Updates on the Quarterly Results – Q4FY14

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

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

Avanti Feeds: Annual Report updates

We discussed Avanti Feeds about a year back at Rs 35. The stock has been a multi bagger backed by very strong growth in revenues and profitability and is currently trading at Rs.145.

Financial Data of last 6 years (Figures in Crores):

FY 2007 2008 2009 2010 2011 2012 CAGR
Sales 121.74 102.83 73.00 96.16 207.75 393.41 26.41%
N.P. 1.67 0.88 (7.03) (1.2) 3.42 28.07 75.82%

The reason for change in fortunes has been due to introduction of new variety of shrimps – Vannamei. Earlier Black Tiger variety was being produced which had lower density and hence higher cost of production.Vannemei is more remunerative for the farmers now.

It was encouraging to go through the FY 2012 Annual Report of the company. The undertone is very positive and as per it, Industry is expected to continue growing at 20- 25% for next 2-3 yrs. Avanti is aggressively expanding its capacity in anticipation of the demand.

Key Highlights of the Annual Report – 2011-12 (Link to report):

  • Thai Union Frozen Products PCL (TUF) holds 25.12% equity stake in the company. Mr.Wai Yat Paco Lee has been appointed as a director representing TUF. TUF is one of the largest seafood exporter company in the world.
  • The overall Shrimp culture was very encouraging and rewarding for the company. Its the second consecutive year where the overall increase in the shrimp culture both in terms of water spread area and density of culture was by around 25%.
  • The main reason being shift from Black Tiger shrimp cultivation to Vannamei shrimp cultivation.
  • The improvement in the international prices for shrimps has also encouraged new farmers in taking up the shrimp cultivation.
  • Strong sales growth by 125% in the Shrimp Feed segment. The processing and export division sales increased by 58.4%.
  • It is the most preferred brand by the farmers due to maintenance of high quality and constant technical support to the farmers.
  • The Government of India’s support and emphasis on Vannamei has also resulted positively
  • First quarter of 2012-13 itself has witnessed overall growth rate of 20% of the industry
  • The dividend has been increased to 65% from 10% last year.

Expansion Plans:

  • It is in process of buying a land near Chennai to set up hatchery in collaboration with THAI UNION
  • During the year the company has doubled its capacity by replacing old machinery with the new ones and constructed new godowns to handle increased volumes.The capacity has increased to 1,10,000 Mts p.a from 52,000 mts p.a.
  • The shrimp processing capacity has increased to 8000 Mts p.a from 2720 mts p.a.
  • As the demand anticipated by the company is slated for a big jump in a couple of years from now, further expansion would be needed as current capacities would be insufficient. Therefore, 4.94 acres of land near their current plant of Kovvur is already bought for expansion.


  • Dependency on climatic conditions makes it unpredictable. Natural calamities like floods, cyclones, during the culture season can have serious impact.
  • Shrimps getting affected by virus and diseases also is a threat.

Our View:

The industry has had a poor past till 2008 but the recent changes in the industry are very strong and augurs well for the good players. Avanti Feeds is one of the biggest and perhaps the most efficient player with a significant tie up with worlds largest Seafood company Thai Union Frozen Products. TUF holds 25% stake in the company.

If the industry is to maintain 20-25% growth for next few years then Avanti has a good opportunity to capture a good business and make the most of it. We feel that the stock has potential and monitoring of performance is needed.

Analyze the company on our Screener

Updates from the company visits & AGMs

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

A review of FY12 Results [Updates]

Comparison of Stocks against Sensex

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]

Q3-FY12 Result Updates

Dalal-Street Updates

When the majority were bearish, the markets surprised them by giving a strong upwards swing. Most of the stocks prices have improved by about 20%+ in less than a month. This is why it is always advised not to time the markets. Rather than remaining on sidelines, one should target companies doing well and yet available at sane valuations. The Q3 results look good till now. Here is an update on some of our existing ideas:

1. Indag Rubber: The company has posted yet another good set of results. Top-line grows @ 55% and Net Profits @ 85%. Yet the stock is still available at less than 5 times earnings. It looks to have good potential ahead.

Particulars Dec 11 Dec 10 % Variation FY 2011
Sales 57.45 37.17 54.60% 149.47
PBIDT 7.77 4.44 75.00% 16.69
Tax 1.59 0.85 87.10% 2.89
PAT 5.31 2.88 84.40% 10.75
EPS 10.12 5.48 20.48

*All Financial figures are in crore rupees (except EPS).

2. IFB Agro: The company has posted steady results with strong improvement in margins from the liquor business. The stock seems cheap as it is trading at just 4.5 times the earnings. Technically too the stock seems to be heading for new highs.

Particulars Dec 11 Dec 10 % Variation FY 2011
Sales 120.97 106.80 13.30% 422.82
PBIDT 14.82 7.73 91.70% 36.27
Tax 4.14 1.86 122.60% 8.40
PAT 8.23 3.47 137.20% 17.82
EPS 10.28 4.33 22.26

*All Financial figures are in crore rupees (except EPS).

3. Gujarat Reclaim: The company remains to be our favorite with its repeated stellar performance. If one considers the superior business quality of the company, superior ratios, management quality etc., we feel this company deserves much higher valuations. Over next one year, the company is in process of expanding its capacity by about 40%+. This stock should get a high allocation in the portfolio.

Particulars Dec 11 Dec 10 % Variation FY 2011
Sales 62.68 46.20 35.70% 185.04
PBIDT 15.23 7.43 105.00% 33.19
Tax 3.96 1.56 153.80% 8.14
PAT 8.53 3.97 114.90% 17.62
EPS 63.98 58.12 132.16

*All Financial figures are in crore rupees (except EPS).

Continue reading Q3-FY12 Result Updates

Avanti Feeds – A Dream Run!

We wrote about Avanti Feeds @Rs.33 and provided couple of updates [1, 2]. The stock has had a dream run since then and now @Rs.147 it is a 4 bagger in flat 7 months!!!


It feel great to be part of a multi-bagger stock idea especially when markets have been pessimistic. The purpose of this post is to highlight the rewards possible even in a weak and pessimistic market. Small growth companies continuously provide opportunities, we have to only look for them. Like Warren Buffett says –Be fearful when others are greedy and be greedy when others are fearful.”

Continue reading Avanti Feeds – A Dream Run!

Welcoming Samvat 2068…

Dear Friends,

Wish you and your family a very very Happy & Prosperous Deepawali!!! May Laxmi Ji shower her blessings and Ganesh Ji his happiness on all of us.

On this auspicious day, do participate in Samvat 2068 – Muhurat Trading session from 4:30 – 6 pm. Our Muhurat picks are:

  1. Nesco (560)
  2. Avanti Feeds (115) / IFB Agro (145)
  3. Balkrishna Ind (171)
  4. GIPCL (82)
  5. Indag Rubber (135)
  6. Gujarat Reclaim (1250)
  7. Atul Auto (107)

Look forward to your views. Have a happy and safe festive time!

Quarterly Result Updates and new idea [Indag Rubber]

In these volatile times, I’m happy to see some of our companies doing quite well and the stocks getting the due re-ratings. It just re-enforces your faith in the fundamentals and markets.

We had discussed about Smruthi Organics on 4th April, 2011 at price of 135 and had provided an update recently. The company has posted good Q1 numbers and the stock has had an amazing run – the stock had appreciated from Rs 140 to 250 levels all in 15 days!


Similar, we had discussed about Avanti Feeds on 13th March, 2011 at Rs 33. The company has posted fantastic Q1 results:

Particulars June 11 June 10 % Variation FY 2011
Sales 109.43 46.92 133.2% 199.62
PBIDT 9.80 2.10 366.7% 12.38
Tax 2.39 1.24 92.7% 1.69
PAT 5.41 -0.68 LP 3.42
EPS 6.77 -.85 4.24

Continue reading Quarterly Result Updates and new idea [Indag Rubber]