Balkrishna Ind–Management Meet

Friends, we had posted about Balkrishna Ind (BKT) and highlighted about their superior business model when compared to the regular tire industry. The story has only become stronger and there is much more visibility on the growth ahead. Our friend Donald Francis visited BKT to get in-depth understanding on the company and get answers to some of the queries. Few highlights:

Co targets to be a $ 1 Bln turnover company by 2015

Co targets to capture about 10% global market share by then

We have grown sales in FY 11 at over 40%. If we had capacities, we could had sold much more

Order book is there for 5 months and the margins are protected at about 18-20%

Please check out the complete management interview (requires free login).

Key Takeaways from the interview:

  • The co seems to be on track to continue its spectacular track record of growing at a CAGR of 29% for last 13 years. Their target of $ 1 Bln turnover and 10% market share seems quite achievable.
  • For FY 12, BKT may be able to do a 25-30% growth resulting into a turnover of 2500-2700 Cr.
  • There were concerns on the growing competition and we asked the management about the same. It seems the market is big enough for 2-3 players to operate like BKT and take away the market share from biggies. Other players will take quite some time to catch up.
  • So if the company is able to do a turnover of about 2500 Cr with 18.5% OPM, it may post a NP of about 240 Cr, resulting into an EPS of about 25 for FY 2012. CMP of 156 discounts it by just 6.5 times.

We feel that as BKT is entering the big league and making its presence felt in the global OTR space, the stock deserves a re-rating also. It would be tough to find companies having a consistent growth of about 30% for last 13 years with good margins, ROCE etc available in single digit PE multiples.

Pondy Oxide – Management Meet

Few weeks back we had discussed about Pondy Oxide and we were asked some good questions by our readers. We always love the creative criticism and this was wonderful.

To know the answers to some of the doubts, my good friend Donald Francis did an extensive research and also had a meeting with the management.

Some of the pending questions to which we got answers were about why the company is so leveraged at around 2 times debt to equity ratio, and who are the top clients ?

Amara Raja is a top client. We have several top battery manufacturers in Export Markets. Korea Indonesia and Malaysia are our top markets followed by Srilanka & Vietnam. We also export to Japanese customers like Yuasa.
We are trying to bring down our financing cost. This will come down by 15-20% easily as we have better terms now on FCPC (Foreign currency packing credits) $ credit norms -Libor+200 bps. Its likely that inventory & debtors will remain at these levels due to more focus on export market.
Please check out the complete report (requires free login) to know detailed answers to many other questions and also find many other reports of meetings with some companies.
Few takeaways from his meeting:
  • The outlook is robust due to ever increasing demand for batteries hence continuous demand for lead and lead oxides.
  • FY 09 was indeed a very tough year. Since then then company has re-aligned a lot of things, changed its business model so as to reduce the effects due to volatility in lead prices.
  • Major achievement has been penetrating the exports market. In FY 2009, the export sales were 16.64 Cr, in FY 2010 the company did 50.88 Cr and for FY 2011, the company expects to cross 100 Cr as export turnover.
  • The growth momentum witnessed in Q1 is sustainable.
  • Plants are now running at high utilization levels and the company plans to take up new expansion in a year.
  • Co aims to reach the 500 Cr turnover milestone in next 3 years.
  • Entry barriers – Licence is required for carrying out lead refining and related activities. Its not easy to get a new licence hence the players are limited. Pondy Oxide would probably be having a 8-10% market share.
  • Amara Raja is their top customer. Pondy is already supplying to top battery manufacturers in Export markets. Tata-Yusa is also their customer.

Initial discussions with Pondy Oxides Management [ Thanks to Donald via ValuePickr]

Best articles during the week

“I read about eight newspapers in a day. When I’m in a town with only one newspaper, I read it eight times”. – Will Rogers

Most of our investment ideas come small corners of the daily newspapers or the weekly magazines (or some interesting blogs). We often come across some interesting articles feeling an urge share with our readers too. So we will often compile (mostly weekly) these interesting articles and share the same here.

1. Gas Sector – Huge Potential ahead

It was an interesting article in Business World magazine on the Gas Troubles in India and the potential ahead.9% Energy needs met by gas in India, while 24% is the world average”.

Arundhati Prasad, 36, who lives in the outskirts of Patna, has to queue up in front of a liquefied petroleum gas (LPG) agency’s office to get a cylinder of gas. Now compare Prasad to Mohammad Ali Bhatti of Dera Baba Bhuman Shah village in Pakistan’s Okara district: in addition to the gas used for cooking in his kitchen, everything from the refrigerator to lamps in the Bhatti home run on natural gas.

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Read complete article here.

There are various charts, tables which provide a lot of understanding on this sector.

2. India’s Best Market Minds (19th March ‘ 10 Issue of Outlook Profit)

It was a really good compilation by Outlook Profit with the warm interviews of the “India’s Best Market Minds” including Jhunjhunwala, Sanjoy Bhattacharya, Prof. Sanjay Bakshi and many more .

While all the interviews are not available online, you can read the interview of Prof. Sanjay Bakshi and Abhay Aima online.

3. Poly Medicure Media Updates (in Business Standard, Hindu & Financial Chronicle)

We have discussed on this company couple of times here and here. The stock has been doing well and getting attention of investors.

The company has provided some updates in the media recently about the expansion plans.

4. India Motor Parts & Accessories Ltd (IMPAL) – by Siddharth Shukla

Siddharth has done a good detailed work on the stock. IMPAL has come out with good Q4 numbers and the stock shot up by 20%.

We will be sharing more interesting articles and blog posts regularly.

Also, we have come upon with a new commenting system powered by Disqus to have more better conversations. So, do leave a comment and feel free to share your favorite articles.

Our stocks in Media

MediaCoverage

Usually most of our discussed stocks are mid-caps whose merits are generally unknown to the masses. Whenever there is coverage of these stocks by Media…they get due attention and often do well. Some of our stocks got wide coverage in last few days:

1. Asian Hotels:

Will Asian Hotels’ shareholders gain after its demerger into three separate companies? Recently, the company split into three different entities — Asian Hotels (North), Asian Hotels (West) and the Asian Hotels (East). Right now, only Asian Hotels (North) is being traded on stock exchanges, and going by its current market capitalisation, the gains to shareholders look uncertain. The other companies are awaiting regulatory approvals to list next month

http://economictimes.indiatimes.com/articleshow/5829815.cms?frm=mailtofriend

We had covered the demerger story at our blog here and covered the demerger impact here. One of the demerged company – Asian Hotels (N) has already got listed and given better than expected returns.

Our View: The above economic times article is very well highlighting the reasons why this demerger is creating value. We do expect the other to companies to list well and provide better gains than the calculations done at our blog earlier.

2. Shilpa Medicare:

The bulls have taken fancy to the Shilpa Medicare — a small-sized pharma company. Its price made a record intra-day high of Rs 362.50 on Tuesday after rising by more than eight times over the past one year. News of financial institutions buying a small stake in the company along with a dilution by the promoters has fuelled the recent rally in the stock.

http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/Shilpa-Med-appears-fully-priced/articleshow/5814072.cms

We have covered Shilpa Medicare several times at our blog. Initially it was covered at Rs 80 here.

Our View: As the article points out – the stock is not cheap, yes we agree but we also believe that good stocks don’t trade cheap 🙂 It would be tough to find a company having leadership position in Oncology segment, having operating margins of 30%+, growing at 45% CAGR available at less than 20 times PE. Infact if one takes a close look at last two quarterly nos of the company, the stock is trading at just 15-16 times annualised earnings.

Also if one increases the outlook to more than 1-2 years, the company has a good future. They are putting up new capacities and plan to double their turnover in 2 years.

3. Jaihind Projects:

We had first covered this company at our blog at about Rs 90 here. The stock has done exceeding well and has created a new all time high of 265 today. The company has been getting coverage on various business channels and people our discovering the underlying story.

4. Balkrishna Industries (Update):

Balkrishna Industries Limited (BKT) specialises in the production of tyres for off-road applications, including agriculture, industry & construction, earthmoving equipment, ATV and lawn & garden vehicles. http://www.tyrepress.com/News/77/19257.html

Our View: This is one company which has a fantastic track record and aims to be a 1 billion dollar company by 2015, which is quite possible looking at the business model of this company. In long run, the stock can give superb returns if they continue to grow as per their plans.

We believe that for better wealth creation investors should keep looking for undervalued and growth oriented stocks and invest in them at an early stage. This is the place where maximum wealth is created. We have been continuously working on this area. Would request the readers to keep exchanging ideas and keep spreading the logics to other investors.

5 Great People – 50 Spectacular “Quotes”

It is my belief that nearly any invented quotation, played with confidence, stands a good chance to deceive.

– Following the Equator

Warren Buffett –

The guru to almost every investor. The Chairman of Berkshire Hathaway, and also ranked by Forbes as the second richest person in the world.

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  1. I buy expensive suits. They just look cheap on me.
  2. [The perfect amount of money to leave children is] enough money so that they would feel they could do anything, but not so much that they could do nothing.
  3. Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
  4. Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.
  5. You only have to do a very few things right in your life so long as you don’t do too many things wrong.
  6. Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
  7. Only when the tide goes out do you discover who’s been swimming naked.
  8. Keeping liquidity and not investing in such a low market is like saving up for sex in your old age.
  9. I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
  10. If you don’t know jewellery, know the jeweller.

Continue reading 5 Great People – 50 Spectacular “Quotes”

Twittering the Market

Twitter is probably the fastest way to get the news and gossips. It’s quick, it’s fun and it’s better than the TV.

Just in case you are new to Twitter, here is Twitter explained in plain English.

Twitter in Plain English from leelefever on Vimeo.

How can Twitter help me with Indian stock markets ?

Twitter is micro blogging. Thus it is the views of the people YOU like to follow. The people tweet what they believe or like, not what they are paid for. Thus it is different from talks on the TV shows which are often biased and don’t cover everyone who matters.

Some interesting tweets in last 12 hours:

negative pe

dp

golden

b50

Continue reading Twittering the Market

Steve Job's shares three stories of his life – Must Watch

 Steve Jobs is the CEO  and co-founder of Apple and Pixar Studios, or in today’s language  founder of the modern iPhones and iPods. Pixar is also the worlds largest animation company. The speech was given at The Stanford University in 2005.

I love this video and have watched it many many times. One must keep looking until he finds his love/inspiration.

I would like to watch such video of Bill Gates too 😀 .

10 Business Geniuses to read about [Interviews]

Reading about the successful investors, managers, entrepreneurs and others gives not only the inspiration but also new ideas. We are an ardent reader of the esteem daily –Mint.” The “Business Lounge” section interviews a successful  Indian business person every Saturday. The interviews are written in a very unorthodox style and worth waiting for every weekend.

Below is the collection of 10 interviews which we often like to re-read. (Click on the images or download PDF articles to read the complete interviews.)

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MOTILAL OSWAL

This stock market veteran is handling the
economic turmoil by simply keeping his cool.

Download PDF article

Continue reading 10 Business Geniuses to read about [Interviews]