Results season – Hits and Misses

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).

A couple of our old ideas which have under performed and one may consider switching from are:
1. Everest Industries and
2. Facor Alloys – One may read Rohit’s post to which we agree.

It is part of the investing process to get a couple of ideas wrong, the important thing is to learn and not to repeat the same. If we are able to get 70% of our ideas right in down markets, the results will be spectacular.

Other companies with very good results are:

Indag Rubber: The Q2 results have been excellent and is attracting public interest:

Particulars Sept 11 Sept 10 % Variation FY 2011
Sales 54.07 35.62 51.8% 149.47
PBIDT 7.63 3.63 110.2% 16.69
Tax 1.41 0.66 113.6% 2.89
PAT 5.24 2.22 136% 10.75
EPS 9.97 4.23 20.48

Balkrishna Industry: The company has posted yet another excellent set of numbers. The company also seems to be moving towards its target of $1 billion turnover by 2015.

Particulars Sept 11 Sept 10 % Variation FY 2011
Sales 675.32 474.08 42.4% 1996.94
PBIDT 118.72 97.87 21.3% 370.7
Tax 30.39 24.9 25% 89.38
PAT 63.27 51.03 24% 185.66
EPS 6.54 5.28 19.21

Other companies with very good numbers and under our research are – Andhra Sugar (120) & Thangamayil Jewellery (169).

We feel great to get valuable feedback and participation from our readers. It is our constant aim to make our blog a platform for exchanging and sharing best ideas in the mid-cap space and all your participation has been very encouraging. Look forward to more interaction :D.

23 thoughts on “Results season – Hits and Misses”

  1. After showing excellent result Indag rubber and Guj reclaim not shown great run in stock price .It is clearly shows that overall market sentiment is not good . This period is accumulation phase for long term investor . which are few in market.Question we need to discuss that these companies(hits result) can sustain good result over the time period( 1 to 2 yrs) when market is in upswing/northwads .

  2. Also do check out Piccadilly Agro results. They seem to have been quite bad and the stock had taken quite a dip. What’s your reading of the situation?

    1. Yes, the results are bad and similarly the stock has taken a lot of beating.

      Considering the good BV of the co at about 30, I think the price should find support. We should try to get understanding about the reason behind the poor performance to get confidence and buy more.

      1. Saving grace is that the company’s top line has actually improved by growing 34% year on year basis. But looks like that due to increased raw material prices, company’s bottom line has crashed 99%with just 1 lakh PAT against last year’s 5 crores. And the raw material prices are cyclical – so may be a quarter or two before thing would be back on track for the company. Currently the company seems to be going through a bad phase and especially sugar sector as a whole has been facing problems. With the governments of UP and Maharashtra hiking procurement prices by more than 19%, it’s inviable for sugar companies to profit. Their
        production cost being Rs. 33 per kg while the selling price is 28 per kg. Wrong policies are hitting the sector hard. The liquor business has
        shown positive results, but even here PAT has been down 60% on a year on year basis (guess because even here the main raw material is same as that for sugar – so higher procurement prices) and there is also some drop in sales volumes.Guess we need to wait for the stock to form a base somewhere and then start averaging lower (for those who already hold at higher levels) or accumulation. Also, its expansion in the liquor segment might help it perform better than other pure play sugar companies. And even the industry unfriendly sugar policies of the government cannot continue for long. So once the situation changes, it would be like a big trigger for Piccadilly and all the other sugar companies too.

        1. What is the strategy that you experienced guys use to average down in such situations? Do you nibble? Or buy like 60% in 1 shot and the remaining later? Trying to learn…

          1. Usually when we like an idea we buy upto 50-60% of the intended qty and then monitor.

            If the confidence increases, we buy more…otherwise reduce if needed.

            In cases like these, we nibble very gradually and wait for clarity or stability before averaging.

          2. Also, since it is difficult to predict the bottom, do you keep buying on the way down? Or is it better to let it settle and then buy on the way up?

    1. The co hasn’t been growing for last few qtrs and the margins are softening slowly.

      The co is good and operates in a very high potential sector. Looks to be a good idea on sharp declines, if any.

  3. Thanks for your wonderful analysis. Both GIPCL, Gujarat Reclaim and in some other cases – P/E ratios are low, but Debt/Equity remains high, interest costs remain high – how do the analyses take this into account? In an inflationary environment, would rising interest costs plus higher debt not have a negating effect on earnings, cashflows and stock owner equity?

    1. Hi,

      We do lot of filtering while selecting new ideas and particularly avoid cos with high debt. For eg: Guj reclaim has a debt : equity of less than 0.50 and GIPCL has less than 1. Interest cost ratio is also quite comfortable in most of the cos.

      Also, most of the cos have high ROCE’s…so some debt is good for them.

      1. Is not Debt/Equity of more than 0.5 very high. GIPCL has very high debt/ equity – not convinced that the high ROCE will flow through to stockholders. Company has high expansion costs, high capital project costs plus high D/E ratio. This has been a core reason for stock to fall from Rs. 120 in 2009, to Rs. 70 currently. Sorry, just trying to understand in a broader context…At a P/E of 4-5, dividend of 4% plus a wonderful history and competent management, downside is well protected – I agree.

        1. Usually debt/equity till 1 is ok if the co has ROCE of more than 15-17%. Most of the power cos have much higher debt equity.

          In the case of GIPCL, the positive I’m looking at is – this co has one of the highest margins in the industry as the co is totally integrated. So as cash flows will keep coming going forward, the loan may get repaid quickly thus improving the bottomline substantially over next 2-3 years.

          Also reversal of interest rate cycle would also be quite positive for them. Yes, stock has corrected well and this is why we are getting interested now…as it seems to have good value at these levels. Buying is being done slowly at falls.

  4. Hi Ayush,

    I believe you are +ve on Andhra sugars. Is it because the Chloro Alkali-Soda Ash prices are on the uptrend?

    Regards,
    Sandriano

    1. Hi,

      We didn’t develop confidence on researching more on it hence gave it a go. The things to worry here are high debts and consistently increasing inventory. With gold prices correcting, its better to wait n watch.

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