Updates on the Quarterly Results – Q4FY14

arun-j3_mini
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!

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

Update on Quarterly Results

Markets Cartoon

The third quarter of the financial year 2013 has generally been very weak. The common problem has been the demand slowdown and the pressure on margins due to inflation and competition. In most of the cases results have been below expectations. On the positive side, these challenging times are the best times to re-structure your portfolio. One gets to accumulate high quality ideas at low valuations, (often) due to temporary problems. The important thing is to maintain liquidity and discipline.

Starting off with the good results:

Ajanta Pharma: The company posted stellar results and the stock witnessed a strong activity and appreciation. We discussed about the company here.

The company has posted a 37% growth in the topline from 164 Cr to 225 Cr and 75% growth in the net profits from 18.50 Cr to 32.57 Cr. The results are remarkable as the growth in profits has persisted despite higher taxation. Usually 4th quarter is the best quarter for the company, hence the company may be able to repeat similar performance in Q4FY13 too. We feel investors can continue to hold and try to buy on sharp declines, if any. Continue reading Update on Quarterly Results

The Best Ideas and stuff of 2012

Best wishes from Dalal Stree team

Welcome 2013!!!

Hello Friends, we wish you and your family a very Happy & Prosperous New Year!

2012 has been a good year for our financial markets with the sensex gaining over 25% this year and beating all other asset classes. The best thing was that the mid caps (the area we focus on) outperformed the broader markets and the high quality stocks were the major wealth creators. Those feeling that they might have missed the bus and it is late, have a look at this stat – markets are still 4% lower than they were 5 years back. It may be just a start of a long term bull market.

We went through the timeline and compiled the list of the best articles, learning and experiences of 2012. (They are not in any particular order):

Favorite Articles:

New Finance Blogs:

In 2012, we had some very interesting new finance blogs; we would love to congratulate them. We expect to see more new investing blogs in 2013.

  • Alpha Ideas – Nitin shares the best of the finance articles, videos and reports – everyday
  • Safal Niveshak – Vishal simplifies the teachings of the investing geniuses and makes them understandable in Indian market’s context
  • Value Investing by Dhwanil – Discusses value investing stock ideas with a clear thought process
  • Safir’s Picks – Safir is an opportunist investor, always with many interesting and winning ideas in his pockets (do follow him on Twitter too)

Best Videos:

Best Company Visits:

  • Astral Poly Technik – We met with the dealers and plumbers in Ahemdabad to do groundwork and were amazed by their feedback for a strong conviction
  • GRP – We were amazed by sincerity and knowledge of the management. Looking forward to attend AGM of 2013 too
  • Mayur Uniquoters – The grip and vision of the management on the business helped us in increasing the conviction

Our Best performers during the Year (with percentage change):

  • Astral Poly Technik (171%) – The growing brand presence and stock discovery led to high returns
  • Atul Auto (142%) – Company went pan-India from its home market of Gujrat
  • Liberty Phosphate (134%) – Favorable government policies for SSP sector led to mis-pricing opportunity
  • Mayur Uniquoters (130%) – Fantastic financial ratios along with growth led to a good re-rating
  • Apcotex (101%) – Earlier part of the Asian Paints group, this company did well on growth and dividends

The close runner-ups were up 100% each: Poly Medicure, Indag and BKT

Market learning of 2012:

Earlier we had a lot of focus on undervaluation while looking at a stock ideas. Now we have also started giving more weightage to the business quality and the scale of opportunity available. The three of the worst performing ideas were: Piccadily Agro, Faccor Alloys & BNK Capital

The common thing among all of them was that though they were good on ratios temporarily, but they had a poor business model or management.

Developing ideas for 2013:

Screener Developments:

During the year, we experimented with lots of ideas and things. We are highly excited about the developments on Screener and the feedback of users. Our favorite features of Screener are:

  • Export to Excel – Screener is the first website in the world to provide such a customization functionality
  • Alerts for Screens – We love to set the email alerts for the favorite screens in the Screener to keep an easy track of the latest results

Plans for 2013:

We are expecting the credit rate-cuts in early 2013 and are optimistic about the markets ahead. We plan to create more new tools to make investing happier and easier. We hope to discover more new stocks ideas. And above all, we look forward to your comments and support!

Wish you a very happy and prosperous new year ahead.

Best Wishes

Notes from company visits and AGMs

Last few days have been one of the most interesting and learning days for me. I travelled with a group of fellow investors and friends to Gujarat on company visit of few of the companies of our interest. We had some fantastic discussions day and night, and were able to do some very exciting ground work on the companies we visited. Here is a quick summary:

GRP Ltd. (formerly Gujarat Reclaim & Rubber Products Ltd): Company held its AGM at Ankleshwar, Gujarat. The plant was quite green and well kept. As we entered, we were provided a safety manual. Management explained that GRP has been taking social economic initiatives and has been recently certified by Japan for a fire safety practice. They are the second company in Gujarat to get this certification. We also met another investor form Mumbai who too had been tracking the company over the years and provided valuable insights.

GRP is the pioneer and third largest company in the world in the rubber reclaiming business. The company supplies to 6 out of top 10 tyres companies in the world and to 4 out of top 10 non-tyre rubber companies in the world. The company is a preferred supplier.

Continue reading Notes from company visits and AGMs