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…

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.

Gujarat Reclaimed Rubber Products (GRRPL)

Rubber recycling looks like a good business – as it is both profitable and eco-friendly. Given the rising prices and supply limitation of natural rubber, usage of reclaimed rubber is more economical (costs Rs 40/Kg) and bound to increase. Add to it the opportunity to expand this business. There was an article which highlights the opportunity for this sector – thanks to addition of almost 33 million vehicles in last 3 years in India.

GRRPL has established a nice for itself and has become the largest reclaim rubber manufacturer in Asia. GRRPL is one of the most organised and technologically advanced company in this sector. The company has been manufacturing one of the widest range of reclaimed rubber with highest quality parameters and exporting almost 60% of its production. GRRPL has the technical expertise to offer machinery and technical know how to manufacture reclaimed rubber.

Lets look at their track record:

  • Grown sales from 15.5 Cr in 2001 to 130 Cr in 2009. i.e.. at CAGR of 30%
  • Grown Net Profit from 0.68 Cr in 2002 to 13.54 Cr in 2009. i.e.. at CAGR of more than 50%
  • Has been a regular dividend paying company. Has been maintaining a dividend pay-out ratio of close to 18-20%
  • High tax paying company.
  • First to implement customised SAP in the industry.

Company has had good profitability and other ratios:

  • Co has maintained high ROCE – almost 40%.
  • Co enjoys healthy operating margins of 18-22%.
  • Co has good control over inventory, debtors and debts.
  • Cash Flows are positive.
  • Company had a Book Value of about 320 as on 2009. It should be close to 400+ as on 31.3.2010


Promoters seem to be honest, educated and highly capable people who have a strong value system and are there to create value in long run.


The company has a tiny equity of just 1.33 Cr. Till 3 months back, the stock was traded in “Z” group and in lot of 50 hence many investors didn’t had access to buy the stock even though they liked this company. Now the stock is in B group.

At CMP of close to 875, the company trades at 8 times FY2010E earnings and 4 times EBITDA margins.

It would be tough to find quality companies at less than 10 times PE with following advantages:

  • Leadership position in their business segment
  • Consistent high ROCE of 30%+
  • Consistent good dividend pay-outs
  • Consistent growth in past years with CAGR of 30%+

The company is in process of expanding its capacity and should create new records in terms of turnover, profitability and market-share. One may do well by accumulating the stock on declines with 2-3 yr perspective.

Company Website | Snapshot of Financials and Projections