We are happy to share that we have got a mention in the April issue of Money Today Magazine.
The magazine’s cover story is on “Equity Investing: Myths vs Reality.” Its an interesting issue and you might like to get a copy of the magazine :).
The markets have done quite well in the recent months. Many of our stocks such as Astral, Ajanta, Mayur Uniquoters, Atul Auto, Avanti, MPS, Poly Medicure have created new highs.
We haven’t been writing about new ideas over the last two months because most of the companies we have held are quite good and it is better to just sit on them and watch. With the markets getting into action, it is not easy to find many new ideas. Owing to the good returns, it might be a good option to build some liquidity/cash in portfolios (around 15-20%).
Kitex Garments: The company is one of the first ones to declare the Q4FY14 results. The numbers are fantastic: sales have increased by 56 %, operating profit margins have increased to 24% and the profits have increased by 170 %. Looking at the increase in the gross block in the balance sheet, it seems the expansion has completed and the current performance may sustain. In the whole textile sector, it is one of the rare companies with a differentiated business model and good quality earnings.
Shilpa Medicare: The company posted very good performance in Q3FY14. The stock price has done well too. The interesting thing is that the growth has started coming even when the USFDA approval hasn’t come for the new formulation plant. We continue to be optimistic about the company’s long term prospects. IndiaNivesh has recently published a detailed coverage on the company; we recommend our readers to go through the same.
Ashiana Housing: Prof. Sanjay Bakshi has written some excellent blog posts related to Ashiana Housing. The posts help us understand the reasons for the superior business model of the company. The management interview discusses the company’s vision and highlights the clarity in the management’s processes. We recommend the readers to go through the posts.
New ideas under study
PTC India Financial Services: The company is promoted by PTC India. It provides financing to energy projects. Earlier the company also had investments in several projects, but divested from them at good profits. Although the company suffers from risks related to power and PSU sectors, it has been increasing its loan book at a brisk pace of 30 to 40%. The growth is expected to accelerate if the sector sees some improvement. At CMP of 14, the stock is trading at about 6 times its normal earnings, half the book value and with an expected dividend yield of over 4%.
Technocraft Industries: Its an interesting company to delve deeper. The company has 3 main segments of which the drum closure division is the primary one. Drum Closure is the lid used to seal the oil and chemical containers. Technocraft is the world’s second largest player in the drum closure business with a market share of 35% . The patented technology and the monopolistic business provide the high margins. The company gets a turnover of around 225 crores and operating profits of around 65 crores from this segment. The market capitalization of the company is 274 crores.
Although the drum closure division is the cash cow, the other two divisions – Scaffolding and Textiles – are low return commodity businesses. These two divisions bring down the overall profitability and return on equity of the company. The company has not been able to utilize the spare funds efficiently and also lost some money in NSEL (booked 50% loss in the December quarter).
If few things can be corrected, the stock has lot of value at CMP of 90.
Freshtrop Fruits: This company is one of the leading exporters of high quality grapes and other fruits from India. In past, the company was one of the earliest and most advanced players with best of the technology to export high quality grapes. Currently the company is supplying to one of the best retailers including ASDA, Tesco, Marks & Spencer, DelHaize and others. Over the last 3 to 5 years, the company has been experiencing a few problems:
1. Europe stopped import of grapes from India due to high pesticide.
2. They had done a major capex for fruit processing plant which has been a drag on the financials.
3. In the current year, there has been a major hailstorm and the results might be poor (we would request our readers to provide the inputs if possible).
We came across a recent article on the bright prospects of the industry. It might be a turning point for the company over the coming years.
Few other ideas which are cheap on valuations and may fit well into Graham kind of plays are: Damodar Industries and KCP Sugar. Another stock which looks opportunistic is Waterbase Ltd based on the superb run-up in Avanti Feeds.
For the upcoming elections, we would request all our readers to caste your vote – your investment returns might depend on it.
Link to manifestos