Saturday, August 18, 2012

BLUE STAR LTD - BUY






Passing through tough business environment  during the life cycles of any company / business  is common.Some managements will learn new lesson from such experience ,take corrective measures and grow even faster.In some rare cases ,such down trends will help managements to open up new business opportunities through diversification or act as an eye opener to look beyond their conventional businesses. On the other hand some others will surrender their business even without a fight.We ,as investors, always interested only in the  first case.So let us look into BLUE STAR Ltd. Till few years back It was a star in Indian Air Conditioning Industry .Its main expertise was in Centralised Airconditioning and Commercial Refrigeration. In FY 2010-11 ,company posted a turnover of Rs 2888 Cr and a net profit of Rs.155 Cr .From there ,just after one year in FY 2012 company posted a loss of Rs.90 cr ! .Sharp slump in commercial real estate developments including the construction of shopping malls severely affected company’s performance during this period.Some communication gaps and lack of integration between the marketing and project execution wings of the company added fuel to the fire .The marketing wing accepted fixed rate orders without accurately assessing the possible increase in raw material cost which ultimately ends in a bleeding bottom line.Realising the seriousness of the situation management  accepted their fault and  has taken corrective actions which include concentrating in bottom line rather than increasing top line,strict measures to ensure profitability in a case to case basis,concentration in home air conditioning business to beat the slump in commercial segment ..etc.With all these efforts, company back to black in latest June quarter with a pre tax profit of Rs.13 Cr( excluding other income ). Actually , the business of air conditioning having good potential at a time of global warming,need of cold chains to preserve food and vegetables..etc.Blue star is India’s one of the largest air conditioning companies with vast marketing and service network and good brand value.I feel ,company will back to its past glory supported by  the initiatives taken by the management and it is the right time to enter in this stock with a long term view. From the peak of Rs.548 ( post FV split)  stock is now trading around Rs.192/-

57 comments :

  1. good work sir plz be continue.thanx

    ReplyDelete
  2. Dear Sir,
    Thanks for the analysis. Could you please let me know your opinion on Commercial Engineers and Body Building Company?

    Thanks and Regards
    Sujith

    ReplyDelete
  3. Value-pick ji,
    What is your views about Jointeca Education IPO.

    ReplyDelete
  4. Dear Sir,
    Have you covered Banking sector recently , would you suggest any deep value stock in Banks.
    Regards,
    Prakash

    ReplyDelete
    Replies
    1. I prefer only Yes Bank and ING Vysya from banking sector

      Delete
  5. Hi VP ,
    what to make out of this statement from mteducare

    After a healthy discussion, it was unanimously decided that fifty per cent (50%) of the net profits in a financial year be allocated towards distribution of dividend to shareholders and the balance be retained for business operations and that the dividend be paid on a half yearly basis.

    The said dividend policy will be subject to review by the Board in case the Company plans any acquisitions / joint ventures etc. involving huge cash outflow.

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  6. Not a fan of dividend yield based investment

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  7. dear VP, whats your opinion on elder healthcare? i have few shares at rs.125.
    thanks in advance
    senthil

    ReplyDelete
    Replies
    1. Since the merger ratio already announced no meaning in discussing the future of Elder Healthcare - it depends on Elder Pharma.

      Delete
  8. sir

    can we look into gei industrial systems post the huge correction that we saw in the stock??what abt tv18??looking forward for you views

    thanks in advance

    ReplyDelete
    Replies
    1. GEI having a futuristic business , but for short to medium term company may face lower order intake due to lower capex in its user industries.Consider it only with a long term view.

      Delete
    2. I don't like the management of TV 18 ,they are running business only for them not interested in minority share holders.

      Delete
  9. Hi VP sir,

    Do you believe Talwalkers can be a 3 bagger in 3 years from now?? They should be able to grow at 30% CAGR and can command 25 PE in a good market.... Whats your call on this. Also any views on Parekh aluminux..?

    ReplyDelete
    Replies
    1. Not expecting a 3 bagger in 3 years in Talwalker .Not tracking Parekh Aluminex.

      Delete
  10. With a book value of Rs. 52, Blue Star scrip is inflated at CMP. Any clarifications ?

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  11. For me , book value is not the only benchmark for investment.

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  12. VPji,

    can you tell us about your portfolio allocation - how much do you put in various types of stock? do you run a concentrated/ diversified portfolio.

    ReplyDelete
    Replies
    1. Depends on your risk taking capacity and conviction about a company .Personally I don't like too much diversification.

      Delete
  13. Dear Sir,
    How do you suggest picking YES bank @ CMP, or you suguest to wait for any correction till 320 levels?

    ReplyDelete
  14. Not a strict 'No' even at current level.

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  15. Sir,
    You view on Garware Wall Ropes and Sterlite Tech? Both have declared very good results. If you think they are not good enough I want to sell it and move to your recommended stocks.
    Garware Wall has been declaring good results but stock has been in same range for last 2-3 years.

    Pls do suggest

    Thank you.

    ReplyDelete
  16. Dear Sir,

    Can you please give your comments on Prozone CSC ltd. the delisted arm of provogue ltd. which is due to be listed shortly in this month. your valuable comments would be appreciated if you are tracking the stock.
    thank you,

    ReplyDelete
    Replies
    1. Even the joint partner having experience in this field ,I don't expect a bright future in short to medium term due to over all sluggishness in mall/real estate development sector.Moreover without knowing a price it is difficult to say whether it is worth or not for long term.

      Delete
  17. Dear Valuepick,

    Selan exploration has been a disappoint in terms of stock price movement......top line and bottom line shows a better improvement but stock price is not factored in ....

    What is your take on selan expl.

    regards,
    Shanid.V.H

    ReplyDelete
  18. Looks like ROTO Results are v bad.Whats your current take on it.

    ReplyDelete
    Replies
    1. For me ROTO result is not very bad.Business having some seasonal effect and it should be compared with last year same quarter.

      Delete
  19. Do you still recommend united phosphorous at 104

    ReplyDelete
  20. Can you please give your view on "Tastybite eatables" at current levels ?

    ReplyDelete
    Replies
    1. Higher vegetable prices due to insufficient monsoon may be a problem for food processing companies in this year.

      Delete
  21. Dear Sir,

    I'm here by requesting your urgent help regarding the below mentioned stock

    Accel Transmatic 500nos @ 28.73

    Hind Industries 100nos @ 89.36

    Kerala Ayurveda 100nos @ 65.86

    Manappuram 250 nos @ 59.80

    All the shared are in less value. Most of the money blocked with these
    shares. What I have to do?

    Please advice

    George

    ReplyDelete
    Replies
    1. Not tracking closely anything except KAPL , already posted my opinion on KAPL.

      Delete
  22. i will never forgive my self for not taking ur advice on Kaveri seeds.

    Hopefully your gem finding mission lasts for a long time.

    thanks for all the picks.
    D

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  23. was just going thru ur old reco. on kilburn.. currently it is quoting at pe of just .90..isnt it a strong buy??

    ReplyDelete
    Replies
    1. Leave it.About 80% of last year's profit came from extraordinary income (sale of the chemical Division Undertaking at Tuticorin). Because of this reason ,withdrawing my old recommendation and requesting to book loss.

      Delete
  24. Dear VP,
    Please remark on Biocon, is it a buy at these levels for the long term.
    Regdards,
    Prakash

    ReplyDelete
  25. sir,
    i just came across your blog few days back, i baught india gelatine and planning to buy epc irr and vulcan eng, should proceed or now no fresh buying and its hold only.....

    ReplyDelete
    Replies
    1. No change in my previous opinion on these stocks.Vulcan may take some long time to move up.

      Delete
  26. Dear Sir ,

    First of all, I would like to thank for your valuable pics.

    Q: Should I enter Granules at CMP ? suggest me the stoploss and target for one year?

    Thanks
    Phani

    ReplyDelete
  27. Sir,

    What is the reason for the decline in OPTO CIRCUITS to 131 level?Is it a buy or hold?Surprisingly,you have not commented on the stock after the recent downside post the latest BONUS.
    Waiting for your reply.

    HNBhagavan

    ReplyDelete
  28. Dear VP,


    1. Does it make sense to hold all below 3
    a. Tata chemicals
    b. Aries Agro
    c. Kaveri seeds

    Tata chemicals is also into both nutrient and Seeds hence it overlaps with Aries and Kaveri

    2. Do you see any major problem with OPTO circuits apart from downgrding ?

    Kind Regards,
    Veeru

    ReplyDelete
  29. Hi VP,

    Would you like to have a look at GMM Pfaudler pls ?

    Rgds
    Your Afficionado

    ReplyDelete
  30. dear sir,
    plese give me advise for piccadily agro ltd as your viwe

    ReplyDelete
  31. Sir,
    Do you have any update on opto circuits.
    Regards
    AR

    ReplyDelete
    Replies
    1. Recently credit rating agency ICRA suspended the rating assigned to the Rs. 538 crore fund based facilities of OCIL. You can read the reasons of the same in the below link

      http://www.icra.in/Files/Reports/Rationale/Opto%20Circuits%20_r_09082012%20.pdf


      As you are aware institutional holdings in this stock is very high and normally institutions are not comfortable to hold any stocks having a black mark from the side of these type rating agencies.Now company approached another rating agency CRISIL to get it rated.

      Delete
  32. Dear Sir,
    Thank you for your reply on OPTO CIRCUITS.It looks the fall is due to ICRA rating.Do you suggest buying at this level?

    H N Bhagavan

    ReplyDelete
  33. Dear Sir,

    Whats your call on WPIL and B & A. All your calls are excellent.

    Great work...

    Regards,
    Aajay

    ReplyDelete
  34. Sir, can I enter Blue Star at 185 range? eben

    ReplyDelete
  35. Sir,
    Thanks! Great job!
    I would like to know your view on Airtel & BHEL. Both seem attractive at current level.

    ReplyDelete
  36. Hi,

    Always your blog reader. A very big hats off to you for your excellent stock picking abilities.

    Would like to have your opinion on certain stocks I am holding whether I shld book lose or hold
    1. Graphite India @ 90
    2. Claris Life sciences @ 210 - Can I buy more at current levels
    3. HSIL @ 140
    4. Prime Focus @ 52

    Your advice would be beneficial to me.
    God bless u

    ReplyDelete
  37. Hello Sir,
    I hold the following
    1. RCOM
    2. Punjloyd
    3. GMR infra
    4. Aurobindo pharma
    5. IL&FS transportaion
    Your view on above stocks from long term perspective would be of great help.
    Regards,
    Raj

    ReplyDelete
  38. Dear VPji,

    Kindly express your view on FCS SOFTWARE LTD.

    Rgds,
    Nilesh

    ReplyDelete

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