Balkrishna Archives | Dalal-Street

Sree Rayalaseema Hypo and other updates

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.

Continue reading Sree Rayalaseema Hypo and other updates

Happy Diwali: Muhurat Picks and Quarterly result updates

Happy Diwali

Wish you a very Happy and Prosperous Diwali friends.

Tomorrow is the Muhurat Trading session from 3:45PM to 5PM and we would recommend all our readers to take part on this auspicious day.

Our muhurat picks are (in no particular order):

Atul Auto
Balkrishna Industries
GRP
Mazda
Polymedicure

We are also studying Maithan Alloys and Aarti Drugs, and one may make an entry into them.

Further, the quarterly numbers have been good so far. A brief update about the latest numbers:

Continue reading Happy Diwali: Muhurat Picks and Quarterly result updates

Updates from the company visits & AGMs

During the past few weeks, we have been on the move to attend the Annual General Meetings (AGMs) and meet the companies we have been tracking. A lot of effort has been in re-understanding the companies and preparing proper questionnaires to get a bigger and longer term picture. We are in process of preparing detailed notes and will share them in coming weeks. Here are some quick updates:

1. Mayur Uniquoters: It was one of the most pleasant and well organized AGM. The company welcomed the shareholders with open arms and proved to be a great host. The management seems to be hands on the business and way ahead of the competition. The company has a fantastic track record (50% CAGR growth in net profits over last 5 years) and has one of the best financial ratios (ROCE of 55-60% with a good dividend pay-outs).

Mayur aims to be a 550 Cr. turnover company by 2015 (company did a 315 Cr. turnover in 2012). They have undertaken a backward integration project and the same is being carried out at their new plant. The company aims to bring down the rejection rate to be able to enter the highly lucrative US Auto OEM market. The company has been building relationships with some of the best names in the industry – Ford, Chrysler, BMW, Mercedes, GM etc. The orders from BMW & Mercedes have been slow and they expect the same to pick up in 1-2 years. The backward integration project should get completed by Sept-Oct, 12.

Continue reading Updates from the company visits & AGMs

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)

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

Welcoming Samvat 2068…

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:

Nesco (560)
Avanti Feeds (115) / IFB Agro (145)
Balkrishna Ind (171)
GIPCL (82)
Indag Rubber (135)
Gujarat Reclaim (1250)
Atul Auto (107)

Look forward to your views. Have a happy and safe festive time!

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.

Updates and Follow-ups

Shilpa Medicare: The company has got funding from Barring Equity PE Fund. The co will be allotting 5 Lac warrants to promoters and 20 Lac shares to the PE Fund @ Rs 350/share. This is a major positive for the co in the long run and fundamentals will improve majorly.

Harrison Malayalam: We had discussed about the company a few days back. The company has come out with poor nos and the stock is down to 118 levels. We feel the intrinsic value of this company is much higher than the current M Cap of the company. Few reasons to substantiate our view:

1. The company has 57,800 acres of plantations. The value today would be multiple times higher than the Current MCap of just 210 Cr. Have a look at the 10 yr financial data of the company. in 2005, the co had sold 674 Hectares of one of its Rubber Estate and had got 33 Cr as other income. Similarly in 2006. the co had sold about 916 Hectares of another rubber estate and got 63 Cr as other income.

2. The asset value of the estates must have almost doubled since 2005. As of 2009, the company has about 25,000 Hectares of plantations. So if one extrapolates the above valuation, the real value of their assets would be huge.

3. Over the years the company has been able to reduce the labour and mechanize it’s plantations.

4. As Rubber & Tea prices are rising, logically the co should be making money.

5. The record date for the demerger should be announced in next few days.

Manjushree Technopack: We had earlier recommended MT at about Rs 32 here. The company has posted excellent Q1 numbers. MT is a proxy play to the domestic consumption story and the co should continue doing well. We expect the company co close FY 2011 with 195-200 Cr turnover and close to 15 Cr of NP. The stock should continue to do well.

Gujarat Reclaim Rubber: The co has posted a very good Q1. We expect the company to come out with better nos going ahead and the stock should do very well. The company had been featured in the latest “Tyre Asia” magazine and the article is a must read.

Balkrishna Industries: BKT continues to do well. The company has posted a good Q1 when other tyres cos suffered heavily on the margins side. The reason for good performance is the niche area the company is operating in. As per Q1 con-call of the co, the updates are:

1. The outlook is very positive. The co is already operating at 100% capacity and needs more capacity to fulfill additional demand.

2. Co is witnessing very strong growth in US markets. Share of EU has come down to about 55% from 70% earlier.

3. Co is adding about 20% capacity in next 1 year. At a cost of about 150 Cr

4. Co is undertaking a major expansion of about 900 Cr over the next 2 years. Post this the capacity of the company will get more than doubled.

5. Co wants to be a $ 1 Bln turnover company by 2015.

We feel that BKT is an excellent long term opportunity.

Sunflag Iron: As expected, the co continues to do very well. The promoters have been buying every other day from the open market. The stock is available at less than 5 PE and 1.2 times BV.

Our stocks in Media

Usually most of our discussed stocks are mid-caps whose merits are generally unknown to the masses. Whenever there is coverage of these stocks by Media…they get due attention and often do well. Some of our stocks got wide coverage in last few days:

1. Asian Hotels:

Will Asian Hotels’ shareholders gain after its demerger into three separate companies? Recently, the company split into three different entities — Asian Hotels (North), Asian Hotels (West) and the Asian Hotels (East). Right now, only Asian Hotels (North) is being traded on stock exchanges, and going by its current market capitalisation, the gains to shareholders look uncertain. The other companies are awaiting regulatory approvals to list next month

http://economictimes.indiatimes.com/articleshow/5829815.cms?frm=mailtofriend

We had covered the demerger story at our blog here and covered the demerger impact here. One of the demerged company – Asian Hotels (N) has already got listed and given better than expected returns.

Our View: The above economic times article is very well highlighting the reasons why this demerger is creating value. We do expect the other to companies to list well and provide better gains than the calculations done at our blog earlier.

2. Shilpa Medicare:

The bulls have taken fancy to the Shilpa Medicare — a small-sized pharma company. Its price made a record intra-day high of Rs 362.50 on Tuesday after rising by more than eight times over the past one year. News of financial institutions buying a small stake in the company along with a dilution by the promoters has fuelled the recent rally in the stock.

http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/Shilpa-Med-appears-fully-priced/articleshow/5814072.cms

We have covered Shilpa Medicare several times at our blog. Initially it was covered at Rs 80 here.

Our View: As the article points out – the stock is not cheap, yes we agree but we also believe that good stocks don’t trade cheap 🙂 It would be tough to find a company having leadership position in Oncology segment, having operating margins of 30%+, growing at 45% CAGR available at less than 20 times PE. Infact if one takes a close look at last two quarterly nos of the company, the stock is trading at just 15-16 times annualised earnings.

Also if one increases the outlook to more than 1-2 years, the company has a good future. They are putting up new capacities and plan to double their turnover in 2 years.

3. Jaihind Projects:

We had first covered this company at our blog at about Rs 90 here. The stock has done exceeding well and has created a new all time high of 265 today. The company has been getting coverage on various business channels and people our discovering the underlying story.

4. Balkrishna Industries (Update):

Balkrishna Industries Limited (BKT) specialises in the production of tyres for off-road applications, including agriculture, industry & construction, earthmoving equipment, ATV and lawn & garden vehicles. http://www.tyrepress.com/News/77/19257.html

Our View: This is one company which has a fantastic track record and aims to be a 1 billion dollar company by 2015, which is quite possible looking at the business model of this company. In long run, the stock can give superb returns if they continue to grow as per their plans.

We believe that for better wealth creation investors should keep looking for undervalued and growth oriented stocks and invest in them at an early stage. This is the place where maximum wealth is created. We have been continuously working on this area. Would request the readers to keep exchanging ideas and keep spreading the logics to other investors.