During the past few weeks, we have been on the move to attend the Annual General Meetings (AGMs) and meet the companies we have been tracking. A lot of effort has been in re-understanding the companies and preparing proper questionnaires to get a bigger and longer term picture. We are in process of preparing detailed notes and will share them in coming weeks. Here are some quick updates:
1. Mayur Uniquoters: It was one of the most pleasant and well organized AGM. The company welcomed the shareholders with open arms and proved to be a great host. The management seems to be hands on the business and way ahead of the competition. The company has a fantastic track record (50% CAGR growth in net profits over last 5 years) and has one of the best financial ratios (ROCE of 55-60% with a good dividend pay-outs).
Mayur aims to be a 550 Cr. turnover company by 2015 (company did a 315 Cr. turnover in 2012). They have undertaken a backward integration project and the same is being carried out at their new plant. The company aims to bring down the rejection rate to be able to enter the highly lucrative US Auto OEM market. The company has been building relationships with some of the best names in the industry – Ford, Chrysler, BMW, Mercedes, GM etc. The orders from BMW & Mercedes have been slow and they expect the same to pick up in 1-2 years. The backward integration project should get completed by Sept-Oct, 12.
The 4th production line setup at the end of last year has now stabilized and the company is now trying to scale up the production. Mayur is in the process of setting up a 5th line of production and the same should get commissioned by the year end. This line would be used to tab exports market.
2. Apcotex Ltd: We had discussed this stock due to an excellent management pedigree, good growth in last few years and excellent dividend payout. The reason behind the past growth has been the active participation of the next generation of the Choksi group.
Apcotex has undertaken an expansion of about 30 Cr. in FY 12 to expand and upgrade its capacities. The company aims to maintain a growth of about 25% for next 3 years, and to scale up a small amount of CAPEX will be required. One may like to go through the AGM document posted by the company.
3. Balkrishna Industry: This has been a excellent company with an incredible track record with a compounded topline growth of 30% for over last 15 years! The company has undertaken a major expansion to double the current turnover by 2015.
Balkrishna looks very well placed to maintain consistent growth of 25-30% for next 3 years. The business model is intact and the company is getting lot of traction from the US market. The company also expects to see a margin expansion in coming quarters due to correction in rubber prices.
4. Oriental Carbon & Chemicals Ltd.: OCCL has been doing very well in its niche area of Insoluble Sulphur. OCCL has been growing at a 25% CAGR for last 5 years with a much higher growth in net profits. Today the company commands a 7-8% global market share of Insoluble Sulphur and is the second largest player. The industry is dominated by the US giant Solutia which commands a 70-75% market share. OCCL has been able to improve quality and relationships over the years and is now a preferred supplier and serves the top names of the tyre industry like Goodyear, Continental, Bridgestone etc.
The company is experiencing some demand slack in near term from Europe and hence the near term growth may be muted but the company expects the things to pick up in few months. The company would take a call on the next phase of expansion by the end of the year after accessing the demand situation.
Updates on Quarterly Results
The quarterly results season is on and its good to see that most of our companies have done well. Some particular updates:
1. Indag Rubber: The Company has once again posted very good set of consistent results. The company seems to be having volume growth in excess of 20% and this is a very good positive. The stock looks undervalued at these levels.
2. Avanti Feeds: Avanti has once again performed much better than the expectations. The biggest positive was the big increase in dividend from 10% last year to 65% this year. This should help in improving the perception of the investors towards the management.
3. Atul Auto: The stock has had a fantastic run by almost doubling a couple of weeks back. The stock has now corrected to levels where it looks undervalued. The company has delivered a good first quarter with a 25% growth in topline. This is a very good growth considering the slowdown in the three wheeler space wherein other companies are posting negative growth.
4. Oriental Carbon: The company has posted good numbers and the margins have expanded. The sales growth has been slower than expected and the same trend may continue for 1-2 quarters after which the things are expected to pick up. Company is trading at Rs.120, with a PE of just 3-4 and below BV of Rs.150+ with a decent dividend yield of 4.20%.
Among new stock ideas, one may study Narmada Gelatine. We would also like our readers to go through some latest annual reports given below (we have highlighted the important sections):
We feel the appointment of P. Chidambaram again as the finance minister would be a positive move for our markets, this should certainly improve the sentiments. His minor corrective steps can bring about a lot of positive change and bring back the cheerfulness in the market. We invite your views.