A brief update on some of our stocks discussed before:
Sree Rayalaseema Hi-Strength Hypo (BSE Code – 532842, NSE Code – SRHHYPOLTD): We had discussed about the company’s expansion plants earlier. In the September quarter, the company has reported a good growth of 27% in turnover and the stock looks quite cheap, if it is able to maintain this growth in up-coming quarters (which is should cause of the recent expansion).
The company is operating in a niche area of water treatment chemical – Calcium Hypochloride and it’s the only Indian company doing this work. The company has healthy operating margins of about 19-20% and the business requires little working capital. The valuations seem quite attractive as the stock is trading at a PE of just 3.5 times and the Price to Book Value of only 0.50. We feel it’s a value pick at these levels.
Negative – The promoters have been increasing stake by doing preferential allotment and merging of group companies.
Balkrishna Ind: Company has been one of our core ideas and it has done quite well to be a multi-bagger. The September quarter numbers have been good, though we are concerned about the medium term prospects as the order book of the company has reduced sharply. The order book has halved from usual 60-65000 MT to just 32,000 MT in the latest quarter updates. The bad part is that this has happened when the company is in the process of doubling its capacity over the next 2 years and the first phase of new expansion has just begun. The company is now sitting on total loans of about 2,000 Cr+ and debt to equity is over 1.50 times.
The company has a pretty good past track record of execution and they should do well if the demand improves. However, if the things remain weak for another 6 months to 1 year, then the company may get into a big trouble. We prefer to play safe here and reduce our exposure to protect our gains.
Technofab Engineering: We had discussed this idea recently and the stock has gone nowhere. A friend – Devesh Kayal, discussed and guided me about the inherit negatives of the infrastructure sector and how the numbers are un-reliable for majority of the companies in this area. We have thus decided to exit from this idea.
Narmada Gelatine: The company has been doing well consistently and with the increasing prospects for this sector, the stock should continue to do well. Given the strong fundamentals and high dividend, the downside seems protected. The company may end up doing an EPS of more than Rs.35 for FY13 and the stock is trading at just about 4.5 times PE multiple.
Kaveri Seeds: We had discussed about this idea recently and the stock has had a fantastic run and has gained more than 60% in a quarter. One may do some profit booking here.
Shilpa Medicare: This has been one of our favorite companies and has been an excellent wealth creator. The company has posted good growth in the September quarter results after a long consolidation of more than 18 months. Interesting thing to note here is the major increase in the capital work in progress in the half yearly balance sheet of the company. The company is quite low profiled and hence very limited details are available. It would be great if we can research more on their upcoming expansion plans.
Poly Medicure: This has been an excellent company and wealth creator over the last few years. If one looks at the numbers carefully, some very interesting things are happening. The company had been providing for major forex losses over the last 2 years and they have finally come to an end in this last quarter. These losses happened due to some derivative contracts undertaken by the company in 2008.
If one removes these losses, then the company has been improving its operating profits in a major way and now would be having an operating margin of more than 25-27%. Going forward, the stock seems to be available at just 12 times normalized earnings.
Negative – Poly Medicure is considering the plans of investing into alternate energy. We feel, it can be a diworsification.
We would also like to thank our readers for the wonderful response to the Screener and for the constant feedback on the blog. Keep sending in your letters and keep spreading the investing love 🙂
Companies on Screener: Balkrishna, Sree Rayalaseema Hypo, Technofab Eng, Narmada Gelatine, Kaveri Seeds, Shilpa Medicare and Poly Medicure
Sree Rayalseema looks good will study deeper
Hi Ayush,
Request your views on Dion Global Services. Formerly known as Fortis Financials & is in the biz of software dev for financial sector. After making losses for past many years, the Co headed by Mr. Ralph since last 2 yrs has now got things under control and latest Qtr Sep 12 results indicate a turnaround.
Appreciate your views on it.
Manish…
Hi Manish,
We don’t track this co and as it has been losing a lot of money in past, I think one should be careful of such cos until and unless there is a strong reasoning and understanding for the turnaround.
Team,
Any view on HSIL/Somany Ceramics
Thanks
Amit
Sorry, not tracking the same.
Hi Ayush,
I’m a new fan of your blog and have been following it closely for some days.
I liked your views on many stocks, and have been invested in a few of
them.
I’d like your views on the following stocks which seem
to be interesting:
Navin Fluorine International:
Low PE, pays handsome dividends, High Piotroski Score, High
Return on Invested Capital and decent Earnings Yield. The Magic
Formula rates this stock highly
Above all, has an EPS of 153.58
I’ve seen some negative comments on this stock like: the business
is seasonal, negative views in terms of carbon credits.
Dont you think with the numbers like above, it should overweigh
the negative sentiments?
Would like your views please!
Haldyn Glass:
Again Low PE, dividend
paying, good return on equity, available at less than book value and
seems to be fundamentally strong company.
Numbers in the past
quarter have not been good though- do not know the reason for this.
Market Cap of 88Cr may be
a turn-off for you, but I think is still worth a look.
Hi Prashant,
The market might be valuing Navin Fluoro cheaply because if the carbon credit ends or prices fall even more (they have already fallen quite a lot), a major portion of the profits would go away. So the right way would be to evaluate current contribution of carbon credits to the current profitability of the company and see the valuations if the same is no longer there. Do share your observations, if any.
On Haldyn Glass, the fundamentals are quite good and I also liked the co on first reading. However I received some negative feedback on the promoter quality etc and hence thought of giving it a pass.
Hi Ayush/Pratyush just a small request could you also add technical indicaters in the screeners along with the fundamental screeners i believe that will help one understand the stock momentum also 🙂 (I understand as a value investor but just my suggestion on further improving this awesome site…)
Thanks for the suggestion. Will try it in future.
Hi Ayush,
can you please label stock picks as long term/ short term types as it will help different investors with different mindset look at stocks accordingly.
paritosh
Hi Paritosh,
Our ideas are with the mind-frame of long term investing. However the status may change with the developments. We try to update the same via updates in a blogpost
Dear Ayush,
Whats your take on Eimco Elecon?Has it passed all your filter tests?
Coming to its growth prospects with latest coal scam there is big pressure on Coal India as well as pvt producers who hv been allotted mines to increase production ASAP so co seems to be in a sweet spot.But How good is the reputation of promoters as Dhwanils was doubting their reputation
Hi Vivek,
Eimco does look interesting as a value pick as it is available at low PE multiples and has good cash on balance sheet. The good thing has been the remarkable improvement in Q2 results. If the same can continue, stock should do well.
Congrats on your fantasatic picks one after the another Caplin Point,Poly Medi.Apcotex,& today Ashiana Housing. Wonderful. Which ones can still be loaded now both from investment n trading perspective?
Thanks, Vivek.
We will keep discussing new ideas at our blog. In the meanwhile you may like to study some ideas already discussed – Mazda, Smruthi, Welspun Syntex etc.
Dear Ayush
Great job with the blog.
Just wanted to get your view on Delta Corp, which is the only listed entity in the gaming industry and has first mover advantage.
Sorry, not tracking the same
Dear CA Ayush, Zylog Systems is a beaten down scrip having G Factor-7, PE of 1.23 against Industry PE of 17, EPS 6 for Q2,’12 etc. Is it worth investing?,Regards,Suresh
Dear Sir,
In falling knives, the financial nos are not important because the market is sensing some major negative or scam. So its better to be careful and buy only if one understands the co very well.
Hi Ayush
Cochin Minerals and Rutile is in a niche business & the stock is undervalued. Q2 results are good.
Any negative feedback on the business and the company ?
Regards
Hi,
There was some article earlier that the co is being investigated by CBI and also about lot of volatility in its raw material. Hence we have stayed away despite interesting nos.
thanku Ayush 🙂
Hi Ayush,
i am a huge fan of your blog and i make sure to go thru it on a daily basis for all the ideas shared on the blog. So thanks for the blog.
i would like to take your advise on Atul Auto, is it a buy at current market price considering the sales performance figures of november ?
Hi Nikhil,
The stock has moved up quite a lot since our initial recommendation and it becomes tough to say if its a buy. But yes, its a good company and if they are able to maintain the current 25-30% growth rates, it does has potential.
Hi Ayush,
Though typically, I am slightly skeptical on technology stocks, Zensar Technologies looks too compelling to ignore. Excellent combination of growth, strong balance sheet, cash flows and prospects at very decent valuation. Request you to share your views.
Best Regards
Dhwanil Desai
Hi Dhwanil,
Have sent you an email.
Hi Ayush,
It would be helpful to readers, if you could share your views here.
Hi Ramkumar,
Zensar does looks cheap on the fundamentals but being part of RPG group, one can’t have high confidence. They do some mess up or the other to hurt minority shareholders.
Dear Ayush,
Fantastic picks and great follow-ups . If you don’t mind sharing it, could you please explain your comments on inherent naegatives of infra stocks and unreliable numbers?
Regards,
Tarun
The problem with this sector is excessive debt, lack of transparency, cash transactions and political connections. At times things change all of sudden and can cause unexpected losses. Hence until n unless there is a high quality co doing something value additive, perhaps one can stay away.
Hi Ayush,
Can you please share your views on buying Aarti drugs at current market price? Will the National pharmaceutical pricing policy affect the stock adversely?
Regards,
VB
Hi,
There has been lot of improvement in the performance of Aarti Drugs over last couple of years. This year the co has grown at about 30%. Promoters have also been increasing their stake by open market purchases. So if the growth is to continue, the stock can do well.
Don’t think there will be a any major impact because of pharma policy.
Hi Ayush,
Please could you give me your current view on Shilpa Medicare. What sort of return do you think it could possibly give over a 5 year period?
Thanks
Hi Naish,
The co has posted growth in last couple of qtrs after a long consolidation. Plus if one analyses their Balance Sheet as on 30th Sep, 12, they have build up a significant work in progress hence it seems some major capex is about to be completed. And growth should start coming in sometime.
As the co is quite low profile and very few forward details are known, hence would be tough to give a 5 yr view.
Thanks for the reply. Similarly if possible please do give me your view on Torrent Pharmaceuticals. Looks very robust to me. Thanks.
hi ayush,
absolute masterpiece is the only comment iam left over, after following you for last 3 months.
need ur serious ideas on 3 issues,
1.need your 5 best picks on date from angle of susbstantial capitaal protection as primary aim.
2. 5 picks with high returns potential. Iam building a new portfolio.
3. do technicals play any role in the world of value investinng?
We don’t go by technical analysis, but they do help once in a while. Don’t use them for short term guidance.
You may look at the performance sheet and include ideas which are still open. Do study those stocks and form you own opinion.
ayush,
for a matter of introduction, iam a chain garment retailer from salem,tamilnadu and i also specialize in alternate investment subject like indianphilately; stamps of india from investment perspective.
thanks and regards,
abhay jain
Very interesting. My dad has had lot of interest in stamps earlier.
Ayush waiting for your reply
Abhay jain
Hi Ayush,
This is a wonderful blog. I follow it frequently. Being a novice in investing I am picking lot of points and cues here and there.
Any way I am sure you must have gone through the quarterly updates of Rayalaseema Hypo which shows a decline in profit by almost 75%. As far as I can figure it out it looks mainly from the increase in input costs. Is it true or have you came through any other fundamental problem with this company. Another thing I found is that this company management is an MLA of that place. Do you think it will have any effect on the company in long term?
Vamseedhar
The profit decline looks bigger due to some one time extra-ordinary exp of 4.83 Cr. If one removes that, then results are not that poor.
But yes, margin contraction is there and needs to be watched.
Ayush,
Sree Rayalaseema Hypo is on my radar after a recent fall of 30%Any reasons for this?
I found the following news when started searching; you have to help us reading into this:
http://www.moneycontrol.com/news/announcements/sree-rayalaseema-allots-3552-lk-shares-to-srhypo_793183.html
Hi Prashanth,
The above news item is already a bit old. I don’t think the fall is due to that. I think the fall is more due to the weaker Q3 nos.
Sree Rayalseema: Any idea why the stock is so beaten down and why the March quarter results were bad. Normally the cos from Andhra/Hyd are known to dupe investors, is it also one of those. Comments from Ayush, Pratysh solicited pls.
The co has been reporting poor performance in recent qtr due to forex losses and high power cost.
On technical it seems like a free fall. It would be prudent to invest more once the fall stops. Will have to wait for those signals
Good results of Sree Rayalsema…
It seems the higher sales did some good but not able to make sure why such a drastic increase in qtrly EPS
Yes, this qtr results have been good and its good to see the co finally posting good sales growth. The EPS is not the right parameter as it includes certain one-time items but yet its good to see the co growing.