We were lucky to get the understanding of the change in the fortune of the shrimp industry and to spot Avanti Feeds at a very early stage. Since then we have been providing regular updates.
It has been one of the dream performance over the last 2-3 years – the company’s revenue have grown at a CAGR of 88% over last 3 years, and the stock returns have also been fabulous.
Over last few days, there have been reports of reporting of EMS disease in the Indian Shrimp industry. The EMS has been confirmed and as a preventive measure, MPEDA has decided to halt fresh production for next 2-3 months. Though it is a short term negative development for the industry, few positives to note are: 1. The EMS reported is in very small portion of the sample (just 1%) 2. As December to February is a lean period for the industry hence the damage will be limited and if the preventive steps are properly undertaken then the industry can quickly come out of the problem. MPEDA has provided a detailed clarification.
As a caution, we have chosen to book profits and reduce the exposure, and monitor how things develop going forward.
Among the new ideas, we are currently studying: APM Industries, KCP Sugar, Kitex Garments and Muthoot Capital. We hope to discuss the latest quarterly results and a detailed analysis in the next article.
We wish all our readers a very Happy & Prosperous Deepawali. May Goddess Laxmi shower her blessings, and Lord Ganesha shower happiness on all of us.
Samvat 2069 ended on a wonderful note as the Sensex hit an all time high.
We recommend our readers to take part in the Muhurat Trading session on this auspicious day. Few ideas for long term perspective are:
1. Alembic Pharma
3. Oriental Carbon
4. P I Ind
5. Shilpa Medicare
Over last couple of years, we have got some superb companies to participate in, such as Astral Poly Technik, Ajanta Pharma, Atul Auto, Avanti Feeds, Poly Medicure, Mayur Uniquoters etc and all of these have given some superb returns. The Q2FY14 results have been very good for most of the companies we have been tracking and hence existing ideas give more comfort and promise rather than something new and unknown.
The best stock to buy could be the one you already own – Peter Lynch
We would like to thank our readers for your support and collaboration in doing the in-depth research and groundwork. We are pretty optimistic about the year ahead and wish you Happy Investing!!!
We personally love to keep a track of small, interesting and growing companies with a market capitalization of under 100 crores. But we are rarely able to talk much about these small companies as they come with their own set of troubles including low liquidity, low visibility, lesser information, chances of corporate in-governance etc.
It is interesting to go through their annual reports and valuations even if one does not invest in them.
[Companies with ** mark are classified under PCAS (call-auction mechanism)]
Acrysil** (M.Cap 53 Cr): Acrysil is the ”only company in all of Asia – and one of just a few companies worldwide – manufacturing quartz kitchen sinks.” The company posted a good June quarter. The management talks about big ambitions in the annual report. If they actually end up delivering what they are aiming for, this stock can give fantastic returns.
Alicon Castalloy** (M.Cap 55 Cr): This company is “one of the largest integrated aluminium casting manufacturing units in India.” Interestingly, the company has posted a growth of 25% in the revenues over last 3 years, when the whole auto ancillary industry has been witnessing a slowdown. The margins have fallen significantly though (from 18% to 11%). CRISIL report provides a good history of the company. The book value is Rs.96 and the stock is at 3.5 times earnings at Rs.50. Continue reading
We have discussed Avanti Feeds several times on our blog in past. The company has performed superbly over the last five years. The revenues have grown at a CAGR of 45%, and the net profits have grown to 30 crore in 2013 from a loss of 1 crore in 2010.
To get a better understanding about the company, a very detailed and in-depth management interview is available on valuepickr.com. The interview provides an insight about the industry, company and the prospects going forward. I would strongly recommend everyone to take out some time and read the whole interview (requires free login).
Some of the key highlights are: Continue reading
“management’s indifference and shareholder negligence both worked on Warren’s behalf, for the fewer folks came to the show, the more valuable would be whatever knowledge he could wrest from the company.” – from The Snowball where WB talks on the importance of attending AGMs
There is a lot of fear in the markets and several stocks in the mid and small cap space are having a free fall. These are the great times to focus and research more on the companies to find undervalued gems.
Last month, we toured South India to attend a few AGMs. We visited Avanti Feeds, Shilpa Medicare and Swelect Energy. The meetings were good and the companies seem well placed. It is often concerning to watch a few shareholders holding nominal quantities and coming over for free gifts and snacks. Despite good arrangements and the good work by the management, these shareholders often sabotage the proceedings. We need to fix this, otherwise the promoters will never treat the minorities properly. Probably having a video conferencing of AGMs may help.
Brief updates from above meetings:
Avanti Feeds: We have discussed the company many times in past and the stock has performed well too. The industry continues to see high growth rates of 30%+ since the adoption of the new shrimp specie - Vannamei. The company is superbly placed in its sector (due to the support of TUF) and ranks among the top. The management seemed quite honest, hard working and conservative. They were one of the first to understand the potential of the Vannamei specie in India and took various steps to get it introduced. The company has grown from a turnover of just 100 Cr in 2009 to 650 Cr in 2013. Avanti seems well placed as the industry is expected to remain on a good growth path for the next few years. Continue reading
Markets have undergone a lot of correction (more visible if one considers the mid/small cap space), and though the economic indicators are not good and there is lot of uncertainty, but these are the times to plant the good ideas and make a strong portfolio for upcoming years.
For the last couple of years, most of the companies are grappling with the rising costs due to power, labour and inflation, and most of them are witnessing a slower growth and contraction in margins. Perhaps the fall in rupee is a way by which several export oriented companies will get some relief and would be able to regain the lost margins. But we should also remember that not all companies will be benefited. Due to a competition, much of the benefits would be taken away by the customers and hence we need to focus on high quality companies which have a pricing power and have done well in past. Most of the companies in our portfolio have been export oriented (and low on debt). We feel that the following may do quite well – Avanti Feeds, Oriental Carbon, Poly Medicure, MPS Ltd, Acceleya Solutions, GRP, Orbit Exports etc.
We discussed a couple of new ideas in our last post; here are more thoughts on them: Continue reading