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Wednesday, July 16, 2014

Capital First Ltd:-My gift to blog readers.Profit from this amazing NBFC with multibagger potential

 Quote:Recommended to members hardly 2 days ago at 204.At present its quoting around 223-224,can be bought for amazing long term gains.


Multibagger Business idea:-

Scripscan:Capital First Ltd
Traded in:Nse-Bse
Cmp:204rs
Target:800rs
Duration:3-4 years
Return percentage:400%

Disclosure:I had 9000rs in my account on last Friday.Bought 44 shares at 209 and then it closed at 204.Intent to buy a lot more in near future.

Note:A great business idea is one where you can make others understand it in few lines.Capital first is all about it.

Company is owned by:Warburg Pincus-Private equity player-40bln USD of AUM.They have had Massive success stories like Havells,Kotak bank,Bharti in past.So capital which is mostly the constraint of the NBFC to grow,will never be a problem here.

MD and CEO:Vembu Vaidyanathan-The same guy whom Kishore Biyani snatched from ICICI bank by offering a 50crs salary.Ya 50crs-much more than anyone else in the country.This MD is one of the main reasons why I bought the shares of the company.He is simply the best.More about him
http://www.indiasgreatest.com/v_vaidyanathan.html

Business:Provides Mortgage Loans,Gold Loans,Two-Wheeler Loans,Durable Loans,Personal loans etc.Mortgage loans contributes around 70% of the total loan book.Over 80% of the total loan book of 9600crs are of retail.Check their corporate presentation to know everything about them.http://www.capfirst.com/pdfs/investor-relations/Capital%20First%20-%20Corporate%20Presentation%20-%20%20FY14.pdf

It takes a lot of time to have such gigantic loan book.Retails are considered much safer than any other ones.A lot of insurance or mfs or wealth management products can be sold to them which would help capital first in incremental ROA without implementing any capital.

Industry outlook:Generally the well managed NBFC's with their reach and experience manages to grow at 3.5-4 times the GDP.So this companies will easily grow by 20-25% for the next 20-25 years,resulting into huge gains for the shareholders.

Its cost of Funds and NIM:For the NBFC industry as a whole probably well rated NBFCs of the AA or AA+ or may be even A+, they all borrow in the range of about 11.5 to may be 11.75. In case of the company, it is much lesser because of the strong asset quality and capital adequacy over 22 percent, it is just around 10.5%.NIM stands at around 5.5% which the management is confident of sustaining.

NPA:The non-performing assets (NPA) of the company has come down to as low as 0.4 percent on a gross basis and 0.1 percent on a net basis.Infact for the last four years it has remained very stable.Management is confident of maintaining the same in the coming years.

Numbers:Net profit of Capital First rose 193.40% to Rs 44.04 crore in the quarter ended March 2014 as against Rs 15.01 crore during the previous quarter ended March 2013. Sales rose 37.74% to Rs 285.67 crore in the quarter ended March 2014 as against Rs 207.40 crore during the previous quarter ended March 2013.For the full year,net profit declined 47.00% to Rs 36.98 crore in the year ended March 2014 as against Rs 69.77 crore during the previous year ended March 2013. Sales rose 32.69% to Rs 1052.41 crore in the year ended March 2014 as against Rs 793.16 crore during the previous year ended March 2013. Profitability has decreased because of high fixed costs associated with building a retail franchise and change in its accounting policy.

Management's guidance for fy14-15:They expect the company to more than double their profits in the present fiscal.

Other points:Promoters own around 72% stake in the company as on date.The company recently declared a dividend of 2 bucks.

Outlook:Over the last five years its portfolio has changed from wholesale (90%) to retail (81%).Led by mortgage loans to SMEs (LAP),loan book has grown at 100% CAGR over FY10-13.This is a 3-4 years call,so what it would do this year or next year is useless.The operating leverage will take care of it as it gets in the higher scale zone.Present loan book of 9600crs.It aims at 30000crs of loan book by fy19-ROA of 2.5%.Presently its leveraged by 10x probably.Even considering 8x leverage with a ROA of 2.5% gives me ROE of 20%.Anything about over 1.5% ROA and 15% ROE with such a gigantic retail book is incredibly amazing.

Conclusion:How I arrived at the target price:P/BV is the metric applied in valuing NBFC's.Estimating book value is a mean task as equity dilution to maintain CAR is a ritual norm of the NBFC business.Book value is 142 presently.Sharekhan's estimate for fy16 is around 162rs.For fy19,veterans tracking it say would be around 220-230.Multiplying 230 with 3.5x gives me the price of around 800 bucks.You can ask me how I arrived at 3.5x of BV and not more or less?Let me try to the answer it the simplest manner.Say you make a FD somewhere,you get post tax interest of 5.6%.You want that 5.6% safety net too when you are valuing your nbfc stock.So divide the ROE which in this case is 20 by 5.6 to get your P/BV for the stock which comes at 3.5 to have the figure of 800.Gruh finance like traded at 8 P/BV last year, coz of its management and quality.Market has its own unique way of valuing quality companies.Capital first is an amazing company with an equally amazing parent and pedigree,a masterclass for your core long term portfolio.
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, June 27, 2014

The aspects of markets and RS Software ltd:-The E-Commerce play

The aspects of markets:-

Last week a member was promised a detailed note about the so called 'Opportunity cost'.OC simply put would be the cost of an alternative that must be forgone in order to pursue a certain action.Put another way, the benefits you could have received by taking an alternative action.OC relates much to the value investing aspect where you opt for deep value counters in place of growth counters thereby availing yourself a long waiting period.A growth stock may well double or triple but chances of the same happening to a value stock remains low.There's a long waiting period,it will likely bore you to death,you may well tear your hairs noticing every cats and dogs turning out to be multibaggers with your owned value bets moving nowhere.But if you could endure a long long waiting period,there's special moolah waiting at the end.If you have got the counter right,it may even single handedly make you rich provided the allocation is on the higher side.Yah am talking about those most craved about 30-40 baggers.So the decision for you members would be which boat are you in?In the growth counters with rich valuations with growth rate or in those value picks with tremendously attractive valuations but attached to the OC factor with a long gestation period backing it up?I used to opt for lot of microcaps in my earlier days which though performed well over a long period of time but certainly they ensured my patience matched the level of the Scotland King-Robert Bruce.They took many many years to perform.Several counters moved massive but those value counters remained in the vicinity of my purchase price.I really got habituated in getting okay with a no return for years period.But as the personal experiences grew and acquaintances became many,the strategy changed to be a more of a mix of both.Jim rogers adage of buying cheap,if not very cheap, with a positive trigger helped me bigtime.The returns started flowing much faster than what I could anticipate.The CAGR saw a betterment with the near banishment of OC factor from the portfolio.

Nowadays even if I come close to a good quality microcap,the screaming excitement of finding a ciger butt no longer prevails.A plethora of questions sets in automatically.Why in earth is it so cheap?Is it kinda we are unaware off certain negative factors in the counter?Its a microcap so mutual funds and FII's cant get in.HNI'S too would be interested at a higher level.It ought to have a low liquidity and the OC factor.Portfolio allocation too would be abysmally low as even 2-3% allocation may get me a 3-4% stake.Thus overall returns even if its a 10 bagger ultimately would be nothing.Also cant even recommend to you guys,you members would chase it and ensure it forcefully remains in the upper circuit for weeks.Ones you folks have pocketed with your's heart content, it will start to drift low due to lack of follow up takers.

A reality check to the recommended counters of mine would speak everything.Tata Elxsi moved to nowhere in the last 5 years till month of October 2013.It suddenly jumped 10% due to a great quarterly result,then when they stated they plan to make it a TCS on its own sector and the result most likely to remain upbeat,the whole game changed.Tata elxsi subsequently was recommended as the special Diwali call with the counter tripling in a matter of 4 months.So think about it folks,what would you have preferred?A tripler in a matter of 5 year and 4 months or just in 4 months?Take the case of recent call on Canfin homes.The company was doing amazingly well,thanks to the efforts of the MD-Mr C llango.It remained in the 170 range for nearly 18 months before moving to 220,all in a matter of a week with good deliver volumes.It was probably the cheapest bet in the sector,thus with even a 30% rally the multiple hardly went by 1.The call was given then even when a lot of members argued about a 30% rally in a week's time.But the factor remained it only moved 30% in a matter of 18 months.Canfin since then has moved to 360 in less than 3 months.There's a nomenclature of similar examples.From Atul auto to symphony to kajaria to hcl info to ratnamani metals etc.Thus its not a crime to buy something higher.A higher price or a higher PE often hints at a lot of clarity.Stronger hands,better perception and the breakout factor.There's also the incredible factor of buying something higher and getting that high conviction.Then those HNI's creeps in eradicating the last bit of negative vibes putting the stock higher.The MF's suddenly finds the particular stock which they long argued not to have owing to several factors, much convincing as it enters into the so called limit of their minimum marketcap requirement.The promoters and the management they too joins the bandwagon seeing the rise in the stock price,putting more efforts to perform,doing conference calls,analyst meets,Tv interviews.Lastly the FII's with billions in pocket,aiming to grow at high single digit ensures it remains in the overbought high multiple territory zone for ages.So if we consider all this thoughts and put together the actions in a 10 PE 100rs stock,growing at 30-35% CAGR and slated to grow at the same rate for coming 3 years,what would happen?The stock would move to 1000 bucks,resulting in a 10 bagger with a PE of just over 40 times.Can you guys name one such stock from my recommended stable?Well why one,take the case of Cera and Relaxo.Hope have been able to help you in learning a tad more about the aspects of markets.Happy investing folks.





Stock idea:-

Scripscan:RS software ltd
Traded in:Nse-bse
CMP:230rs
Target:300rs
Duration:6-9 months
Return percentage:30%

Quote:q)Who are the key influencers for the company?
Ans)The rapid growth in electronic payments volumes and new payment types forces payment providers to constantly revise their strategies, shorten their time to market, and create new products and services. RS Software provides solutions to help them meet these challenges.A close glance to the director report gave me everything about the company.Just ignore everything and concentrate on the quintessence.Think e-commerce-electronic payment-online payment gateway-mobile payment and their potential.Add up a visionary management,debt free growing company with lot of cash in books.Attractive valuations and Moat.You got the whole RS story folks.

Story:Story:Founded by the US based entrepreneur Raj Jain, RS began with a clear vision of providing quality software services to international markets. The company researched and instituted global best practices in the areas of People Management and Process Architecture to build a world-class organization. With rigorous attention to world standards, the company acquired ISO 9001:2000, SEI CMM Level 4, P CMM level 3 and ISO 27001:2005 certifications.RS Software is a Kolkata based IT company focussing on electronics payment domain. They have their own products which they sell as solutions.Playing a pivotal role for the Payment Industry, RS has developed and maintained mission critical applications for leading Payment networks in North America, Japan and UK. RS Software’s offices are located in the US, Canada, UK and India, employing over 1000 professionals to deliver high quality solutions for Payment networks, Processors, Acquires, Issuers, and other Payment Industry companies.Today RS Software is on course to be the leader in using its domain expertise to enhance the most powerful Payment Networks globally, and provide leading edge technology solutions to all stakeholders in the Payments industry.

Clientele:RS Software seems committed to its aggressive growth strategy.This company caters to the need of topline clientele which includes the likes of Visa, Visa EU, Visa CEMEA, Maclane, Pemco, Vignon etc.The cornerstone of RS Software’s value proposition is its understanding of the payment transaction’s entire life cycle, and a unique methodology customized for managing software applications for the electronic payment industry, in the areas of development, maintenance, migration and support. The experience of working in this industry over the past 20 years continuously enhances the knowledge pool that is managed by RS’ knowledge management system, with a goal to cross train in all areas of work. RS constantly refines the unique methodology to meet the dynamically changing requirements of its customers.RS Softwares is a niche player working on patent pending solutions in the mobile payments area.

Positive trends of the payments industry to continue:Few aspects which would speak about the positive trend of the industry.Nearly $11 trillion is spent globally each year (cash and cheques)providing a robust foundation for the growth of the electronic payments industry.The global electronic payments industry is experiencing an unprecedented growth on account of an irreversible shift from paper to electronic payment forms, processing tens of trillions of dollars of payment transactions.US payment transactions processing just on Visa & MasterCard networks have grown from 18% of non-auto retail sales in 1991 to 77% of non-auto retail sales in 2012 (estimated at $4 trillion).US consumer payments using cards are estimated to rise from 40% in 2006 to 60% by 2016.This industry has grown 10,000% since its inception in 1970. RS Software is well positioned to capitalise on this global opportunity and has a well laid out strategy backed by a comprehensive understanding of each client’s business.

Mobile telephony potential:While the global population is around seven billion, the total number of mobile phones is close to six billion, a global penetration of nearly 85%.Developed countries like the US, the UK and Germany have a penetration of over a 100% while Hong Kong and Saudi Arabia have a penetration approaching 200% even as the mobile phone penetration indeveloping countries like India and China is close to 70%, representing a scope for expansion.Mobile phones are extending financial services in lieu of an underdeveloped banking system with transactions involving SMS-based payments, direct mobile billing using PIN and onetime password (OTP) authentication and mobile web payments.The room for smartphones to grow is huge considering that there are only 1.5 billion smartphone users as against 6 billion mobile phone users in 2013.The global volume of money spent using mobile phones was around $106 billion in 2011, rising to $171 billion in 2012, and expected to grow to about $617 billion by 2016.

Words from Raj jain:The US economy has revived in the last few quarters. It is expected to continue to grow over the next few years and possibly be the best performing economy in the developed world.About 84% of our revenues comes from US. We should be strengthening this further. The US is the largest market for payments industry. We are starting to explore the India market, which has large potential but is currently limited as compared to US and Europe. We are today operating in four continents.However, our clients operate across the globe. We work with them globally. We have an excellent foundation to be a domain leader from India in the IT services industry, which is still largely focused on general outsourcing requirements.We continually evaluate good opportunities for acquisition globally . We have significant cash on our balance sheet and any acquisition if undertaken will make it possible to enhance our strategic capability and add value to our clients.The company’s global delivery model and knowledge transfer disciplines ensure that the company’s cross-culture experience enables maximum value to the customer from start to finish.

Sunidhi-Brokerage call on it:RS has seen demand recovery in the U.S. which bodes well for its business given its exposure to the market. RSSIL continues to put significant thrust on innovations and in building competencies through the Payments Lab and School of Payments.RS is building a robust global sales engine that complements the high priority accorded to the company's dominant customers and leveraging at the same time unusual growth potential.Longer term operational and strategic planning is being put in place.With its foundation for growth well laid out, RSSIL is poised to confidently approach the other leadership companies engaged in the one trillion dollar Electronic Payments space globally mitigating its risk of depending on a few clients. RSSIL is encouraged by its initial traction in the market place and the quality of the dialogue with new prospects/customers.RS remains committed to constant renewal of its abilities to deliver high performance.RS sustained focus on merchant acquiring aspect of the payment landscape, procedural improvements in CRM, focus on e-mail marketing to generate strong business response and undergoing initiatives to strengthen the team and process - all give strong revenue visibility going forward.

Few cool aspects:RS Software has appeared for the first time in Forbes ‘Asia’s 200 Best under a Billion’ in 2012. Steady growth in revenues, profit and earnings per share has placed theCompany in this elite group.RS Software has been listed as one of the ’30 fastest growing companies in India‘, by Outlook Business.Ranked at #17, RS Software has moved into the spotlight of high performing organisations across all sectors in India.

Numbers:Company has grown at CAGR of 24 percent in revenues for the last 5 years.PAT has seen a massive CAGR jump of 53 percent.Company delivered consolidated revenues of 381crs in fy13-14 vs 317crs in fy13-14.PAT jumped to 51crs vs 35crs in the same period.OPM and NPM stood at 22.0% and 14.0% Vs 17% and 11.9% respectively in FY13.The company is expected to grow 22-25% in the present fiscal.Reveneus should increase to around 470crs,PAT is expected to inch up to 64crs.EPS will stand at over 50rs for fy14-15.

Conclusion:RS software is an amazing play on the e-commerce boom.This fine business boasts of 30%+ ROE does not burden the oarsman.Debt too is nothing leaving balance sheet squeaky clean.The company has generated free cash flow year after year.The marketcap of the company is only 295 crs.As at 31 March 2014,the cash &cash equivalent including deposits and investment stood at 61.5 crore or 48 per share.Thus we are getting the company for just 230crs.The dividend declared for the year has been 6 rs per share.A debt free, dividend paying company which has been a consistent performer over the last several years operating in a sunrising industry, commanding a trailing PE of less than 6 is a massive bargain for the investors planning to own a pie of it.The company is expected to deliver an EPS of 50 for fy14-15.Keeping the same trailing PE of just 6 for fy-15,helps me to arrive at my target price for the counter.Its still an unnoticed gem which whenever gets attention would move on to a different orbit.One can safely buy it for solid returns in the coming months and years.

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.

Saturday, June 14, 2014

Shakti pumps and Gulshan polyols:-The couple of amazing attractively valued midcap bets

Recommended to paid members hardly few weeks back.Its time for you readers to act on it.


Stock tip:-

Scripscan:Shakti Pumps ltd
Traded in:Nse-Bse
Buy range:135-149rs
Target:210rs
Percentage returns:50%
Duration:9-12 months

Company:An ISO 9001-2008 certified company has its sprawling state of the art manufacturing facilities with an installed capacity of 1 million pumps per annum, is strategically situated in central India at Pithampur in the state of Madhya Pradesh.Company manufactures diverse models of submersible pumps and motors and other application pumps for a wide range of applications. Over the years of steady growth, Shakti has become one of the leading pump exporters in India apart being a major player in domestic market as well.Today the company is answering water needs of more than 100 countries across the globe and the number is steadily growing over years. Owing to its success of strong product lines and technology that is at par with the best in international markets, Shakti Pumps has carved a niche amongst quality conscious users around the globe.

Accolades and Product applications:Shakti is among the few pioneers in the world to produce 100% stainless steel submersible pumps and motors.Shakti is rubbing its shoulders with best brands in the world thanks to the state-of-the art technology and innovation as its hallmarks.The main focus of the company is to manufacture best quality pumps which consume less energy, have long life and are easy to maintain. Considering energy efficiency features of its pumps, Bureau of Energy Efficiency (BEE) has granted it 5-star ratings to more than 260 of its pump models.Its pumps are largely used for applications like drinking water supply, agriculture, irrigation, industrial applications and processes, pressure boosting in high rise buildings and townships, rural/urban community water supply schemes, waste and sewage water treatments, firefighting etc.

New products:Innovation and R&D are the key of long sustainability in the pumps industry and it got plans to launch many new products like high capacity solar pumps, enhance the range of booster pumps, upgraded open well pumps, and hydro pneumatic systems and update products as per customer requirements. Its also in process to develop high quality energy conservative sewage pumps,slurry pumps, waste water pumps, hot water pumps etc.All this products will help the company catapult in the top global league and cement its position as one of the largest players.

Industry outlook:The global pump industry in on the threshold of scorching growth ahead in the coming decade.Global pump demand will rise 6.4 percent yearly through 2016 to $76.1 billion. Gains in developing areas such as China and India will result from investment in water infrastructure and electricity generation.In developed areas, growth will be driven by process manufacturing.Growing urbanization,irregular rainfall and depleting ground water levels augur well for the pump industry.India's agriculture accounts for around 14% of its GDP and employs majority of the people.The Govt has taken various initiatives to improve the agri business thereby reducing the growing food inflation rate.Demands for food grains and ground water for irrigation will drive the demand for the pump industry in our country in the near future.

Company Future outlook:Despite only moderate growth in the global economy,company expects order intake and sales revenue to grow at a good speed in coming years. In next two yearsthe company aims to achieve top line of 600 crores with net margins of 10%+.In the last one year, the company expanded its footprint into new geographies like Ecuador, Mexico, Argentina and Morocco.It has plans to register its presence in all BRICS, G20 and European Union and in other growing countries in coming years. Shakti pumps is also committed to increase the Branch Network to 30 and Dealer network to 100 by the next 15 months.Shakti has further plans to set up or acquire small plants in other region of the country which will help it to cater across the regions by mid 2015.

Domestic focus:Solar pumping solutions also are the next big buzz in the sector as many state govt with MNRE are coming up with solar pumping projects.With its strong R&D capabilities, the company is moving towards industrial pumps,solar pumps to target institutional and Govt businesses.Going forward, Shakti Pumps has decided to expand its presence in the domestic market by tapping the fast growing industrial segment through its energy efficient pumps. The company has also made a strategic shift in its dealership model beginning April 1, 2014. The company will now appoint dealers who will exclusively sell only its products. This it believes will help the company to serve farmers better as they will now opt for what is required and not what is necessarily offered to them.

Margin of safety:The company trades at just 5 PE(forward earnings) vs industry PE of 15.Its one of the largest player in its segment.Five year((from 2009 to 2014)CAGR of Sales and profits at 22% and 26% respectively.Sales went up from 107crs to 292crs,PAT galloped to 25crs from just around 8crs in the same period.Stock market loves consistent players and treat them with premium valuations.The investor friendly company rewarded shareholders with a 1 for 1 bonus issue in the year 2011 which speaks about the confidence and conviction of the management.Promoter owns around 45% stake in the company as on date.ROE and ROCE of over 15% and 20% respectively.

Concerns:Chinese competition remains the main concern but the superior quality and competitive price of the company's product will ensure it always remains in the reckoning.

Conclusion:It is investing aggressively for strengthening product mix with value added pumps to cater growing international and domestic market.About 67% of revenues comes from export and remaining 33% from Indian market.On a consolidated basis, Shakti Pumps India's net profit rose 48.5% to Rs 24.98 crore on 39.9% increase in net sales to Rs 292.09 crore in the year ended 31 March 2014 over the year ended 31 March 2013.Now the company targets sales of Rs 400 crore plus including exports of 250crs and PAT of Rs 42-45 crore for FY 2015(with 21-22% EBITDA margins).That should result into an EPS of 29rs for fy15.The company presently quotes at a very attractive valuation of just 5 times its expected earnings.A mere multiple of 7 odd times helps me to arrive at the target price of 210rs.



Gulshan Polyols:-

Gulshan polyols has moved nearly 200% since the recommendation hardly 6 months back.Enjoy members.

Quote:I have been fortunate to be associated with a lot of amazing analyst buddies and corporate folks.I have been bullish on GPL for quite a while now.On discussing about the future prospects of the company with kinda a mentor figure(Hemant bhai),he forwarded me his take in the counter.Since we both post similar stuff,am not penning any fresh words but having said that it must be noted we both echo a very bullish stance on this particular counter.

Stock tip:-

Scripscan:Gulshan Polyols Ltd(December end call)
Bse code:532457
Cmp:70rs
Target:180rs
Return percentage:160%
Duration:9-12 months

Story:Muzaffar Nagar based Gulshan Polyols Ltd (GPL) has emerged as the largest manufacturer in India of 70% Sorbitol and Calcium Carbonate.Its production facilities are spread over 6 locations in 5 states covering land area of more than 150 acres. Company has installed capacity of 1.05 lac tonnes of Calcium Carbonate and 60000 tonnes of Sorbitol.In order to reduce energy costs, GPL also has 10MW of cogen power.

SORBITOL 70%:GPL has fully integrated facility for producing Sorbitol (Corn to Starch to Dextrose to Sorbitol) with 3MW cogen power. Sorbitol is mainly used as Sugar substitute and bondingagent. Main user industries are Healthcare,Cosmetics,Confectionary,Textile,Paper,Paints industry etc.

CALCIUM CARBONATE :Company producing various varieties including PCC, GCC, ACC and WGCC. Installed capacity is 1.05 lac tonnes with 7MW cogen power plant to meet energy requirements. GPL is also 1st company in India to install onsite PCC plant at a paper factory.Main user industry for Calcium Carbonate are PVC&Cables,Dentrifice,Detergents,Rubber,Plastics etc.

Clientele:GPL's customer list includes who's who of corporate India:-
FMCG :Colgate, Dabur, ITC, Unilever, Wipro
Food :Brittania, Candico, Yahoo Foods
Paints :Berger, Asian Paints, Kansai, Pidilite
Paper :ITC, TNPL,BILT, ABC Papers, Century Pulp
Pharma :IPCA, Cadilla, Torrent, AstraZeneca, Novartis, Pfizer, Merck etc

Buying of promoters:Last year, promoters had increased their stake by 5% (maximumpermissible limit through creeping acquisition route). Again, in current year promoters have increased their stake by another 3.50%.Now, PROMOTER STAKE STANDS AT 73.64%. A comparative small promoter increasing stake by 8.50% in less than 2 years speaks of confidence of promoter in future prospects of GPL.

Valuation:.GPL has been reporting consistent performance and steady growth. Same has been possible due to strong cost control measures, highly efficient production practices,and dominant market shares with strong/top brand customer base. Despite so called economic slowdown and global factors and rising interest rates,company has been improving its performance year after year which speak s of efficient management. With low debt, interest cost account for less than 1.50% of total sales.For FY13, GPL Pat rose 34.70% to 24.13 crores, translating into EPS of Rs 27.43. Company doubled the dividend to Rs 2.50 per share.For H1, GPL has achieved good nos with topline rising by 18% and Bottomline rising 14%.Newly set up plant in Rajasthan has contributed to higher turnover.GPL is likely end FY14 with topline of 310 cr ores and Pat of Rs 25.50 which will provide EPS of Rs 30.20. Hence, stock is available at extremely low PE Ratio of 2.5x FY14E EPS.Current Marketcap of GPL is just 64 crores whereas CASH ACCRUALS OF PREVIOUS 2 YEARS (FY 12 and FY 13) stand at Rs. 69.53 crores which means market cap is less than 2 years' Cash accruals.

Conclusion:In today's tough environment,those companies in smallcap and midcap segment have good future which DOMINANT market share of their product, assured demand from growing user industry, low debt, steady growth, strict control of costs and GPL meets all these criteria as its products are used in variety of industries (and those industries are growing rapidly). Moreover,company is supplying its products to renowned MNCs and other big Indian companies,so there are no problem of bad debts and delayed payments. Despite growing business, interest costs are not rising. And, GPL is very cost efficient producer and is able to compete against Chinese manufacturers in international market as well. Finally, GPL has strong and large asset base spread over 6 plants.Company is quoting at very attractive valuations of less than 2.5 PE its FY14 earnings of 30 rs.A modest PE multiple of 6x gives you the target price which is nearly 160% higher than the CMP.At present prices there's hardly any downside either.Go for it 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.

Tuesday, May 27, 2014

Words of Wisdom and the paid stock idea:-Transport corporation of India ltd

Words of Wisdom/Words from experience:-

Often in my tweets have mentioned this market reminds me of the bull market of 2002 to 2007.Now during those days,I was what a kid of 14-15,bunking school classes to know more about the market stuff.Had no demat accounts and dealt whatever I could with the small amount of money dad had in his account.Though I was lucky to earn 45 bucks in Wellwin industries,the subsequent blunders cost me nearly everything.In the present scenario,often members are upto interesting mischief(read mistake),and they are so alike to the blunders I committed in my early teens.Am penning 3 mistakes which really changed my life for good.Often blunders help you to get better than ever before,you understand the methodologies and if you can learn from them,you ought to perform way better in your future dealings.

1)In the very early stages of my life,I was churning the portfolio like hell.The lure of easy money and the childish excitement cost me a fortune notionally.Knowing all the details and after doing those childwood due-diligence, I bought Ttk prestige at 25 only to sell it at 30 around a week later.Got into Havells at 5 to exit at 6(adjusted split bonus).Today Ttk quotes at 3200 bucks and Havells at 900 respectively.

Lesson:In both the cases I made money.On a percentage annualised term,those were big but too miniscule if compared to the returns they would have provided if those were held on to even today.There was no obligation to exit them,but the greed of easy money took the better out of myself.Profit booking is a good habit but the longer term always provide big returns.Stay put in a business till the growth is intact.Active portfolio churning would never make you rich but ya your broker may well become your best companion as long as the chapter continues.

2)Just by using logic, I zeroed in on a counter called Kec international.Hailing from the coveted RPG stable it was one of the largest power transmission companies in Asia.Am not putting the whole analysis but opted for it at 16 bucks.The next day it nosedived to 14,a week later to 12 and a fortnight later to below 10.It was too much of a tension,money going down the drain and folks at that age,even 10k was like a million to me.Kec dropped more and I couldn't take it.Sold it off at one ago when it was finally below 8.Was kinda relieved,felt it would come to 5 and would buy more.3-4 years passed by and Kec moved to 800.

Lesson:Understand what the company is all about.Read as much as you can.The more amount of confidence and conviction you got,the higher the chances of returns.Market is all about greed and fear,they pay no heed to short term emotions,let alone relation with the intrinsic value or inherent fundamentals.But markets seldom overlook quality or value for long.If you have got a good company,stick to it and buy more provided the conviction and margin of safety is at helms.

3)Bought into a counter called Alphageo at 60 bucks with high amount of conviction backing it up.I already had the experience of Kec and hence even when it moved to below 50,was cool and kept holding it.What followed was pure frustration and boredom of your's truly.Entire markets moved up,its peer like Shiv vani moved 4 times yet Alphageo stayed at around 65.A year and a half passed by,alphageo traded at below 70.Out of depression,I exited at 65 to move on to some other counters.Within 20 months,Alphageo went on to hit a level of over 1000 bucks.

Lesson:Even if the market doubles, triples or quadruples and your quality stock is around your acquisition price,don't get bored but stay put and if possible add more of it.Your patience may well get tested but ultimately the conviction would be rewarded.It would also be prudent to note that when those overlooked superstars move,they really move big and results in massive 10-20-30 bagger gains for its owner or the stakeholders.Even the great Rakesh Jhunjhunwala got bored of Hawkins and sold it at below 100,as we all know hawkins quote over 2000 bucks this days.Learn and earn folks.Happy investing.





Quote:In a matter of less than couple of weeks,TCI delivered a spectacular return of 40% for the members.Enjoy folks.Its funny how market rewards a particular stock so fast,what I presumed would be achieved in 9-12 months got done just in 12 days.

High Conviction long term bet:-

Scripscan:Transport corporation of India ltd
Traded in:Nse-Bse
Buy range:124rs
Target:170rs
Percentage return:40%
Duration:9-12 months
Long term call:High conviction bet,expect 30% CAGR for next 5 years.

Quote:Was discussing about TCI with Ram,great mate of mine who also happens to own a lot of TCI.He was kind enough to forward me his note.Am aligning my thoughts with his note for the same.

Business+Moat:TCI is India's leading Multimodal Integrated Supply Chain Solutions Provider with a Global presence. With expertise developed over five decades, customer centric approach and extensive infrastructure,TCI today moves 2.5% of India's GDP by value.In a highly fragmented road transport sector, TCI is no more a commodity kind of player but a business driven by Brands and Networks => moat => pricing power. Apart from moving goods, TCI doing more complicated works like 3PL,inventory management, order processing, delivery, payment collection, labeling &packaging, warehousing and storage.

Management:Very important criterion-the people whom you are dealing with? If you get it wrong,then all other facts and numbers become unreliable, everything is a  waste of time.Good conservative Management with over five decades of experience.Governance and disclosure standards are high from the legacy of being listed over 4 decades since 1974. Now, infusing young blood with Vineet Agarwal elevated as MD last year,only raises hope. He is not only the face of the co but represents the industry on many issues.

Asset size:Covered warehouse space of mammoth 10 million sq ft, 7000+ fleet of customized vehicles (1500 owned), network of 1000+ IT enabled offices, call centers across India, 5000+ strong trained work force, 4 cargo ships, nearly 200 properties across India, presence in 4 countries, 10.5MW wind forms, high potential JVs etc. Can you duplicate the setup (replacement cost) for 900 crs?Imagine how many years it will take for anyone new to come up with such gigantic stuffs.

Opportunity size & Scalability:The country’s logistics sector is expected to cross US$200 billion by 2020 from current size of US$125 billion.Logistics is middle infra, hence a direct play on economy. In 2007, India was barely $1trillion economy but now kissing $2trillion.Despite current hiccups, hopefully set to double in 6-7 years and many more trillions to follow. So does the goods manufactured, consumed, imported and exported. No choices but all things have to be moved, who is going to do it? The great new Indian consumer society consuming like never before, who is going to fill the shelves? Logistics is unavoidable bridge and you have to pay the toll. Obviously leaders like TCI, armed with some finest assets in the industry, will leverage this asset base and benefit.The industry is one of the most fragmented.With technology adoption and the advent of modern sales formats, the unorganized sector is gradually losing out to organised counterparts.

Prudent debt management:Despite being in a capex driven industry, they are very careful with its debt. Net D/E ratio at 0.6 & Longterm D/E at 0.15. Long-term debt is just 20% of total.Interest cover is 4. Highest credit ratings from rating agencies.Capex mostly funded from internal accruals. From 2006-2013, their total capex was 501 crs. During that period, net debt increased only by 123 crs (from 113 crs to 236 crs), means they generated 378 crs from internal accruals over the 7 year period. This cash generation would only increase going forward.They propose big a capex of 230 crs for this year, FY2014— 60 crs from internal accruals & 170 crs from debt. These capex are unavoidable in this business since you have to be ready with infra to seize the opportunity bcaz of likes of GST & FDI. Given their prudence with debt, these big capex may bring short-term pain as higher interest costs but do bring fruits over long-term.

Carving for better margin:Their approach seems pragmatic about growth— knowing topline is vanity, bottomline is sanity.They let go off many deals sensing bad payments.Self-restricting the growth of credit driven TCI Freight, since its debtor days crossing normal 60 days and putting stress on working capital. That’s how they keep the business in rock solid footing.Management tries for better profitability with better business mix. Now, the two high potential divisions SCS, XPS are contributing 55% in sales and 70% in profits. In future the share of SCS, XPS & Freight in sales would finally settle as, 35:30:25 respectively. As high margin businesses taking lion share and improving, margins would pickup.If Management gets things in order, TCI can finally achieve net margins around 8%.

GST proves elusive:Usually logistics grows at 1.5 times the GDP rate. As a direct economy play, lower GDP means lower growth for the co.But I think over a 5 year period, things will even out.GST for logistics is somewhat comparable to what Cable Digitisation meant for Media.It would bring a 15-20% cost advantage and more business for logistics players over 3 years period (single national market, seamless movement of goods across state borders, emergence of hub&spokes distribution model etc). 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.GST can be delayed but not denied.With Modi at helms now,things surely can only change for good.

Consistency:Over the last 5 years from FY2009 to FY2013, which was very difficult period for the world trade after the 2008 meltdown,the CAGR of TCI in:-
BV = 10% (rs.40 to rs.60)
Topline = 15% (1350 crs to 2140 crs),
Net profit = 20% (33 crs to 70 crs).
Not expecting anything this fiscal 13-14 as more of a period of consolidation.PAT more or less would be at the same level.
Assuming TCI will continue to grow at 20% rate from now on— which it achieved in the worst period of world trade— net profit will be in triple digits for first time in FY2015-16. And over next five years,say from 2016-17 to 2020-21, they will make 250 crs at 20% CAGR. And fortunately, say, the much expected tail winds (like GST, retail FDI, GDP growth etc) happens soon after election.Then a bit of higher growth can be possible. At 30%, they will net 370crs.At 40%, they will net 540 crs.Over last 10years, 2003-2013—they never had a down year— topline up 4 times (530 crs to 2140 crs) and bottomline up 11 times (6 crs to 70 crs).

Valuation:Last quarter results are on may 24th so not making an assumption.Better to see and pen an update once the same gets announced.For fy15-16 they will cross 100crs of PAT.So at present prices it quotes at 9 times its fy15-16 earnings.Lets put a reality check to its peer group valuations.Gati trades at 15 times forward,Blue dart trades at 20 times fy15-16 earnings.There's no point which should make the leader TCI quote at such a large discount to the peers.Putting a conservative multiple of 12.5-13,I arrive at the target price of 170 bucks.A great high conviction bet.Bet it on for coming 3-5 years to make a pot of money 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.

Sunday, May 18, 2014

Stock market guidelines and a stock idea:-TRF ltd

Recent guidelines note given to members and also a stock tip which so far has moved over 30% in a matter of 3 weeks and looks good for more.

The 10 pointers which will help you to protect your losses and enhance the profits.Also accumulate the given names too.

1)Accumulate high conviction Top 10 ideas:-Tv today,Godrej properties,Ptc Finance,Jyothy labs,Canfin Homes,Shilpa Medicare,Fluidomat,Selan exploration,Transport Corp and Atul auto.

2)One question which flows incessantly is the query regarding targets.I mean why do you need to bother about targets?We all talk about the Jhunjhunwalas and the Damanis,crave for 10-20-50 baggers.Imagine if the ones who owned those stocks,sold at 20-30% profits or exited on some targets,Would they be worth so much today?Simply no is the answer.Please don't bother about targets.Stay put till the story is intact.

3)Its definitely important to ride your profits as well as to conserve them.The best way to do so is to keep a trailing profit level at your comfort.Say I have recommended a stock at 100 for a target of 150.It meets the target so will you sell?Again no is the answer.You keep a stop profit at 130 and continue to ride the rally.If it falls to 130,be happy as you have made 30%.But there's more than a chance it may continue to move up.Say if the stock moves from 150 to 180,put the stop profit at 150-160 and so on.In this way you can taste the real bigtime multibaggers.

4)I have been fortunate to earn quite a sum through stock markets.The secret being simple.I have always put some fund on a monthly basis throughout the last 11 years of my stock market endeavour.No matter if its 500 bucks or 5 lakhs,every penny helps.They make your cost of acquisition price very healthy.So try to allocate some fund every month folks.

5)The aspect which pains me a lot is the act on ignorance.You guys often buy without even knowing what the company is all about.Hearsay,rumuors get heavy on you.Equity represents lucrative ownership.Imagine a click of a mouse makes you the proud owner of a great company.Its obligated to share each and everything with yourself.Can wealth be made in more easier way?So the next time you delve into some company,make sure you have reasons and logic backing it.

6)Understand margin of safety.Its great to know about a company,its business and future prospects.Knowing about margin of safety is of prime importance too.A good dividend yield,great visionary promoters,any competitive advantage or moat,attractive valuations and decent return ratios act mostly as the margin of safety.If your company got all of these or say some of this aspects-It will more likely outperform the markets both ways,bear and bull market.

7)Am not a votary of stop losses,more a believer of averaging rather.But I have observed a lot of members piling on the ones which got a lot of risk and the high beta factor.Under such circumstances put a stop loss at 35% below the acquisition price.Again minimising losses and maximizing profits should be your mantra always.Even in my scrips, if something moves down more than 35%,simply exit from it.Coz after a lot of careful study, taking into account the margin of safety factor,a scrip gets suggested.So such a severe fall will only indicate something has gone wrong terribly.

8)Please don't chase any stock.Often the day after my recommendation,I find a lot of scrips either hitting upper circuit or quoting near to the circuit.Why to chase a stock?Is it like you wont get any more opportunities or am I winding up the consultancy services?Haste only makes waste.Buy slowly,steadily.Accumulate in the declines.Even if it moves only up,there's something better waiting for you to lap it up.

9)I know all my members are realistic and not the ones who gamble to loose.Warren Buffet, the greatest and the richest investor of all times made billions just by 20% odd compounding.So if you have been able to make 25-30% in a year,pat on your back as you really have accomplished something commendable.Any one who is looking for doubling or tripling of money in a quarter,can well make their way in the horse race course or in the lottery ticket counters.

10)Make a proper portfolio allocation.Often a lot of people puts 100% in a single counter.Ain't there more 5200 listed counters?If you have got high conviction,can put 25-30% in it.Not more than that.Always better to construct a diversified portfolio of 12-15 stocks.A single 30% allocation to a 20-30 bagger can well liberate you.Also a 26% portfolio compounder for 16 years with just 3000rs monthly fund allocation will give you the craved  millionaire status.It would be prudent to note that my consultancy services have provided over 30% CAGR since its inception.Last year being as high as 47%,as you folks are aware.Happy investing members.



Short term call:-(Given hardly 3 weeks ago)

Scripscan:TRF ltd
Traded in:Nse-Bse
Cmp:147
Target:225(Raised from 185)
Duration:3-4 months
Percentage return:52%

Note:A short term call and thus makes no senses to pen a large note.

Business:Established in 1962 as Tata Robins Fraser, TRF is a pioneer in solutions for material handling equipment and processing systems required in the infrastructure development and automotive applications.The material handling equipment and systems business caters mainly to sectors such as power, steel, port, mining, etc. Its two principle business segments, products and projects, are further divided into the following business units:

Bulk Material Handling Equipment: The division specialises in the design and manufacture of a wide range of material handling equipment, such as wagon tipplers, conveying systems, screens and crushers, travelling wagon loaders, etc. The division manufactures its products in its state-of-the-art works at Jamshedpur.

Bulk Material Handling Systems: The division offers a complete package of material handling and allied systems and services on a turnkey basis.

Port and Yard Equipment: This division focuses on the design, supply, erection and the commissioning of material handling equipment for ports and stockyards including level luffing cranes, ship loaders and unloaders, container cranes, stacker-reclaimers, etc.

Balance of Plant (BoP): This division offers complete EPC solution to power plant developers, comprises systems and utilities like coal and ash handling plants, water treatment, cooling tower, electrical-BoP, civil work, HVACs and compressed air, fire prevention and fuel handling systems. Its services also include system engineering for integration within BoP packages and those between BTG and BoP.

Operation and Maintenance Services: The division provides operation and maintenance services to customers using bulk material handling equipment.

Joint ventures, subsidiaries, associates:-

1)York Transport Equipment (Asia) Pte, Singapore is engaged in the business of production and distribution of trailer under-gears, which includes axles, suspensions and other components.The company has manufacturing facilities in Singapore, Australia, China and India.

2)Adithya Automotive Applications is an automotive applications unit in Lucknow, India, which provides end-to-end solutions through fabrication and machining for tippers, load bodies, refrigerated bodies, etc.

30Dutch Lanka Trailer (DLT) Manufacturers, Sri Lanka is a world-class trailer manufacturing company with manufacturing facilities in Sri Lanka, Oman and India. It exports trailers to over 30 countries.

4)Hewitt Robins International designs and manufactures mobile crushing plants and screens, feeders, foundry equipment, etc. The company produces standard and custom-designed equipment to perform in the toughest industrial environments.

Story:Often a quarter is enough to start a new bright trend.The same is the reason for recommending this week's call TRF or Tata Robin Fraser.

Results:TRF delivered consolidated 4th quarter revenues of 352crs vs 292crs in the corresponding period.It hit a PAT of 24crs vs a loss of 50crs earlier.For the full year 2013-14,the company clocked consolidated revenues of 1175crs vs 1115crs.Losses reduced to 28crs vs 92crs.

Conclusion:Earlier its debt went up as collections wasn't good because of the money market situation, some of the customers didn't pay and some of the projects got delayed. A lot of its money gets spent on these projects and overall the debtors went up and that impacted it badly.Company now got plans to reduce its debt by 10-15% which will help it to improve its margins.Management is very confident of making a strong turnaround in the present fiscal.This is the same company which even few years ago quoted at a level of 1100 bucks.Sectoral slowdown and resultant losses made the company shrink to new lows.It belongs to the coveted TATA stable and with better numbers,scrip may certainly roar and move on to new levels.


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.

Saturday, May 3, 2014

Jai balaji Industries ltd:-The high risk high return steel bet

Quote:Just recommended the counter to paid clients hardly 5 days back.Its been an instant hit with an appreciation of over 20%.Looks set for more.Readers its your time folks.


High risk Multibagger stock idea:-

Scripscan:Jai balaji Industries ltd
Traded in:Nse-Bse
CMP:14
Target:No targets(Targets are hard to assign in turnaround stories and makes no sense)
Duration:Play it for any term with your own targets.


Quote:Often you will find its not the profitable companies which turn out to be multibaggers but mostly its the turnaround cases that provide multi times return,provided they are caught early.

Business:The company is an integrated steel player with four manufacturing facilities having a capacity of over 1MTPA. It is engaged in manufacturing of sponge iron, pig iron, ferro alloys, billets/MS ingots, DI pipes and steel bars/rods (TMT bars),besides having backward integration for sinter and power.Apart from manufacturing activities, the company is also engaged in trading of steel products.

Note:Company which traded at 325 bucks even 3 odd years ago presently quotes at just 14 bucks,a price erosion of a pathetic 96%.

What went wrong:-
1)Its expansion plan of Purulia went to a backburner as GOVT changed in west bengal.
2)The raw material prices went up(iron ore,coking coal and non coking coal) while the product prices shifted sharply lower.
3)Demand dried up and interest rates kept going higher and higher.Even USD hit 20% to 60$ which ballooned Jai balaji's raw material import bill(it purchases low ash Met coke in bulk through merchant importers on high sea basis)
4)Coal scan and subsequent deallocation of coal blocks took the toll away of the steel companies.
5)Markets are afraid of pledge shares and this company has over 84% of its promoter holding pledged to lenders.
6)Company reported losses of over 200crs in the fiscal 2013-14.
7)Due to accumulated losses,the Networth kept eroding which presently makes the debt-equity ratio looks scary to say the least.
8)Company operating at 40% capacity with its ductile iron pipe operating at a mere 20-25% capacity.
9)Till last quarter its interest cover was less than half,which in simple words mean,your gross profit is much lower than your interest costs which is alarming and increases the chances of default(86crs interest vs 24crs gross profit)
10)The CFO resigned,a CFO resigning suddenly without notice is not a good sign as puts question mark on the company.

Now am analysing the problems and trying to find the positives out of it:-

1)Purulia plant(probably not on anymore) though was one of the reasons for brokerages to go gung-ho on the stock in actual is a blessing in disguise.Under the environment, it would have only surmounted its debts and increased the costs,as the cost of raw materials went up multi fold.Management can concentrate more on the installed capacity.

2)Raw material prices over the last few months have come down quite sharply.Coking coal is almost hitting 6 year lows.Iron ore and non coking prices too have seen some softening.This should help in its working capital needs.Margins would increase too.

3)Demand has increased a bit and also the company has been to able to squeeze better realization from its product prices.I don't foresee interest rates going much higher from the present levels.However say a 2 notch points reduction over the coming couple of years can help it in saving around 50crs of interest costs.

4)Coal scam chapter has probably ended for good now.Most of the coal blocks allotted to the parties got cancelled.However all the coal blocks of the company are intact.I ain't bothered about the remaining ones but my area of interest lies on its two coal blocks,i.e,Dumri and Rohne.They are awaiting final stage clearence from the govt and got till 31st of November to get the same done.On operation,both together will add over 350crs of EBITDA.I have no updates on dumri but there seems to be some good news on the Rohne coking coal mine front.JSW and Bhushan steel are partners of the company as far the Rohne mine is concerned.Jsw as per the recent news have got the nod from coal India to use its infrastructure for the mining.Since the mining will be done at the same place, its easy to assume the partners would pluck out the coal at the same point of time.It would be prudent to note that JSW Steel on last Jan 2013 gave the guidance of starting the rohne coal production after a period of 18-24 months(search google for Jsw conference call Jan 13).With 15 months done now,mining can start by the end of this year.Jai balaji will save 250crs of inputs from the rohne mine alone.

5)Even when the price collapsed from 325 to 7 bucks,not a single pledged shares got sold.As per the management,pledge shares would never get sold as per their agreement with the lenders.Now even after 96% erosion,if the pledge shares are intact,we ought to believe in the statement of the management.

6)Company expects a much better year of fy14-15.The worst is over as per their words.

7)Its definitely scary but the coming quarters will probably help it to service its debt more efficiently.

8)Company as per my recent words with the management has seen an uptick in capacity levels.Its operating at near 50% capacity now vs 40% even a quarter ago.Ductile iron pipes demand are expected to grow 15% CAGR till 2017.Company is hopeful of utilizing the most of its DI pipe capacity.At even 85% capacity(25% now),DI pipes would add up over 150crs of EBITDA.

9)I believe from this quarter or maybe from the next, company would actually be in a better position to service its debt.

10)That was actually a part of the reorganization of the management team.The CFO got demoted to the post of GM finance(If I can use the word demotion here in place of shifted).Sanjiv Jajodia is presently serving the CFO duties as well the wholetime director duties.He is regarded as a very efficient finance guy who has been with the company from scratch.It would be prudent to note that MR Jajodia was the CFO till 2010 and under his reign company clocked record profits.

Coverage aspect:Even 2-3 years ago as many as around 8 reputed research houses covered the stock at over 200 bucks putting huge targets(UBS even went on to assign a target of as high as 450 bucks and kept the company on their high conviction list).The company had hardly anything then(coal block clearance was 4 years away,no ductile plant,no coal washery plant,no coke ovens),it got most of the things in place now but those guys who covered the company may have forgotten it or sold it off as a super flop bet.Probably its the best time to get into the counter.

Creeping acquisition part:Promoters know the most of their company.They bought shares worth 12crs from market at around 180,further bought 6.5 lakhs shares at around 40 bucks from market in the earlier years(between 2011-2012).Again chipped in with a massive 50crs(50rs per share-1cr warrants)to hike up their stake at a premium to the market price when they could have taken the same at 36rs.Though CDR stuff but at a 40% premium to the guideline price speaks volume about the commitment and confidence of the promoters.

Conclusion:The company presently may be fighting for survival but it still got the distinction of probably being the only entity to set up an integrated million tonne capacity at just 1600crs vs today's benchmark of 3500-4000crs.At full capacity this company can deliver a turnover of over 4000crs.At 100rs Marketcap you are getting the 8th largest steel manufacturer in the country(2nd or 3rd largest coal based steel manufacturer).Its a classic high risk high reward play.NAV or the bankruptcy value of the company would be much higher at over 50 bucks(replacement cost of assets at 4000crs vs debt of 2500crs).Its been a high beta play,moved up and down over the years in a huge manner.Other companies from this sector like Tata metalliks came out with great turnaround numbers recently.Jai Balaji has always been within the striking distance of the hot metal cost of Tata Metaliks which is an industry benchmark.With everything looking up,Jai balaji should too deliver much better numbers.If you got some risk appetite with penchant of high returns,park on some fund in the counter.Again a play for any term- short,medium or long term.


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, April 21, 2014

Orient paper Ltd:-The cheapest bet with massive potential in the consumer appliances segment

Another paid call given just couple of months ago.Already up 20% from the suggested level.Now open readers act on it for further 40% movement in the short term.

Stock Idea:-

Scripscan:Orient paper Ltd
Traded in:Nse-bse
CMP:14
Target:23
Return percentage:65%
Duration:4-6 months
Point to note:Please don't make any haste.Its a volatile counter with good volumes and would always offer chances to pick up during correction periods.

Quote:A lot of action is expected to happen in the recommended counter.The note is of Skp aligned with my views.Its not meant for long term members.Folks who fancies short term stuff can act accordingly.

Company Background:Orient Paper & Industries Ltd (OPIL) is a part of CK Birla Group. It is engaged in the business of manufacture of Paper (tissue papers, writing and printing papers, photocopy papers etc) and Consumer Electrical goods (fans, lightings and household electrical appliances). OPIL has five manufacturing units located at Amlai (M.P.), Brajrajnagar (Orissa),
Kolkata (W.B.), Faridabad (Haryana) and Noida (U.P.)

Investment Rationale:OPIL Paper business in recent years have been facing stiff challenges, since Indian Paper Industry has been passing through a very difficult phase due to huge cost increases and depressed market conditions. In addition, the OPIL had problems in functioning of its aging captive power plant, which led to losses during the year FY13. OPIL has already taken several initiatives to improve the performance of paper business:

a)A 55 MW power plant was commissioned in December -2012 at Amlai, M.P. This will not only overcome the bottleneck of steam and power unavailability but will also result in savings of ~INR 300 million annually.

b)New 250 million gallon water reservoirs are now fully operational,which is helping OPIL to avoid any water shortage related shutdown.

c)OPIL has taken ~12% increase in the prices of paper which has helped in reducing losses.Apart from the above Rupee depreciation had increased the cost of imports thereby, giving some respite to the industry.

Diversification into the small electrical appliances to propel growth:OPIL has launched a wide range of Electrical/Household Electrical Appliances (achieved turnover of ~INR 500 million in the first year of launch). Initially the company will trade in the aforesaid new products and will leverage its Orient brand coupled with its robust distribution network comprising of ~5,000 dealers.

Surplus land to add value:OPIL Paper plant at Brajrajnagar is non-operational since 1999. The company has applied for coal linkage for an IPP project and is awaiting an approval. Though, we believe that relevant available land can be optimally used for other purposes going forward.

Valuation:We rate a BUY rating on OPIL with a price target of INR 23.7/share. Our target price is based on SOTP valuation methodology, discounting Electrical and Paper business at 0.2x and 1x FY15EEV/Sales.

Btw:The past data of OPIL is not comparable since the Cement division has been demerged with effect from 1St April 2012. Post the demerger, the OPIL business reflects the value of the Paper, Consumer Durable business and Investments.

My view:Orient paper after the demerger has rejuvenated itself with its initiatives.The company is all set to make a sparkling turnaround in the coming quarters.Its a class company coming from a quality stable.Interest is very high in the counter because of the intrinsic value.A lot of MF's are already behind it and with the expected profits,it should attract a premium valuation.My target is 23 bucks which should get achieved over the next 4-6 months.


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.

Thursday, April 10, 2014

Tv Today network Ltd:-The next big wealth creator in making

Below penned are the couple of paid calls which were given to members a few months back.Both doing amazingly well.Also put is a fresh stock idea for my beloved readers.

1)Scripscan:Fluidomat ltd
Traded in:Bse
Cmp:68
Target:120
Return:75%
Duration:9-12 months

Strategy:The company is the only listed fluid coupling play in the bourses.A fluid coupling in a company is what an underwear(read page industries),lunch plates(Read La opala),pressure cookers,(read ttk and hawkins) is to us in our daily life.Company got a ROE of 30% with nearly a monopoly business.Management is sound and paid a sound dividend of 2.5rs this fiscal.Company has been very consistent on its numbers over the last several years.Fluidomat trades at a low single digit PE.Company is about to bag huge orders from Petronas which would take the company in the top global league.One of the very few companies which got a tremendous pricing power.Promoters stake have gone from 30% to nearly 53% in the last five years.Accumulate slowly for a 70-80% yearly return.Its kinda a safe compounder too.Company got all the potential to be a massive multibagger.At 30 crs marketcap its an amazing bargain.Personally I do own a heavy position in the stock.At some point of a time expect a research note on the counter.

2)Scripscan:Eicher motors ltd
Traded in:Nse-Bse
Cmp:4900
Target:6200
Return:25%
Duration:4-7 months

Strategy:The Royal Enfield maker is doing wonders in the bourses.A lot of HNI activity is slated to happen in the counter.Scrip is in very strong momentum.Though the price is bit high but stock market is a place where quality counters are often treated with abnormal valuations.I ain't bothered about its long term potential.But for someone looking to rake in cool moolah in a large cap masterpiece can consider it at present levels.




A high conviction bet for my beloved readers:-

Scripscan:Tv Today network Ltd
Traded in:Nse-bse
CMP:119
Target:10% in short term,20% in medium term and 40-60% in a year's time
Long term target:30-40% CAGR for coming 5 years

Note:AS you all are aware,through my VC vehicle I own the MOSL(Motilal oswal)franchise but never in my services have resorted to use their stock tips.The logic been simple-my unique way fits into the tiny micro cap category whereas MOSL only pens on known mid or large caps with yearly target return of 20-25% .Now for the first time a couple of things gonna happen.I am going to recommend a media stock assimilating mosl's research logic.Digitisation is certainly a windfall gains for broadcasters and hence don't want to miss the inevitable run in the scrips related to the sector.TV today at present prices is one heck of a medium bet.At 7x fy15 earnings,the company deserves a place in your portfolio.

About the company:TV Today Network Ltd is a company engaged in news broadcasting operations.The company is a part of India Today group and operates a network of TV news channels,namely Aaj Tak, Headlines Today,Tez and Dilli Aaj Tak.They are first Indian broadcaster to uplink from India, a 24 hour Hindu news channel.The company also has also made strategic investment worth Rs 45 Crore during FY12 in Mail Today Newspaper (Private) Limited, which publishes a news paper called Mail Today.The company has one subsidiary, namely TV Today Network (Business) Ltd.

Digitisation,a windfall gains for broadcasters:Broadcasters are likely to enjoy windfall gains as digital cable opens up the under declared pay-TV revenues. Digitisation will also ensure increase in cable capacity, which will lead to reduction in carriage cost paid by broadcasters to erstwhile analog cable oparators. The power of bargaining will shift from distribution networks to content. In such a scenario, we believe broadcasting networks will grow their profit at CAGR of 35-40% during FY13-FY17 just because of increase in subscription revenue, which will flow entirely to bottom line.

News Content's double whammy: News channels suffer double whammy as they need to pay high carriage fee on top of low subscription income as compared to General Entertainment Channels (GECs) to get their channels carried on analog networks. Carriage fee is the single largest cost item in P&L of news channels at ~30-35% of revenues. This has lead to financial bleeding of almost all news channels.Two of the three listed players are barely profitable and one is loss making for a long period of time. Digitisation will reduce the carriage fee, which will ensure better financial performance from news broadcasters.

TV Today Network, a turnaround:Surge in revenues with not much increase in associated cost will ensure a huge turnaround in operational performance of the company.The company will likely report life high profit at the end of FY14, which will also ensure RoE of ~20%.We expect revenues to grow at CAGR of 23% during FY13-15E vs 10% growth during FY06-13. This will lead to disproportionate growth in PAT at CAGR of 171% during FY13-15E vs PAT CAGR of -11% during FY06-13.

Numbers:Company reported 313crs of revenues in fy13 with PAT of 12crs.The same is set to inch up to 415crs and 69crs respectively in fy14.In fy15,company to post revenues of around 480crs on an expected PAT of 88-90crs.At around 12 times fy15,you get your target price.Company only commands a marketcap of 700 odd crs at present prices.

Valuations and View:TV Today is play on turnaround of news broadcasting business as well as general theme of digitization in media space. The stock offers attractive risk reward at ~9x FY14E EPS with ~4% dividend yield in FY14E. Historically , the company has traded at median PE of 21x and lowest PE of 9x since listing in FY04.Therefore, we believe there is a decent upside to stock in 1 year time frame even if we take 30% discount to median valuations.

My personal take:The company came with its IPO 11 years back at 95rs.Even the Sensex was at 3000 levels then.Sensex moved over 7 times,many companies became 100 baggers but TV today remained a laggard.As India  transitions to become the worlds fifth largest consumer market by 2025, its middle class will swell  by over ten times its current size of 50 million to 583  million people.We have the leading Hindi news channel in our hand which will benefit massively from that.Digitization would do wonders for the company.Not to forget the expected 4-5% dividend yield.Even on historical valuations its quoting at its lowest over a period of 10 years.Tv today as we all know owns channels like Aj Tak and headlines today.AJ tak brand is even superior to that of biggies like ICICI bank and HDFC bank.Company is terribly under owned inspite of all the multibagger ingredients.Present price offers a great chance to opt for the only recommended pure media play.Buy it for any term members.

Conclusion:High ROE+High Dividend Yield+Brand play+Hindi news market leader+Digitization+Nearly zero debt+Ethical visionary management+Under owned stock from a boring sector+A laggard for the last 11 years with no capital appreciation+Content Owner+High entry barriers+Amazingly cheap valuation+I own it too.Lolz ignore the last+.TV today over the next 8-10 years will create massive wealth for the shareholders.Go for it.


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, March 30, 2014

V-mart Retail ltd:-The best bet in the retail sector with multibagger potential

 Very recently recommended to the paid members at 250 odd bucks.Hardly has moved 20rs from the suggested level.Its more of a Gift to my loyal readers to make some cool bucks now.

Stock tip:-

Scripscan:V-mart Retail ltd
Traded in:Nse-Bse
Buy range:250
Target:325
Duration:4-7 months
Return percentage:30%
Long term target:Should continue to provide 30% CAGR for coming 5 years.

Business:V-Mart is a complete family fashion store that provides its customers true value for their money.V-Mart offers fashion garments at down-to-earth prices and over a period of time has emerged as the destination of choice for bargain hunters and the fashionable alike.It primarily operate in tier II & tier III cities with the chain of “Value Retail” departmental stores.The stores cater to the needs of the entire family altogether by offering apparels, general merchandise and kirana goods.“Price Less Fashion” is the Main Motto through which the company believes in providing the latest trends to the upwardly mobile Indians at the best possible price.

Stores:V-mart operates 88 stores across 76 cities in 12 states and union territories(with a total area of 7.1 lakhs sq ft,so round about 8000 sqft per store).The stores are located in prime cities such as Bihar, Chandigarh, Gujarat, Haryana, Jammu and Kashmir, Madhya Pradesh, New Delhi, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh.New stores are set to be opened in smaller towns and cities in regions such as West Bengal, Assam and Uttarakhand etc.The company is among the pioneers in setting up modern ambiance stores or large retail malls across various small towns and cities like including Sultanpur, Ujjain, Motihari and more.

Why I am bullish:-

1)The average sales per sq ft has increased from Rs.507 in 2011 to around 710rs now.The management is confident of increasing the same to even higher rates(ideal sales rate just over 800 bucks according to the management) by meeting the aspirations of people by proving quality fashion at affordable prices.The inventory days has improved from 104 in FY12 to 92 in FY13.Present breakup of product mix is 86:14 in apparel:kirana stores. The company plans to take it to 90:10 in about 2 years which will provide higher margins.

3)What is like the most about the company is its concentration towards the Tier-3 cities,huge growth potential with not much competition(Likes of Trent,Shoppers stops or even Big bazaar would probably never come there in the next 5 years).The store guidance given by them stands at 94 by march 2014.The company plans to add up atleast 25 stores for the coming few years.Its a simple calculation.So 50 stores would come up in next 2 years.It takes about 2500 bucks to set up per sq ft(1300rs store and 1200 bucks inventory).So on a capex of 100crs(again no debt or equity dilution but to be funded by Ipo money and from internal accruals),calculate the sales folks.

4)The company has been an amazing performer over the last several years.Both sales and profits have grown at over 35% CAGR respectively for the last 5 years.The company ended fy12-13 with revenues of 383crs accompanied by a PAT of 18crs.In the 9 months of the present fiscal,it has already done revenues of 395crs and a PAT of 24crs.The company is expected to end the fiscal with revenues of 500 crs and a profit of 29crs(last quarter isnt the strongest quarter and contributes around 17% on an overall basis).Further for fy15,the company is expected to grow by 40%(700crs of revenues and  around 42crs of PAT).

4)A lot of retail companies like Vishal killed themselves by opting for massive debts.Retail as a sector always remained an area of interest but due to high leveraging and exorbitant valuations,(industry PE at around 40 as per estimates of Moneycontrol)I gave them a miss.But with V-mart,say debt equity of .2 and quoting at less than 12 times fy15 earnings with management guidance of 30% CAGR growth for the coming decade, gives me the impression of having a massive probable multibagger.A mere multiple of 15 on fy15 earnings, helps me to arrive at the target price of 325 bucks.

Conclusion:The company bunches store locations of about 150-200 km from each other, allowing economies in sourcing and distribution.Working-capital cycle has remained steady over the years, and is on a par with its retail peers. The company enjoys superior margins in comparison to its counterparts on account of lower rentals and meagre employee cost.V-Mart is now concentrating on high margin apparel and non apparel segment where the gross margins are around 35%,much higher than kirana stores which sees around 13% margin.Company should comfortably generate around 20% ROE in the coming many years.This is a very simple yet an attractive business which has got massive growth potential.The FII's and MF's have bought huge amount of shares from the open market in the last few months.Promoters are neat,visionary and seem committed towards making money for themselves and for the minority shareholders.A scrip which has got all the potential to write a scripture for itself.


 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, March 17, 2014

Ratnamani Metals and Tubes Ltd:-My birthday gift to the paid members(Turning 26 years on 20th of march).Enjoy the metal multibagger

Quote: Ratnamani was recommended to paid members just hardly a couple of weeks ago.

Guys it has been a great blogging journey for me since the last 7 years.The blog has got tremendous response and accolades from all over the world.It has been visited over 1.7 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 26 years of age on day after tomorrow,i.e,20th of march.You can send all your blessings and wishes by either mailing me or texting me on my number.Please put your name folks so that I can figure you out.

 Stock tip:-

A high conviction bet:-

Scripscan:Ratnamani Metals and Tubes Ltd
Traded in:Nse-bse
Buy range:150-162rs
Target:10% in short term,20% in medium term and 40-50% in a year's time
Long term target:25-30% CAGR for coming 5 years

Business:Ratnamani Metals and Tubes Ltd produces carbon steel welded pipes and stainless steel welded/seamless tubes and pipes.It got a stainless steel capacity of 27,000 metric tonne (20,000 for welded pipes and 7,000 for seamless pipes) and 350,000 tonne of carbon steel.Ratnamani provides high frequency welded pipes, electric resistance welded pipes, saw pipes, seamless tubes and pipes, welded tubes etc. The company serves various industries including power plants, refineries, water distribution, petrochemicals, fertilisers, irrigation, process industries and oil and gas sector.Ratnamani has an impressive clientele comprising major public, private and joint sector Companies in the country who are leaders in their respective segments.The company exports its products to around 16 countries.Over the years company has expanded its capacities to handle more critical grades and specialty tubes for the stainless steel division along with increasing capacity of carbon steel pipes on the other. Ratnamani's manufacturing facilities are located at Chhatral and Indrad on Ahmedabad – Mehsana Highway and at Bhimasar, Kutch, on Bachau – Anjar Road.

Fiscal 12-13:Despite the challenging scenario,the Company continued to be successful and has performed well.The major factors attributable to this include strong business initiatives strengthened with the sound domain knowledge, consistent product quality aligned to customer expectations, product mix, captive skills partnered with cost consciousness and persistent focus on efficiencies.During the year 2012-13, revenues from operations were Rs. 1200crs though reduced marginally but PBT increased by 44.80% from Rs. 139 crs to Rs 201 crs and profit after tax surged 44.15% from Rs. 94 crs to Rs. 136 crs.EPS went up by 21.92% from Rs. 23.90 to Rs. 29.14,strengthening shareholder''s value.Company basically capitalized on the interest front as its debt came down from 275crs in fy12 to just 120crs in fy13.

What I like the most:Ratnamani with over 50% market share is the leader in production of stainless steel pipes.It also got the distinction of India's only company to be approved by Nuclear Power Corp to supply pipes for heat exchanges in nuclear reactors and instrumentation tubes.Its diversified clientele insulates it from the vagaries of any sectoral slowdown.On words of the management,"We have consciously turned conservative, concentrating on only those segments where we see good potential for growth. We are now focusing on the stainless segment and high-value products to ensure that returns stay healthy".The company enjoys one of the best operating margins in the industry,thanks to its initiative of buying inputs on bulk only when the orders are ready to be executed.There's not much inventory to talk about either.Sales have grown at an amazing speed of 29% in the last 10 years,from 118crs to 1200crs in fy13.Profits too have galloped at a superior pace of 48% CAGR,4crs to 136crs.Company has managed the slowdown perfectly and has been able to grow its profits year after years.It will continue to grow 15-20% for the coming few years,ones the cycle picks up Ratnamani may even grow at say 40-50% CAGR.

Conclusion:Net profit of Ratnamani Metals & Tubes rose 13.59% to Rs 35.94 crore in the quarter ended December 2013 as against Rs 31.64 crore during the previous quarter ended December 2012. Sales rose 28.09% to Rs 334.41 crore in the quarter ended December 2013 as against Rs 261.08 crore during the previous quarter ended December 2012.The business model is one of its kind.With manageable debts and signs of a revival in the cycle-Ratnamani looks all set to perform extravagantly again.The company will end the fiscal with revenues of around 1320crs and a PAT of 145crs.Its trading at just 5 times its fy14 earnings(fy13-14 EPS expected to be 33 bucks).So how to value a company which has grown by leaps and bounds,survived the down cycle and managed its profits well,got ROE and ROCE of over 20% backed by a visionary pedigree and investors like Nalanda and IDFC?Buy it for any term folks.As soon as the market realizes the potential and the story,scrip would get heavily rerated in the bourses.The company has never skipped a dividend in the last ten years.Ratnamani over the last 12 years has seen its stock price moving over 100 times.With its business model and sound strategies in place,it looks to be another 10 bagger in the coming 7-8 years.Huge upsides and limited downsides to make the quintessence.


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.

 Regards,
ARUN 

9804589299

Sunday, March 9, 2014

Omnitex Industries ltd:-Can Strata India be the next big multibagger?

Note:This isn't your multibagger or my paid call or even a recommendation to clarify beforehand folks.Its a tiny cap with a mere 5crs market cap.I am penning the details or the quintessence which caught my eye.I invite a general discussion on the counter.You people try to dig more about the company,anything and everything helps in markets as you know.

Scripscan:Omnitex Industries ltd(Strata India)
Bse code:514324
Cmp:14
Marketcap:5crs

Note:In 2009 or probably 2010,similar company called Subuthi Finance(now Indus finance)was suggested at 8 bucks as the company was holding truckload of Indowind energy.Subuthi from 8 in a matter of few quarters moved all the way to 339 bucks.

Quote:I have called Omnitex guys a few times and every time I was asked to mail them up which eventually was done but till date no reply has arrived from their desk.On calling the Omnitex given phone number in Bse,one is greeted by the message of "Welcome to Strata India".Plan to meet them up in due course.You folks try to grill them up too.

About Omnitex:Omnitex is a company with no core business.So before you start to sense irrational stuff,pay heed to the details.It owns around 30% in its JV company called Strata Geosystems and there lies my interest.Company's paltry income is of basically licence fees received for premises and amenities from Strata Geosystems.Google up to know more about Strata or even a close eye on the care ratings will do a world of good too.

Care ratings:Ratings are mostly unbiased stuff which provides mostly everything about a company.Here's the link(http://tinyurl.com/nyvbw9h).Am pasting the CARE rating's nutshell.

Background:Strata Geosystems is a JV promoted by Omnitex and Strata Systems Inc.SGIPL is engaged in manufacturing of Geogrids along with providing end-to-end solutions from designing to execution of constructing retaining wall for approach to fly-overs.The manufacturing facility of SGIPL is located at Daman & as of March 31, 2013 had the capacity to produce 4.50 million sq.mtr of Pet Geo Grid per annum.In FY13,company was also engaged in trading of Geo cell and in FY14, the company is setting up a plant to manufacture the same at an estimated cost of Rs.3.33 crore.Furthermore the company is an exclusive distributor of BEBO arch system in India.

Increase in scale of operation coupled with healthy order position:During FY13, the total income of SGIPL’s grew by 21%, mainly due to increase in orders received for both manufacturing of geo grids coupled with receiving orders for providing end-to-end solutions.However, overall scale of operations remains modest with operating income of Rs.63.32 crore and PAT of Rs.2.42 crore.On H1FY14,it reported total income of Rs.27.00 crore.SGIPL has order book of Rs.138 crore as on October 01, 2013,out of which approximately 50.00 crore will be executed by March 2014.

Improvement in overall gearing:Overall gearing improved 0.52x as on March 31, 2013 from 0.74x as on March 31, 2012 primarily on account of repayment of term loans and accretion ofprofits.Moreover, SGIPL has comfortable liquidity position in the form of un-utilized working capital borrowings (as the average monthly working capital utilization was around 49% for the past twelve months ending September 2013.

Decline in operating profitability leading to marginally deterioration in debt coverage indicators:The operating margins of SGIPL declined by 670 bps during FY13 vis-à-vis FY12 primarily on the account of comparatively lower realizations coupled with write off bad debt amounting to Rs.1.90 crore. However the operating margins continues to moderate.

Introduction of new products & services resulting in moderate capex:As discussed above, during FY13, SGIPL has ventured into trading of Geocells and has plans to set up a manufacturing unit for the same.Furthermore, the promoters has also planned new vertical for design, supply and construction of bridges using precast archbridge technology. The company will source technology from Swiss based BEBO Arch International AG.The company is developing moulds for bridge arch with a total cost outlay of Rs.1.00 crore.Thus going forward, ability of the company to successfully diversify its revenue stream and complete the aforementioned project,without any time and cost over-run, shall be critical from credit perspective.

Prospects:SGIPL’s prospects will largely depends on its ability to increase the scale of operations via continuous flows of orders from infrastructure sector in the scenario of slowdown. While increasing awareness towards the technical textiles would be crucial for its future prospects in India.
(Source:Care Ratings)

Positives:-

1)1)Strata geosystems growing at a rapid speed(Company has grown over 50% CAGR since inception).Even its counterpart Maccaferri India aims to be a 1000cr turnover company in next 5 years with growth of 50% CAGR(http://www.business-standard.com/article/companies/maccaferri-eyes-robust-growth-targets-rs-1-000-cr-turnover-111032900215_1.html)

3)Robust clientele,comfortable debt equity ratio,great pedigree team(mostly IIT folks,Checkout in linkedin).Just read more about the background of guys who are the promoters of Omnitex or say who owns a lot of shares in Omnitex.The likes of "Ashok Bhawnani,Narendra Dalmia-People of great repute and incredible entrepreneurial skills with extravagant successful past track records.

4)Industry is new and growing at 30% per annum.Maccaferri and Strata have got lot to gain.Their business is confined to just 5-10% of the entire construction spending. However, the amount of quality and savings they ensure for the developers are phenomenon. Hence, the growth is certain.Strata recruiting daily,can find jobs in google with good million yearly package.

5)Promoter owns 20% of strata in their name and 30% through Omnitex,if they put the remaining 20% in Omnitex in lieu of warrants,story will change and stock will get massively re-rated.Also since Omnitex has given a corporate guarantee of 21crs,it obvious the minimum value of Omnitex assets are worth atleast 21cr,so the present marketcap of 5crs is not even 25% of its asset value.


Concerns:-

1)In fy09 shares were issued at 60 when PAT was mere 16 lakhs.In fy12 again shares were issued at 60,valuing the co. at only around 4xFY11 earnings.Omnitex applied for only 8718 shares during FY12 & its stake got diluted from 33.88% to 29.5%.Omnitex invested only 5.23 lakhs for 8718 shares, even though it found money to give 17 lakhs inter corporate deposits.

3)The corporate guarantee given by Omnitex to Strata increased from 10Cr. to 21Cr.For this, Omnitex is not receiving any guarantee commission which is generally ~ 2% of the guarantee amount or 42 lakhs p.a.Though on the reverse,strata is saving that amount which is helping some cost reduction.

3)Strata would continue to grow but if they allots more shares and Omnitex stake gets diluted(Provided omnitex refrains from subscribing),shareholders of Omnitex would never benefit or any re-rating may never occur.Also its a call auction category scrip with 2week average trading volumes of just 800 odd shares.

 

Valuation:Holding companies typically trade at 50% or a bit less than the their intrinsic holding value.Since there's no direct listed player in the segment and also considering Strata's amazing management team and with robust growth prospects,I prefer to value it on 1 time marketcap/sales.Strata as per the order book position would end fy13-14 with 77cr sales.So applying my valuation metric,77cr is the valuation for Strata Geosystems.Now the listed Omnitex India owns around 30% in Strata geo(30% of 77crs comes at 24crs).After putting a 50% holding discount,we arrive at a value of 12crs.Also as pointed out,Omnitex properties are atleast worth 21crs.So on adding up the values,we get much superior valuation for omnitex.It would also be prudent to note that Strata is expected to perform amazingly once the infra cycle picks up.Say even 50% CAGR is not a big deal as it has already proven its execution skills(albeit on a small scale),the low base effect will also help.I mean considering the prevailing tough environment,its still a cash positive profit making company with comfortable interest cover.So if Strata even grows at 40% cagr,the stock price of Omnitex should follow suit too.Provided there's no malpractices and 40% Strata geo growth(from 77crs in fy14 to 295crs in fy17).So again if Strata makes it 290crs revenues in next 4 years,Omnitex with 30% stake and 50% discount value,will have a value of 45crs or 108rs per share.Present market cap is just 5crs folks.

Disclosure:Bought 280 shares on last week.Intent to buy a few more.


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, February 25, 2014

DHP India Ltd:-The hidden gem which is set to become the next multibagger.

Scripscan:DHP India Ltd
Bse code:531306
Cmp:33

Story:DHP India Limited engages in the manufacture and sale of low pressure regulators for liquefied petroleum gas (LPG) cylinders, and related accessories and parts in India. Its products include propane regulators, butane regulators, LPG regulators, hose assemblies, and brass fittings. The company also exports its products.The Registered Office of the Company is situated in Kolkata & its Factory is situated in Howrah District, West Bengal.

This is an interesting microcap with good potential.The company has been pretty consistent in its numbers over the last several quarters.Its a mere 10crs mcap company having an equity base of just 3crs.It hails from our part of the world and once am out of this present bedridden restrictions,a management meet seems very on.Promoter owns 75% stake resulting in negligible volumes in the bourses.Its a herculean task to pen analysis about this unknown unheard counters.There's just no detail to work over.Even after meeting the managements if details are put on which are not in public domain,controversies may arise.It has happened in past and chances remain loads of getting it repeated once again.Anyways would still try to dig in details.

DHP has increased its sales from 12crs to 25crs in the last five years.Net profit in the same period vaulted five times to 3.5crs from just 70 lakhs.This can be attributed to its decision of manufacturing its products from trading previously.Presently it boasts of a superb net margin of 14% compared to 5-6% what its used to enjoy earlier.The Company presently has shifted the main focus of its manufacturing business from domestic market to the export markets and is pretty confident of obtaining satisfactory orders in the coming years.

I had the opportunity to interact with a few client of this company.Feedback received can be defined remarkable,they vouched for its world class product quality at much affordable prices.Can the company scale up remains the million$ question.Balance sheet is squeaky clean.Networth stands tall at 16crs with debts of less than 2crs, allowing it to go for fresh debts,in case it plans to expand big.Industry is fragmented though, with the company facing stiff competitions from superior vendors.Its too premature to suggest it a buy as lot of questions are in mind.On a prime facie it looks in better shape than a lot of other inferior microcaps.Volumes are too less,so any bulk buying or selling can make it move either ways bigtime.Growing consumption of low pressure regulators & gas related products coupled with immense potential for LPG  appliances makes the stock worth a look.I am not assigning any fat targets but downside seems very minimal from the present prices.


Quote:Dhp India was suggested few quarters back(http://tinyurl.com/nfx5ogp) to my readers as the microcap of just 10crs marketcap was looking very interesting.The company is buzzing as it has bagged few major orders.I have been able to gather a lot more information on the company which will be updated shortly.Coming quarter numbers should be spectacularly good.All in all a tiny cap to watch out for.

Recent numbers:Net profit of DHP India rose 408.70% to Rs 2.34 crore in the quarter ended December 2013 as against Rs 0.46 crore during the previous quarter ended December 2012. Sales rose 89.70% to Rs 11.23 crore in the quarter ended December 2013 as against Rs 5.92 crore during the previous quarter ended December 201.

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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