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:
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
We had recently posted about Astral Polytechnik Ltd. (APL). We had discussed about the shift taking place in the Indian plumbing market from GI Pipes to CPVC and Astral’s leadership position in the same. The feedback and further research on this stock has been remarkable.
Our friend – Donald Francis, made a company visit and had a Management Meet to get a better understanding. Few highlights:
We see us growing at 30-35% CAGR for the next few years. If we execute well, a Rs. 1000 Cr turnover is achievable within the next 3 years.
We are looking to expand to 70,000 MT by this year end.
The availability of the CPVC compound (other than Lubrizol) is a key constraint.
Please check out the complete report (requires free login) to get a in-depth understanding of the company and the potential ahead.
Key Takeaways from his meeting:
- The opportunity for the CPVC players is huge as the acceptance and usage of CPVC is increasing fast in the plumbing industry.
Continue reading Astral Polytechnik–Management Meet
Its results season again and a good time to monitor and shuffle your portfolio. Like we used to have exams earlier, similarly its result time for the stocks we invest into.
In the mid/small cap space hardly 10-15% of the companies have come out with their numbers. Till now the results have generally been on the softer side. The companies are growing but there is lot of pressure on the margin side due to inflation and other factors. Some of our companies which have come out with numbers are:
ABC Bearing – Company has posted very good numbers and it seems the expansion we had talked about in our initial post has finally kicked in. At current market price of Rs.150, the stock is trading at about 6 times FY 2011 earnings. Continue holding.
Balaji Amines – The numbers are below expectations. Though the topline and operating profits have grown inline with the expectation, but margins have gone down + interest cost have increased + company has provided for a lot of taxation. For the full year the turnover has increased from 262 Cr to 355 Cr and Net Profit has increased from 20.64 Cr to 25.40 Cr. At current market price of about Rs.41, stock is trading at 5 times FY 2011 earnings. We advice a hold at current levels.
Continue reading Quarterly & Annual result update…
A week back we had mentioned about Facor Alloys as one of our Mahurat Picks. The stock was in action today and up by about 16% to Rs 7.73. As the stock is crossing the level of Rs 7 after about 6 months, the action may have just begun.
First of all, I’ll like to thank Rohit for bringing to notice the merits in this company at his blog. He had discussed the stock about 6-7 months back, since then the company has posted much better than expected numbers.
Facor Alloys is in the business of chrome alloys, which are used in the steel industry. The industry is highly cyclical and the fortunes are linked to the steel industry cycle. South Africa is worlds largest producer of Alloys (60% share), over the last few years, India’s alloy industry has gained importance and is growing rapidly due to acute power shortage in South Africa.
Over the last few years, the company has very well re-structured itself. The debt has been wiped off, preference capital paid off + the company now has excess cash on balance sheet of about 35 Cr + Investments of 15 Cr in unlisted group company. Hence excess cash + investments is almost 40% of Current M Cap of about 130 Cr and provides a lot of comfort.
We feel the stock is a valuepick at these levels of about 7-7.50 and a re-rating may happen in the stock. Several positives are:
- The chrome alloy cycle seems to have turned positive.
- Co has been growing steadily by generating cash from internal accruals. This year expected revenues are 400 Cr+
- Co has posted excellent Q2 numbers.
- Cash Equivalent on Balance Sheet is almost equal to 40% of Current M Cap
- The company has been paying a dividend of 15% for last 2 years (FV = 1). Hence giving a dividend of 2%+ at these prices.
- Stock is available at 1.2 times BV of 5.6
- Stock is trading at just 5 times TTM PE
- Being a highly cyclical business, the earnings are highly volatile.
- Its a commodity natured business.
We had discussed about Poly Medicure and their plans to become a major global Medical Disposable player. The article highlighted about their expansion plans ahead and target to be a 300-400 Cr company by 2013. We had discussed the stock @ Rs 100 (adjusted 1:1 bonus) and the stock price has tripled to Rs 315 in just 10 months!!
So what does the stock hold for existing investors?
The company is expected to post a turnover of 170 Cr+ this year with an EPS of 18-20.
As the stock has given multi-bagger returns and valuations are not cheap anymore, one should do partial profit booking at these levels and explore our other ideas. For long term perspective, the stock still holds value as the company is a leader in the healthcare field where the potential is unlimited. Its not easy to find such good companies again. The company is on a growth path and has lined up several expansions.
We have been holding this stock for few years and had lot of faith on the future potential of the company and quality of management. Few important learning from this investment:
- Look for companies whose end product has ever increasing demand. In the case of Poly, the medical disposable space has a great future.
- Look at crucial ratios like – High Operating margins, consistent growth, High ROCE. Poly has had very good operating margins in the range of 18-20%, consistent growth of 25-30% and consistent ROCE of 25%+ hence the company has been able to scale up quickly majorly from internal accruals.
- Look for young, dynamic and ambitious management.
- Buying into a quality company at cheap valuations is a sure shot multi-bagger thing 😀
Few weeks back we had discussed about Pondy Oxide and we were asked some good questions by our readers. We always love the creative criticism and this was wonderful.
To know the answers to some of the doubts, my good friend Donald Francis did an extensive research and also had a meeting with the management.
Some of the pending questions to which we got answers were about why the company is so leveraged at around 2 times debt to equity ratio, and who are the top clients ?
Amara Raja is a top client. We have several top battery manufacturers in Export Markets. Korea Indonesia and Malaysia are our top markets followed by Srilanka & Vietnam. We also export to Japanese customers like Yuasa.
We are trying to bring down our financing cost. This will come down by 15-20% easily as we have better terms now on FCPC (Foreign currency packing credits) $ credit norms -Libor+200 bps. Its likely that inventory & debtors will remain at these levels due to more focus on export market.
Few takeaways from his meeting:
- The outlook is robust due to ever increasing demand for batteries hence continuous demand for lead and lead oxides.
- FY 09 was indeed a very tough year. Since then then company has re-aligned a lot of things, changed its business model so as to reduce the effects due to volatility in lead prices.
- Major achievement has been penetrating the exports market. In FY 2009, the export sales were 16.64 Cr, in FY 2010 the company did 50.88 Cr and for FY 2011, the company expects to cross 100 Cr as export turnover.
- The growth momentum witnessed in Q1 is sustainable.
- Plants are now running at high utilization levels and the company plans to take up new expansion in a year.
- Co aims to reach the 500 Cr turnover milestone in next 3 years.
- Entry barriers – Licence is required for carrying out lead refining and related activities. Its not easy to get a new licence hence the players are limited. Pondy Oxide would probably be having a 8-10% market share.
- Amara Raja is their top customer. Pondy is already supplying to top battery manufacturers in Export markets. Tata-Yusa is also their customer.
Initial discussions with Pondy Oxides Management [ Thanks to Donald via ValuePickr]
We had recommended the stock on 4th July, 2010 @ 100. Since then the stock has done quite well and the price has more than doubled in just 3 months. As the underlying logic while recommending the stock was deep undervaluation, the stock seems to have got the needed attention 🙂
We feel investors may sell at-least 50% at these levels to make their holding free. Some other stock ideas which can be considered for investment are – Balaji Amines & Pondy Oxide.
We had mentioned about Sunflag Iron. Since then then the stock price has appreciated by just 10% while the fundamentals and the outlook seems to be getting stronger.
We had mentioned that the company has been acquiring coal blocks since last few years and getting backward integrated. The latest annual report gives a strong confirmation on the same:
Excerpt from the FY 2010 annual report:
“During the year under review, the total coal production at Belgaon Coal Block is 140,147 MT as against of 51,234.41 MT in the previous year, which is about 174% higher than the previous year.”
If one analyses the Fixed Asset schedule and the investment section, the company has been stepping up the investments for captive coal blocks after the success from the Belgaon coal mine. For eg: The co has invested 10 Cr+ in subsidiary – Khappa Coal Mine which is JV between Sunflag Iron (63.27%) & Dalmia Cement (36.73%).
Future expansions as per the annual report:
Compelling Valuations at CMP of 34:
- FY 2011 Expected turnover is 1650 Cr+, with expected NP of 110 Cr+
- Stock is trading at less than 5 PE on expected FY 2011 earnings
- Stock is trading at 1.25 times BV of 25.50
- Debt Equity ratio has improved to 0.80 : 1
Promoters have been regularly buying from open market and have increased their stake from about 40% in September 2008 to about 51% as of now.