Updates on the Quarterly Results – Q4FY14

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Arun Jaitley – the new finance minister

First of all a heartiest congratulations to everyone for giving such a clear mandate. It was the need of the hour for our country and society to have a better and stable government. It is heartening to see that this time the election has been won on the agenda of development. From inaction and scams, lets hope the economy gets back on track.

The markets have witnessed a major change and upliftment in its mood over last few weeks. Those who were invested from before must be enjoying the gains. One should be careful, however, to not get carried away. These broad rallies are very useful for portfolio reconstruction – i.e. getting out of ideas or mistakes where the conviction levels were not high and moving into companies with a better clarity and visibility.

Lately, we have not been posting much because the companies we have discussed earlier are performing quite well fundamentally and continuing to grow consistently. We feel they still have a good long term potential.

Brief updates on our existing ideas:

Astral Poly – While the company continues to deliver an expected growth of about 30%, the stock keeps surprising everyone through a regular re-rating. Though the stock does trade at high valuations now, we recommend reading this article for some insights about the company’s high quality of business, management and growth prospects going forward.

Ajanta Pharma – Ajanta has once again come up with an excellent quarter – it continues to surprise everyone with the quality of its numbers. Do see their latest presentation, which gives a lot of insight on the brands they own and other qualitative aspects of their business. The slide number 14 is very interesting and is one of the key reasons behind their good growth and superior margins.

Shilpa Medicare – Shilpa Medicare too has reported a good quarter:

Particulars 2013 2014 % Change
Turnover 328.19 527.37 60.69%
EBIDT 69.82 126.57 81.28%
NP 46.06 80.86 75.55%
EPS 12.49 21.98

Its good to see a consistent increase in the gross block of the company. Recently the company has raised 75 Cr by way of preferential allotment to an FII. The company has been developing a product pipeline over the last 3-4 years; we expect the new facilities and products to give a revenue growth of 25-30%+ CAGR over the coming years.

Avanti Feeds – The company continues to maintain high growth rates with a revenue growth of 75% in 2014. Its amazing to see that the company has grown from just 72 Cr turnover in 2009 to 1135 Cr in 2014. The balance sheet is quite healthy with a debt of just 50 Crores.

Particulars 2009 2010 2011 2012 2013 2014 % CAGR
Turnover 72.51 96.16 199.62 393.41 648.04 1131.61 98.76%
NP -8.59 -1.20 3.42 28.06 30.20 69.75
EPS -10.74 -1.50 4.28 30.90 33.26 76.82

As per a recent article on the company, the company has recently set up a 85,000 tonne plant in addition to its capacity of 1,40,000 tonnes. With the industry continuing to do very well, it is expected that Avanti may again deliver high growth of 30-50% for the coming year FY15.

Its also good to see promoters buying over 1.7 lac shares since 1st April, 2014.

*Caution: Shrimp industry is a high risk industry, often affected by shrimp diseases and natural calamities.

Kitex Garments – We visited the AGM of the company and it was a superb experience. Its one of the those extra-ordinary entrepreneurship stories where a person has created a great company from scratch, all in 15-20 years.

Shareholders awarding Mr. Sabu for the excellent performance

Today, KGL is the third largest infant garments manufacturer in the world and supplying to some of the best names in the world including Gerber, ToysRus and Carter. They are known for manufacturing the best quality garments. Compared to a normal textile industry, the infant’s garment industry does not have a high competition. Infants can be allergic to dyes and chemicals, or chew the buttons – thus Kitex uses the best of the dyes and yarns. They also invest heavily into social compliances and provide an air-conditioned factory, free food and free stay to almost 9000 workers, of which 90% are females. The company had done a recent capex – it aims to be the biggest in the world in this year and eventually double the current size in 3-4 years.

Though the stock has had a sharp run up in recent times, we feel that it is one high quality business and should do well over a long term.

GRP – The company continues to face tough times. We were expecting the things to get better with the improving turnover, but this quarter has been a disappointment. Till the previous quarter, the issue was underutilization of capacity and problems at the new plant set up; hence we had a hope of better times as and when the economy improves. During the last quarter, however, the raw material cost as a percentage of total cost has increased substantially and is now a new cause of worry. We have reduced some exposure (by about 15-20%) and look forward for an update at the company’s upcoming AGM.

Oriental Carbon – After a long wait, the company has posted a good set of numbers. One of the big positives is the increase in dividend from Rs 5 last year to Rs 7 this year. The stock is trading at 5 times earnings with a price to book value of 1.

Amongst the new ideas, we are working on Anuh Pharma these days. The latest quarterly numbers hint an improvement in the company’s operations. From being a general bulk drug company, the company seems to be making efforts on R&D and entering regulated markets. The negatives are – 1. the group has several other unlisted companies which are also into pharmaceutical business and 2. the listed company has had a dull past.

We look forward to a strong budget over the next month. Happy investing!

Alembic Pharma Q&A and other updates

Alembic Pharma Management Q&A

We have an US CEO who has been with us for last 5 years and assembled together a top Team in International Generics business. Success has come because of Product Identification ability. Year-wise market-wise plans are drawn up till 2024

We have built a strong IP Culture/Team over last 5 years or so.

We have been following Alembic Pharma for last few quarters. We mentioned about the company in our Diwali post.

Alembic Pharma is among the oldest companies in the Indian pharma industry. But no major developments took place over the last decade as the company was more into the domestic markets, and limited to the anti-infectives, cough and cold segment which are highly competitive and matured. Over last 2-3 years there has been a contrasting change in the company. The revenues are growing (earlier the growth was 10% now it is 20-25%), the margins are expanding (earlier margins were 13-15% now it is 18-20%) and the balance sheet is getting stronger and efficient.

Reason for the change is the shift towards the international generics. This segment is expanding quite quickly for the company – from about 100 odd Cr in 2010 to 235 Cr in 2013 to 450 Cr in 2014 (expected). This segment has a potential to scale up to 1000 Cr turnover over the next 2-3 years given a strong product pipeline prepared by the company. Alembic Pharma has filed 60 ANDAs (just 18 five years back and 31 are approved till date). On the domestic side, the company has been entering the specialty segments such as Ophthalmology, Cardio, Anti-Diabetic etc, which have a higher growth and a better margin. Continue reading Alembic Pharma Q&A and other updates

Happy New Year 2014

Welcome 2014!

New year img

Dear Friends,

Dalal-street team wishes you & your family a very Happy & Prosperous New Year!

2013 has been a great year for markets, especially the mid cap area we focus on. The best thing about markets has been that it has focused on quality and rewarded companies with good balance sheet, business model and corporate governance. Several stocks which we discussed earlier like Astral Poly, Ajanta Pharma, Atul Auto, Mayur Uniquoters, Poly Medicure etc underwent multiple re-ratings and delivered multi-bagger returns. While at the same time cos with poor track records and corporate governance standards are just languishing and long term returns have been very poor. This will go a long way in encouraging investors, companies etc to seek something unique and establish high governance standards. Continue reading Happy New Year 2014

Avanti Feeds: MPEDA announcements

We were lucky to get the understanding of the change in the fortune of the shrimp industry and to spot Avanti Feeds at a very early stage. Since then we have been providing regular updates.

It has been one of the dream performance over the last 2-3 years – the company’s revenue have grown at a CAGR of 88% over last 3 years, and the stock returns have also been fabulous.

Over last few days, there have been reports of reporting of EMS disease in the Indian Shrimp industry. The EMS has been confirmed and as a preventive measure, MPEDA has decided to halt fresh production for next 2-3 months. Though it is a short term negative development for the industry, few positives to note are: 1. The EMS reported is in very small portion of the sample (just 1%) 2. As December to February is a lean period for the industry hence the damage will be limited and if the preventive steps are properly undertaken then the industry can quickly come out of the problem. MPEDA has provided a detailed clarification.

As a caution, we have chosen to book profits and reduce the exposure, and monitor how things develop going forward.

Among the new ideas, we are currently studying: APM Industries, KCP Sugar, Kitex Garments and Muthoot Capital. We hope to discuss the latest quarterly results and a detailed analysis in the next article.

Happy Deepawali: Samvat 2070

Muhurat Trading Session

We wish all our readers a very Happy & Prosperous Deepawali. May Goddess Laxmi shower her blessings, and Lord Ganesha shower happiness on all of us.

Samvat 2069 ended on a wonderful note as the Sensex hit an all time high.

We recommend our readers to take part in the Muhurat Trading session on this auspicious day. Few ideas for long term perspective are:

1. Alembic Pharma

2. GRP

3. Oriental Carbon

4. P I Ind

5. Shilpa Medicare

Over last couple of years, we have got some superb companies to participate in, such as Astral Poly Technik, Ajanta Pharma, Atul Auto, Avanti Feeds, Poly Medicure, Mayur Uniquoters etc and all of these have given some superb returns. The Q2FY14 results have been very good for most of the companies we have been tracking and hence existing ideas give more comfort and promise rather than something new and unknown.

The best stock to buy could be the one you already own – Peter Lynch

We would like to thank our readers for your support and collaboration in doing the in-depth research and groundwork. We are pretty optimistic about the year ahead and wish you Happy Investing!!!

Avanti Feeds: Management Q&A

We have discussed Avanti Feeds several times on our blog in past. The company has performed superbly over the last five years. The revenues have grown at a CAGR of 45%, and the net profits have grown to 30 crore in 2013 from a loss of 1 crore in 2010.

To get a better understanding about the company, a very detailed and in-depth management interview is available on valuepickr.com. The interview provides an insight about the industry, company and the prospects going forward. I would strongly recommend everyone to take out some time and read the whole interview (requires free login).

Some of the key highlights are: Continue reading Avanti Feeds: Management Q&A

Updates from quarterly results and AGMs

“management’s indifference and shareholder negligence both worked on Warren’s behalf, for the fewer folks came to the show, the more valuable would be whatever knowledge he could wrest from the company.” – from The Snowball where WB talks on the importance of attending AGMs

Swelect AGM

There is a lot of fear in the markets and several stocks in the mid and small cap space are having a free fall. These are the great times to focus and research more on the companies to find undervalued gems.

Last month, we toured South India to attend a few AGMs. We visited Avanti Feeds, Shilpa Medicare and Swelect Energy. The meetings were good and the companies seem well placed. It is often concerning to watch a few shareholders holding nominal quantities and coming over for free gifts and snacks. Despite good arrangements and the good work by the management, these shareholders often sabotage the proceedings. We need to fix this, otherwise the promoters will never treat the minorities properly. Probably having a video conferencing of AGMs may help.

Brief updates from above meetings:

Avanti Feeds: We have discussed the company many times in past and the stock has performed well too. The industry continues to see high growth rates of 30%+ since the adoption of the new shrimp specie – Vannamei. The company is superbly placed in its sector (due to the support of TUF) and ranks among the top. The management seemed quite honest, hard working and conservative. They were one of the first to understand the potential of the Vannamei specie in India and took various steps to get it introduced. The company has grown from a turnover of just 100 Cr in 2009 to 650 Cr in 2013. Avanti seems well placed as the industry is expected to remain on a good growth path for the next few years. Continue reading Updates from quarterly results and AGMs

NMDC and other updates

nmdc

Markets have undergone a lot of correction (more visible if one considers the mid/small cap space), and though the economic indicators are not good and there is lot of uncertainty, but these are the times to plant the good ideas and make a strong portfolio for upcoming years.

For the last couple of years, most of the companies are grappling with the rising costs due to power, labour and inflation, and most of them are witnessing a slower growth and contraction in margins. Perhaps the fall in rupee is a way by which several export oriented companies will get some relief and would be able to regain the lost margins. But we should also remember that not all companies will be benefited. Due to a competition, much of the benefits would be taken away by the customers and hence we need to focus on high quality companies which have a pricing power and have done well in past. Most of the companies in our portfolio have been export oriented (and low on debt). We feel that the following may do quite well – Avanti Feeds, Oriental Carbon, Poly Medicure, MPS Ltd, Acceleya Solutions, GRP, Orbit Exports etc.

We discussed a couple of new ideas in our last post; here are more thoughts on them: Continue reading NMDC and other updates

Updates on latest quarterly results [Q4FY13]

“Market rewards you as per your perception about the market. If you treat it as a gambling den, it will prove a gamble for you” – Vijay Kedia

Presenting results

The results season is here and we are again busy tracking them. For those who still don’t use the alert feature in the Screener, we would highly recommend you to set an email alert for the Bulls Cartel Screen and the Growth Stocks screen (select alerts for the “new results”) to keep an easy tap of the results (that is what we do along with adding stocks to the watchlists to also get the updates about them).

On the performance side, most of the results look good and here is a brief review on the stocks we have discussed so far:

Avanti Feeds – The company has posted a fantastic Q4 result. This is the fourth year since the industry has changed and started doing well, and Avanti is delivering a super growth. Here is a snapshot: Continue reading Updates on latest quarterly results [Q4FY13]