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Friday, September 5, 2014

IFGL Refractories ltd:-The attractively valued small cap wonder with multibagger potential

INVESTRIVIUM:-Here we showcase a historical fact from the stock markets that not only motivates the investor but its a complete stream of education to speak the least.The following phrase is a lesson in itself:

“I invested Rs.50 lakhs in Karur Vyasa Bank in 1993 and today it is more than Rs.200 crores.”– Rakesh Jhunjhunwala (Oct, 2012)

Moral: Buy Right, Sit Tight! This saying is as common as air.Have you recently watched that Kaun Banega Crorepati promotional video where a girl from the North-East India is quizzed about the Kohima City and she replies “Jaante Sabhi Hain, Par Maante Kitne Hain?” Such is the condition of this short and widely popular saying in the stock markets. The investment turned whooping 400x in less than 20 years;the micro-cap bank with conservative business model, strong fundamentals returned over 20x between 2002 and 2012. The residual of that initial investment of Rs.50 lakhs after booking substantial profits a couple of times now fetches an annual dividend income, yes, an annual income of above Rs.5 crores.





Quote:Recommended to members at 168rs few weeks back.It has just moved 15% since then.Readers,its your time to pocket the gem which is set to pen a new scripture for itself in the bourses.

Business Idea:-

Scripscan:IFGL Refractories ltd
Traded in:Nse-Bse
Cmp:168rs
Target:250rs
Duration:6-9 months
Return percentage:50%

Company Overview:Indo Flogates which was founded in 1979 managed to collaborate with Flogates, UK in 1983 for manufacturing of Slide Gate Mechanism & Refractories. The joint venture was with Flogates Ltd, UK and an exclusive Indian Licensee of Flocon Slide Gate Systems, developed by US Steel Corporation through their wholly-owned subsidiary USS Engineers and Consultants Inc. On the other hand, Mr. SK Bajoria founded IFGL Refractories in 1993 in collaboration with Harima Ceramic Co., Japan. In 1999, both the companies merged to come into the current form of existence.Over the past decade, the company has scaled up its operations significantly, both, organically and inorganically. During these years, the company made several acquisitions and also set up a few greenfield capacities to evolve from a single manufacturing facility to current eight capacities with across the globe distribution presence.

Later, during 2005, the company acquired Monocon Group with production facilities in the Brazil, China, UK, USA and Taiwan; the product portfolio included tundish spraying mass, refractory darts, monolithic lances robotics for EAF, Ladle and tundish lining maintenance, monolithics for EAF, Ladle and Tundish. Later, during 2006 the company acquired UK based Goricon Metallurgical Services Ltd and US based Goricon LLC that manufactured darts, lances, ladle powders etc. used by the steel industry. Again, in 2008, the company overtook Hoffman Group with manufacturing facilities in Germany and Czech Republic and the product offerings got wider with inclusion of foundry ceramics – casting filters, feeders, SiC chill plates, pouring system and monoblock stopper, high grade fire proof refractory shapes, drawing tools and tread guides. Recently, in September, 2010, the company acquired EI Ceramics LLC and CUSC International Limited engaged in manufacture of isostatically pressed continuous casting refractories in US.

Today, the company’s distribution network spreads over 50 countries and a business relationship with all the leading steel manufacturers; some of these clientele include Arcelor Mittal, SAIL, Tata Steel, Corus, Bhushan Steel, Gerdau Group, Nucor Group, Hyundai Steel, Essar Steel, Jindal Steel, Adhunik Metaliks and others while the company competes with Vesuvius India, Orient Refractories, Orissa Cement, etc. Vesuvius is the global leader and commands a majority of market share both in International markets and domestic markets.

Business Overview:IFGL Refractories is engaged in manufacturing of specialized refractories and requisite operating systems for the iron and steel industry through its facilities based in India, US, UK, China and Germany. The product range includes casting refractories, slide gates, furnace gates, tundish gate refractories, refractories for the purging in the ladle, precast refractories, monolithics and castables, tube changer mechanisms for slab caster, foundry ceramics, namely foundry ceramic filters, feeders, silicon carbide chill plates and mono-block stoppers for foundry industry. These refractories are made with the latest know-how from Krosaki Harima Corporation, Japan, a subsidiary of Nippon Steel Corporation. These refractories are used for flow control of steel and treatment of quality. As mentioned earlier, the company also offers customized operating systems for clean metal. The company also makes foundry ceramic filters. Additionally, the company is engaged in manufacturing of bio-ceramic products for dentistry, orthopedic and ophthalmic segments with the technical association of CSIR Laboratories; which is nothing but a substitute for human limbs. They make dental implants, bone implants, hip-joints, etc. This business maybe a low volume but ensures high profitability. Although the division is in nascent stage but the Management cites a huge potential for the segment in the long-run.

Recently, the company had announced significant capacity expansion programmes. The company is doubling up the capacity of its Kandla, Gujarat plant from 80000 odd pieces which will subsequently be tripled (phase-ii), during the next fiscal and also the capacities at the US plant (EI Ceramics LLC) would be doubled from current levels, during the current fiscal year.For the aforesaid developments, the company will incur a minimal capex since these are primarily brownfield expansions and de-bottlenecking; capex of less than Rs.6 crores (Kandla) and Rs.6-7 crores for US, which would be funded through internal accruals. These expansions would possibly have an incremental revenues of Rs.50-60 crores (Kandla) and Rs.75-85 crores (US). Besides, there would be a maintenance capex which could be in the range of Rs.10-15 crores on the consolidated level. However, the phase ii expansion at Kandla might require Rs.15-18 crores.

Financials & Investment Rationale:Despite a slump in the metals and probably the worst times of the last decade, the company has managed quite a handsome growth over the last 5 years through strategic investments, foray into new geographies, increased product portfolio and healthier industrial relationships. Resultantly, during the difficult times, the company has more than doubled the top-line and bottom-lines since FY2010. For FY14, the consolidated revenue stood at Rs.778 crores and the operating margin improved to 14%; the company managed a bottom-line of Rs.64 crores. During these times, the company has increased the net block from Rs.110 crores to Rs.258 crores while the debt levels have not gone up substantially.During these times, the debt has gone up moderately from Rs.78 crores in FY10 to Rs.98 crores in FY14. Going forward, the recent capacity expansions, an upturn in the steel sector and push to infrastructure will drive the top-line while debottlenecking,cost-efficiency measures along with savings on tax and logistics with expansion of Kandla facility would result into improvement in profitability. Moreover, foray into new markets, new products and technologies are likely to place the business poised for robust growth. However, significant appreciation in Rupee may pose threat to the company’s financials.     

Outlook & Valuations:The management expects the country to witness significant growth in steel production and consumption in the domestic markets and thereby the industry to come out of the slump of last so many years over the next few years. Reportedly, there are a lot of steel plants that are lined up in commissioning stage; to the tune of some 30-40 MT of new capacities coming over the next 3-4 years on account of increased thirst for infrastructure by the new Government. Thus, there are bright years for refractories as well, going ahead.The current capacity utilization levels are 67-70% at the consolidated level which could be further taken to cent per cent utilization levels as witnessed in US facilities. 

Conclusion:Going forward, we expect company to achieve a turnover of Rs.1000 crores by FY16 and a slight improvement in the EBITDA margin of 16% with the improved utilizations of current capacities and debottlenecking exercises being undertaken and savings on tax and logistics costs from Kandla facility. Strong free cash flow generation, strengthened balance sheet and comfortable valuations are added advantage. Assigning an EV/EBITDA of 6x (In a good market, it has historically traded at 10x) and Price/Sales ratio of 1.0x (historically traded at 1.3x), we expect market capitalization should be somewhat in the region of Rs.900-1000 crores that showcases huge potential upside from current levels. We strongly believe that with the recent growth, increased size of the company, wider coverage, leadership position in the industry, the company has all the reasons to trade beyond the historical multiples.



BTW:For different stock market related services,rush a mail at my mail id arunsharemarket@gmail.com 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 ifgl in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments
.

259 comments:

«Oldest   ‹Older   201 – 259 of 259
Anonymous said...

hi arun
i have in small quantities few stocks which i wish to hold long...
bilcare
ongc
nilkamal
fluidomat
kopran
wockhardt
godrej properties
gati
suzlon
jp power
guj borosil
moldtek packaging
sunil hitech
sakthi pumps
plz guide as to which one to hold..add some more..or exit or which new counter should i have
thank you

Anonymous said...

Dear arun sir
Is kilburn chemical is good company

Unknown said...

We are in Indian market and every investor must understand this story……….
Once upon a time in a village, a man announced to the villagers that he would buy monkeys for Rs 10. The villagers, seeing that there were many monkeys around, went out to the forest and started catching them..
The man bought thousands at Rs 10 and as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at Rs 20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to Rs 25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it !
The man now announced that he would buy monkeys at Rs 50 ! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers. Look at all these monkeys in the big cage that the man has collected. I will sell them to you at Rs 35 and when the man returns from the city, you can sell it to him for Rs 50.”
The villagers squeezed up with all their savings and bought all the monkeys.
Then they never saw the man nor his assistant, only monkeys everywhere !
Welcome to the’Stock Market’

భానోదయం said...

It is the silence that counts more than the cacophony on the rise of index.
The time between disappointment and anticipation.
Enthusiasm and frustration.
Conviction and doubt.
Actually we all should think one point.
We anticipate a share to rise and buy it. Who is intelligent then?
THE BUYER OR THE SELLER?
Life goes on....,,,,

Anonymous said...

Sir, your views on
Haldyn Glass
Bilcare
Aban Offshore
Wondrela

Anonymous said...

Dear vip sir,
I like to invest in market at current levels for long term so please suggest which one is better from this 2 companies.
1)mmfl
Or
2)minda ind
Thanxs in adv

Unknown said...

Plz give ur view on arvind remedies at cmp... Plz...

Anonymous said...

due to the ecommerce boom in india now, can you recommend few stocks that will benefit from this with a viewpoint of 3-4 years atleasr. I have already invested in gati for the long term. any other good stocks on your radar?

Akk said...
This comment has been removed by the author.
Anonymous said...

Hi Arun,
Is Hexaware Technologies a good option at CMP 177?
Thanks

Anonymous said...

Sir, your views on...

Haldyn Glass
Bilcare
Wondrela
Asian Granito
TCI

Anonymous said...

Sir, your views on...

Haldyn Glass
Bilcare
Wondrela
Asian Granito
TCI

Akk said...

hi ur view on kesoram industries, and sundaram fastner

Akk said...

sir ur view on apcotex, is it promoted by asian paints

Anonymous said...

sona koyo is a much better bet at present valuations.compare prices in two trading sessions and then take ur call.steering system leader in the country.any vehicle will need a steering...still cheapeast in the ancillary segment

Anonymous said...

Hi arunji thanks for your help to others.. Your really a wonderful person helping other..your all calls are rocking when the market is down.. Thankz a lot.. Pls keep helping us like allways..
Rita.M

Equity wealth said...

1)Click newest comments to see the answers.

2)I have apoctex under my radar.Good prospects and huge potential to unleash big.

3)Bilcare,wonderla,tci,haldyn,granitp all are decent stocks with huge potential.

4)Barings would make sure stakeholders of hexaware make a pot of money in the next 4-5 years.

5)In ecommerce have already suggested microsec at 20.Read the note.Buy logistics,packaging as proxy plays.

6)Not much fond of arvind remedies.Check out shilpa medicare.

7)Minda,mmfl both good buy at dips.

8)In my stock career of 12 years now,have never bothered about markets,be it bull or bear or whatever.Concentrate on individual counters.

Anonymous said...

your view about JHS Svendgaard lab

Anonymous said...

Hi Arun,

Jenson and Nicholson has denied to the exchanges any activities going on. Any ideas what might happen to this company.

Thanks

Unknown said...

your views on madhucon project "Simhapuri generated 140 cr units as of 16 sep 14 and company is likely to end with 150 cr units for first half and 350 cr units for full fiscal with likely profit of 250cr. Current market cap of madhucon is 300cr.

భానోదయం said...

Hurreeeeeeeeeeeeeeeeer
RSSOFT

Unknown said...

Rs soft turnaround surprising small investors and new comers like me..

Anonymous said...

Hi Arun,

Since we are already couple of months into the bull market, considering a major bull run for next 3-4 years, what could be the bull market theme in your view - e-Commerce/Logistics, Media, Infra, Oil & Gas, Packaging, Cement.....your views please

Unknown said...

Sir
I have tanla at 19 plz suggest me can i hold

Ramesh raju

Anonymous said...

hi ur view on kale cosultants [acceleye kale]

Sachin G said...

Hello Arun Sir,
Can we expect any Diwali gift stock from your end to the blog readers.

Anonymous said...

Hi Arun,
Though my question may not be related to this thread, but do you have any idea if you don't get any allotment in the IPO whom to reach out for clarification?

Ashiq mehraj said...

Sir ji please your view upon ask optifiber orchid chemical nitin fire and oxide Ind thanks

Anonymous said...

sir, I just wanted your views on
1.) kwality
2.) vinyl chemicals (low pe and great eps.) trading way below the value it deserves
your views for the long term?

Anonymous said...

Currently holding kopran @ 69/= - 750 shares. Please guide me with your views on this script.

Anonymous said...

Hi Arun- Shakti pump done some equity dilution recently (board meeting 17th Sep). Can it be a matter of concern or it is part of the growth strategy?

Unknown said...

Hi Arun
Ur view on balmer lawrie

Unknown said...

Sir
Ur view on tanla sir i bought at 19 rs plz suggest

Anonymous said...

Any update on Control Print?

hi said...

Hi

ritesh said...

Hi
Please advice on windsor machines and southern petrochem
Thank you

Anonymous said...

Your view and news on Control Print? any update?

banti said...

Hi arun LML is spikeee since last 2-3 day's. What's your viewfor lonv term...

Anonymous said...

i bought kopran @ 69.....
arun please share your views and guidance

Anonymous said...

Hi arun...
What is your view on suzlon energy at cmp...?

Anonymous said...

Sir, I have some stocks in my portfolio:
30-Aban Offshore @805
500-Fluidomat @135
275-Selan @411
650-TV today @125
250-Gulshan poly @175
325-IFGL @164
1235-PTC india finance @36
175-Shakti pumps @166
325-Bilcare @81
1000-Jai balaji ind
Which one should hold please tell me

Anonymous said...

Please your view upon nitin fire

Anonymous said...

Arun Sir

Triveni Turbine: survived and emerged as strong one. It will be great if you give your views on future of this company in terms of their complex power dependent buisness.

hi said...

Hi at this time can I enter market

Anonymous said...

Sir, w.rt. Ahmednagar Forgings is debt really a big concern & are valuations cause of worry?

Anonymous said...

sir ifgl falling recently....do u think its d best time to averae it....u have given a target of 250 in this one...i m sure dat it will go beyond dat....

Anonymous said...

Hi Arun; whats your view on Sudar Industries having PAT of 41 Crores & Market Cap of 81 Crores??
Also your views on Kiri Industries?? Is is a turnaround story??

Akk said...

sir ur view on HEG

Akk said...

SIR UR VIEW ON SUNDARAM FASTNER

Anonymous said...

ur views on chandra prabhu?

Anonymous said...

Sir, your views on 'Prajay Engineers Syndicate Ltd'

Anonymous said...

Hi Arun, Can I buy Balakrishna Ind and Selan at CMP for LT?

Anonymous said...

sir will sona koyo reach 100 as predicted by brokerage houses...what ur best 2 picks in auto ancillary segment

Veera said...

Sir i bought Supreme tex mart at Rs 8. Can i hold for long term

Unknown said...

Sir,i have Himalaya International At 18.what do you think about the stock? is it good to keep it and wait? please comment.

Unknown said...

Can you please look at Coral labs and also re look on Coral India Finance & Housing Ltd? In case what targets can be seen?Will be grateful.

Regards,
Shravan

Unknown said...

Hi Arun,

What is your view on FIEM industries. They are mainly into making light equipment for auto and bikes with huge makret share in this segment. Can it be a multibagger or give 30% returns

Unknown said...

any update from u on talwalkars fitness the stock has not moved much

Unknown said...

Sir, ur guidance regarding SINTEX, SIYARAM,

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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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