1)Recall the Modi wave?Most of you clamoured for the infrastructure stocks.They were expected to double/triple in days,going by some words and speeches.Innumerable mails poured in for stock tips related to that sector.What actually happened?Did they blasted?Its the reverse actually,stocks like Simplex and Ivrcl are down over 40% from their recent levels.
My view:Too much cook simply spoils the broth.Never bother about any sector,specially if its the talk of the town.Where everybody joins,its ought to flop.This doesn't mean stocks from that sector wont move in near future.They will definitely but only if the stock is of quality and posses something which seperates it from the other inferior ones.To sum up,even if you bag 10000crs order,you need money or say working capital for that right?.Bank provides loan at 14% circulating and your profit margins are 10%,so you will only make losses right?
2)A member sometimes back mailed me about some Intraday tips provider who helped him in making lot of money.That particular member again mailed yesterday about how he went bankrupt,thanks to that same Intraday stock tip provider.
My view:Intraday trading means gambling.Ever heard people making money through gambling?My simple question to the folks who asks for sureshot intraday tips provider-If they are so good,why would they give you the tip for some 2000-3000 monthly fees?Wont they beg,borrow and sell everything they posses to garner as much as they can with brokers 1:10 margin to double it in an instant?Self preservation is the first law of nature after all.
q)I know whats coming next.Why do Arun or your's truly provides the tip then?
ans)Because that provides me more cashflows and I buy more of that company.Its like not only am making money with your money but helping you to make yours too.Whatever money I have made of so far,they all being yours man.1000 bucks compounded to 10000 and that compounded to few more zeroes.
3)So many members with around a lakh rs capital dreams about 1cr portfolio in the next 15-20 years.They get disheartened as they feel its an herculean task to achieve that figure.
My view:Not really members.Lets chalk out a formula then,say the way out to achieve your dream.If you start with a lakh capital,put on 3000 bucks every month for 16 years and compounds it with a 26% gain-You will reach that craved figure of 1cr.Considering out last 5 year's CAGR,thats a possible target right?I mean we already have compounded by over 30% for the last five years inspite of adverse market conditions.Prevailing circumstances have changed for good and hopefully so would be the returns.Just want to buy such counters?Buy all the Godrej group counters and come back being a Crorepati after just 16 years.To some surely 16 years would sound like massive lengthy ages.Tarry a bit pal-How much did you actually earn in the last 16?
4)I do cater to some post retired sexagenarians who prefer to gift business ownership(stocks re) to their grand childrens.They should have huge margin of safety and can survive business cycles of two decades.They should be compounders in the range of 18-20%.So what would be ten such stock ideas for such intelligent prudent would be grandfathers?
My view:Hdfc bank,Amara raja batteries,Godrej consumer,Asian paints ltd,Pidilite Industries,Gruh finance,Sun pharma,Hero Honda,United spirits and ITC.That makes one heck of a very long term portfolio.All are highly expensive counters but they are sure shot winners for coming several decades.All are leaders in their respective sectors with huge margin of safety,great brand and past wealth generation track records backed by amazing pedigree.From robust ratios to high payout,you got them all.Such great stories,a click of a mouse and you are owner of such amazing high quality businesses.Am already having goose bumps,ain't you too?
5)Life is all about full of uncertainties right?Accidents,critical diseases can well destroy one.So how does stock chips in there?
My view:Few years back a terrible bike accident nearly killed me.Fortunately, I did survive but to avoid complete paralysis,a spinal surgery was done with inclusion of few titanium screws in the back.I even lacked a complete mediclaim then which worsened the matter.The hospital assumed a charge of several lakhs within a short period to which the cash was unavailable.It just happened after I lost my loyalest bestest admirer,my Granny.We were also amidst the construction of our residence.It was one heck of a stormy period which happened all so suddenly.My stocks came to the rescue,sold a part of them and had a successful surgery which lasted almost 4 hours.I got laid for over a year but the stocks made sure the income kept coming in,dividends ensured everything happens smoothly too.I owe a great deal to my stocks.So there's that side also guys.Stocks or business ownership can help you in so many ways.Be disciplined and passionate,love the subject,understand what you are owning,have patience and conviction.If implied,you will have extravagant future gala days in store for sure.
Quote:Fluidomat was recommended to members at 68rs and at 131rs very recently.Even at present price of 160 odd,it looks to have some worth.Readers time for you to act on it.
Quote:It was very difficult to dig about this company as management always been very very reluctant to speak.Thanks to my analyst buddies Keshav and Saurav for their inputs and research notes which helped me in getting aware of the most about the company.
Business:Fluidomat Ltd. makes Fluid Couplings.Google up to know what a fluid coupling is all about.Fluid Coupling is a Power Transmission Product.It is a Capital Good & not a consumable.Fluidomat has supplied more than 900 Scoop Control Couplings and several thousand constant fill fluid couplings on variety of applications in all sectors of industry including Coal base Power Plants, Steel, Cement, Paper, Chemical & fertilizer industry, Petrochemical Industry,Underground & Open Pit Coal and Mines, Harbor Handling and Nuclear Power Generation Plants in India and Abroad.Around 75% of the Revenues of the company are from the Power Sector.Sales growth of the company is dependent upon the Capex in these industries.
Market Size:Around 230crs in India and several times more internationally.Huge export potential for the company.Main thrust is on the Domestic Market, though the co. has expectations in Australia, Indonesia, Malaysia & Brazil(from the mining sector). The company has appointed dealers in these geographies.
Clients:ABB, BHEL, Braithwaite, Burn Standard, CIMMCO, Chemical Construction, DEMACH, DCIPS, ELECON, EPIL, FFE, Fuller KCP, Flakt, Flender, HEC, HDOL, HSML, INDURE, Krupp, Kirloskar, Kraft Engg., L&T, MAMC, MBE, Metso, MECON, Naveen, Oilex, Penwalt, Promac, Reitz, Sayaji Iron, Techpro,Thermax, TLT, TRF, Walchandnagar Industries, Warman etc.
Approvals from the Consultants:Fluidomat Fluid Couplings are approved by all leading industries and consultants in the country. The consultants include ACC, BHEL, Birla Tech Services, DCPL, Desin, HOWE India, Holtech, Jacobs, MECON, MN Dastur, NTPC, Tata Consultants,Tata Projects, Samsung, Doosan (Korea), Hyundai (Korea), Alstom (France), Sulzer (Germany) etc.Its also got a tie up with flow serve (Spanish company).They too have requirement for these couplings.
Price Range of company products = Rs.12,000/- to Rs.80 lakhs.
Competitors:Premium Energy Transmission Ltd., Elecon Engg. Ltd. & Voith (German). Apart from Voith,all others have rented tech.Main competition is from voith but with time I feel fluidomat would be able to beat voith comfortably.Voith’s pricing is 3 to 10X of fluidomat for same products.
Service cycle:FCs can last for 25-30 years also,typical replacement cycle is 10-12 years.In government departments specific budgets are allocated,hence they tend to replace their couplings earlier at 5-6 years as if these budgets are not used they are extinguished.
Points to look for:-
1)There is no unorganised sector in Fluid Couplings due to the hitech nature of the product.Also Fluid Couplings are very crucial products and reliably is a big factor. If it fails then the whole plant comes to a standstill.
2)The company does not require much capex.Land and building are excess.It can grow to Rs80-100 Cr turnover by adding only CNC machines.Capex could 1-2 Cr per annum.The company has started manufacturing FCs for fans used in boilers. It is now supplying the same to BHEL. Voith is the only competitor in this segment. The company entered into this segment three years ago based on indigenious R&D.
3)Fluidomat has also concluded designs for less than 110 MW boilers.It will enter this market soon.Working capital requirement for company's business is 3-4 months.Cycle is long as until the entire order is ready inspections don’t start(Debtor Days thus being 100).The company does not face issues on account of bad debtors as it supplies very critical equipment.
4)The company has started supplying FCs to NTPC also in the last year.Here again voith was the competition.Voith used to charge 4 Cr for one coupling which the company is supplying for 45 lakhs.In Jan 15 these couplings would complete one year of functioning.If the operation is glitch free.The company will be automatically approved for all future orders of NTPC.
5)The company is vertically integrated.It has its own foundry and fabrication facilities.The company has got cash and bank balance of 10crs as on date.Thats more than 20rs per share.Its a debt free counter.Company paid dividend of 2.75rs for the fiscal.Management has hiked their stake from 25% odd to 53% in the last few years.
6)Fluidomat has increased the prices of its fluid couplings from 70000rs in fy06 to over 100000rs in fy13-14.It generated 5crs FCF last fiscal,toppled that with a return on equity of 30%+.This is one heck of a monopoly company.When you get a company which can increase the prices of its products without loosing its market share and then you talk about 30% ROE,You are really on something.
7)In case the economy starts recovering which it should as now the BJP guys are at the helms.Fluidomat can do a turnover of Rs50 Cr in two years.If it receives incremental order from Petronas.Turnover could increase to Rs100 Cr in 2 years.If the economy does not recover it can sustain its turnover at 30-35 Cr based on replacement demand and through its spare parts sales.Spare parts contribute nearly 40-45% of its revenues.
Latest update/My latest interaction with the management:As per the words of Pramod jain,"Getting an order is bit difficult because of our size and inexperience.For one ntpc tender we bidded for 22 lakhs vs voith's 2.7crs,yet the order went to voith.But we are hopeful of bagging future NTPC orders.As we grow, more orders will flow to the company".At the present capacity they can achieve a turnover of 65-70 crores.There are several developments going on but any of them could be a big one.A single order can change the fortunes of the company big time.Product is very crucial and its significance can be seen by this example-one company which had never used couplings - ordered fluidomat couplings for the first time.Fluidomat was expecting payback to be around 4-5 years but it happened before end of first year.Competition is tough with voith but they are gradually taking over businesses of others like elecon.Elecon used to outsource its requirement to fluidomat then it started copying fluidomat products and began supplying but last year they saw some rejections.
Consistency:Revenues in the last 11 years(2003-04 to 2013-14) increased from 5crs to 27crs.PAT has jumped from a mere 12 lakh to 5.7crs.
Conclusion:The promoters have no business interests except Fluidomat.No inter dealings and thus strong influence on the owned listed company.Company is getting lot of enquiries from both the domestic as well as the international markets.A single big order(there are talks of a 50crs order from Petronas) can change the fortunes of the company as mentioned earlier.The company is expected to grow 25-30% on bottomline for the coming couple of years.Revenues are bit difficult to predict as of now.Assuming it grows with a 30% CAGR in bottomline,the company would come end fy15-16 with PAT of 9.6crs.Thats 19 odd rs EPS for you.So assigning a PE multiple of 10x for fy16,I arrive at the target price of 195rs. Company is an amazing long term buy.
btw:I have recommended Fluidomat earlier at 68rs.But the story is too good and the scrip deserves much bigger levels than what its quoting at present.
BTW:For different stock market related services,rush a mail at my mail id firstname.lastname@example.org to know more about it.
Note: The above is not a research report but assimilation of information available on public domain and it should not be treated as a research report.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”
Disclosure: It is safe to assume that I might have fluidomat in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments.