We discussed Oriental Carbon & Chemicals Ltd. (OCCL) almost a year back. The stock has remained at the same levels while the company has grown and the fundamentals have got even better. To get a more understanding on the company and the future prospects, we met with the senior management of the company. Here are the extracts from the management meet:
Insoluble Sulphur is a niche market and as per our data total market is about 2,25,000 MT. Solutia controls 70-75% of the market. OCCL is the second largest with 7-8% market share.
Insoluble Sulpher is mostly used by the Tyre Industry. Increased Radialisation is the main demand driver.
Entry Barriers: The technology is closely guarded. No tyre major is interested in shifting vendors or entertaining new vendors unless you can supply in sizeable quantity and the approval process is lengthy and costly.
Continental AG, Goodyear, Bridgestone, Pirelli are some of our big customers. In the domestic market we have MRF, Apollo, JK tyres and some more.
Demand situation warranted that we expand quickly. Yes capacities were pre-sold as per arrangements with our customers. We are working at something like 75% capacity utilisation at the moment.
We should continue to grow at current levels. The volume growth may be limited to 10-15% if the demand slack continues.
Effective tax rate will be lower at 20-22%.
If you see the last 5 years, we have generally been increasing dividends. In FY12 again we have increased dividends.
Yes 500 Cr is possible and should happen after the expansion of the next 11000 MT capacity.
Please check out the complete management interview (requires free login)
Continue reading Oriental Carbon & Chemicals: Management meet
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.
Continue reading Updates from the company visits & AGMs
We received an overwhelming positive response to our article on “How to find better investments using Accounting Ratios” and few of our readers asked to share few stocks which met those criteria. These are some interesting mid/small cap stock ideas, which have been doing well yet go un-noticed. They have good accounting ratios and seem to be trading at very compelling valuations.
1. Mazda Ltd (BSE Code – 523792): Mazda is an engineering company, specializing in steam jet vacuum systems and condensers and they find application in process and power industry. The interesting part is the balance sheet and the valuations at which the stock is trading. At CMP of 92, the company is available at a market capitalization of 40 Cr while it has cash of close to 15-20 Cr on Balance Sheet. Company is generating annual sales of 100 Cr & net profits of 10 Cr and is available at an Enterprise Value of just 20-25 Cr. Stock is trading at a PE of just 4 and Price to BV of just 0.60. Company has also started a new factory at the end of March, 12 and may help in growth.
A good detailed post was recently done by Dhwanil, do go through that for details.
2. Kakatiya Cement (BSE Code – 500234, NSE Code – KAKATCEM): KCL is a south based company having three divisions – Cement, Sugar & Power. Though first two segments are cyclical in nature but the interesting thing is that this company hasn’t been expanding, rather they have utilized the cash flows to repay the debts and become a debt free company.
Continue reading Stock ideas: Debt free companies
FY 2012 results are now out and the focus will shift towards earnings for FY13. Despite a very challenging market and weak economic conditions, we are happy with the financial results of the companies we track. Most of them have been able to report healthy growth and maintain their leaderships. Many of the companies have raised dividends and are now trading at very low PE (price to earning) and Price to Book (P/B) ratios. Although the macro environment and prospects remain uncertain, there is an opportunity for stock pickers to do their home work and build a quality portfolio.
Some of the noticeable results of the companies we track are: Continue reading Updates for Financial Results 2012
The annual results are coming out and it’s a good time to re-evaluate the portfolio and also start considering what lies ahead for FY13. Here is an update on the performance of some of our ideas:
Gujarat Reclaim Rubber: We had first discussed about this idea at 875 levels and provided multiple updates. The stock did very well despite the weak markets. The Q4 nos are pretty weak and below expectations in terms of profitability though the top-line growth is intact. We feel that one should consider the annual performance also wherein the company has grown the topline by 30% for the year and net profits by 45% despite the weak Q4. It may be just a weak quarter due to several reasons like – write off of Plant & Machinery due to fire in the last quarter and loss of production (majority to be recovered by way of insurance), increase in employee cost due to one time bonus etc. and fluctuation and appreciation of rupee resulting in lower margins.
As per notes to accounts, the company has partially started the new production capacities and may be the growth will bring back the profitability. For FY 13, we do expect the company to grow 25-30% once again.
Continue reading A review of FY12 Results [Updates]
I wrote an article on the using of accounting ratios to find better investments after completing my CA for The Chartered Accountant Journal. The same has got published in the May 2012 edition. It covers few important benchmarks, some rules of thumbs and a brief about other important financial variables. Happy to share it with you all.
Using accounting ratios to find better investments from The Chartered Accountant Journal
Manali Petrochemicals Ltd. has posted an excellent set of numbers for FY 2012 and looks undervalued based on the improving financial numbers & growth ahead:
||Mar 12 Qtr
||Mar 11 Qtr
*All Financial figures are in crore rupees (except EPS).
Manali Petrochemicals is a leading producer of Propylene Oxide (PO), Propylene Glycols (PG) and Polyols in India. These products find application in industries such as Pharmaceuticals, Polyurethane, Resins etc. Below are some extracts on the growth prospects from the last annual report of the company:
Continue reading Manali Petrochemicals Ltd. – A safe midterm stock idea
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.
Continue reading Cheers for Gujarat Reclaim & Rubber Products
BSE: 500013 | NSE: ANSALAPI | Market Cap. : ~510 Crore
One asset class where huge wealth creation has happened over last few years is real estate, where the maximum appreciation has happened in Tier 2 & 3 cities over the last 3-5 years. Yet real estate stocks haven’t performed well over last 3 years. The reason is the irrational exuberance the sector had witnessed during the 2007-08 boom. Most of the stocks are down 80-90% from 2008 highs. Lets rewind back to IT boom of 2000 and similar thing had happened but after the circle of extreme optimism and pessimism things came back to normal and genuine good companies were rewarded by the markets. We feel that real estate sector is also going through extreme pessimism and there could be selected winners going forward. One such stock idea might be – Ansal Property. They were one of the first to start the big township concept in these Tier 2 & 3 cities and going by the appreciation in land prices in these cities, they may be perfectly placed to reap the rewards going forward.
Ansal Property is one of the oldest and biggest builder of North India. Some of the landmark buildings constructed by the company are – Ansal Plaza, Ansal Bhawan, Statesman House etc. Following are the major projects being undertaken by the company: Continue reading Ansal Properties–Dark Horse?
Liberty Phosphate (BSE:530273) is one of the largest manufacturer of SSP (Single Super Phosphate) Fertilizer. The fortunes of the company have changed over the last 2-3 years since the introduction of the Nutrient Based Subsidy (NBS) policy by the Government. Under the NBS, the subsidy amount for each fertilizer is fixed based on the nutrient composition in the fertilizer. This is the first time, the policy recognized Sulphur content in SSP while fixing the subsidy. With better subsidy, SSP is much cheaper to other fertilizers and hence the usage and production is increasing rapidly after years of stagnation. Hence the existing SSP manufacturers are witnessing growing turnover along with higher margins.
The stock looks interesting due to its cheap valuations at CMP of Rs.64:
- Stock is trading at just 2 times its trailing twelve month earnings.
- Stock is available at just 1.1 times BV.
Now the question comes, is this performance sustainable and growing?
Continue reading Liberty Phosphate Ltd.