We had recently mentioned about our trip to Gujarat and company visits there. Here is the detailed update on Astral Polytechnik.
We had first mentioned about this company in March, 2011. Since then the stock has done very well, rising from Rs 120 to 300 and we feel that it still has a good potential over a longer term. Here is a summary of the past track record of the company:
The company has had a fantastic growth – it has grown its turnover from hardly 13 Cr in 2003 to 578 Cr in 2012. We feel that the conversion from GI Pipes to CPVC is still catching up and hence the potential is still big enough and with the development and introduction of new products, company can continue with 25-30% growth rates for next few years. The stock may look fairly priced based on PE ratio but if one removes the forex losses (which are one time in nature), the stock is still reasonably priced, looking at the long term growth potential. Company is also focusing on creating a national brand.
Here are few excerpts from the management meet: Continue reading Astral Poly: Management meet
We had recommended Liberty Phosphate on 29th March, 2012 at Rs 64. The stock has more than doubled and created a new all time high @ 160 today. The stock has closed at about 148 today and we recommend an exit from the stock.
Though the stock may seem cheap but there are several negatives/limitations:
- The industry is highly dependent on Government policies. Any change can lead to significant change in prospects in a very short term.
- The SSP industry though doing well as of now but its highly competitive. There are hardly any entry barriers and hence over a longer term, the margins should moderate.
- The company’s equity has increased in past and the promoters had increased their holding at very cheap prices by doing preferential allotments to themselves. This is negative for minority shareholders.
We feel there are several better ideas we are invested in for long term compounding. One may switch to GRP, Smruthi, Sree Rayalseema Hypo, Narmada Gelatine, Sree Sakthi Paper, Sahyadri etc.
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
We discussed Avanti Feeds about a year back at Rs 35. The stock has been a multi bagger backed by very strong growth in revenues and profitability and is currently trading at Rs.145.
Financial Data of last 6 years (Figures in Crores):
The reason for change in fortunes has been due to introduction of new variety of shrimps – Vannamei. Earlier Black Tiger variety was being produced which had lower density and hence higher cost of production.Vannemei is more remunerative for the farmers now.
It was encouraging to go through the FY 2012 Annual Report of the company. The undertone is very positive and as per it, Industry is expected to continue growing at 20- 25% for next 2-3 yrs. Avanti is aggressively expanding its capacity in anticipation of the demand.
Key Highlights of the Annual Report – 2011-12 (Link to report):
- Thai Union Frozen Products PCL (TUF) holds 25.12% equity stake in the company. Mr.Wai Yat Paco Lee has been appointed as a director representing TUF. TUF is one of the largest seafood exporter company in the world.
- The overall Shrimp culture was very encouraging and rewarding for the company. Its the second consecutive year where the overall increase in the shrimp culture both in terms of water spread area and density of culture was by around 25%.
- The main reason being shift from Black Tiger shrimp cultivation to Vannamei shrimp cultivation.
- The improvement in the international prices for shrimps has also encouraged new farmers in taking up the shrimp cultivation.
- Strong sales growth by 125% in the Shrimp Feed segment. The processing and export division sales increased by 58.4%.
- It is the most preferred brand by the farmers due to maintenance of high quality and constant technical support to the farmers.
- The Government of India’s support and emphasis on Vannamei has also resulted positively
- First quarter of 2012-13 itself has witnessed overall growth rate of 20% of the industry
- The dividend has been increased to 65% from 10% last year.
- It is in process of buying a land near Chennai to set up hatchery in collaboration with THAI UNION
- During the year the company has doubled its capacity by replacing old machinery with the new ones and constructed new godowns to handle increased volumes.The capacity has increased to 1,10,000 Mts p.a from 52,000 mts p.a.
- The shrimp processing capacity has increased to 8000 Mts p.a from 2720 mts p.a.
- As the demand anticipated by the company is slated for a big jump in a couple of years from now, further expansion would be needed as current capacities would be insufficient. Therefore, 4.94 acres of land near their current plant of Kovvur is already bought for expansion.
- Dependency on climatic conditions makes it unpredictable. Natural calamities like floods, cyclones, during the culture season can have serious impact.
- Shrimps getting affected by virus and diseases also is a threat.
The industry has had a poor past till 2008 but the recent changes in the industry are very strong and augurs well for the good players. Avanti Feeds is one of the biggest and perhaps the most efficient player with a significant tie up with worlds largest Seafood company Thai Union Frozen Products. TUF holds 25% stake in the company.
If the industry is to maintain 20-25% growth for next few years then Avanti has a good opportunity to capture a good business and make the most of it. We feel that the stock has potential and monitoring of performance is needed.
Analyze the company on our Screener
During the past few weeks, we have been on the move to attend the Annual General Meetings (AGMs) and meet the companies we have been tracking. A lot of effort has been in re-understanding the companies and preparing proper questionnaires to get a bigger and longer term picture. We are in process of preparing detailed notes and will share them in coming weeks. Here are some quick updates:
1. Mayur Uniquoters: It was one of the most pleasant and well organized AGM. The company welcomed the shareholders with open arms and proved to be a great host. The management seems to be hands on the business and way ahead of the competition. The company has a fantastic track record (50% CAGR growth in net profits over last 5 years) and has one of the best financial ratios (ROCE of 55-60% with a good dividend pay-outs).
Mayur aims to be a 550 Cr. turnover company by 2015 (company did a 315 Cr. turnover in 2012). They have undertaken a backward integration project and the same is being carried out at their new plant. The company aims to bring down the rejection rate to be able to enter the highly lucrative US Auto OEM market. The company has been building relationships with some of the best names in the industry – Ford, Chrysler, BMW, Mercedes, GM etc. The orders from BMW & Mercedes have been slow and they expect the same to pick up in 1-2 years. The backward integration project should get completed by Sept-Oct, 12.
Continue reading Updates from the company visits & AGMs
FY 2012 results are now out and the focus will shift towards earnings for FY13. Despite a very challenging market and weak economic conditions, we are happy with the financial results of the companies we track. Most of them have been able to report healthy growth and maintain their leaderships. Many of the companies have raised dividends and are now trading at very low PE (price to earning) and Price to Book (P/B) ratios. Although the macro environment and prospects remain uncertain, there is an opportunity for stock pickers to do their home work and build a quality portfolio.
Some of the noticeable results of the companies we track are: Continue reading Updates for Financial Results 2012
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]
Congratulations to you all for participating in this superb run of Gujarat Reclaimed Rubber. Thanks for all your wonderful comments and your continuous support. Even in this relatively dull market, GRRPL has done remarkably well.
The stock has been a major outperformer and has more than doubled since our initial recommendation @ 875 about 2 years ago to Rs 2,000 now. We have been repeatedly providing updates on Gujarat Reclaim Rubber and the high allocation & conviction has been possible due to the regular feedback by our readers and friends. We would encourage you all to invite more of your friends & colleagues and keep exchanging more ideas.
Continue reading Cheers for Gujarat Reclaim & Rubber Products
Q3 results have been generally good and most of our stock ideas have posted good performance. Here is a brief evaluation of their performance:
1. Balkrishna Ind: The company has yet again posted an excellent set of numbers and has surpassed the expectations. It is fantastic for a company with as large a turnover of about 2500 Crores to grow at 30%+ per annum. The company is in process of a greenfield expansion which should double their capacity in 2 years and hence the company has potential to keep growing at 30% p.a. for next 2-3 years. They are targeting 10% market share worldwide by 2014.
The stock has been a major outperformer in this market. Yet the stock is trading at just less than 10 times earnings. I do expect it to get further re-rated upwards with bigger investors coming in.
*All Financial figures are in crore rupees (except EPS).
2. Astral Polytechnik: This is another GEM of a company. The company has delivered a growth of 60%+, much more than the expectations. This quarter results were expected to be bad because of the abnormal forex movement over last few months (company imports majority of raw materials and the Indian rupee has fallen from about Rs.44 levels to Rs.54 against the dollar in a span of few months). But the rupee has now recovered to Rs.49 levels and as the company has also done some price hikes in last few months, we may see some fantastic numbers in upcoming results.
*All Financial figures are in crore rupees (except EPS).
Continue reading Quarterly Results Update (Q3 FY12)
With the markets delivering a fantastic performance over last 1 month, there is a lot of debate whether the markets have started a new bull market or is it a sort term dead cat bounce. Here are some very important and useful articles from Gurus:
In the article, Warren Buffett shows using past data that bonds usually don’t deliver returns more than the inflation. Over a long term, they cause a serious loss in purchasing power to the holder of the instrument. The above chart shows the fate of $100 and how equities deliver a much superior returns compared to any other asset class.
For unproductive investments in Gold, he says that for total value of Gold in World:
…we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money…
Continue reading Gurus Speak – The road ahead