Company Data Archives | Dalal-Street

Sree Rayalaseema Hypo and other updates

A brief update on some of our stocks discussed before:

Sree Rayalaseema Hi-Strength Hypo (BSE Code – 532842, NSE Code – SRHHYPOLTD): We had discussed about the company’s expansion plants earlier. In the September quarter, the company has reported a good growth of 27% in turnover and the stock looks quite cheap, if it is able to maintain this growth in up-coming quarters (which is should cause of the recent expansion).

The company is operating in a niche area of water treatment chemical – Calcium Hypochloride and it’s the only Indian company doing this work. The company has healthy operating margins of about 19-20% and the business requires little working capital. The valuations seem quite attractive as the stock is trading at a PE of just 3.5 times and the Price to Book Value of only 0.50. We feel it’s a value pick at these levels.

Negative – The promoters have been increasing stake by doing preferential allotment and merging of group companies.

Continue reading Sree Rayalaseema Hypo and other updates

Oriental Carbon & Chemicals: Management meet

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

Results season – Hits and Misses

Quarterly results are good to introspect the stock ideas we are invested into. We review the performances to stay with winners and switch out of stocks where the companies are not performing as per expectations. It is heartening to notice good performances by most of the companies we are invested into.

Gujarat Reclaim: – The company has posted fantastic Q2 results with an EPS of Rs.58.12 in the quarter. The stock seems to have also given a positive technical breakout on the upside and should create new highs:

Particulars	Sept 11	Sept 10	% Variation	FY 2011
Sales	62.83	47.99	30.9%	185.04
PBIDT	14.25	9.26	26.18%	33.19
Tax	3.91	2.20	77.7%	8.14
PAT	7.75	5.23	48.2%	17.62
EPS	58.12	39.24		132.16

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

Continue reading Results season – Hits and Misses

Astral Poly Technik Ltd – BSE:532830

Real Estate/Construction sector is a huge area in India and the potential going forward is enormous. Plumbing and clean water transportation is a very important area and crucial part of a construction project. Repairing of plumbing work is a very troublesome and costly affair and hence one won’t compromise on this front.

The plumbing industry in India is undergoing a smart change. Earlier, GI Pipes used to dominate the market but now PVC and CPVC pipes are fast replacing the GI Pipes. CPVC resin is most hygienic compound for water transportation and is resistant to corrosion. Hence as awareness and quality consciousness is increasing, more and more people are adopting CPVC pipes for plumbing needs.

Lubrizol (earlier B F Goodrich a Fortune 500 Company, USA) has been a leader in development of CPVC and they hold the patent for the same. Astral Poly is the first licensee of Lubrizol of USA and have a techno-financial joint venture with Specialty Process LLC of USA. Continue reading Astral Poly Technik Ltd – BSE:532830

Sree Sakthi Paper – BSE Code: 532701

Sree Sakthi Paper (SSP) is the largest kraft paper producer in South India. The company is part of the Sree Kailas Group. Incorporated in 1991 with an installed capacity of 4,500 tpa the company has been growing steadily and now has a installed capacity of 1,00,000 tpa i.e.. 20 times in 20 years.

SSP has a impressive client list – ITC, HUL, WIMCO, Godrej, Mc Dowel etc.

What we like here is the high dividend yield of 7%+ and regular growth in the company. This stock might be offering the highest dividend yield in the market.

Snapshot of the dividend track record

Year End	Dividend %
March 2010	18.00
March 2009	15.00
March 2008	15.00
March 2007	10.00
March 2006	5.00

At CMP of about 25.50, if the company maintains the dividend of 18% declared last year, one will get a dividend yield of 7.05%. This is much better than FDs etc cause dividend is tax free in the hands of investors. Also as SSP is a growing company, one can expect a good capital appreciation.

Company came up with the IPO in January 2006 at Rs.30 when turnover was approx. 60 Cr while today the fundamentals are much better yet the stock is available below the IPO price.

Why the dividend of 18% may be maintained?

Very good half yearly results:

Company has already reported 30% growth in sales and 55% increase in profits for the first six months and the second half is expected to be better. So there is a high chance of the company maintaining the past dividend track record or improving it further.

Strong Fundamentals:

Over the last 5 years, sales have grown at a CAGR of 26% from 57 Cr in 2006 to 143 Cr in 2010. This year, the sales are expected to cross 175 Cr.
Stock is available at PE ratio of 7.25 based on trailing twelve month earning.
Company has a good BV of 22.20.
Co has already announced a 8% interim dividend. Stock is trading ex-dividend.

Conclusion:

This stock idea may be used as a safe bet to balance cash portion of the portfolio or to park the profits.

Financials

Company Annual Report @ reports.dalal-street.in

Poly Medicure – Dream Run

We had discussed about Poly Medicure and their plans to become a major global Medical Disposable player. The article highlighted about their expansion plans ahead and target to be a 300-400 Cr company by 2013. We had discussed the stock @ Rs 100 (adjusted 1:1 bonus) and the stock price has tripled to Rs 315 in just 10 months!!

So what does the stock hold for existing investors?

The company is expected to post a turnover of 170 Cr+ this year with an EPS of 18-20.

As the stock has given multi-bagger returns and valuations are not cheap anymore, one should do partial profit booking at these levels and explore our other ideas. For long term perspective, the stock still holds value as the company is a leader in the healthcare field where the potential is unlimited. Its not easy to find such good companies again. The company is on a growth path and has lined up several expansions.

We have been holding this stock for few years and had lot of faith on the future potential of the company and quality of management. Few important learning from this investment:

Look for companies whose end product has ever increasing demand. In the case of Poly, the medical disposable space has a great future.
Look at crucial ratios like – High Operating margins, consistent growth, High ROCE. Poly has had very good operating margins in the range of 18-20%, consistent growth of 25-30% and consistent ROCE of 25%+ hence the company has been able to scale up quickly majorly from internal accruals.
Look for young, dynamic and ambitious management.
Buying into a quality company at cheap valuations is a sure shot multi-bagger thing 😀

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]

Sunflag Iron – Update

We had mentioned about Sunflag Iron . Since then then the stock price has appreciated by just 10% while the fundamentals and the outlook seems to be getting stronger.

We had mentioned that the company has been acquiring coal blocks since last few years and getting backward integrated. The latest annual report gives a strong confirmation on the same:

Excerpt from the FY 2010 annual report:

“During the year under review, the total coal production at Belgaon Coal Block is 140,147 MT as against of 51,234.41 MT in the previous year, which is about 174% higher than the previous year.”

If one analyses the Fixed Asset schedule and the investment section, the company has been stepping up the investments for captive coal blocks after the success from the Belgaon coal mine. For eg: The co has invested 10 Cr+ in subsidiary – Khappa Coal Mine which is JV between Sunflag Iron (63.27%) & Dalmia Cement (36.73%).

Future expansions as per the annual report:

Compelling Valuations at CMP of 34:

FY 2011 Expected turnover is 1650 Cr+, with expected NP of 110 Cr+
Stock is trading at less than 5 PE on expected FY 2011 earnings
Stock is trading at 1.25 times BV of 25.50
Debt Equity ratio has improved to 0.80 : 1

Promoters have been regularly buying from open market and have increased their stake from about 40% in September 2008 to about 51% as of now.

Company Website

Updates and Follow-ups

Shilpa Medicare: The company has got funding from Barring Equity PE Fund. The co will be allotting 5 Lac warrants to promoters and 20 Lac shares to the PE Fund @ Rs 350/share. This is a major positive for the co in the long run and fundamentals will improve majorly.

Harrison Malayalam: We had discussed about the company a few days back. The company has come out with poor nos and the stock is down to 118 levels. We feel the intrinsic value of this company is much higher than the current M Cap of the company. Few reasons to substantiate our view:

1. The company has 57,800 acres of plantations. The value today would be multiple times higher than the Current MCap of just 210 Cr. Have a look at the 10 yr financial data of the company. in 2005, the co had sold 674 Hectares of one of its Rubber Estate and had got 33 Cr as other income. Similarly in 2006. the co had sold about 916 Hectares of another rubber estate and got 63 Cr as other income.

2. The asset value of the estates must have almost doubled since 2005. As of 2009, the company has about 25,000 Hectares of plantations. So if one extrapolates the above valuation, the real value of their assets would be huge.

3. Over the years the company has been able to reduce the labour and mechanize it’s plantations.

4. As Rubber & Tea prices are rising, logically the co should be making money.

5. The record date for the demerger should be announced in next few days.

Manjushree Technopack: We had earlier recommended MT at about Rs 32 here. The company has posted excellent Q1 numbers. MT is a proxy play to the domestic consumption story and the co should continue doing well. We expect the company co close FY 2011 with 195-200 Cr turnover and close to 15 Cr of NP. The stock should continue to do well.

Gujarat Reclaim Rubber: The co has posted a very good Q1. We expect the company to come out with better nos going ahead and the stock should do very well. The company had been featured in the latest “Tyre Asia” magazine and the article is a must read.

Balkrishna Industries: BKT continues to do well. The company has posted a good Q1 when other tyres cos suffered heavily on the margins side. The reason for good performance is the niche area the company is operating in. As per Q1 con-call of the co, the updates are:

1. The outlook is very positive. The co is already operating at 100% capacity and needs more capacity to fulfill additional demand.

2. Co is witnessing very strong growth in US markets. Share of EU has come down to about 55% from 70% earlier.

3. Co is adding about 20% capacity in next 1 year. At a cost of about 150 Cr

4. Co is undertaking a major expansion of about 900 Cr over the next 2 years. Post this the capacity of the company will get more than doubled.

5. Co wants to be a $ 1 Bln turnover company by 2015.

We feel that BKT is an excellent long term opportunity.

Sunflag Iron: As expected, the co continues to do very well. The promoters have been buying every other day from the open market. The stock is available at less than 5 PE and 1.2 times BV.

Three cheers for Shilpa Medicare

Shilpa Medicare has made a new high at 345 today. We had initially discussed the stock on our blog here on 26th July, 2009 when the price was Rs 80. Hence the stock has given a gain of 331% in less than 1 year :). The stock is now a 10 bagger from March lows.

The stock has been witnessing a lot of fund action, Reliance Capital has bought 4.50 lac shares yesterday @ 285. Earlier ICICI Prudential had bought 9 lac shares.

The interest in the stock is logical due to the fantastic financial performance of the company and the bright prospects ahead. The Oncology business will remain to be the fastest growing segment for next 4-5 years and Shilpa is the largest standalone (not for captive use) Oncology API manufacturer in India. The company targets to be a 500 Cr turnover company in next 2 years.

Such successes are possible only due to active participation, discussion and feedback of our readers, investors and friends. Look forward to you support and views.

Regards,