Quarterly Result Updates and new idea [Indag Rubber]

In these volatile times, I’m happy to see some of our companies doing quite well and the stocks getting the due re-ratings. It just re-enforces your faith in the fundamentals and markets.

We had discussed about Smruthi Organics on 4th April, 2011 at price of 135 and had provided an update recently. The company has posted good Q1 numbers and the stock has had an amazing run – the stock had appreciated from Rs 140 to 250 levels all in 15 days!

Smruthi

Similar, we had discussed about Avanti Feeds on 13th March, 2011 at Rs 33. The company has posted fantastic Q1 results:

Particulars June 11 June 10 % Variation FY 2011
Sales 109.43 46.92 133.2% 199.62
PBIDT 9.80 2.10 366.7% 12.38
Tax 2.39 1.24 92.7% 1.69
PAT 5.41 -0.68 LP 3.42
EPS 6.77 -.85 4.24

The markets have rewarded the investors in the stock quickly and the stock was up 20% to Rs 59 yesterday, making a new 52 week high. The sector is doing very well and the exports from India are expected to grow sharply this year so if the company can repeat a performance like Q1, the stock may continue making new highs:

Avanti_Feeds

On similar lines, we keep looking for stock ideas where the companies are doing well and valuations are very attractive. We are trying to avoid companies with high debt, high working capital or high outstanding loans. New idea on these lines is:

Indag Rubber (BSE code : 509162, CMP 110): The company is one of the leading player in manufacturing of tyre retreads in India. Though it may sound to be a boring business, but the company seems to be doing quite well and numbers look great.

Indag has been growing consistently at a CAGR of 25% for last 10 years! The company had a turnover of just 18 Cr in 2002, which has grown to 150 Cr last year. The profitability has also grown at a CAGR of about 25%.

The company is almost debt free and business generates good free cash flows. The company also pays out decent dividend and gave a dividend of 40% last year. Dividend yield at CMP of 110 is attractive of about 3.65%.

The Book Value is also strong at about 85. Stock seems to be trading cheap with a PE ratio of less than 4 on trailing twelve month EPS. The company has had ROCE of 30%+ for last 5 years.

Conclusion:

It’s important to do a re-check of portfolio from time to time. One should re-access their investments and switch out from non-performers to better ideas. In the current scenario, one should stay calm and understand the long term potential of the stock markets and do value investing at regular intervals. I firmly believe that Equities are the best asset class and good ideas will be rewarded and will lead to wealth creation.

Financial Results of Indag Rubber:

  • Chan_ndu

    Hi ayush, is piccadilyagro good for holdin long term? Is indag rubber to buy now? Thanks

    • Ayush

      Hi,

      Both look interesting ideas to us. We are invested.

      Would suggest every individual to their homework also and try to form an individual opinion also. Then only one can reap the full benefits of investing. Building individual opinion and confidence is very important.

      Do share your opinion when done.

      Regards,

  • Anonymous

    Hi Ayush
    great job so far. What is your take on BNK capital ? The stock seem to have fallen a lot and I am invested in that.

    • Ayush

      Hi Sunil,

      Sometime it takes a lot of time for the value to get unlocked. This is why we take up several ideas at same time.

      How much of your portfolio have you invested in this idea? Usually we recommend less than 5% exposure in such ideas.

      Regards,

      • Anonymous

        Hi Ayush
        It is about 7% of my portfolio. Time is not a constraint as long as the idea is still good and valid and there are no changes to the fundamentals of the company. I do not see anything untoward in the reports, but the stock has kept falling since the bonus issue.

        • Ayush

          Hi,

          Yeah, nothing has changed as such. Its just that in weak markets, stocks will less liquidity/interest fall off on low volumes.

          Regards,

  • Vinod

    Hi, thank you for the new idea and congrats for the great results from your previous picks.
    Regarding Indaag – if the PE of the com is 4 inspite of 10 yrs of performance what can lead to a rerating now, since the growth might still continue at same rate only?

    Rgds
    Vinod

    • Ayush

      Hi,

      Good query. We are not banking on PE rating as such.

      Important thing is growth. If the co can continue to grow at 20-25%, the returns will be there without PE re-rating.

      Regards,

  • Neeraj Marathe

    Great going Ayush,
    You have been spot on in finding out these valuation mismatch stories.
    cheers!

    • Ayush

      Thanks, Neeraj bhai

  • 123

    Hi
    I had the honor of being taught by Shri Sanjay Bakshi. Are you professionally related to him ? His blog is what drew me to your blog. Since I was new to your blog when I started tracking, I ignored Smruthi Organic. But after seeing fantastic results I started investing in your ideas (of course after doing my own home work, which is mostly debt capacity evaluation), I booked profit on Everest and Balkrishna with dividend, and now invested in Mangalore chem.

    Now I wait for your ideas to come. Keep up the good work !! You are one of the finest value investment blogs which I have come across !! I like the qualitative analysis you do, no technical charts or jargons. This is what value investing is all about !

    • Ayush

      Hi,

      Thanks for kind words and appreciation. Do share your work on the ideas discussed. It will help us in adding new perspectives in our work.

      Thanks & Regards,

  • pravin

    Hi Ayush,
    Looking at Indag rubber annual reports, they are not going to enjoy tax free heaven from this year and this already impacted their net profit for this year, so I believe we may not see the same groowh in NP going forward. What is your view on this?

    • Ayush

      Hi Pravin,

      The tax benefit got ended for the co last year and hence there wasn’t much growth in NP last year, despite operating profits growing well.

      In the first qtr, the co has already provided for 25% taxation and still the results are very good. If they can repeat the performance like in Q1, I think the stock should do well.

      Regards,

  • vijay singh

    hi Ayush
    Piccadily Agro hurt badly because of its Q1 result. After seeing result i think its net profit fall due to inventry. in comparing with last Q1 results about 5.98 cr value of stock blocked in extra. That is main reason for bad result. What u think. Kindly analyse result. we are eagerly waiting.
    vijay singh

    • Ayush

      Hi Vijay,

      It would be too early to be able to find out the exact reasons for the decline in performance. I’m waiting for the annual report of the co to get further insights.

      Regards,

  • aditya singh

    sir, what is your view about crew bos product and twilight litaka pharme both these companies looking very attractive but it seem that the share pledge by promoters is liquidated by the finances even twilights promoters also say to the iifl that there share were liquidated by finances what is your view

    • Ayush

      Hi,

      Haven’t been tracking both the cos. Regarding Litaka, I would like to caution on the quality of the co and its nos. Have heard negatives on the co.

      Regards,

  • Ravi gowda

    Hi Ayush,

    I am a follower for your blog, I appreciare your great work. What is your take on Manjushree Technopack? Company is posting very good results ever quarter. Do you see one more multibagger in this scrip? Please advise.

    Thanks and Regards,
    Ravi

    • Ayush

      Hi Ravi,

      We feel Manjushree is an excellent co. We have discussed several times on this co – http://dalal-street.in/manjushree-technopack-snapshot/

      The Q1 results have been very good and the stock should do well.

      Regards,

      • Ravi gowda

        Thanks Ayush.

        • Ravi gowda

          Hi Ayush,

          Do you track Vivimed labs? Its been posting good results quarter on quarter, looks like a value buy. The only concern would be equity dilution. Please share your thoughts,

          Cheers,
          Ravi

          • Ayush

            Hi,

            Yeah, we do hold some for tracking it but haven’t been able to understand the co properly. Need to understand the reasons for low tax pay-outs.

            Regards,

          • Ravi gowda

            Thanks Ayush, please post some information when you are done with analysis.

            Cheers,
            Ravi

  • Shravanrayhaanpaul

    hi ayush,
    i guess its a gud time to have the cash gun loaded, thanks for the interesting picks .
    anyways ( i know this is not going to help the thesis much) i ve been wondering that is are there some risks that haven t been noticed or underestimated ? I MEAN I TRULY CANT FIND ANYTHING SIGNIFICANT RISK IN THIS STOCK AND YET I VE BEEN WATCHING IT SINCE 12TH CLASS AND IT CONTINIUES TO TEST THE PATIENCE OF EVERY INVESTOR!
    i guess what i mean is what are the risks involved here?
    and yeah the money matters story keps getting better
    tc

    • Ayush

      Hi,

      Its not that this stock hasn’t provided returns. In 2006, the stock was just Rs 20 which rose to 110 by early 2008. Similarly during the last crisis in 2008-09, the stock went down to abt 19 and then rose to 115 by April, 2010. Since then the stock has been consolidating between about 90-115 levels while the financial are getting better.

      I agree, this stock has usually got low PE multiples but with consistent performance and lot of value, may be the stock will get more attention.

      The risk could be – If the natural rubber prices show a lot of volatility there may be volatility in earnings.

      Regards,

  • Ravi gowda

    Hi Ayush,

    What is your view on PG Foils? Company is posting good results quarter on quarter and there seems to be lot of opportunity for growth in the business. Can one buy a stock at the current price? Please advise.

    Cheers,
    Ravi

  • Abc

    ayush,
    since u have said equities are the best asset class, i would like to bring your attention to real estate also(plots,farms nt talkin about apartments)….not just in Tier 1 cities but in tier 2 and 3 cities also ,in last 10-15 years real estate has given phenomenal returns arnd 50 % p.a…..i am tryin to think abt possible formation of bubble..bt seems unlikely

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  • Chan_ndu

    Hi Ayush, your tips are better than market sentiments. Keep it up AyUsHjI jai HO…

    • Ayush

      Thanks

  • ricky

    Hey. What about Visaka Industries? Do you track it?

    • Ayush

      No, don’t track the same closely. I prefer Everest Ind in this sector

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  • Hi Ayush, Looks like INDAG wants to venture into new areas like power gen , dist etc…. what do you think?

    • Ayush

      Co hasn’t provided the details. Hence no change in opinion/update as of now.