Jocil

Are there any value picks in this market? Yes, I believe there are a few options like – Jocil. Most of us would be hearing this name for the first time 🙂

The company is a subsidiary of Andhra Sugars (55.02% stake) and is listed only on NSE. The company specializes in manufacturing of Stearic Acid Flakes, Fatty Acids, Toilet Soap, Soap Noodles and Refined Glycerine. The company has been doing contract manufacturing of toilet soaps for leading FMCG brands such as – HUL ( Liril, Lifeboy etc), ITC (Vivel, Superia etc), Marico ( Manjal, Jasmine etc), Johnson & Johnson (Savlon) etc.

Very strong financials:

  1. Jocil has been growing at a CAGR of 51% for last 3 years and a CAGR of 25% for last 5 years, yet it is available at a P/BV ratio of just 1.25, TTM PE of just 6.
  2. It is a debt free company. Has excess cash of 25 Cr on Balance Sheet (as of 31st March 2009)
  3. Has limited investment in inventory and debtors. Hence the business is not working capital intensive.
  4. Has a track record of excellent dividend payout ratio. (Payout ratio has been around 35% for last two years)

So at CMP of 265, we are getting an FMCG related company at a M Cap of about 115 Cr having atleast 25 Cr as cash on Balance Sheet, turnover of approx 300 Cr, Operating profit of approx 35 Cr and a Net Profit of 21 Cr. Isn’t it a value pick?

Other trigger could be – If the company maintains the div payout ratio of even 30%, it means a 150% dividend this year :):)

Company’s website: http://www.jocil.in

Views Invited.

Happy Investing

Jocil

8 thoughts on “Jocil”

  1. Definitely a good value pick – trading at a discount.
    Meets most of the criteria

    The stock is relatively unknown, (the not having been listed for a long time could be the reason). Strong financials, lots of cash etc..

    However, the scalability isn’t there. the power business has limited upside. it might fetch prices in the summer but don’t expect explosive profits. The soap business too will cannot be scaled up easily.

    the ten year record of the company shows that its revenues and profits have seen lots of ups and downs.

    Some concerns:
    1) the company has said that there is a demand for higher quality of products and it is considering upgrading its facilities, the cost and impact of this is not known.

    2) Most of the FMCG players are themselves setting up
    capacity to manufacture soaps and chemical related products – so again limited growth here.

    All said and done the argument is just that while this is a stock that is undervalued and one i would like in my portfolio, it is not the multibagger we have been looking for.

    P.S. u guys have done an excellent job so far.. keep up the good work. May be u should take a closer look at the companies where the management has increased its stake (u posted them last month) and also there a few excellent stocks with good growth prospects that have only marginally recovered from the lows of March 2009.

  2. Definitely a good value pick – trading at a discount.
    Meets most of the criteria

    The stock is relatively unknown, (the not having been listed for a long time could be the reason). Strong financials, lots of cash etc..

    However, the scalability isn’t there. the power business has limited upside. it might fetch prices in the summer but don’t expect explosive profits. The soap business too will cannot be scaled up easily.

    the ten year record of the company shows that its revenues and profits have seen lots of ups and downs.

    Some concerns:
    1) the company has said that there is a demand for higher quality of products and it is considering upgrading its facilities, the cost and impact of this is not known.

    2) Most of the FMCG players are themselves setting up
    capacity to manufacture soaps and chemical related products – so again limited growth here.

    All said and done the argument is just that while this is a stock that is undervalued and one i would like in my portfolio, it is not the multibagger we have been looking for.

    P.S. u guys have done an excellent job so far.. keep up the good work. May be u should take a closer look at the companies where the management has increased its stake (u posted them last month) and also there a few excellent stocks with good growth prospects that have only marginally recovered from the lows of March 2009.

  3. First thing: Odds of finding a multibagger at 18k levels is not an easy task. While the more important thing at these levels would be protecting downside and deploying the available cash with the investors in good value stocks with good prospects. So this is where Jocil fits in.

    Now coming to Jocil:

    1. The company has been growing well over last 5 years before that it was a stagnant company facing lots of competition. Till 2005 the company the revenues were decreasing but profits were constant at abt 10 Cr.

    2. Power is not a focus area for them. Apart from that if their business grows even at 15-20% the stock should do well.

    3. Regarding upgrading cost – it would only be for the benefit of the company and after that they should grow.

    4. I don’t think FMCG manufacturers are putting up capacities. Even if they are – they would be doing it for high value soaps. If otherwise, plz forward me the articles.

    Thanks for the appreciation. Please feel free to discuss your stock ideas…I’ll definitely give in my contributions on the same.

  4. First thing: Odds of finding a multibagger at 18k levels is not an easy task. While the more important thing at these levels would be protecting downside and deploying the available cash with the investors in good value stocks with good prospects. So this is where Jocil fits in.

    Now coming to Jocil:

    1. The company has been growing well over last 5 years before that it was a stagnant company facing lots of competition. Till 2005 the company the revenues were decreasing but profits were constant at abt 10 Cr.

    2. Power is not a focus area for them. Apart from that if their business grows even at 15-20% the stock should do well.

    3. Regarding upgrading cost – it would only be for the benefit of the company and after that they should grow.

    4. I don’t think FMCG manufacturers are putting up capacities. Even if they are – they would be doing it for high value soaps. If otherwise, plz forward me the articles.

    Thanks for the appreciation. Please feel free to discuss your stock ideas…I’ll definitely give in my contributions on the same.

  5. Thanks, Preet.

    The price increase is in line with expectations. It seems ICICI Bank has sold out the 15% stake it had earlier. The buyer hasn't been disclosed till now.

    Stock still has lot of value. One may book partial profits and continue to hold the resst.

    1. Yeah, the last qtr was weak due to raw material hit. But as they have completed the expansion recently, i would like to see one more qtr before taking a call.

      Regards,

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