Market outlook and stock tip:-Tilaknagar Industries Ltd(Saturday, June 30, 2012)
Scripscan:Tilaknagar Industries Ltd
Quote:6-7 months back this company got recommended at 29 bucks and achieved my target of 62rs.At present its quoting at 52rs and looks good for a solid 30% return deliver candidate for the coming 3-4 months.It gives you all-good trading bet/robust medium term return booster/a potential long term multibagger.The whole business has got a CAGR of something like 23-25% last 6 quarters, which is very impressive considering that the IMFL industry in India is growing by about 10-12%.Under the tough environment it delivered great numbers with management sounding confident to even better it in the forthcoming quarters.It has consolidated in the range of 50-60 for a period of over 3 months now and looks set for an upmove.It should test a new high over the mentioned time frame.
Business:Tilaknagar Industries Ltd. engages in the manufacture and sale of various alcoholic beverages primarily in India. Its products include whisky, brandy, rum, vodka, and gin, as well as Indian made foreign liquors. The company markets whisky under the Mansion House, Senate Royale, BlacPower, Senate, White House Premium, Castle Club, Classic, TI Bachelor Deluxe, TI Golden Chariot, Royal Choice, Hottt Silk, and Shot names; brandy under the Mansion House French, Courrier Napoleon, MH VSOP, Duchess V.S.O.P., TI White House, Master's Doctor, Shot OLP, and Crown Prince names; rum under the Bonking Matured, Black Colt Matured XXX, Madiraa Premium Dark XXX, TI Nigro He-Mans XXX Matured, and Madira Rock XXX Rare names; vodka under the Castle Club Triple Distilled and Classic names; and gin under the Savoy Club Gin & Fresh Lime and Royal Choice Duet names. In addition, it provides industrial alcohols, sugar cubes, and packaged drinking water, as well as diethyl oxalate, an ester of alcohol and acid. Tilaknagar Industries Ltd. exports its products in the markets of Africa, the Caribbean Islands, the Middle East, the Far East, Europe, and Asia.
What I like the most:This company is managed by a young guy of 35 called Mr Amit Dahanukar.Solid visionary neat guy who has completed his masters from stanford university to return back to India and make the company a name to reckon with, in the industry it operates in.Its slowly becoming a pan India based player from a south based player.Tilaknagar wants to bring down its dependence on the S. Indian markets from 85% to 65% over the next few years, as well as double its share in the national IMFL market to 10%.It plans to strengthen its presence in the CSD, East, West and exports market. In the CSD market one of its strong brands‐ Madira Rum, has alsogot registered. It is building its whisky portfolio and has re‐launched Senate Royal.Its acquiring companies with good brands,integrating operations to boost margins,going for every possible tie-ups,aggressively expanding capacities in a diversified manner-Tilaknagar is all about class.
Conclusion:I really could have penned a massive report in Tilaknagar but refrained since its all about getting your logic right.You members may well get bore too.So have put the quintessence in the best manner I could possible make.When I see this company available at just 600 odd crs marketcap with 19 million cases capacity, I scream in excitement having the hunch of bagging a massive bargain.When I confirm the high double digit ROE for the company I drool.Rechecking the ROCE at over 20% raises my respect level for the company.The current discount of over 40% discount to the sector leaders like united spirits and radico khaitan is unjustifiable to a company with comparably stronger growth outlook,better margins and higher return ratios.In terms of the main valuation metric,its quoting at 1.2 times market cap to sales, which is too tiny for a FMCG company.For comparison say a HUL quotes at around 7 times.It should do 63 crs consolidated profit for fy13 which gives an EPS of rs 5.3 on an expanded equity cap of 115crs.It paid a dividend of 80 paisa which should increase in the coming fiscal.A justified PE of around 13 times forward helps me to assign a target of 69rs to be achieved in a span of 3-4 months thereby providing a rich capital appreciation of 30%.Tilaknagar is a company which can be bought in a SIP method for huge returns in a matter of 3-5 years.
Todays update:In a matter of less than 4 months, the company has hit the 33% return target of 69rs and looks good for even more.Enjoy the ride members.
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