Atul Auto–Management Interview

Filed under Interviews, Update by on January 15, 2012 at 12:58 AM {no comments}

We have discussed about Atul Auto a couple of times and to go in-depth and get a much better understanding of the company, we interacted with Mr. J V Adhia, Vice President, Finance – Atul Auto.

The company seems to be in a sweet spot with a very comfortable balance sheet and a good opportunity to maintain growth rate of about 25-30% for at least next couple of years. The co has been a leader in its existing territory – Gujarat (approx. 45% market share) & Rajasthan (approx. 30% market share), the company is now trying to go Pan India by entering new territories.

Here are the highlights from the management interview:

During the period 2001-06 the company had been growing at about 70% p.a. Till then we were a front-engine 3-wheeler company. In 2007 we decided to go pan India and introduced the more predominant rear-engine 3-wheeler segment.  Some things went wrong and the company faced a rough patch, and that is the reason you notice stagnant sales for the period 2007-10. However in June 2009 period we introduced Atul Gem the rear-engine vehicle and it has been received very well in the market. The growth is back on track.

Overall about 91% of the total autos are rear-engine vehicles.

We are No #1 in Gujarat with about 44% market share & No #2 in Rajasthan with about 30% market share. Kerala & Assam are our next big markets.

We are gradually entering new territories and ramping up dealer network.

Current dealer network is about 120 dealers. A year back we had 100 dealers but only 30-40% were active! Now more than 80% are active. Plan to have 140-150 dealers by this year end and 250 in 2 years.

As of now the company is seeing a very strong demand and there is a waiting period of about 10 days. As per policy the company is taking orders on advance basis only. Hence the high advances on Balance Sheet

We are in process of doubling our capacity from 24,000 to 48,000 vehicles p.a. This expansion is being done at our existing plant and we have sufficient space.

We are expanding capacities by ongoing de-bottlenecking exercises. We are already at 20-25% higher production and the rest of the de-bottlenecking increases should happen over next 3-6 months.  We have options of introducing a double shift, as and when deemed necessary.

We do envision to be 1000 Cr company by 2015-16. (Co did 203 Cr turnover in 2011 and 275 Cr+ is expected for FY 12)

Please check out the complete management interview (requires free login)

Happy New Year – 2012

Filed under fun by on January 1, 2012 at 7:55 PM {13 comments}

emailteaser

Dear Friends,

Wishing you and your family a very Happy New Year. May this year bring immense joy, health and prosperity.

With a good correction in our Markets during last year 2011, this year should provide some excellent long term opportunities. We believe coming months would be an apt time to create a quality long term portfolio.

The hangover of a gloomy 2011 continues into the New Year. And while we can’t predict how the year will ride out, we can hope for the tide to turn – that the markets will revive, the political turbulence will calm down and the people on the street will breathe easier. Till then, optimism seems to be the only mantra to survive this crisis.

Couldn’t agree more with the above quote from Financial Express on 1st Jan, 2012. India has one of the best growth prospects and if we believe the future lifestyle of individuals will be better than surely markets will also deliver. There will be new big winners and we have the opportunity to grow along by investing in their shares.

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Atul Auto Ltd.

Filed under Stocks by on December 15, 2011 at 5:40 PM {28 comments}

BSE: 531795

We mentioned Atul Auto Ltd. as one of our Muhurat picks, the conviction has grown with more research and feedback on the company. Atul Auto Ltd. looks very promising company with a strong and stable balance sheet.

Atul Auto is one of the leading 3 wheeler manufacturer and is based in Gujarat. They already have a lead in the state of Gujarat & Rajasthan and are now trying to replicate their success across new territories in India & abroad. The company is trying to enter new states and is appointing new dealers. Company has even entered into agreements to enter Bangladesh & Sri Lanka.

Atul Auto has grown @ 40-50% over the last 2 years and seems geared up to maintain good sales momentum going ahead. Here is a snapshot of financials of last 4 years:

Particulars FY 2008 FY 2009 FY 2010 FY 2011 6M FY 12 FY 12 Estimate
Sales 82.04 120.95 121.08 202.67 136.39 275
PBIDT 6.87 5.42 13.80 20.03 13.72 27.50
Tax .64 .13 2.61 4.64 4.03 7.00
PAT 1.27 .46 3.17 9.43 8.35 14.75
EPS 2.28 0.76 5.22 15.51 20.18

*All Financial figures are in crore rupees (except EPS). (more…)

Management Meet–Indag Rubber

Filed under Interviews, Update by on December 5, 2011 at 8:29 AM {28 comments}

We discussed Indag Rubber recently and the stock has done quite well in a challenging environment.

We recently visited 3 companies to get a better understanding of them – 1. Indag Rubber 2. P I Industries 3. MBL Infra. The meetings went on well and all the three companies are optimistic. Here are the key highlights of our meeting with Mr. J K Jain (CFO), Indag Rubber:

Indag as a brand has got fairly established. A certain segment of quality conscious customers do ask for Indag brand.

Our quality has stood out over the years. For example we are the only retreader who can collect advance payment from some State Transport Units (STU) like the UP STU.

We have introduced newer materials and more effective tread patterns that have started paying off in the last couple of years. We have started growing at a much faster pace now.

If a new CV tyre costs Rs. 18000 then retreads usually sell at 4500-4800 range and a good retread runs approx. 80-85% of a new tyre. Hence it’s a logical cost saving proposition and the business will continue growing.

Roughly 40% of tyres come for retreading at the end of useful life.

Demand is robust, we have not seen any slowdown in demand of retreads.

Please check out the complete management interview (requires free login)

One of the key take away from the meet is that the company is being professionally managed and management is quite conscious on the quality of earnings rather than just growth. Company maintains strict control on debtors and inventories and hence it has good free cash flows.

Company is confident of maintaining the volume growth seen in first two quarters of FY 2012 and we expect an EPS of Rs.30-35 for current year.

Results season – Hits and Misses

Filed under Company Data, Stocks, Update by on November 6, 2011 at 6:22 PM {23 comments}

Quarterly results are good to introspect the stock ideas we are invested into. We review the performances to stay with winners and switch out of stocks where the companies are not performing as per expectations. It is heartening to notice good performances by most of the companies we are invested into.

Gujarat Reclaim: – The company has posted fantastic Q2 results with an EPS of Rs.58.12 in the quarter. The stock seems to have also given a positive technical breakout on the upside and should create new highs:

Particulars Sept 11 Sept 10 % Variation FY 2011
Sales 62.83 47.99 30.9% 185.04
PBIDT 14.25 9.26 26.18% 33.19
Tax 3.91 2.20 77.7% 8.14
PAT 7.75 5.23 48.2% 17.62
EPS 58.12 39.24 132.16

*All Financial figures are in crore rupees (except EPS).

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Avanti Feeds – A Dream Run!

Filed under Update by on November 2, 2011 at 2:50 PM {20 comments}

We wrote about Avanti Feeds @Rs.33 and provided couple of updates [1, 2]. The stock has had a dream run since then and now @Rs.147 it is a 4 bagger in flat 7 months!!!

Avanti_Feeds

It feel great to be part of a multi-bagger stock idea especially when markets have been pessimistic. The purpose of this post is to highlight the rewards possible even in a weak and pessimistic market. Small growth companies continuously provide opportunities, we have to only look for them. Like Warren Buffett says – “Be fearful when others are greedy and be greedy when others are fearful.”

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Welcoming Samvat 2068…

Filed under Announcements, fun by on October 26, 2011 at 2:59 PM {10 comments}

Dear Friends,

Wish you and your family a very very Happy & Prosperous Deepawali!!! May Laxmi Ji shower her blessings and Ganesh Ji his happiness on all of us.

On this auspicious day, do participate in Samvat 2068 – Muhurat Trading session from 4:30 – 6 pm. Our Muhurat picks are:

  1. Nesco (560)
  2. Avanti Feeds (115) / IFB Agro (145)
  3. Balkrishna Ind (171)
  4. GIPCL (82)
  5. Indag Rubber (135)
  6. Gujarat Reclaim (1250)
  7. Atul Auto (107)

Look forward to your views. Have a happy and safe festive time!

Oriental Carbon & Chemical Ltd

Filed under Stocks by on October 10, 2011 at 2:20 PM {42 comments}

Dad spotted OCCL (Oriental Carbon & Chemical) early – a couple of years back but all this time, I was not sure of sustainability of good profits. Over last 5 years, Net Profit of OCCL has grown @ CAGR of 74%. I used to think that this might be cyclical like other chemical companies but it does not seems so.

OCCL’s core business is manufacturing of Insoluble Sulphur, a vulcanizing agent used in the Rubber Industry. It is an important raw material for tyre manufacturing. Manufacturing of insoluble sulphur is limited to only a few companies globally due to restricted access to technology. OCCL is the only Indian company into manufacturing of Insoluble Sulphur. Company is now a preferred supplier, exporting about 70% of its production to leading tyre companies.

Earlier, the company was exposed to huge volatility in prices of its raw material – Sulphur. But now the company is better placed to protect its margins by adopting quarterly pricing.

Growth triggers:

  • Company undertook an expansion to double its capacity by 11,000 MT at SEZ Mundra. Phase 1 – 5500 MT, of the expansion has been commissioned during Aug, 11 and the second phase should get completed by end of this year.
  • Production from this phase is already sold out.
  • The land acquired at Mundra SEZ is sufficient for putting up another plant of 11,000 MT capacity.

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Portfolio shuffling…

Filed under Stocks, Update by on September 25, 2011 at 12:09 PM {16 comments}

It is important to re-evaluate the portfolio and weed out non-performers, or the stocks in which the story is not developing as expected, or switch to new ideas which look cheaper or have more value than others. We have exited from couple of our ideas over last few days:

1. Jocil – Initially discussed @ 265, it is a good company with good fundamentals. The company has also rewarded with a bonus in the ratio of 1:1 and the stock is cum-bonus @ 285. Yet, we are switching out as we feel better ideas are available. Also a couple of negatives are – 1.) The company hasn’t been growing over last few quarters while the debt has increased. 2.) Company is import dependent and due to strong rupee weakness, they may get a hit.

2. Balaji Amines – Initially discussed @ 48, though the stock seems cheap at 4 times PE multiple @ 35, but the negatives are – 1.) The debt levels are too high to be comfortable with. 2.) Being in chemical sector, stock usually get low PE ratios due to lumpy earnings. At this time, there are several companies which are debt free, domestic business and showing growth, yet available at 4-6 times earnings. Eg: Indag Rubber, IFB Agro etc.

Some new ideas which we are studying and look good are – AMD Industries, Oriental Carbon & Chemicals and GIPCL. (more…)

Apcotex Industries Ltd (NSE, BSE : 523694)

Filed under Stocks by on September 19, 2011 at 8:22 AM {16 comments}

Apcotex Ltd was spun-off from the prestigious Asian Paints in 1991. Since then the co is part of the “APCO” group of companies headed by Mr. Atul Choksey (former MD – Asian Paints).

The company is one of the leading producer of polymer products namely Synthetic Latices & Synthetic Rubber. They have one of the broadest ranges of products based on Styrene – Butadiene chemistry. The company has developed the technology through in-house R&D and upgrades the same continuously.

Company has been doing very well for last 5 years and growing at a CAGR of 26% and did a turnover of 200 Cr in FY 11. It seems the management is much more aggressive now and aims to do a 500 Cr turnover by 2013!

Other scoring points are :

1. Promoter Quality – The promoters have more than 3 decades of experience in paints and chemical industry and are experts in the field of chemicals.

2. Good corporate governance – Company seems to have very good internal controls and systems. For last 5 years the company has been following the Japanese TPM method. The company has been regular in financial reporting and progressive dividend pay-outs. They even went for a buy-back during 2009.

(more…)

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