, EBITDA and Net Profit stood at Rs.266 crores, Rs.27 crores and Rs.18 crores,respectively. I expect FY15 and fy16 Sales to grow ~11-12% CAGR(from 266crs to 330crs) and net margin to improve further to 7.5%(from 17.5crs PAT in fy13-14 to 25crs in fy15-16).Assigning a P/E target multiple of 15x to FY16 earnings, I derive a price of 450 bucks,an upside potential of 25% from current levels of Rs.360,of which, more than Rs.50 vouches for cash & cash equivalents and current investments.The promoters have been shareholders friendly; never missed on dividend since FY98; for the last fiscal, they declared Rs.8.50 per share.They have rewarded the shareholders with bonus issues time & again, ’95, ’99, ’06, ’10. Typically, pharmaceutical companies trade at twice and more of its revenues.A company which has amazing ratios,got payout of 30%, will not trade at less than 1x sales forever(fy14-15 expected revenues at 303crs,present mcap stands at exactly 300crs).So even if it moves up much higher and all those typical doomsayers starts to question,investors would always have the counter argument of making it sustain its higher valuations.Still need help in that regard?Recall the year 2006?200crs marketcap on 52crs sales.

Disclosure time:I personally bought quite a bit of "Daru" recently.We will never have something like "United spirits" in the next 50 years.Anyone having 12-15 years kinda horizon,buy it,SIP it but don't miss it.A 12-15 bagger in 12-15 years.P.S:I am also a satisfied consumer who happens to fancy "VAT69" in celebration rituals.So eventually am the 'Company owner+satisfied loyal consumer of my own produce'.Kya feeling hain yaaron :)Aint that feels great?


BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Tuesday, December 23, 2014

Kesar Terminals & Infrastructure Ltd(KTIL):The Christmas Gift for you blog readers

Quote:Recommended to paid members just 10 days back.Counter is trading at 467 bucks now.Its the Christmas gift for you blog readers.Make the most of it.Twitter followers though should have been aware of it beforehand.

Stock Idea:

Scripscan:Kesar Terminals & Infrastructure Ltd(KTIL)
Traded in:Nse-Bse
Cmp:425rs
Target:600rs
Percentage returns:45%
Duration:9-12 months
Portfolio allocation:5%

Quote:As Phil Fisher says,"It seems logical that even before thinking of buying any common stock,the first step is to see how money has been most successfully made in the past".The silent multibaggers of the past often leads to big future multibaggers.

Note:Continue to be very high on the logistics sector.Earlier recommended ones like shreyas,tci,Gati-All been 3 baggers.Kesar terminals too shouldn't disappoint.The best way to play a bull market remains to ride on a sector which is fancied by the market.

IP:Intellectual property or human brain is one of the most important factor which I look for before selecting a company.Also as per Phil Fisher,“In evaluating a common stock,the management is 90%, industry is 9% and all other factors are 1%".Check the below given profiles and the detailed summary.
https://www.linkedin.com/in/santkharee
https://www.linkedin.com/pub/ramesh-nayak/5/4a6/998


Business:Presently the company through its 2 bulk liquid chemical terminal at kandla has a capacity of 127,000 Kilo Litres (KL) at with a total of 64 tanks including specialized tanks, such as stainless steel tanks equipped with heating and insulation facilities and coated tanks which stores specialized products.The company is awaiting approval to further add capacity of 7000 kl at its kandla unit.Last year,the Company had converted 2 of its existing Mild Steel (MS) Tank to Stainless Steel which has contributed to additional revenues. The Company plans to convert more MS tanks based upon demand from its customers.Further,Kesar Multimodal Logistics Ltd (KMLL) is the SPV Company of Kesar Terminals & Infrastructure Ltd & Kesar Enterprises Limited and is developing a ‘Composite Logistics Hub’ at Pawarkheda(MP) under a Public Private Partnership (PPP) model.The Logistics Hub will comprise of a Private Freight Terminal with railway sidings, warehousing complex, cold storage, bonded warehouses, Inland Container Depot, Agri product processing units and modern cargo handling & storage facilities spread over 88.3 acres of land located strategically on the intersection of East-West, North-South corridor of the Indian railway network.The Company has planned to expand its presence to places like Kakinada [Andhra Pradesh], Pipavav (Gujarat).

Business in simple words:Put liquid storage facilities in port and rent them to importers and exporters.Company' vision is to be a Pan-India Integrated logistics Player.

Pawarkheda Expansion update:Kesar has done world class construction work in its new Pawarkheda unit.The company has almost completed its project phase 1.Few warehouses are even rented with high realizations.KMLL has also completed construction of some of its Agro Warehouses.KMLL has strongly geared up its marketing activities to create awareness among the prospective clients about the facilities that would be available at the Logistics Hub and also to assess the demand of such facilities in the area of influence.The facility is close to Itarshi which is a busy loading place owing to the high demand for food grains.Within the next 2-3 months,the company is hopeful of the full completion of its expansion along with the required approvals.That would see decent revenues coming mostly from its 800m long railway warehouse as well as from the futuristic looking 3.75k ton cold storage.Company in every possibility has chances of coming with blockbuster quarter4 numbers.Check the pictures:

http://www.kesarmultimodal.com/gallery.html

Relevant deals in the sector:The sector in recent past witnessed lucrative deals.Warburg invested more than 200crs in IMC when revenues were just 65 odd crs.Royal vopak also acquired CRL at a pretty high valuations.Those extravagant deals happened on distressed times.With logistics booming bigtime,future such deals too will happen inevitably at exorbitant prices.

Performance:KTIL posed total revenue of Rs.36.24 crore with net profit of Rs.11 crore recording an EPS of Rs.20.95 for 2013-14.The increase was mainly on account of better realisation of terminal tankage charges and maintaining the utilization efficiency of tanks by over 99%.

2014-15 numbers:The company will close the present fiscal with a topline of around 47crs and a bottomline of 16crs(20.5cr revenues and 7.56crs PAT already done in the half yearly numbers).Company should report sales of 65crs and PAT of 21crs in fy16(40rs EPS).

Past and future numbers:Company has grown its sales and profits at a decent pace of 19% and 25% respectively in the last four years.The overall demand for Bulk Liquid tanking business is firm.With good demand growth is expected in the oil & gas sector in India and a more favourable business outlook,Company is poised for higher growth in the medium term.With its expansion plan going smoothly,company should grow at a minimum 30-35% CAGR for the coming 4-5 years.

Concerns:Consolidated debt as on last balance sheet figure stands at 56crs.Company may resort to more debt to fund its future expansion plan.Too much debt and delay in project completion can be detrimental to the financial health of the company.

Concern clarified:Company has Contingent liabilities of Rs 108cr which is nothing but guarantee given for KMLL.

Future scenario:KMLL has great long term prospects.Entry barriers are very high in this business.There's more than a chance of company opting for value unlocking by spinning it off as a separate entity and allotting free shares to you shareholders.That can only happen 3-5 years forward,if at all.Considering the potential,KTIL over the last couple of years,has put in around 25crs to increase its stake in KMLL from around 50% to 99.90%.

Few very interesting aspects:Company has got pricing power.Year after year the Kandla liquid storage division has seen higher realizations.The same trend should continue in the near future.The multi modal logistics hub would have strong pricing power too.As per our Buffett Grandpa,"The single most important decision in evaluating a business is pricing power.If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business".It would be prudent to note that,"Madhya Pradesh is the fastest growing state in our country with a GDP of over 11%".Rest of India are you listening?Cumulatively you cant even notch up 5% GDP.Think about it folks,you are putting on a massive size warehouse in an area where there's no such similar warehouses in 200km radius,Where the GDP itself is growing at an alien speed.Its also near to a railway station which sees a nomenclature of over 250 trains moving up and down.Year after year,you will increase the per sqft realizations and would supper on piles of cash flows.The expenditure would be the same fixed costs enabling you to enjoy rich operational leverage.Servicing interest shouldn't be a big deal.

Conclusion:KTIL’s business model is similar to one which Peter Lynch explained in‘One up on Wall Street’ as : success of business at one place and duplicating the same in another place(from Kandla to pawarkheda and later to pan India).Promoters are ethical and posses great long term vision.Company though is a professionally managed company.They own 60% stake in the company.Company has paid dividend since its inception.Average payout for last few years has been around 15%.Payout should increase with higher profits in future.In the era of 30-40x future earnings in the logistics sector,Kesar is just trading at 12 times its trailing cash flows of 18.5crs.Post march15,the trailing cash flows would make the valuation look much more attractive.Company also boasts of a fabulous ROE of 30% which is kinda unheard of in the logistics arena.Assign a buy with a target of 600 bucks which would discount its fy16 earnings by 15x(basis can be half of PEG,trailing cash flows of the same 12-13x,PE of 15-So many ways to arrive at the target price).Peers quote at way above.
BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Friday, November 28, 2014

Unique Stock market App and Sanghi Industries Ltd

Stock app:-
 
About the app:I understand that finding right investments to compound your hard-earned  savings over a long period of time can give you financial freedom and can help you attain your long-term goals.

WHAT ARE THE ISSUES THAT STOP YOU FROM MAKING A LOT OF MONEY IN THE MARKET?

1.Subscribes to dozens of magazines and newspapers to follow nearly 5,000 companies listed in Indian Market - This does not help as you need to devote huge chunk of your time to read and understand each element

2.Learning fundamental and technical analysis becomes a task that is impossible as you need to visit a trainer for guidance which leads to disturbance in the daily schedule.

3.Following big investors, mutual funds and research analysts and knowing what they are buying involves a lot of effort to check shareholding pattern of each company.You never really know what made them buy xyz?Can well be the case the one you opts for accidentally hails from the fraternity of 'rare seldom failures'.

4.Finding small caps and mid caps where there is real growth and money is risky and painful as it can lead to wrong decisions that can lead to permanent destruction of wealth.

5.Seeking guidance and asking questions about your investments from an expert is something that can only be dreamt of till now.

WHAT IS THE SOLUTION?

Solution lies in a simple yet immensely powerful mobile application that solves all the problem that an investor in equity market faces.It involves:

1.Short articles about the interesting developments in the market.
2.News feed in a condensed form for day to day updates on companies.
3.Your Story - Stories of successful investors and successful companies.You would find the stories of so many unsung heroes who have made massive from the market through small and midcaps.
4.Fundamental and Technical Analysis training with full support and guidance that comes to you in your smartphone.
5.Daily Market Update.
6.Quality small cap and mid cap stories with futuristic guidance.
7.Important and Relevant ratios and company data.
8.Facility to ask your queries about market on the go in one click.

Not only these you will also be informed about the important events using PUSH NOTIFICATION  so that you never lose out on making money.

NOW YOU CAN BE TRACK THE MARKET ON THE GO.. !!

Now you don't have to run after information, training and guidance - ALL THESE WILL KEEP RUNNING AFTER YOU !!.It would be a "FREE APP" readers.Just a token gratitude for being so caring,supportive and loyal for last so many years. 


"The next blog update would also have the APP launch".Fixing the last minute issues.



Scripscan:Sanghi Industries Ltd
Traded in:Nse-BSE
CMP:48rs
 

For 5th graders like myself:You own a branded cement company with capacities of 3mtpa and expanding more,worth 1100crs which will generate real free cash for you worth 250crs from fy17 onwards.You have given your management an achievable aggressive revenue target of 1800cr sales with 10% profits by fy17(1040crs and 50crs fy14).You have a robust network of 1500 dealers who speak highly of your commercial integrity.You see a huge spike in margin as previously you had transport issues which you are finally addressing.You are buying jetties and setting coastal terminals to neutralize the effect of higher transport cost.You are fixing the clinker-cement mismatch by putting a grinding unit.You are also changing the market mix by selling more cements in Mumbai.You have already successfully pared your company debt from around 1000crs to just about 500crs.It averaged operating cash flows of over 170cr over the last five years.Now you have a bank loan of just 500crs,with 250crs of cash you find it very easy to service the interest cost.You own such a company which has got captive power,limestone and land far more than whats required which you can use to expand your capacity many fold without any issue.Your company partners were smart enough to understand the potential and hence they bought truckload of shares(read 20% in last four years) through the open market route.You are already thinking what am I going to do with that 250crs of cash?Make my company a debt free one in 2 years,pay fat dividend to myself and my other company partners or expand more as I have access to raw material and land already?Your company also trades at half the valuation of similar other cement companies floated by your friends.This awesome facts would someday be realized by smart investors and they will be hungry to have a pie of your company(you recall already the process probably got started as some alien mutual fund named Reliance acquired 33 lakh shares of your company)as they buy you get richer.Understanding a company ain't that hard na?

BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Sunday, November 16, 2014

Stock market basics and a cool stock idea:-Premier Explosives Ltd(PEL)

General aspects for newbies:-

1)What is stock market to you?

Ans)Stock market is a place which gives you lucrative ownership of companies.By owning a single stock you are actually becoming the owner of a company.Its liable to share everything with yourself.

2)What is the kind of returns that can be generated?How its comparable to bank FD returns?

ans)I personally look for 26-30% yearly gains on a compounding basis.A 26% compounder increases your fund by 10 times(1 lakh invested becomes 10 lakhs) in 10 years.A 30% CAGR boosts your portfolio by nearly 14 times(1 lakh invested becomes 13.8 lakhs) over a period of decade.Bank FD's would just double your money(1 lakh invested becomes 2.15 lakhs) over the same period.Add up some dividend top ups which if further invested,makes the figure look much more interesting.

3)Its easy to earn this days as everything is moving up isn't it?I buy xyz and double my money in a week.

Ans)It was always easy to earn actually but only over the longer term.So how much you actually made from the time you joined markets?What was the CAGR?Everything looks green from the other side.A lot of crap stocks are moving coz of vested interests.Once the wind stops,they gonna go down like anything.Invest in a disciplined way in stocks which you understand,that too with proper portfolio allocation.Even the greatest mathematician,Sir Isaac Newton lost nearly 30crs(on today's figure) and mentioned – "I can calculate the motion of heavenly bodies, but not the madness of people".

4)How does one construct a portfolio which can provide 25-30% CAGR returns year after year?When to exit is something which confuses me a great.Please help.

Ans)Buy my recommended companies and allocate not more than 5% in each of them.A basket of 15-20 stocks is enough to get your desired returns.Why to exit actually if the growth is there?I see a lot of guys exiting my older recommended stocks like symphony and avanti feeds to buy the new ones.This is one of your biggest mistakes.The secret to win from markets is to have the best ones and sit tight with them till their growth is intact.You just don't need to buy the new ones as you already posses the best money making companies.I myself hardly bought any recent recommendations as am fully invested on the older ones which ensured an amazing overall portfolio return so far.

5)Then do we exit once the target gets achieved?Also have seen you recommending companies only after they have doubled/tripled/became 5x.If those were provided earlier,we could have made so much more.

Ans)What is a target?Its just based on historical figures showing what its worth over a period of time.Frankly speaking there's no target folks.Just hold with trailing stop as long as the growth of the company persists.Minimizing losses and maximizing profits is what you should strive for.A company which moves up and consolidates higher gives me the required clarity.There's so much to speak about,say from opportunity costs to MF's or FII's interest.A higher PE means investors confidence whereas a low PE company simply signifies lack in confidence.Buy at low and sell at high ain't in vogue.It should be buy high to sell much higher.A higher valuation also boosts the confidence and productivity of the promoters/management as they are biggest gainer of the rising stock valuation.

Some more words:You need to pay wealth tax if the value of personal assets you own exceeds 30 lakhs.Nah,don't be concerned.Stocks, which are one of the best assets ain't even considered as an asset in our country.My association with you guys last from a quarter to some years.Its not the money which satisfies me(30% of the paid readers are given free membership coz of their sheer passion and love for the subject.They all wanted to pay though)but only when I see the members trying to learn and doing the required due diligence before zeroing on a stock,that's such a wow feeling.So earn and try to learn too.Happy investing folks.



Note:Premier explosive too was recommended to members at 206rs just few weeks ago.Here's the research note of it.Company quoting around 230 rs now.Readers its time for you to act on it now.

Stock idea:-

Scripscan:Premier Explosives Ltd(PEL)
Bse code:526247
Cmp:206rs
Target:300rs
Return percentage:47%
Duration:9-12 months

Quote:Keshav's research helped me to complete 50% of the note.Rest of the inputs got penned down by your's truly.

Promoter: Dr. Amar Nath Gupta (ANG) is the CMD of PEL. He is a first generation entrepreneur.He is a Gold Medallist from Mining Geological and Metallurgical Institute of India. He is a Member of Society of Explosives Engineers, U.S.A. and was Chairman of Explosives Development Council constituted by Government of India and Chairman of Explosives Manufacturers Association of India.Dr. ANG believes in profitable growth. The company could have achieved sales of around Rs.300 - 400Cr. had it been ready to sacrifice margins at the altar of sales growth. The company only considers projects where it expects to recoup its investment in 4 years.

History:Premier Explosives Ltd. was incorporated in 1980 and started off with manufacturing Slurry Explosives and during the 90’s started manufacturing the complete range of explosives & accessories like detonators, bulk explosives, detonating cords and blasting accessories. The company diversified into Mushroom Farming in 1997. In FY07, the company ventured into Space & Defence. The co. divested its Mushroom Division in FY08 for a consideration of around 20Cr. Since then the company is focussing & expanding into the Space & Defence sectors.

Company:The Indian Explosives Industry is amongst the top 5 in the world. Around 70% of the entire output of the industry is consumed by the coal mining industry which primarily consists of Coal India Ltd. & its subsidiaries. The Indian explosives industry is fragmented with around 45 units and around 10 major manufacturers Premier Explosives is the 6th largest manufacturer of explosives with around 5% market share.PEL caters to all mining sectors like Iron Ore, Limestone, etc..PEL is the only private sector entity manufacturing solid propellants & other specialized products for the defence sector.

Some more info: Amongst many firsts, PEL is the first company in the world to produce safer and greener NHN (Nickel Hydrazine Nitrate) detonators on commercial scale replacing ASA (Lead Azide, Lead Styphnate and Aluminum Powder) detonators.PEL is operating and maintaining a State-of-Art Chemical Manufacturing facility of Indian Space Research Organisation (ISRO) at Sriharikota and Solid Fuel Complex of Advanced Systems Laboratory at Jagdalpur.PEL's R&D facility is recognised by the Council for Scientific and Industrial Research (CSIR),Government of India, as an established research centre. It is also recognised as a research base for Ph.D. work by Gulbarga University, Karnataka. Further,PEL has collaboration with IIT, Madras and Gulbarga University for research in high energy materials.For FY14, PEL achieved a turnover of INR 145crs and profit after tax of INR 9.2crs

Presently, PEL has 4 main divisions:-

1)Commercial Explosives
2)Detonators & Accessories
3)Special Products Division – Solid Propellants
4)Service Contracts – ‘Operation & Maintenance’ Contracts.

Commercial Explosives: The Company is manufacturing a diverse range of commercial explosives for mining and infrastructure requirements at its 6 manufacturing units.The company is a dominant player in its segment.The explosive industry is fragmented while the main customer is a monolithic (Coal India).Others include the likes of Singareni Collieries,Neyveli Lignite,NMDC,Karnataka Emta Coal Mines and the Cement companies.The other listed players from this space are Keltech Energies Ltd. & Solar Industries India Ltd.The ‘Industrial Explosive’ division of PEL did sales of Rs.67crs vs 48crs.Production of explosives increased to 20,703 tonnes from previous year's 16,367 tonnes.The company should be able to maintain 15% operating margins as the management refuses to bid for those tenders where a threshold margin of 15% is not assured.With signals of revival of global economy and expected industry-friendly policies, Indian explosives industry is expected to post 8% CAGR over the next few years on robust growth plans of user industries like mining and infrastructure .

DETONATORS:After adoption of NHN technology last year subsequent to the accident, during the current year Detonator plant produced 53.27 million pieces which is 17% higher than 45.44 millions produced during previous year(sales value of 33crs vs 29crs).Demand for detonators, which are sold through trade channels,continue to be weak.Revival in detonator demand is expected in Q3FY15.The company is confident of raising the production further in 2014-15.

SERVICES DIVISION :O&M –Premier has been operating and maintaining the solid propellant production facilities of prestigious agencies, namely ISRO’s satellite launching station, SHAR at Sriharikota, Andhra Pradesh and Solid Fuel Complex (SFC) at Jagdalpur in Chhattisgarh.At SHAR, the company has deployed 330 of its staff under the 10 year contract for O&M services which commenced in 2007.The company also has O&M contract at SPROB. At this facility about 60 of the company’s staff are deployed.More than margins,O&M is a significant technology transfer as PEL is learning to run complex facilities and than setting up such units on its own. Such contacts are called GOCO (Government Owned, Company Operated). These contacts have annual price escalation clause which leads to steady increase in revenues.The segment contributed 15crs of revenues in the fiscal fy13-14.

SPECIAL PRODUCTS DIVISION:Premier has been manufacturing solid propellants from 2003.Since then Premier has been adding facilities to manufacture solid propellants at Peddakandukuru in Nalgonda district of Telangana. The company has been catering to the needs of tactical missiles like Astra, Akash, LRSAM and rockets like Pinaka.PEL is the only private sector entity in India manufacturing solid propellants & other specialized products for the defence sector.Solid Propellant manufacturing is a Sunrise Industry in India.Premier produces Explosive Bolts, Pyro Actuators,Smoke Markers, Cable Cutters and many other products including Blazer Plates for the Indian defence services.Premier also is the only private entity producing oleoresin based tear gas grenades used for mob control by law enforcement departments. The company had developed this product in collaboration with Defence Research Development Establishment (DRDE), Gwalior..The defense related business of the company has grown more than five folds(from 5.2crs to 26.7cr) in the period of fy10-fy14.Defence Off sets is a big opportunity for PEL.The management believes that the defence & space business will exceed the Bulk Explosive & Detonator business within the next 5 years(as of now defense contributes 20%).

Concerns:The company wrote off investments worth around Rs.13Cr. during FY09 & FY10. These investments were made in FY07 in JV’s in Turkey & Georgia. The management claims that’s the foreign partner duped it. It is possible that the management duped the shareholders as this a very convenient way of siphoning off funds by Indian promoters. After all who is going to Georgia to check out the details.PEL is fighting a case against its Turkish partner & is expecting a write back.This 'writing off' investment aspect kept me away from the counter for long.It was after a long interaction with few of the big investors which finally made me recommend it.The recent entrance of reputed investors like Dolly Khanna and Vijay Kedia further convinced me.

Other aspects:Got debt equity ratio of less than .2%.Boasts of 10 year average ROE of over 20%.Promoter has hiked its stake to 48% from below 40% in the last few years.Paid a dividend of 2.5 bucks which with higher profits should see a decent hike.Company never diluted its equity in the last 17 years until very recently when it did a tiny preferential issue to promoters.Cash flow has been positive over the last 6 years.Check out the presentations to know more about the company.
http://www.pelgel.com/Q4FY14_Presentation_PEL.pdf
http://www.pelgel.com/Q1FY15_Presentation_PEL.pdf

Conclusion:The proportion of revenue from Defence products and Services(low competition-high margin) is expected to rise vis-a-vis proportion of revenues from Explosives(high competition-low margin), over the next three years.The company has guided a topline of 200crs for the present fiscal, 2014-15.PAT should be around 13crs.Next year the company may deliver revenues and PAT of 260crs and 18crs respectively.The company at present prices quotes at a PE of 14 times its forward earnings.The other listed entity-Solar Industries quotes at 30 times its fy15 forward earnings.Putting the same multiple of 14 for fy15-16 earnings of 21.5rs,to arrive at a price target of 300 bucks.


BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Monday, October 27, 2014

Galaxy Entertainment Corporation Ltd:-The special Diwali call to members

Note:Galaxy Entertainment was suggested to members as a special Diwali call at 31 bucks just few days ago.Scrip is on circuit since then.As it has moved over 20% from the recommended price,time to post in the open blog for the readers.Please don't haste and buy at higher levels.Treat the article for educational purpose.

The Special Diwali call:-

Multibagger Idea-

Scripscan:Galaxy Entertainment Corporation Ltd
Bse Code:506186
Cmp:31 rs
Target:No targets as returns can be huge.
Portfolio Allocation:2-3%

History:The company much earlier was controlled by the Chatterjee group of Haldia petro fame and run by one Satish Chunder, a former banker from Citibank.Unfortunately,Chunder died suddenly and the company became rudderless.The company changed hands in early 2006; one of the largest and most experienced organised retailing chains, Pantaloon, bought 15.73% stake in it(now it holds around 31% stake).It also amalgamated Pan India Restaurants with itself which had food courts.Mumbai-based real-estate firm Phoenix Mills holds a 27 percent stake in Galaxy.Few papers reported the phoenix stake to be higher at 34%.No clue about it though as my figures are based on the SHP of the company.

Scene of 2010(Annual report with 92 pages)

Company:Galaxy Entertainment Corporation Limited was incorporated on August 13,1981.It operates leisure and entertainment centers across the country and as at the balance sheet date it has 23 centers offering a variety of facilities such as bowling,pool and video games,restaurant service etc.Note the below mentioned aspects.

Revenues:36crs
Centres:23
Rent paid:10crs
Debt:26crs
PBT:10crs loss
Cash flows:3crs
Working capital:(3crs)

Scene of 2012:Company eroded its network and was a BIFR case.The company only had 14 centres then.It was nearly a gone candidate but the 2013-14 A.R suggest an entire different picture.

Scene of 2014(Annual report with 78 pages)

Company:Galaxy Entertainment Corporation Limited was incorporated on August 13,1981.It operates leisure and entertainment centers across the country and as at the balance sheet date it has 28 centers offering a variety of facilities such as bowling,pool and video games,restaurant service etc.Note the below mentioned aspects.

Revenues:35crs
Centres:28
Rent paid:4crs
Debt:10crs
PBT:30 lakhs
Cash Flows:14.5crs
Working capital:(13crs)

Note:So the Biyanis seems to have learnt their lesson.Finally they have embraced the power of low debt and high cash flows.Even a lot of meaningless crap pages got curtailed from the A.R.The present A.R is quite a delight.

More from the 2014 A.R:-

1)With cash flows of 14.5crs the company repaid 7.2crs of debt and financed its capex worth 7crs.

2)Out of that 14crs,Trade payables contributed 10crs.The power of trade credit folks.Simply means it has been able to demand trade credit from its suppliers and made best use with it.

3)It got negative working capital of 13crs.Advances from customers stood at over 14.5crs.What the hell?I mean think about it-its gaming and restaurants business did a revenue of 17crs for the entire fiscal of 2013-14 and already 14.5crs+ is in your pocket.This is like your interest free money.Can expand,can pay your suppliers without need of any further capital.Obviously you have some superior offerings or products or plans through which your clients happily paid for it.In an ordinary product,we get the product and then pay for it.In an extraordinary product,we pay way before and get the product later.Recall my earlier recommendations of Caplin point,Symphony,Atul Auto,Relaxo etc.

4)Long term debt of around 4crs would mature within this fiscal.Further it has short term debt liabilities of 5crs.So are we really talking about a debt free,negative working capital,high cash flow generating Kishore Biyani company?

5)After a long long time,the future group as it seems has taken the company seriously.From closing the loss making centres to focusing on the profitable ones,opening up new ones,seems to have done the trick.Over a period of five years,they not only have more than what they had but a lot debt got retired,rentals are down sharply,strong cash flows,large trade credit facilities from suppliers,huge customer advances- all hints at the strong future prospects.This time as it seems,the Biyanis are determined to make it really big.

Food court/Food chain deals:Ammis biryani got a funding of 40crs from Saif partners when it delivered hardly 4-5crs of sales.Paradise foods got funding of 70crs at 3x(as per sources) its revenues from Samara Capital.Other deals in the QSR business include Ventureast investing Rs 21 crore in Goli Vada Pav, a Mumbai-based ethnic food chain selling vada pav, a popular snack in Maharashtra.Sequoia Capital also invested $5 million in Faaso’s,Pune-based vendor of Indian fast food.The only listed play,Speciality restaurants Ipo which was heavily subscribed,was priced at 4.5x its fy11 revenues.

Point to note:Owing to accumulated losses(negative reserves)it should have a lot of deferred tax assets.This amount is available to offset tax on future taxable income.Given the carried-forward tax loss,no tax provision is required for atleast some more quarters,if not years.

The Era of Sports:Probably sports in near future will occupy all our 365 days.We already have IPL,Kabbadi league,badminton league,Hockey League.ISL or Indian soccer league just got started too with a bang.Not to forget the ever raging EPL,Uefa champions league and all other sports carnival which we crave for bigtime.You can now enjoy all those on big screens with a glass of beer at food courts managed by Galaxy Entertainment Corporation.

On words of Sunil Biyani:"The Indian food service industry is growing on the back of increasing income and changes in food consumption pattern.Besides, food courts are driving this industry as malls are expanding to smaller towns.Food-courts play the role of anchor tenant in a mall. Along with complimenting businesses such as books, games, fine dining restaurants and movies,they provide good recreational space to the customers.However, there is a huge vacuum and the latest offerings are geared towards entertainment, relaxation and leisure dining. We plan to open 22-24 food-courts this fiscal at an investment of 10 crore".It currently runs 11 food courts, and has tie-ups with various malls to operate and manage food outlets through a minimum-guarantee-plus-revenue-sharing model.

Raju Nanwani?Who?Was looking at the SHP and found this bloke having 1.8 lakh shares,acquired over the last 9-10 months.The Bible of internet(obviously Google)came with few results,notable among them was a guy who also happens to be the VP of ICICI Sec.Considering my 9600 readers,he probably would have the search of his life now.Jokes apart,mailed him up but no reply as on time of this note.So is it like already the smart ones have started accumulating it?

Recommendation in public domain:Couple of reputed guys did recommend the counter with multibagger tag but those lacked any meaningful substance.In any case the stamp of value seekers help.

Few links to vindicate my stand:-

1)http://freepressjournal.in/sporty-menu-at-sbxs/
2)http://indulge.newindianexpress.com/high-spirits/bangalore/8651
3)http://epaperbeta.timesofindia.com/Article.aspx?eid=31806&articlexml=DESIGNS-ON-YOU-Distressed-look-in-their-genes-15062014002026
4)http://brandsdisplay.com/?p=3271
5)http://archive.asianage.com/life-and-style/sports-city-338
6)http://www.thehindubusinessline.com/companies/future-groups-galaxy-bets-big-on-food-courts/article5902020.ece
7)http://www.fashioncurry.com/night_life.html
8)http://mumbaimag.com/sports-box-mumbai/

Fy13-14 numbers:It delivered a sales of 35crs and a PAT of 30 lakhs for fy13-14.Trading in fabrics contributed 17crs of revenues.Have no idea what it is all about.Core business contributed the rest(my subject of interest).

June numbers:Net profit of Galaxy Entertainment Corporation reported to Rs 0.20 crore in the quarter ended June 2014 as against net loss of Rs 2.30 crore during the previous quarter ended June 2013. Sales rose 18.20% to Rs 5.52 crore in the quarter ended June 2014 as against Rs 4.67 crore during the previous quarter ended June 2013.

FY14-15 Guidance:They expect to end the year with a 20% growth.

What can derail the story:Biyani is an over aggressive guy who for sake of topline growth sacrificed his cash flows and through massive debts made his empire.As we all know what followed next.In 2011-12,the company seeked shareholders' nod to hike borrowing limit to 80crs.So far,the company has pared debt but in case it opts for a big debt funding,the story will change again.There's no need of any debt as can be made out from the above penned lines.

Conclusion:So the scaling up of business is happening at a rapid speed.Its quoting at a mcap of just 46crs.The company's business of gaming and restaurants contributed 17crs on last fiscal.So roughly 2.7x of its trailing revenues.We are talking about a business with quite a bit of margin of safety.Valuation wise too,at 2.7x trailing revenues ,in comparison to the above mentioned deals,sounds pretty cheap.Scaling up of business with pedigree of Biyani,nearly zero debt company with high negative working capital and loads of cash flows makes it an interesting buy at present levels.There's no listed comparable peer,hardly any floating stock to talk about too.Even above average numbers can make the stock move really really high.

Btw:The company trades with very little volumes.Its overlooked for reasons not known to me.Buy slowly and accumulate at declines.Let the story unfold more.Don't make the stock move up with artificial forceful volumes,let market realize and re-rate it."Wish you all a very happy,peaceful and prosperous Diwali".Happy Investing folks.


BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

Friday, October 10, 2014

Shreyas Shipping & Logistics Ltd:-The high quality coastal logistics bet with cheapest valuations

Note:Shreyas was recommended at 69 bucks to members, hardly 2 weeks ago.Company since then has moved quite a bit and ended the last trading day at 88 bucks(up 3% in Friday's trade).The target penned was 97rs but with falling crude prices and considering the 'Sudden interest" of some of my big HNI acquaintances,the same is raised to 130 rs.So open blog readers,there's nearly 50% gain to pocket up folks.


Stock tip:-

Scripscan:Shreyas Shipping & Logistics Ltd
Traded in:Nse-bse
CMP:69rs
Target:130rs
Duration:6-10 months
Percentage return:85%

Quote:This note has been penned by my elder brother Ram,who also happens to be a member of mine.He is an amazing research guy and counts in my list superior to many renowned analysts.With assimilation of my thoughts,here's the quintessence.

Note:As you all know,am bullish on the entire logistics sector.Previously recommended the likes of Gati,TCI and Balmer lawrie of the world.Its the time for Shreyas now.

Company: Shreyas Shipping & Logistics Ltd (SSLL) is a dominant multimodal container logistics operator using land-sea-land route. Their claim is they are No.1 Coastal Operator in India with 51% market share, in handling domestic coastal cargo. It is also the India's largest container feeder vessel owning and operating company & first co to link all key ports of India for containerised trade.Shreyas begun in 1994 as a container feeder operator between Indian ports and international container transshipment ports. A few years back they crafted a niche business model, by giving more focus to domestic container logistics using land-sea-land route, covering: transportation, warehousing, distribution, airfreight, sea & air freight forwarding and parcel services.
It has two subsidiaries:
1). Shreyas Relay Systems Ltd (100%)
2). SRS Freight Management Ltd (51.1%)

CONTAINER FEEDER SERVICES:The principal co SSLL operates this service vertical. Container Feeder Service covers carriage of containers of Main Line Container Operators from Indian Ports to proximal well equipped International Container Transshipment Terminals like Dubai, Colombo & Singapore.

Today India’s 70% of the Indian containerised cargo is usually transshipped in:
1). Singapore and the Malaysian ports of Port Tanjung Pelepas and Port Klang for importers and exporters using the Indian east coast.
2). Middle East ports such as Jebel Ali, Khor Fakkan and Salalah for Indian west coast origins/destinations.
3). Colombo (Sri Lanka) for both west coast and Bay of Bengal ports.

The need for feeder service is:As only few Indian terminals provides the depth & facilities for operating main line vessels hence all other ports need assistance of feeder vessels to carry out the containerized trade.Main line operators unable to service all ports due to size, cost and volume constraints.To bridge the gap and provide connectivity to all ports.High land transport cost demands more feeder connectivity between the ports in India

The customers for Feeder Service are the Main Line Operators (MLO) and their basis of selection of a feeder operator hinges on factors such as frequency of sailings, experience of feeder operator, suitability of their vessels and their integrity & consistency of operations. Shreyas being pioneers in Feeder Service in the Indian Subcontinent enjoy excellent rapport with almost all Main Line Operators in India.

Multimodal Logistics Services:Shreyas Relay Systems (SRSL) provides scheduled round the clock seamless, door-to-door, domestic, multimodal container transportation solutions incorporating the Road-Rail-Sea-Air route. It offers a tailor-made solution to suit the needs of the customer.SRS also offers regular Domestic & Regional Liner Services to various ports in Indian Sub Continent, South East Asia & Middle East, by way of slot agreements with various operators through own container fleet.SSLL and SRSL business models complement each other—depending upon the market condition, they interchange the vessel deployment. SSLL’s shipping adds value to its logistics business in a way similar to companies using aircrafts for cargo movement.

They offers services to various ports given below:
Indian Sub Continent: Colombo / Karachi / Male / Nhava Sheva / Mundra / Cochin / Tuticorin / Chennai
South East Asia: Singapore / Port Klang
Middle East Continent: Jebel Ali / Bandar Abbas / Muscat / Sharjah / Abu Dhabi / Doha

As part of the multimodal operations, SRS also offers customized land transport solutions to all industries and product segments, using a fleet of owned & leased trailers fitted with GPS to enable Trace and Track.SRS has strategic alliances with CONCOR and other private Container Train Operators in Railway network. Using this, it offers varied rail based container service to the different segments and types of cargo across the country, to meet the customers multimodal requirements.

Key multimodal clients of SRS includes: JSW Ispat Steel Ltd, Vedanta Aluminium Ltd, Sterlite Industries Ltd, Bharat Heavy Electricals Ltd, Galaxy Surfactants Ltd, Indian Steel Corporation Ltd, Ashapura Minechem Ltd, Reliance Industries Ltd, Kajaria Ceramics Ltd, TRF Ltd, Bhushan Steel Ltd, RAK Ceramics Ltd, Cochin Minerals & Rutile Ltd, Star Bentonite, Ankur Chemfood Ltd, ITC Agri Business Division Ltd, Bansal Group, Cargill India Ltd, Bagadia Brothers Pvt Ltd, HNG Glass Ltd, Gujarat Guardian Ltd, Saint Gobain Glass Ltd, Food Corporation of India.The company has a strong brand recognition and respect among potential clients and peers, because of its leadership in identifying and successfully executing new opportunities.In a recent development, for the first time Food Corporation of India (FCI) has been permitted by Union Govt to transfer food grains by sea route from Andra Pradesh to Kerala. SRS secured the contract to move 20,000 tons of food grains per month using multimodal logistics. This contract is expected to add to topline & bottomline substantially going forward.

Freight Forwarding Services:SRS Freight Management Ltd, leveraging its own domestic network & through the parent Transworld Group’s global network spread over Europe, USA, Middle East, Far East and Indian sub-continent offers the customers with complete Freight Forwarding and Supply Chain Management Services (SCM) around the globe. It associated with organizations: ACCA, IATA, WCA & FFA.The value added services like Cargo Consolidation, Custom Clearance, Bonded Trucking, Air Charter Operations, Warehousing & Distribution and Door to Door services offers customers a single window solution.

Rich assets:Presently, the Company owns & operates six container ships:
• MV OEL Kochi (1,725 TEUs)
• MV OEL Kutch (1725 TEUs)
• MV OEL Shreyas (1280 TEUs)
• MV OEL Trust (1050 TEUs)
• MV OEL Victory (501 TEUs)
• MV OEL Mumbai (1613 TEUs)

Trucking fleet:TATA Prima 4028 - 12 Nos, TATA 4018 - 5 Nos, TATA 3518 - 35 Nos, LEYLAND 4023 - 5 Nos, LEYLAND 4019 - 13 Nos.Have own 100+ Heavy Commercial Vehicles & operates many more leased trucks and trailers as per business requirements.Tanker movements and operations.Trained and experienced drivers who have undergone driving training program

Warehousing space:Covered space – 0.6 million sq.ft.Open space – 0.7 million sq.ft.The co is actively adding up to the warehouse capacity through a mix of owned and leased facilities.

Warehousing locations:Kandla,Ahmedabad,Cochin,Tuticorin,New Delhi and Mumbai.

Facilities:Loading Unloading Bay (Platform),Fork Lifts,Pallet Trucks,Bulk Storage Racks,Trolleys.Other equipments and facilities that can be provided on request as per commodity-cargo requirements.Computers with Internet connection for online Warehouse Management.Trained Staff and Laborers and 24 hours security.SRS also owns a large inventory more than 6200 quality containers of 20' / 40' HC / 40 RHC—consists of Dry, Special, Reefer and Tank Containers.Management is highly skilled with domain knowledge & expertise which along with massive network established over long period of time - is a great asset in itself.As on 31.3.2014, the co employs 30 shore staffs & 126 floating staffs besides many temporary staffs.

Management: Shreyas is part of Dubai based shipping conglomerate TRANSWORLD GROUP, which has 25 years of experience in the shipping industry. Promoters own 73.29% of the small equity base of 2.2 core shares outstanding. They respects &never diluted equity.The $800-million annual turnover group operates through 15 subsidiary companies including: Orient Express Lines, Balaji Shipping, Shreyas Shipping and Logistics, Shreyas Relay Systems, Albatross Shipping among others. It has more than 1,700 employees on payroll, spread across nine locations in the GCC, 28 cities in India and one office in the United States.It operates a fleet of 27 ships, including 12 container ships and 15 feeder vessels.The group has been growing at a year-on-year rate of 15-20 per cent over the last few years despite the downturn, cashing in on Dubai's central location as the region's biggest transshipment and re-export hub.They maintains excellent relations with DB World, Dubai which owns the Vallarpadam ICTT, Kochin.

Unique business model:Shreyas traditionally had two businesses – vessel charter and feeder services. Revenue from these businesses were exposed to fluctuations in international freight and charter rates, which were determined by the Howe Robinson Container Index (HRCI).Shreyas Shipping & Logistics Ltd realized the impact of the fluctuation in price realization and formulated a new business model to remain immune to international pricing and generate steady cash flows. It re-positioned itself as a pure logistics company, in addition to feeder and regional service.
THE NEW DOOR TO DOOR Model:
• Container sent to clients premises for loading
• Cargo loaded in containers, sealed and transported to nearest port
• Coastal shipping to port of destination
• Container discharged at port, transported to client's premises and cargo delivered
It also offering this service in Door to Port, Port to Port, Port to Door models.
ADVANTAGES OF USING SRS SERVICE:-
• Door-to-Door service
• Customized solution for each client
• Own ships, containers and trailers
• Special containers like Open Top/Flat Rack of all sizes
• Web based cargo, container and vehicle tracking system
• Fixed day schedule departure and arrival service

Governement push:Unfortunately so far, it’s all hiccups in terms of Govt policies and implementation for costal shipping.About half a dozen groups/committees formulated for the promotion of coastal shipping in India over the past 2 decades, such as: Afzalpurkar Committee (1993), Pinto Committee (1997), Kakkar Committee (1999), Tenth plan Sub Group (2002), Tata Communication System Study (2003) and Eleventh plan Sub-Group (2007) etc. Though Government has formally accepted a number of recommendations given by them, adequate implementation is yet to happen.But all this set to change with new initiatives of Modi Government —now, coastal shipping have increasingly become the focus of attention in India.Govt has envisaged an ambitious plan to grow the Indian shipping fleet from 12 million GT to 40 million GT by the year 2020.Many State Governments also now trying to divert cargo from road to costal shipping, to reduce road congestion and accidents.The Kerala Government recently announced a policy providing financial and fiscal incentives to encourage movement of goods by sea. The Minister of Ports K. Babu said that Kerala is the first State to offer a subsidy of Rs.1 for a consignment of one tonne for a distance of 1 km. He pointed out that Government had constituted a coastal shipping promotion fund with an allocation of Rs. 3 crore.

Containerization-boon to coastal shipping:Huge waves of changes have been taking place in the shipping industry, particularly in the container shipping trade, globally and in India too.In the present globalized economy, container is at the centre point of a highly automated system for moving goods from anywhere to anywhere, with minimum cost and complication.Containerization of cargo is one of the key trends expected to drive Indian coastal shipping to higher levels—it’s share has been growing steadily in coastal shipping, from 14.8% in FY04 to 20.6% in FY14.Impressive growth rate of about 22% (excluding 2008-09) in container traffic & container demand in India is forecast to grow about 21 million TEUs by 2020.Presently, the containerization level of general cargo that can be containerised is only 68% in India against the international levels of around 80%. Further increase in containerization of bulk cargo is expected over the next few years and this increased penetration of containerization is expected to push domestic traffic volumes to higher levels.Of late with Modi, India is poised to becoming the most preferred destination for manufacturing outsourcing in the world, offering greater potential for containerization.As observed, the future of maritime trade is expected to be containerized cargo!

GST Trigger:What GST means for logistics? A single national market, seamless movement of goods across state borders, emergence of hub&spokes distribution model, increased outsourcing of logistics, emergence of new models such as 3PL, 4PL etc— a big volume booster by all means.In GST regime, more companies will outsource logistics to 3PL players—at present, 3PL accounts for just 9-10% of total logistics in India against 57% in developed countries.And finally, GST could be live here in next 9-12 months. It would bring a 15-20% cost advantage immediately and more business for logistics players over time.Not only for logistics, the positive vibe of GST will be felt across the board. It alone can lift GDP 1-2%, really big deal for a growth starving nation.

FINANCIALS & VALUATIONS:After successfully recasting the business model, SSLL posted a 35% CAGR in topline over last 5 years to Rs.488 crores in FY2014. This commendable performance comes without any increase in debt levels or working capital—indicates co is cash-flow positive & no-nonsense people are running the business well & they try to keep asset light as much as possible.Net Debt to Equity ratio is at a modest 0.6.SSLL is posting big losses over last 2 Qs because of booking losses on selling old ships and buying new to modernize fleet—a one off event. Otherwise it would be in green.Also normally for a shipping logistic company, the first two quarters (Q1 & Q2) are difficult because of the monsoon and storms. Q3 and Q4 would be usually better.With healthy topline growth & changing business dynamics, it will charter into profit zone soon.Management is confident of EBITDA margin @ 12-13% & net margin @ 6-8% over time.For Shreyas, fuel expenses are the biggest cost item amounting upto 22-25% of topline. Now with crude on a sustainable easing trend—of late Brent below $100—it would prove to be a big relief on this front.Mcap is Rs.150 crores with reported cash flows of 42crs for last fiscal 13-14.I mean a quality logistics company quoting at less than 4 times its trailing cash flows makes it one heck of a buy.Even at a MCap to Sales ratio of 0.3, the stock is going very cheap.Stock also at a discount to BV of RS.63.Its tough to lose money from this counter.A 7 odd times trailing cash flows gives me my target price.
BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

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This blog does not share personal information with third parties nor do we store any information about your visit to this blog other than to analyze and optimize your content and reading experience through the use of cookies.You can turn off the use of cookies at anytime by changing your specific browser settings.This privacy policy is subject to change without notice and was last updated on 20.3.2013. If you have any questions, feel free to contact me directly here: arunsharemarket@gmail.com Investment in equity shares has its own risks.Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that I consider reliable. I,however,do not vouch for the accuracy or the completeness thereof.This material is for personal information and am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.The stock price projections shown are not necessarily indicative of future price performance.The information herein, together with all estimates and forecasts, can change without notice.
 
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