Pondy Oxide – Management Meet

Few weeks back we had discussed about Pondy Oxide and we were asked some good questions by our readers. We always love the creative criticism and this was wonderful.

To know the answers to some of the doubts, my good friend Donald Francis did an extensive research and also had a meeting with the management.

Some of the pending questions to which we got answers were about why the company is so leveraged at around 2 times debt to equity ratio, and who are the top clients ?

Amara Raja is a top client. We have several top battery manufacturers in Export Markets. Korea Indonesia and Malaysia are our top markets followed by Srilanka & Vietnam. We also export to Japanese customers like Yuasa.
We are trying to bring down our financing cost. This will come down by 15-20% easily as we have better terms now on FCPC (Foreign currency packing credits) $ credit norms -Libor+200 bps. Its likely that inventory & debtors will remain at these levels due to more focus on export market.
Please check out the complete report (requires free login) to know detailed answers to many other questions and also find many other reports of meetings with some companies.
Few takeaways from his meeting:
  • The outlook is robust due to ever increasing demand for batteries hence continuous demand for lead and lead oxides.
  • FY 09 was indeed a very tough year. Since then then company has re-aligned a lot of things, changed its business model so as to reduce the effects due to volatility in lead prices.
  • Major achievement has been penetrating the exports market. In FY 2009, the export sales were 16.64 Cr, in FY 2010 the company did 50.88 Cr and for FY 2011, the company expects to cross 100 Cr as export turnover.
  • The growth momentum witnessed in Q1 is sustainable.
  • Plants are now running at high utilization levels and the company plans to take up new expansion in a year.
  • Co aims to reach the 500 Cr turnover milestone in next 3 years.
  • Entry barriers – Licence is required for carrying out lead refining and related activities. Its not easy to get a new licence hence the players are limited. Pondy Oxide would probably be having a 8-10% market share.
  • Amara Raja is their top customer. Pondy is already supplying to top battery manufacturers in Export markets. Tata-Yusa is also their customer.

Initial discussions with Pondy Oxides Management [ Thanks to Donald via ValuePickr]

17 thoughts on “Pondy Oxide – Management Meet”

  1. Hi Ayush,

    What is the target price of pondy oxide as it has given good move from 30 to 45 (day high today).
    Also like to know your view on vinati organics and Balaji Amines at current level.
    Please update Performace & Status sheet as it is very useful for investors like us.

    1. Hi Pulkit,

      Yes, the stock has done well but the expectations are higher 🙂 Co may be able to post 240-250 Cr turnover this year with an EPS of 8+.

      Regarding, updation of Performance Sheet, we are trying to automate the same…hence taking time.

      Regards,

    1. Hi,

      Though the company has value in terms of land bank etc, the problem is – real estate hasn’t picked up well.

      In the recent con-call, the company was very upbeat on upcoming launches. I don’t think there is too much risk at this price.

      Regards,

    1. Today at 66. Should we wait for further rise for profit booking or should we exit completely?

      Ayush – Thanks for providing this stock to us.

      1. Our investing process is – when the stocks are attractively priced, we accumulate them. When they start rising beyond the undervaluation range, we sell in several lots to take the benefit of future upsides.

        In the case of the Pondy, one may book partial profits to reduce cost of investment and make original investment free of cost and venture into new ideas.

  2. hi Ayush,

    Is there some bad news about Pondy ? the stock has been hitting lower circuit consistently for some days now

    Regards
    Raja

        1. Hi,

          I don’t think one should panic and sell out if there isn’t any specific negative.

          Re-evaluate the reasons for your buying and if those are intact, stay invested.

          Regards,

  3. Hi Ayush,Any update on Pondy oxide? I think stock is stablised 25 level. after merger with subsidery stock is moving sideways.what is your thought on after merger ? what will be the future ?I am bullish on this sector especially alternative energy concept.I belive you tracking HBL power. their latest annual report indicating good turn around story..lot of demand coming from Railway , defence etc. Pondy indirectly benefit lot…Kindly share your latest thought on this stock.thanks

    1. Yes, Pondy looks good at these levels.

      Not positive on HBL as it has performed poorly in last couple of years. The space the co operates in has become too competitive.

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