Saturday, December 22, 2012

MANGALAM CEMENT --- EXCELLENT OPPORTUNITY










After a long time ,tune of RBI officials signalling a possible rate cut in another few months.On this expectation shares of many companies from Infrastructure,Real Estate and Housing sectors showing  better attention from investor fraternity.Any improvement in the business prospects of any of these sectors will  ultimately ends in an increase in the  demand for cement consumption.This week I am selecting one wonderful company from Cement  space - Mangalam Cement which is showing excellent growth even during tough times.This company belongs to BK Birla Group based in Kolkata and having a manufacturing capacity of 2 Million tonne per annum  located in Rajasthan.  Other major companies from the same business group includes Century Textiles,Jayshree Tea,Pilani Investment..etc. This is an integrated cement manufacturer  mainly supplying  to  Rajasthan, Madhya Pradesh, Haryana Delhi and western Uttar Pradesh under the brand ‘Birla Uttam Cement’


I know many of you may ask what is special with this company among many other mid sized listed cement players.Reasons are many .

1 ) First of all , compared with other regions ,there is not much capacity addition is happening in the area (except for Mangalam) where this company is selling its product .

2) Secondly  ,as we all are aware, shortage of power and availability of Limestone are the key issues of Cement Companies for the past many years.About 35 % of the production cost is going for power and fuel in Cement industry . Mangalam having enough captive power generation capacity which include 35 MW coal based (coal linkage upto 65 % requirements) and 13 MW wind based -where its total requirement for current  cement production capacity  is only 25 MW .This means .company is already backed by captive power for ongoing capacity expansion too.

3) In case of lime stone reserve ,Mangalam possessing enough limestone reserves for its existing and proposed expanded capacity for another 60 years  near to its factory itself.

4 ) Another important  factor  is the lowest debt level of this company .As on 31 March 2012 ,this company is totally debt free ! .This is very rare in case of capital intensive cement industry.For adding capacity(1.25 million ton per annum) ,this year company  will raise funds through a mix of debt and internal accruals.Even after this fund raising company’s debt equity ratio will be at a comfortable level  and remain as one of the  lowest in the industry.

5) This company following a very liberal dividend policy which distributed a dividend of 50 % in 2008 ,55 % in 2009 and 60% each in 2010 to 2012  uninterruptedly.


6) In the financial front ,company reported robust performance in recent times .In the latest quarter ,Mangalam reported  a profit of Rs.28 Cr v/s just Rs.68 lakhs in the same period last year.Its half year EPS already crossed last years full year EPS  which is Rs.20. Company is expected to report even better numbers in second half . Based on firm cement prices and expanded capacity which will be completed by September 2013 ,Mangalam is expected to report an EPS above  Rs.60 in FY 2014.

7) Company having a cash  and bank balance of of Rs.43 Cr already in its books and a book value of of over Rs.160/-.

8) Not a single share  pledged by the promoters.

Currently this stock is trading at a  dirt cheap valuation by any parameters and deserves a place in your portfolio by all means.I strongly recommending Mangalam Cement and  expecting minimum  50% appreciation in one year time frame. Stock is listed both in NSE and BSE and trading around Rs.176 /-

Link to company website HERE

Link for latest Annual Report HERE

Discl:I have vested interest in MCL 

88 comments :

  1. what about anjani we have to sift?

    ReplyDelete
    Replies
    1. May shift considering the power situation in AP

      Delete
  2. Thank you sir...:)

    I was not sure which cement stock to pick. I liked ambuja cement...but was not sure of any midcap opportunity. Thanks :)

    ReplyDelete
  3. thankyou,sir, you dig another gem. god bless you sir.

    ReplyDelete
  4. Dear Sir, your view on Cairn....I've @125.

    ReplyDelete
    Replies
    1. Cairn - A good company in the hands of not so minority share holder friendly owners.

      Delete
  5. sir,
    kindly advise for sun pharma advance.Is it buy at todays
    rate?
    regards
    kamal

    ReplyDelete
    Replies
    1. For those love some risk and ready to wait without any time limit.

      Delete
  6. Hello Sir,

    What do you think about OCL India?

    ReplyDelete
  7. dear Sir,
    compliment to you, great job. my question to you regarding sunshine 300 share @59 with horizon of one year.and heritage 100@376 pls guide

    regards
    ajay

    ReplyDelete
    Replies
    1. Positive on Heritage .I did't get -- Sunshine ??

      Delete
  8. Sir,
    I am wondering why this stock has been recommended now and not earlier as the stock has moved from sub 100 levels to 177. Did we miss this opportunity earlier and jumping in between?

    This stock was discussed else where also at lower levels. Normally you are first to spot it then others but this time it seems otherwise.

    Just wanted to know the reasons if you can, because its possible that the story may have developed now and that could be the reasons??

    Thank you for the pick.

    cheers

    ReplyDelete
    Replies
    1. Dear Vishnu
      Only now the company advanced in the financial closure of their capex .

      Delete
  9. hi value picker,
    may i know your view on A2Z maintenance & services , and Aptech, .........Hold or sell ? my average holding price for both of them is rs.110 and rs.77 respectively

    ReplyDelete
    Replies
    1. Purely on fundamental basis I am not positive on both these.Stock may move due to other reasons , no comments on that.

      Delete
  10. From sabero and rallis india which one do you prefer, do you initiate a buy on bilcare.

    Mohan

    ReplyDelete
    Replies
    1. Both are good companies.Not tracking Bilcare.

      Delete
  11. Sir,
    the promoter holding is very low and cement companies are prone to govt intervention.

    Do you see that as damper.

    Also your take on Heidelberg cement which is MNC and expansion have taken place

    ReplyDelete
    Replies
    1. Dear Friend

      When we look at the share holding pattern of companies owned by big business houses like Tata's and Birla's most of their companies are managed with lower promoter holding .Because of their reputation they are confident to get the support of institutional investors as and when necessary.Take the case of this company , even the promoter stake is only 28% another 28% is held by large institutions and mutual funds .So I don't see any threat in this case.Moreover some names appeared in the non promoter category is of the related parties of promoters itself.

      In case of Heidelberg , even this is an MNC its operational efficiency is not top class.Moreover this company is already trading at a market cap of 1.5 times of sales where Mangalam at 0.75 times.Heidelberg already having a debt of about Rs.800 Cr in its books.

      Delete
  12. Sir

    Few weeks back in ET this stock recommended by Centrum Broking at Rs.183 with a one year target of Rs.284

    ReplyDelete
  13. Hello VP, I am writing this question again wrote earlier but it didn't appear here... in one of your previous notes you list 5 companies with great brand...Acrysil was one of those...wanted to know your further thoughts on Acrysil India, is it a 'value pick" now :-) ... or the story is yet to unfold..... pls reply

    warm regards

    ReplyDelete
    Replies
    1. No change in previous opinion.

      Delete
    2. I believe this is the right time to accumulate this stock...before the stock gains momentum and becomes unstoppable.... I went through the web site, think they really have a great market share and have niche products which may prove quite a multi bagger...
      regards

      Delete
  14. Sir,
    Due to power shortage in AP do you think Granules performance will be affected in coming qtrs?

    ReplyDelete
    Replies
    1. Not expecting big impact since pharma is not power intensive as cement , some additional expense may be possible.

      Delete
    2. sir, still just want to know how much downside expected in this Granules counter? can we avg down again at these levels?

      Delete
    3. It is not an easy question to answer - how much downside expected in a particular stock ? .What we can only do is whether one stock is worth at a particular sense . I believe Granules is worth at CMP for an investor with some patience.

      Delete
  15. hello sir wants to your view on india gelatine and sabero for atleat 1 year horizon and plese share your view on Indiabulls Infrastructure and Power after recent de-merger, is it good enough to invest

    ReplyDelete
  16. Hold Ind Gelatine and Sabero is even a buy for long term investors. In case of India Bulls ,price may move or not but I don't like India bulls group.When I buy a stock I feels become a small owner of that business ,so I don't like to invest in any company if I don't like their business ethics .This does not means investing in such companies will not make monetary benefits and hence I can't suggest anyone to avoid such business groups.But personally I would like to stay away from some business groups like Essar,RPG,Videocon ,India Bulls..etc..etc.

    ReplyDelete
    Replies
    1. dear VP,
      may i know your views on Crompton greaves and Chambal fertilizers

      Delete
    2. Thank you sir for giving valuable time........doing excellent job. god bless you.

      Delete
    3. uvalueji, your statement of being a small businessman of that group has changed our attitude of long ?short? Term. Thanks. Bless u.

      Delete
  17. thank you sir for ur helpfull job u r doing here for small investors.
    want to know about UNITY INFRA. fundmentals are good valuations are cheap. (i think so). but the stock is not performing for a long time. can i invest in it for 9-12 months timeframe? please tell in detail if time permits.

    ReplyDelete
  18. Hello VP Sir,

    What is your view on Orchid Chemicals and Pharmaceuticals(Previously recommended by you) at CMP 101.70 one can but it at this time kindly suggest me.

    Amit

    ReplyDelete
    Replies
    1. Down side looks limited but their strategy to sell business with potential again and again in parts to pare debt is a point of concern.

      Delete
  19. Replies
    1. Expecting signs improvement in business in another one year.

      Delete
  20. Sir.
    your advise on sunshied chemical @60 with one year horizon.....

    ReplyDelete
    Replies
    1. Nothing to comment about time bounded investment.

      Delete
  21. thanks Sir, this is a learning , not to make your investment
    time bound. can i add more sunshied chemicals at present price with long term horizon.......

    ReplyDelete
    Replies
    1. ravit, i think you only want to be money man. Plz be patience, not patient.

      Delete
  22. Sir, What do you think about Hind Industries?

    ReplyDelete
    Replies
    1. Expecting at least this time promoters will do something to unlock value.

      Delete
  23. what is your view on piramal life sciences

    ReplyDelete
    Replies
    1. Same case as mentioned above in case of Sun Pharma Advanced Research.

      Delete
  24. Thank you.... what r ur views about ashapura minechem?

    ReplyDelete
    Replies
    1. Expecting gradual improvement in business

      Delete
  25. Sir,
    do you track and any view on Hind Rectifiers?

    ReplyDelete
  26. Dear VP
    Please share your view on for next six months on

    SambAndam Spinning Mills Ltd.
    Garware-Wall Ropes Ltd.

    ReplyDelete
    Replies
    1. Not a fan of Investment with a pre- fixed time frame and I believe the success rate of such an investment in stock market is very low.Try to distinguish between savings and Investment and invest only surplus fund (not with the money intended for another purpose) in stock market without a fixed time frame.As you are aware there is higher risk and return in stock compared with many other options and stock price is not depends only on fundamentals in a short period .So we can't assure at a fixed time point we will get this much return.But one thing is sure ,for long term gain is always correlated with company's business growth.

      Delete
  27. Hi I need your views on ABC Bearing, AK Capital, Nagarjuna Agrichem, voltamp, logix microsystem & bilcare. Please take your time and let me know.

    Regards

    ReplyDelete
  28. sir i am your ur blogs new reader, in this short time i believe u advise growth potential stocks..thanks for that..i brought span dignostics@49..recenty slowly going down..your valuable view please.

    ReplyDelete
    Replies
    1. No change in previous view on this stock

      Delete
  29. Dear Sir
    What is your view on Madhucon projects, since long it is stagnant near 35 level and infra sector will get a boost from govt

    Regards

    ReplyDelete
  30. dear vp what is your view in treehouse?

    ReplyDelete
    Replies
    1. Positive on its prospects but stock price appreciated sharply in recent past.For a low risk investor ,it is better to wait for a correction.

      Delete
  31. Dear VP,
    Latest pick by many brokerages in pharma is aurobindo pharma your view please.

    ReplyDelete
  32. What happened with Simran farms...I bought on your recommendation at 32 and now its 23...shall i keep it or sell?

    ReplyDelete
    Replies
    1. Due to steep rise in feed cost ( mainly on account of delayed monsoon) company's last quarter was below expectation.

      Delete

  33. VP Sir...

    I wanted to ask you about Timber Home ??

    ReplyDelete
  34. Business having prospects,promoters should prove their ability to scale up the business.A stock to watch.Not much idea about promoter quality.

    ReplyDelete
  35. Dear Sir
    Can you suggest me sir that what are point to be for selecting a stock for investment for long term investment and any site for news of stocks.
    Please guide me in this matter.
    Thanking You
    With Regards
    Mahesh C Sainik

    ReplyDelete
  36. Hello Sir,
    I made an entry into Manglam cement at 184. This is my first buy to your recommended stock. I found this blog recently. Can i consider to buy tata chemicals at around 340, your one of the old recommendations. Is the value still intact and can be good investment?
    Thanks and Regards,
    Nadim

    ReplyDelete
  37. What is you take on NIIT Ltd ? near 52 weeks low..upside possible ?

    ReplyDelete
  38. hi.
    your views on BRANDHOUSE RETAILS, FEDDERS LLOYD CORPORATION, GUJARAT AMBUJA EXPORTS and RUPA & COMPANY.
    thanks
    jimmy

    ReplyDelete
    Replies
    1. Negative on S Kumar's Group,Neutral on Fedders lloyd
      Not tracking the rest.

      Delete
  39. Sir what are your views on allcargo logistics from a long term perspective?

    ReplyDelete
  40. Value Pick Ji,

    Thanks a lot for your valuable insights on various stocks.

    Just have a query,Why is the book value of Eon Electric is above 200 but the stock is trading below 35.

    Thanks
    Arun

    ReplyDelete
  41. Sir your views on RPower JSW Energy and Aditya Birla Nuvo?

    I can hold for 6-12 months

    ReplyDelete
    Replies
    1. Hold Aditya Birla .While investing in large projects like power companies we should ready to wait for long time.

      Delete
  42. Sir,


    Mangalam is falling consistantly for last 2-3 days with volume. Its currently in 160's. Any reason for this decline?

    ReplyDelete
  43. since following your blog, for the first time I am seeing any stock which is available below the price you recommended!. is this excellent opportunity to accumulate ? I am looking for just 20% returns....not greedy :D

    ReplyDelete
  44. Hi VP Sir,

    Should we hold Mangalam cement still? Please suggest.

    ReplyDelete
  45. Your current view on mangalam cement,eon electric,orient bell,tractor india ltd,laopala

    ReplyDelete
  46. your view/update on mangalam post results

    ReplyDelete
  47. Hi,

    You recommended Mangalam Cement at 176 on 22nd Dec 12
    After the bad results it is gone to 123 today.
    In about 6 months people who bought on your recommendation are looking at a loss of around 50 % on the share price. What are your views on Mangalam Cement now ?

    Amit

    ReplyDelete
  48. HI
    is it buy at current level for 1-2 year period?

    ReplyDelete
    Replies
    1. Stock came down due to overall lower demand situation of cement on account of slow growth in Infra and real estate sectors.Nothing negative happened specifically to the company.

      Delete

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