Dalal-Street | Page 5 of 15 | A Value Investing Blog for Indian stocks

Quarterly Results Update (Q3 FY12)

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.

Particulars	Dec 11	Dec 10	% Variation	FY 2011
Sales	757.08	492.93	53.60%	1996.94
PBIDT	133.47	86.60	54.10%	370.70
Tax	35.02	18.37	91.87%	89.38
PAT	72.88	38.21	90.70%	185.66
EPS	7.54	6.54		19.21

*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.

Particulars	Dec 11	Dec 10	% Variation	FY 2011
Sales	160.51	98.49	63.00%	410.82
PBIDT	11.35	13.86	-18.00%	57.50
Tax	1.19	1.55	-23.20%	8.60
PAT	4.74	8.38	-43.40%	33.59
EPS	2.11	3.94		14.95

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

Continue reading Quarterly Results Update (Q3 FY12)

Gurus Speak – The road ahead

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:

Warren Buffett on why stocks beat gold and bonds

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

Q3-FY12 Result 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

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)

Happy New Year – 2012

Dear Friends,

Wishing you and your family a very Happy New Year. May this year bring immense joy, health and prosperity.

With a good correction in our Markets during last year 2011, this year should provide some excellent long term opportunities. We believe coming months would be an apt time to create a quality long term portfolio.

The hangover of a gloomy 2011 continues into the New Year. And while we can’t predict how the year will ride out, we can hope for the tide to turn – that the markets will revive, the political turbulence will calm down and the people on the street will breathe easier. Till then, optimism seems to be the only mantra to survive this crisis.

Couldn’t agree more with the above quote from Financial Express on 1st Jan, 2012. India has one of the best growth prospects and if we believe the future lifestyle of individuals will be better than surely markets will also deliver. There will be new big winners and we have the opportunity to grow along by investing in their shares.

Continue reading Happy New Year – 2012

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.

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!!!

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!