Dear Friends,
Wish you and your family a very very Happy & Prosperous Deepawali!!! May Laxmi Ji shower her blessings and Ganesh Ji his happiness on all of us.
On this auspicious day, do participate in Samvat 2068 – Muhurat Trading session from 4:30 – 6 pm. Our Muhurat picks are:
Look forward to your views. Have a happy and safe festive time!
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:
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…
Apcotex Ltd was spun-off from the prestigious Asian Paints in 1991. Since then the co is part of the “APCO” group of companies headed by Mr. Atul Choksey (former MD – Asian Paints).
The company is one of the leading producer of polymer products namely Synthetic Latices & Synthetic Rubber. They have one of the broadest ranges of products based on Styrene – Butadiene chemistry. The company has developed the technology through in-house R&D and upgrades the same continuously.
Company has been doing very well for last 5 years and growing at a CAGR of 26% and did a turnover of 200 Cr in FY 11. It seems the management is much more aggressive now and aims to do a 500 Cr turnover by 2013!
Other scoring points are :
1. Promoter Quality – The promoters have more than 3 decades of experience in paints and chemical industry and are experts in the field of chemicals.
2. Good corporate governance – Company seems to have very good internal controls and systems. For last 5 years the company has been following the Japanese TPM method. The company has been regular in financial reporting and progressive dividend pay-outs. They even went for a buy-back during 2009.
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]
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!
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]
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:
Its results season again and an excellent time to tweak portfolios. For us its exciting times as we get several new ideas to work upon. One such new idea is – IFB Agro listed on both BSE (507438) & NSE and trading at about Rs 105. The co has posted excellent Q1 numbers:
| Particulars | June 11 | June 10 | % Variation | FY 2011 |
| Sales | 136.07 | 96.78 | 40.6% | 422.82 |
| PBIDT | 15.82 | 3.67 | 331.1% | 36.27 |
| Tax | 4.57 | 0.17 | 2588.2% | 8.4 |
| PAT | 9.05 | 0.93 | 873.1% | 17.82 |
| EPS | 11.31 | 1.16 | 22.26 |
IFB Agro is part of the IFB group and it has two business divisions – IMFL & Agro Marine.
IFB Agro is one of the largest producer of alcohol in Eastern India, having 6 large captive bottling plants situated in Bengal, Orissa and North East. The company has a strong position and had made sale of 5.5 lac cases of IMFL products in 2011. The value of sales of Liquor division in 2011 was 327 Cr vs 241 Cr last year.
In the Agro Marine division, the company is into exporting of Prawns and selling of Feeds business. The agro marine industry was going through a tough time till 2009, but since mid 2010, the situation has improved and the future is bright. IFB has a 48% market share in the shrimp feed business in West Bengal. In FY 2011, the company achieved a turnover of about 122 Cr vs 52.59 Cr. “IFB Royal” is the brand name of the frozen marine product of this company
The liquor business is witnessing a strong demand and hence the company has set up a new bottling plant at Panagarh, West Bengal. Company is awaiting for a couple of approvals to start the operations.
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.
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.
