Cheers for Gujarat Reclaim & Rubber Products

Hello friends,

Congratulations to you all for participating in this superb run of Gujarat Reclaimed Rubber. Thanks for all your wonderful comments and your continuous support. Even in this relatively dull market, GRRPL has done remarkably well.

The stock has been a major outperformer and has more than doubled since our initial recommendation @ 875 about 2 years ago to Rs 2,000 now. We have been repeatedly providing updates on Gujarat Reclaim Rubber and the high allocation & conviction has been possible due to the regular feedback by our readers and friends. We would encourage you all to invite more of your friends & colleagues and keep exchanging more ideas.

Here is the two year chart:

Gujarat_Reclaim

What’s ahead?

Though the recent run-up has been quick but it remains an excellent stock idea for a long term portfolio given the high quality fundamentals and regular growth of the company.

GRRPL is world’s third largest manufacturer of reclaimed rubber and has been growing at a compounded annual growth of 28% for last 11 years! The company has a strong competitive advantage and has undertaken series of expansions to maintain growth going ahead. The company had aimed to be a 500 Cr company by 2014 (company did 185 Cr turnover in 2011 and 240 Cr turnover is expected for FY 12) and and they seem to be moving in the right direction.

GRRPL had done a greenfield expansion at Sohlapur during FY 12 and the first phase achieved full utilization quickly. The company has undertaken Phase 2 of expansion to increase capacity by another 10-15,000 MT. This might have become operational during March, 12. The company has also undertaken another greenfield expansion of 10,000 MT in Phase 1 at Erode, Tamil Nadu and the same might get completed during Q1, FY13. So with successful completion of these expansions, the company has a potential to deliver another 30%+ growth during FY13.

One does feel tempted to do profit booking seeing the quick run-up but we feel that investors should try to remain invested (apart from partial profit booking) cause such high quality businesses are not easy to find. Also, given poor fiscal deficit situation of India, good export oriented companies should continue to do well.

Last 1 year has been a stock pickers market wherein market has rationally rewarded high quality growth companies. There are plenty of hidden gems in the mid cap space and investors should do continuous investments to participate in existing & new promising ideas.

Happy Investing!

Updated Financial Sheet for Gujarat Reclaim:

23 thoughts on “Cheers for Gujarat Reclaim & Rubber Products”

  1. I had been buying this at around 1200-1450 based on your recommendation in last 1-2 months. Was planning to increase this to 20% of my portfolio but is just around 4%.
    The sudden spurt in the last week left me gasping and stranded. Anyways still happy that I am sitting on a handsome profit. Thanks to you Ayush.

    Just tempted to ask this. What is your next best after GRRPL? Smruthi, Atul Auto or Mayur.

    Roberto

    1. Mayur is a good co but the stock has run up well. We do like Atul Auto & Smruthi at current prices.

      We feel one should have a diversified portfolio when investing in mid caps, spread across 15-20 ideas. You may look at other ideas discussed at our blog and allocate some portion to them also.

  2. HI Ayush,

    congrats for picking this hidden gem early and for smart gains you made on this. It is not very often that one finds a stock that runs up by 200% and still looks undervalued. It essentially shows that company is able to increase its intrinsic value year over year. This is one stock in my portfolio, where I can sleep over it for next few years without worrying too much about it.

    I would love to know your views in piramal healthcare limited. I feel it is significantly undervalued company.

    Best Regards
    Dhwanil Desai
    http://valueinvestinginpractice.blogspot.in/

    1. Hi Dhwanil,

      Yes, this is the beauty of a good investment 🙂 Piramal Healthcare is an excellent company and a value pick but we are watching it as of now and waiting for more clarity to inc exposure. (Post merger of Piramal Life, the earnings might take a hit)

      Regards,
      Ayush

  3. hi ayush, congratulations for this wonderful research. i have been following your blog from london for a few months now and have found your research extremely good. what would be your top picks at the moment?

    1. Hi,

      Thanks a lot for the encouragement. Its great to see Indians investing from abroad. We believe that Indian markets have a lot of value and with the easing of access for global investors its one of the best places to invest. Look forward to more participation from you and your friends.

      Current ideas are shown in bold in the performance sheet. We like – Atul Auto, Smruthi Organics, Nesco, Ansal, Guj Recl, Balkrishna for long run.

  4. Congrats Ayush!! Good stock analysis and long term recos! They have benefited me a lot!!
    Do you still recommend a buy on Indag Rubber? That has also run up and has given almost as good returns as Guj Recl..
    Also what are your views on debt capacity bargains like: Sasken com, Nucleus software, Lakshmi Electrical Control systems etc.
    I find TVS Srichakra also attractive..

    1. Hi Daya,

      Indag has posted good nos and its a good company. Existing investors may continue to hold while new investors should try to target sharp declines, if any.

      Sasken & Nucleus have value but I think in Indian markets, growth is very important specially when growth stocks are available at cheap valuations. Lakshmi Electric is also a interesting co, used to track it earlier. In TVS the debt is too high….otherwise the growth has been very good.

  5. Hi Ayush,

    Hinduja ventures with its cable distribution in major cities, looks good with the compulsion of digital set-top box in the coming years. deadline for 4 metros is june 2012 and for other cities is 2013. do you track this stock?
    -Daya.

        1. Hi,

          Yes, the results are weak on quarterly basis but still very good on annual basis. The stock would take correction but it remains a high quality stock with good prospects for long term. As per notes to acs, new capacities have started production so there should be good growth in coming year.

          1. what do you think could be the reasons for the weak bottomline? topline still seems ok

          2. The reasons seem to be:

            There was a fire during the last qtr which was duly shared in notes to acs. As per indications, it has resulted into inc in other exp by close to 1 Cr. The insurance claim would be accounted when it comes.

            Similarly the inc in employee exp seem to be one time, usually a bonus etc.

            Also the rupee had appreciated back to 48-49 levels in the march qtr, which would had softened the margins.

            Going ahead, inc in turnover etc should take care of these things.

          3. would you advice to exit now given that stock will correct now and enter later? also, what would be your best picks in the current environment for fresh cash investment?

    1. We like this co for long term investing. However, the stock may test patience given the weak demand. One may wait for Q3 results to take a call.

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