Smruthi Organics – Update

We had discussed about Smruthi Organics Ltd (SOL) earlier and had highlighted about the consistent growth of 25%+ in this company and attractive valuations of just 6 times earnings. SOL has posted very good Q1 numbers and FY 2011 annual report also looks optimistic. The stock still looks attractive at CMP of 155.

Q1 results:

Particulars June 11 June 10 % Variation FY 2011
Sales 52.84 39.07 35.2% 157
PBIDT 7.09 5.23 35.6% 21.63
Tax 1.54 .74 108.1% 3.91
PAT 3.39 2.49 36.1% 9.71
EPS 8.89 6.51   25.50

Going by the strong Q1 results, it seems the company might be able to hit 200 Cr turnover for FY 2012 and post a NP of 12-13 Cr resulting into an EPS of 30-35.

Continue reading Smruthi Organics – Update

Balkrishna Ind–FY 2011 Annual Report

I’m sure you all must have realized my enthusiasm about the long term prospects of BKT by now. Post the management meet and latest annual report of the company, I think the company is on a very good wicket to deliver consistent growth for next 3-5 years and achieve its internal target of $ 1 Bln turnover & 10% Global Market share by 2015.

Few highlights from the latest annual report:

On Business:

Your company operates is predominantly known as “large variety-low volume” – a segment that restricts optimal capacity utilization. It is a capital intensive as well as labour intensive proposition, making it un-attractive for fresh investments by major players. Your Company is fully geared up to take advantage of the peculiarities of the said segment and has developed a large base of SKUs to meet the diverse needs and applications.

Company has already set up an all-steel OTR Radial tyre plant at its Chopanki location and thereby become the first company in India to set up such plant.

Continue reading Balkrishna Ind–FY 2011 Annual Report

Balkrishna Ind–Management Meet

Friends, we had posted about Balkrishna Ind (BKT) and highlighted about their superior business model when compared to the regular tire industry. The story has only become stronger and there is much more visibility on the growth ahead. Our friend Donald Francis visited BKT to get in-depth understanding on the company and get answers to some of the queries. Few highlights:

Co targets to be a $ 1 Bln turnover company by 2015

Co targets to capture about 10% global market share by then

We have grown sales in FY 11 at over 40%. If we had capacities, we could had sold much more

Order book is there for 5 months and the margins are protected at about 18-20%

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

Key Takeaways from the interview:

  • The co seems to be on track to continue its spectacular track record of growing at a CAGR of 29% for last 13 years. Their target of $ 1 Bln turnover and 10% market share seems quite achievable.
  • For FY 12, BKT may be able to do a 25-30% growth resulting into a turnover of 2500-2700 Cr.
  • There were concerns on the growing competition and we asked the management about the same. It seems the market is big enough for 2-3 players to operate like BKT and take away the market share from biggies. Other players will take quite some time to catch up.
  • So if the company is able to do a turnover of about 2500 Cr with 18.5% OPM, it may post a NP of about 240 Cr, resulting into an EPS of about 25 for FY 2012. CMP of 156 discounts it by just 6.5 times.

We feel that as BKT is entering the big league and making its presence felt in the global OTR space, the stock deserves a re-rating also. It would be tough to find companies having a consistent growth of about 30% for last 13 years with good margins, ROCE etc available in single digit PE multiples.

Company Results Update…

The results season is finally over and it has been a mixed bag. There haven’t been much instances of major outperformances but overall good topline growth is being witnessed while margins are under pressure. It’s a good time to buy into selected good companies as margins would come back over the long run.

Results & updates on some of our favorite stock ideas:

1. Astral Poly – The stock was recommended here and we had provided an update about the meeting with the management.

The company has posted stellar growth yet again. For this year their turnover has grown 42% from 291 Crores last year to 411 Crores this year. The margins were under pressure and Net Profit growth was 18%. As per notes to accounts, the company has expanded the capacity by 56% from last year. As per analyst meet held recently, during the current year the company will expand the capacity by another 45%. It remains one of the best stock idea with strong growth visibility @ 25-30% p.a. for next 2-3 years.

Continue reading Company Results Update…

Astral Polytechnik–Management Meet

We had recently posted about Astral Polytechnik Ltd. (APL). We had discussed about the shift taking place in the Indian plumbing market from GI Pipes to CPVC and Astral’s leadership position in the same. The feedback and further research on this stock has been remarkable.

Our friend – Donald Francis, made a company visit and had a Management Meet to get a better understanding. Few highlights:

We see us growing at 30-35% CAGR for the next few years. If we execute well, a Rs. 1000 Cr turnover is achievable within the next 3 years.

We are looking to expand to 70,000 MT by this year end.

The availability of the CPVC compound (other than Lubrizol) is a key constraint.

Please check out the complete report (requires free login) to get a in-depth understanding of the company and the potential ahead.

Key Takeaways from his meeting:

  • The opportunity for the CPVC players is huge as the acceptance and usage of CPVC is increasing fast in the plumbing industry.

Continue reading Astral Polytechnik–Management Meet

Quarterly & Annual result update…


Its results season again and a good time to monitor and shuffle your portfolio. Like we used to have exams earlier, similarly its result time for the stocks we invest into.

In the mid/small cap space hardly 10-15% of the companies have come out with their numbers. Till now the results have generally been on the softer side. The companies are growing but there is lot of pressure on the margin side due to inflation and other factors. Some of our companies which have come out with numbers are:

ABC BearingCompany has posted very good numbers and it seems the expansion we had talked about in our initial post has finally kicked in. At current market price of Rs.150, the stock is trading at about 6 times FY 2011 earnings. Continue holding.

Balaji Amines The numbers are below expectations. Though the topline and operating profits have grown inline with the expectation, but margins have gone down + interest cost have increased + company has provided for a lot of taxation. For the full year the turnover has increased from 262 Cr to 355 Cr and Net Profit has increased from 20.64 Cr to 25.40 Cr. At current market price of about Rs.41, stock is trading at 5 times FY 2011 earnings. We advice a hold at current levels.

Continue reading Quarterly & Annual result update…

Textile Stocks offering value?


The whole textile sector has witnessed a strong performance in last 1 year and the last quarter numbers were exceptional. Yet most of the stocks are languishing and available at low PE multiples. Yes, it could be a value trap if the textile cycle turns towards bad but there are several long term positives going on for the sector and the medium term looks bright, for eg: Appreciation of Yuan is making Indian Textile much more competitive than before.

Ideal way to bet on this sector is to choose few stocks which offer decent margin of safety and invest for medium term. Few ideas which we like are:

Continue reading Textile Stocks offering value?

Sunflag Iron – Update & Ideas

A Blog of Value Investing

We had discussed about Sunflag Iron and provided an update earlier. At that time the company had been posting substantial improvement in operating margins and hence much better net profits and it seemed that the improved was because of the backward integration the company had been doing over last 2-3 years. But since last 2 quarterly results, the margins have taken a hit and so have net profits.

As the whole midcap space has undergone a strong correction in last 3 months, there are several other interesting ideas available at good valuations. One may consider switching out from Sunflag Iron into new ideas.

Some new ideas on which we are researching are:

Continue reading Sunflag Iron – Update & Ideas

Market Update

Markets go up the stairs and down the elevator – Warren Buffett

The markets are in a correction mode these days and the cut in stock prices has been sharp when compared to 15% cut in the Sensex from 20,500 at the start of year to 17500 today.

Reasons for the decline:

  • The valuations were rich. PE ratio for Nifty as on 1st Jan, 2011 was 24.50 and has now corrected to 20. At 17-18 times PE multiples, the markets will become very attractive.
  • Unearthing of scams – shakeup in investor confidence
  • Rising Interest rates
  • High Inflation
    What has changed?
    Nothing too much in terms of longer term picture. We believe that India is an excellent long term growth story and the investors will do well by investing in growing corporates.
    In the short/medium term, if one analyses the Q3 numbers, many companies have seen lower margins due to inflationary pressures. The margins may remain under pressure for sometime but over a longer period, good companies should be able to pass on costs.

Interest rates have a inverse relationship with the valuations of markets hence investors should seek more margin of safety while investing.

What to do?

Market fall is always faster. Like Warren Buffett says – ” Markets go up the stairs and down the elevator”. So stay calm and take WB’s other advice – “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”.

As most of the stocks are in correction mode and in many stocks fall is of more or less equal magnitude, investors have an opportunity to sell their weaker stocks to better ideas. Portfolio re-shuffling is a must in these times.

Plan your future strategy and make a plan to invest money at fresh intervals on every fall (something like an SIP).

We have updated the “performance and review sheet” recently.

Happy Investing.

Facor Alloys Ltd.


A week back we had mentioned about Facor Alloys as one of our Mahurat Picks. The stock was in action today and up by about 16% to Rs 7.73. As the stock is crossing the level of Rs 7 after about 6 months, the action may have just begun.

First of all, I’ll like to thank Rohit for bringing to notice the merits in this company at his blog. He had discussed the stock about 6-7 months back, since then the company has posted much better than expected numbers.

Facor Alloys is in the business of chrome alloys, which are used in the steel industry. The industry is highly cyclical and the fortunes are linked to the steel industry cycle. South Africa is worlds largest producer of Alloys (60% share), over the last few years, India’s alloy industry has gained importance and is growing rapidly due to acute power shortage in South Africa.

Over the last few years, the company has very well re-structured itself. The debt has been wiped off, preference capital paid off + the company now has excess cash on balance sheet of about 35 Cr + Investments of 15 Cr in unlisted group company. Hence excess cash + investments is almost 40% of Current M Cap of about 130 Cr and provides a lot of comfort.

We feel the stock is a valuepick at these levels of about 7-7.50 and a re-rating may happen in the stock. Several positives are:

  • The chrome alloy cycle seems to have turned positive.
  • Co has been growing steadily by generating cash from internal accruals. This year expected revenues are 400 Cr+
  • Co has posted excellent Q2 numbers.
  • Cash Equivalent on Balance Sheet is almost equal to 40% of Current M Cap
  • The company has been paying a dividend of 15% for last 2 years (FV = 1). Hence giving a dividend of 2%+ at these prices.
  • Stock is available at 1.2 times BV of 5.6
  • Stock is trading at just 5 times TTM PE


  • Being a highly cyclical business, the earnings are highly volatile.
  • Its a commodity natured business.

Company Financials:


Company Website