Stock ideas: Debt free companies

Hi Friends,

We received an overwhelming positive response to our article on “How to find better investments using Accounting Ratios” and few of our readers asked to share few stocks which met those criteria. These are some interesting mid/small cap stock ideas, which have been doing well yet go un-noticed. They have good accounting ratios and seem to be trading at very compelling valuations.

1. Mazda Ltd (BSE Code – 523792): Mazda is an engineering company, specializing in steam jet vacuum systems and condensers and they find application in process and power industry. The interesting part is the balance sheet and the valuations at which the stock is trading. At CMP of 92, the company is available at a market capitalization of 40 Cr while it has cash of close to 15-20 Cr on Balance Sheet. Company is generating annual sales of 100 Cr & net profits of 10 Cr and is available at an Enterprise Value of just 20-25 Cr. Stock is trading at a PE of just 4 and Price to BV of just 0.60. Company has also started a new factory at the end of March, 12 and may help in growth.

A good detailed post was recently done by Dhwanil, do go through that for details.

2. Kakatiya Cement (BSE Code – 500234, NSE Code – KAKATCEM): KCL is a south based company having three divisions – Cement, Sugar & Power. Though first two segments are cyclical in nature but the interesting thing is that this company hasn’t been expanding, rather they have utilized the cash flows to repay the debts and become a debt free company.

Continue reading Stock ideas: Debt free companies

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]

Manali Petrochemicals Ltd. – A safe midterm stock idea

A look at growth

Manali Petrochemicals Ltd. has posted an excellent set of numbers for FY 2012 and looks undervalued based on the improving financial numbers & growth ahead:

Particulars Mar 12 Qtr Mar 11 Qtr % Variation FY 2012 FY 2011 % Variation
Sales 161.87 127.80 26.70% 573.03 451.90 26.80%
PBIDT 24.29 13.30 82.60% 66.69 40.76 63.60%
Tax 4.60 2.67 72.28% 15.21 9.03 68.44%
PAT 17.54 8.48 106.80% 43.68 25.28 72.80%
EPS 1.02 0.49 2.54 1.47

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

Manali Petrochemicals is a leading producer of Propylene Oxide (PO), Propylene Glycols (PG) and Polyols in India. These products find application in industries such as Pharmaceuticals, Polyurethane, Resins etc. Below are some extracts on the growth prospects from the last annual report of the company:

Continue reading Manali Petrochemicals Ltd. – A safe midterm stock idea

Ansal Properties–Dark Horse?


BSE: 500013 | NSE: ANSALAPI | Market Cap. : ~510 Crore

One asset class where huge wealth creation has happened over last few years is real estate, where the maximum appreciation has happened in Tier 2 & 3 cities over the last 3-5 years. Yet real estate stocks haven’t performed well over last 3 years. The reason is the irrational exuberance the sector had witnessed during the 2007-08 boom. Most of the stocks are down 80-90% from 2008 highs. Lets rewind back to IT boom of 2000 and similar thing had happened but after the circle of extreme optimism and pessimism things came back to normal and genuine good companies were rewarded by the markets. We feel that real estate sector is also going through extreme pessimism and there could be selected winners going forward. One such stock idea might be – Ansal Property. They were one of the first to start the big township concept in these Tier 2 & 3 cities and going by the appreciation in land prices in these cities, they may be perfectly placed to reap the rewards going forward.

Ansal Property is one of the oldest and biggest builder of North India. Some of the landmark buildings constructed by the company are – Ansal Plaza, Ansal Bhawan, Statesman House etc. Following are the major projects being undertaken by the company: Continue reading Ansal Properties–Dark Horse?

Liberty Phosphate Ltd.


Liberty Phosphate (BSE:530273) is one of the largest manufacturer of SSP (Single Super Phosphate) Fertilizer. The fortunes of the company have changed over the last 2-3 years since the introduction of the Nutrient Based Subsidy (NBS) policy by the Government. Under the NBS, the subsidy amount for each fertilizer is fixed based on the nutrient composition in the fertilizer. This is the first time, the policy recognized Sulphur content in SSP while fixing the subsidy. With better subsidy, SSP is much cheaper to other fertilizers and hence the usage and production is increasing rapidly after years of stagnation. Hence the existing SSP manufacturers are witnessing growing turnover along with higher margins.

The stock looks interesting due to its cheap valuations at CMP of Rs.64:

  • Stock is trading at just 2 times its trailing twelve month earnings.
  • Stock is available at just 1.1 times BV.

Now the question comes, is this performance sustainable and growing?

Continue reading Liberty Phosphate Ltd.

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

Nesco Updates

Nesco - Bombay Convention and Exhibition Centre

BSE Code: 505355 | NSE Code: NESCO

We recommended Nesco recently after going through the wonderful analysis by Prof. Bakshiji. The stock has got good coverage by fellow value investors and business channels. Do go through the detailed post by Rohit along with links to posts by Neeraj & Ninad.

Our viewpoint and thoughts in brief:

The Bombay Exhibition Center covering area of about 4.5 Lac sq. ft., is a sort of monopoly in Mumbai with a lot of bargaining power. The growth in rentals can be observed from the table below:

Year Annual BEC Revenues (Million in Rs.) Space (sq. ft.) Monthly Rate (per sq. ft.)
2011 656.20 450000 122
2010 540.40 450000 100
2009 349.60 450000 65
2008 496.30 450000 92
2007 329.10 450000 61
2006 144.10 450000 27
2005 109.70 450000 20
2004 54.40 450000 10

Today most of the biggest trade events held in Mumbai are held here. Such kind of business is tough to find at reasonable valuations and I think most of us would agree that current valuations are reasonably cheap.

The trigger is: the company has already constructed IT Building – 3 which has a leasable area of close to 8 Lac sq ft. At a conservative rental of Rs.100 / sq ft, the company should be able to get a Net Profit of 70 Cr+ (post tax). This might happen over next 1 year.

Nesco made a Net Profit of about 68 Crores last year so if the profits are to double over next 1-2 years, the stock can also double out without any PE re-rating. Plus going forward, the company plans to build another IT Building and double the leasable at its Bombay Exhibition. Hence being a debt free company with about 180 Crore cash on Balance sheet, it seems to be a very safe pick at these levels.

Atul Auto Ltd.

BSE: 531795

We mentioned Atul Auto Ltd. as one of our Muhurat picks, the conviction has grown with more research and feedback on the company. Atul Auto Ltd. looks very promising company with a strong and stable balance sheet.

Atul Auto is one of the leading 3 wheeler manufacturer and is based in Gujarat. They already have a lead in the state of Gujarat & Rajasthan and are now trying to replicate their success across new territories in India & abroad. The company is trying to enter new states and is appointing new dealers. Company has even entered into agreements to enter Bangladesh & Sri Lanka.

Atul Auto has grown @ 40-50% over the last 2 years and seems geared up to maintain good sales momentum going ahead. Here is a snapshot of financials of last 4 years:

Particulars FY 2008 FY 2009 FY 2010 FY 2011 6M FY 12 FY 12 Estimate
Sales 82.04 120.95 121.08 202.67 136.39 275
PBIDT 6.87 5.42 13.80 20.03 13.72 27.50
Tax .64 .13 2.61 4.64 4.03 7.00
PAT 1.27 .46 3.17 9.43 8.35 14.75
EPS 2.28 0.76 5.22 15.51 20.18

*All Financial figures are in crore rupees (except EPS). Continue reading Atul Auto Ltd.

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

Oriental Carbon & Chemical Ltd

Dad spotted OCCL (Oriental Carbon & Chemical) early – a couple of years back but all this time, I was not sure of sustainability of good profits. Over last 5 years, Net Profit of OCCL has grown @ CAGR of 74%. I used to think that this might be cyclical like other chemical companies but it does not seems so.

OCCL’s core business is manufacturing of Insoluble Sulphur, a vulcanizing agent used in the Rubber Industry. It is an important raw material for tyre manufacturing. Manufacturing of insoluble sulphur is limited to only a few companies globally due to restricted access to technology. OCCL is the only Indian company into manufacturing of Insoluble Sulphur. Company is now a preferred supplier, exporting about 70% of its production to leading tyre companies.

Earlier, the company was exposed to huge volatility in prices of its raw material – Sulphur. But now the company is better placed to protect its margins by adopting quarterly pricing.

Growth triggers:

  • Company undertook an expansion to double its capacity by 11,000 MT at SEZ Mundra. Phase 1 – 5500 MT, of the expansion has been commissioned during Aug, 11 and the second phase should get completed by end of this year.
  • Production from this phase is already sold out.
  • The land acquired at Mundra SEZ is sufficient for putting up another plant of 11,000 MT capacity.

Continue reading Oriental Carbon & Chemical Ltd