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–Management Interview

We have discussed about Atul Auto a couple of times and to go in-depth and get a much better understanding of the company, we interacted with Mr. J V Adhia, Vice President, Finance – Atul Auto.

The company seems to be in a sweet spot with a very comfortable balance sheet and a good opportunity to maintain growth rate of about 25-30% for at least next couple of years. The co has been a leader in its existing territory – Gujarat (approx. 45% market share) & Rajasthan (approx. 30% market share), the company is now trying to go Pan India by entering new territories.

Here are the highlights from the management interview:

During the period 2001-06 the company had been growing at about 70% p.a. Till then we were a front-engine 3-wheeler company. In 2007 we decided to go pan India and introduced the more predominant rear-engine 3-wheeler segment.  Some things went wrong and the company faced a rough patch, and that is the reason you notice stagnant sales for the period 2007-10. However in June 2009 period we introduced Atul Gem the rear-engine vehicle and it has been received very well in the market. The growth is back on track.

Overall about 91% of the total autos are rear-engine vehicles.

We are No #1 in Gujarat with about 44% market share & No #2 in Rajasthan with about 30% market share. Kerala & Assam are our next big markets.

We are gradually entering new territories and ramping up dealer network.

Current dealer network is about 120 dealers. A year back we had 100 dealers but only 30-40% were active! Now more than 80% are active. Plan to have 140-150 dealers by this year end and 250 in 2 years.

As of now the company is seeing a very strong demand and there is a waiting period of about 10 days. As per policy the company is taking orders on advance basis only. Hence the high advances on Balance Sheet

We are in process of doubling our capacity from 24,000 to 48,000 vehicles p.a. This expansion is being done at our existing plant and we have sufficient space.

We are expanding capacities by ongoing de-bottlenecking exercises. We are already at 20-25% higher production and the rest of the de-bottlenecking increases should happen over next 3-6 months.  We have options of introducing a double shift, as and when deemed necessary.

We do envision to be 1000 Cr company by 2015-16. (Co did 203 Cr turnover in 2011 and 275 Cr is expected for FY 12)

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

Management Meet–Indag Rubber

We discussed Indag Rubber recently and the stock has done quite well in a challenging environment.

We recently visited 3 companies to get a better understanding of them – 1. Indag Rubber 2. P I Industries 3. MBL Infra. The meetings went on well and all the three companies are optimistic. Here are the key highlights of our meeting with Mr. J K Jain (CFO), Indag Rubber:

Indag as a brand has got fairly established. A certain segment of quality conscious customers do ask for Indag brand.

Our quality has stood out over the years. For example we are the only retreader who can collect advance payment from some State Transport Units (STU) like the UP STU.

We have introduced newer materials and more effective tread patterns that have started paying off in the last couple of years. We have started growing at a much faster pace now.

If a new CV tyre costs Rs. 18000 then retreads usually sell at 4500-4800 range and a good retread runs approx. 80-85% of a new tyre. Hence it’s a logical cost saving proposition and the business will continue growing.

Roughly 40% of tyres come for retreading at the end of useful life.

Demand is robust, we have not seen any slowdown in demand of retreads.

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

One of the key take away from the meet is that the company is being professionally managed and management is quite conscious on the quality of earnings rather than just growth. Company maintains strict control on debtors and inventories and hence it has good free cash flows.

Company is confident of maintaining the volume growth seen in first two quarters of FY 2012 and we expect an EPS of Rs.30-35 for current year.

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

Avanti Feeds – A Dream Run!

We wrote about Avanti Feeds @Rs.33 and provided couple of updates [1, 2]. The stock has had a dream run since then and now @Rs.147 it is a 4 bagger in flat 7 months!!!

Avanti_Feeds

It feel great to be part of a multi-bagger stock idea especially when markets have been pessimistic. The purpose of this post is to highlight the rewards possible even in a weak and pessimistic market. Small growth companies continuously provide opportunities, we have to only look for them. Like Warren Buffett says –Be fearful when others are greedy and be greedy when others are fearful.”

Continue reading Avanti Feeds – A Dream Run!

Portfolio shuffling…

It is important to re-evaluate the portfolio and weed out non-performers, or the stocks in which the story is not developing as expected, or switch to new ideas which look cheaper or have more value than others. We have exited from couple of our ideas over last few days:

1. Jocil – Initially discussed @ 265, it is a good company with good fundamentals. The company has also rewarded with a bonus in the ratio of 1:1 and the stock is cum-bonus @ 285. Yet, we are switching out as we feel better ideas are available. Also a couple of negatives are – 1.) The company hasn’t been growing over last few quarters while the debt has increased. 2.) Company is import dependent and due to strong rupee weakness, they may get a hit.

2. Balaji Amines – Initially discussed @ 48, though the stock seems cheap at 4 times PE multiple @ 35, but the negatives are – 1.) The debt levels are too high to be comfortable with. 2.) Being in chemical sector, stock usually get low PE ratios due to lumpy earnings. At this time, there are several companies which are debt free, domestic business and showing growth, yet available at 4-6 times earnings. Eg: Indag Rubber, IFB Agro etc.

Some new ideas which we are studying and look good are – AMD Industries, Oriental Carbon & Chemicals and GIPCL. Continue reading Portfolio shuffling…

Results Update – [Manjushree & Gujarat Reclaim]

Eid Mubarak & Happy Ganesh Chaturthi to all our readers. It is a great festive time and I hope we all are enjoying the early weekend.

Couple of our favorite companies did very well in the first quarter and here is an update of the same:

Gujarat Reclaim Rubber (CMP 1050): The co has posted all time high turnover of 53.84 Crores and all time high quarterly Net Profit of 6.6 Crores!!!

Particulars June 11 June 10 % Variation FY 2011
Sales 53.84 41.00 31.3% 185.04
PBIDT 11.93 8.82 35.3% 33.19
Tax 2.84 2.6 9.2% 8.14%
PAT 6.60 4.49 47% 17.62
EPS 49.50 33.66 132.16

The company is a leader in its niche business area of making reclaimed rubber from waste tyres/rubber and has a very good track record. We had initially discussed about the co here. GRRPL is in a steady expansion mode and targets to be a 500 Crore turnover company in next 3 years. One should definitely go through the detailed Management Meet done by our Friend – Donald Francis at his website (requires free login).

As per a recent article, Mott MacDonald has been appointed to provide their services for GRRPL’s new plant in the state of Tamil Nadu. The plant is due for completion early next year.

Considering the leadership position of the co and its strong business dynamics, we feel the co will be able to complete the expansion successfully thus providing a compounded annual growth @ 25-30% for next 2-3 years. Stock is available at less than 6 times expected FY 12 earnings.

Risk – GRRPL earns a major share of its revenues from exports market. Continue reading Results Update – [Manjushree & Gujarat Reclaim]

Quarterly Result Updates and new idea [Indag Rubber]

In these volatile times, I’m happy to see some of our companies doing quite well and the stocks getting the due re-ratings. It just re-enforces your faith in the fundamentals and markets.

We had discussed about Smruthi Organics on 4th April, 2011 at price of 135 and had provided an update recently. The company has posted good Q1 numbers and the stock has had an amazing run – the stock had appreciated from Rs 140 to 250 levels all in 15 days!

Smruthi

Similar, we had discussed about Avanti Feeds on 13th March, 2011 at Rs 33. The company has posted fantastic Q1 results:

Particulars June 11 June 10 % Variation FY 2011
Sales 109.43 46.92 133.2% 199.62
PBIDT 9.80 2.10 366.7% 12.38
Tax 2.39 1.24 92.7% 1.69
PAT 5.41 -0.68 LP 3.42
EPS 6.77 -.85 4.24

Continue reading Quarterly Result Updates and new idea [Indag Rubber]

Mangalore Chemical–CMP 32

crops in rows

We had discussed about Mangalore Chemicals at our blog about in December, 2010 @ 37. Our interest was due to good results in first half and expectation of better times ahead. After a weak quarter of March (due to annual closedown and higher depreciation on impairment), the company has posted good set of results for June Quarter:

Particulars June 11 June 10 % Variation FY 2011
Sales 583.45 489.29 19.2% 2520.11
PBIDT 43.73 26.85 62.9% 159.07
Tax 2.75 6.23 -55.9% 34.51
PAT 29.70 12.54 136.8% 77.54
EPS 2.51 1.06   6.54

If one looks at the whole fertilizer sector, there is a lot of interest in these stocks as major reforms are expected. Agri related sector is doing well and with upcoming reform, investments should increase and better results should be seen.

We feel that Mangalore Chemical is one of the cheapest stock in the sector and stock at CMP of 32 provides a very favorable risk reward ratio due to strong fundamentals:

  • Stock is trading at 5 times FY 2011 EPS of 6.5. For FY 2012, the company may do better than last year.
  • Company has a good Book Value of 33. Stock is trading at less than Book Value.
  • Co has raised dividend from 10% last year to 12% in FY 2011.
  • Mangalore Chemicals is part of the Vijaya Mallaya group and M Cap of the company is just about 380 Cr.