Sunday, December 25, 2011

SABERO ORGANICS GUJARAT LTD - BUY FOR LONG TERM




Sabero Organics Gujarat is an agrochemicals manufacturer promoted by Chuganee family.Company producing various fungicides, herbicides , insecticides and other speciality chemicals. Company having manufacturing facilities in Gujarat,Jammu Kashmir ,Tamilnadu and marketing offices in Europe, Brazil, Argentina, Phillipines and Australia other than various parts of India..Sabero's products includes Acephate, Mancozeb, Chlorpyriphos, Glyphosate, Dichlorovos, Methamidophos and Propineb.A major portion of its products are exported to various countries in their own brand names and also supplying products to other companies including well known MNC's.About 65% of its total sales is generated from exports and company's major asset is its product registration of more than 250 products in 50 countries.Company having many products registrations and strong presence in Brazil which is one of the biggest agrochemical markets in the world.Sabero came to limelight in recent past after the acquisition of the company by south based Murugappa group .'Murugappa group'is a well reputed business group from South India with deep knowldge in Agriculture related businesses along with others.Success of companies like Coromandel International and EID Parry is best example for their expertise in this field.Other listed companies from the same group includes Carborundum Universal,Cholamandalam Investment,Tube Investment,Coromandel Engineering..etc
Coromandel bought this company at a steep premium of 80 % to then prevailing market price and the deal concluded @ Rs.160/- per share.Also it paid Rs.38.47 extra per share as a non compete fee to the promoters of Sabero.Coromandel's strong marketing network is a big boost to Sabero where the largest customers are more or less the same.Management expertise and deep pockets of Murugappa group is added advantages.Due to lower capacity utilisation and higher overhead costs Sabero posted losses in first two quarters of this FY.In a recent interview Mr.Kapil Mehan MD of Coromandel indicated that they have took over the management of Sabero only in third week of December and their first priority is to enhance the capacity utilisation.He also mentioned that they are expecting the company will back to black in another two quarters. Earlier in FY 2011, Sabero posted a turnover of Rs.412 Cr and a net profit of Rs.10 Cr.I believe the massive capacity of its plants and the ability of Murugappa group will create  a multibagger from current price of Rs.55/-

13 comments :

  1. Dear Sir,

    Your earlier picks Agrotech foods, Novartis, Honda Siel, Advanta, and Aditya Birla Nuvo are also available at a very attractive price. Will it be prudent to reinvest in them considering their fundamental strength. Or do you have other recommendations.

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  2. All of the above mentioned stocks are good for Investment at current level.Considering the volatile market try to buy in small lots rather than in one go.

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  3. Do you think in th elong run , it will merge with Coromandel International??

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  4. Dear Santy

    I don't think so .Earlier they merged Godavari fert with coromandel , but both the companies were in same sector .I believe they will grow this company as a separate entity in Agrochemical sector.

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  5. Hi Sir,

    Whats your take on Omega-ag seed punjab (BSE code 519479 ) ...Recently the management has promised huge expansion plans and venture into into Sea food and Marine Exports business and in this direction, the Board resolved to acquire a 25% stake in Gayatri Sea Foods and Feeds Private limited.

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  6. I do not agree to the argument about the point which says that since promoters have bought it @ 160 the stock should trade above that over a period of time. I don't tend to agree on that views. If thats the case people should also buy AP PApers which is trading @ 150 levels v/s open offer price of 550+

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  7. Dear Deepak Kumar

    Not tracking Omega Ag seed

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  8. Dear Rakesh

    I have never argued anywhere that the share price will rise only because of the promoter purchase at higher level .

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  9. Dear VPji,

    Your pick of Sabero Organics Gujarat seems to be OK.
    But Murugappa group is very orthodox when it comes to sharing profit with shareholders.
    Look at the dividend payments by their group companies. Pittance no? Even when they have good profit they take it for themselves. Appreciation in shares is also very limited.
    What is your comment on this?

    Neeraj Sharma.

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  10. Dear Neeraj

    Your argument is without considering Stock Splits.Company is paying liberal dividends and in 2003 it issued the shares of Coromandel Fert free of cost to the share holders in 1:3 ratio,that Coromandel itself splitted again and currently trading at Rs.270/- .For the past few years it is paying dividends in an average rate of 400% .What a management can do more than this.

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  11. Dear BR

    What do you really mean ?

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  12. Sir can v look to buy ths stock at cmp..

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