Monday, December 31, 2012

STOCK FOR 2013




Be it drinking water,drip irrigation,power generation ,sewage treatment  - Water – offers lot of business opportunities ..Scarcity of quality water  is expected to become a reality around the world in another few years.Even we know the potential is very huge ,as Investors in Indian stock market we have only limited options from the  listed space. VA Tech Wabag  is an excellent unique company operating in this field.This Chennai based company is a true multinational with operations in more than 20 countries around the globe with 17 subsidiaries.Company offers complete water life cycle solutions from concept to operation phase. Company executing  EPC and O&M services for sewage treatment, drinking water treatment, effluent treatment, sludge treatment, desalination and re-use for institutional clients like municipal corporations and infrastructure sectors like power,and oil& gas companies.Now company is concentrating in large projects like the one recently completed in Chennai  .The Chennai desalination plant is one of the biggest in the country with a capacity of 100-million liter per day.This plant is going to commission in another one month or two .Wabag will operate it for another 7 years for Rs.500 Cr.Successful completion of this prestigious project will act as  a testimony for company’s ability to handle large projects and will help the company to get more projects like this in future. Company’s strong order book of Rs.4000 Cr ensures visibility for next few  years. Company’s world wide presence,proven execution skills ,good reputation,strong financials and the potential of the industry it operates makes it an excellent opportunity not only for 2013 but even beyond.CMP is Rs.539

 Link to company website HERE
 
More info from Wiki HERE
 


Saturday, December 29, 2012

GILLANDERS ARBUTHNOT & CO.LTD. - BUY







Even  this company operating in India for the past 77 years ,this may be a strange name for many of you.This company originally promoted by  Mr. F. M. Gillanders and Mr. G. C. Arbuthnot and later taken over by Kolkata  based Kothari Group.Albert David Ltd is another listed company from this business group  .GAL is a diversified company with operations mainly in sectors like Tea,Engineering,Textiles,Chemicals,Property and Trading.Company owns 10 Tea estates with approximate area of 6000 hectares mainly in Assam.In addition to selling  bulk tea , company selling tea in retail packets under two brands – Mayur and KPI. GAL’s engineering division- Modern India Construction Company ‘MICCO’ executing turnkey contracts for designing and execution of  Building & Technological Structures, Tankages, Piping, Blast Furnace, Re-Heating Furnace, Industrial Furnaces, Cold Rolling Mills, Continuous Casting Machine, Gas holders, Coke Oven Battery projects, Raw Material Handling etc. Company is a preferred contractor of big steel companies like Tata Steel,Bhushan,SAILl..etc.Even in this tough times, recently GAL 's engineering division received orders worth Rs.133 Cr from Tata Steel and Bhushan. Textile division manufacturing cotton and synthetic yarn from two of its factories located at Kolkata and Ludhiyana.Total operating  1200000 Spindles in both these units together and selling the products both in local and export market. Company also operating a 6.5MW biomass based Power Plant in Punjab .
Chemical division of GAL manufacturing Lead oxide and it is one of the  largest manufacturers of Lead Oxides and Stabilizers for PVC Industry in India with a capacity of 17,655 Metric Tons.Company’s trading division importing and distributing various type of industrial products  includes Paints,Construction chemicals,Abrasives ,Painting equipments..etc. After a bad performance in last year company back to robust growth in first half of this FY .GAL reported a net  profit of Rs.21 Cr in the first half itself v/s a small profit of just Rs.1.5 Cr in same period last year.HY EPS is Rs.10/- .Due to softening cotton prices and increasing tea prices company is expected to benefit further .Management is liberal in profit distribution and distributed 50 % each in 2009 and 2010 .45% in 2011 and 5 % in last year even there is a loss.In 2010 company declared a bonus too.Recommending a BUY on GILLANDERS ARBUTHNOT & CO.LTD @ CMP of Rs.76 /- .Stock is listed both in NSE and BSE

Friday, December 28, 2012

NITCO LTD - UPDATE

I have recommended a BUY on NITCO last year @ Rs,62/-and later suggested to book loss @Rs.40 mainly due to their increased debt in last two quarters.In a filing to stock exchanges( HERE) today the company informed that the CDR cell has approved its debt restructuring package.Hope the worst is over for the company .CMP is Rs.24/-

For old posting Click HERE

Thursday, December 27, 2012

NITTA GELATINE - UPDATE

I have recommended this stock on 13 May 2012 @ Rs.87 - .Today Nitta  hits its 52 week high  @ Rs.251 /-. Still recommending to HOLD.


For old posting click HERE

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 

Wednesday, December 19, 2012

LA-OPALA RG - UPDATE

LA-OPALA RG  is a stock repeatedly recommended from a level of Rs.60/- ( Initial posting HERE) up to Rs.190/- (Latest posting HERE) .Today stock hits its life time high @ Rs.237 /- backed by strong accumulation by promoters even at higher level.( Latest Disclosure HERE). As mentioned in the previous posting, full benefits of recent capacity expansion is expected to reflect in coming quarters. Recommending to HOLD .

Monday, December 17, 2012

GODREJ INDUSTRIES - UPDATE

I have recommended this stock around Rs.185 last year (For old posting Click HERE ) which is currently trading around Rs.305.Today  company announced .  Temasek- an investment company based in Singapore, has entered into a definitive agreement to acquire a 19.99% stake in Godrej Agrovet Limited (GAVL), a subsidiary of Godrej Industries Limited for a total consideration of Rs.572 Cr.Investors with some risk appetite can still HOLD it for long term.

Saturday, December 15, 2012

ORIENT BELL LTD ------- BUY





Tiles become the preferred flooring material of Indian’s mainly due to its variety,affordability and durability.Led by Kajaria Ceramics  Indian organized Tiles industry showing decent growth in past few years which now stands around Rs.6500 Cr.Somany Ceramics,,Orient Bell,Nitco, HR Johnson..etc are the other major players in this industry..Orient Bell is one of the largest player in this industry with a market  share close to 12 -15 % .In 2010,company acquired Bell Ceramics and later merged this company with itself.With this acquisition Orient becomes a company with largest installed capacity in India and one and only company having plants in North ,West and South India and becomes the fourth largest Tiles company by sales in India.Orient’s manufacturing facilities are located at Sikandrabad (UP) ,Dora ( Gujarat) and Hoskote (Karnataka) with a total production capacity of 30 million square meter per annum. Company having a strong marketing network with 2500 direct dealers and 9000 Retailers and 30 Stock points across the country. Region wise contribution of sales is close to 41% from North India ,33% from South,17 % from East and 9 % from West.OBL selling its products under three different brands – Orient,Orient International and Bell.Out of these orient International is selling premium imported tiles from Italy ,Spain ..etc..For introducing most modern trends in tiles industry company operating a full fledged design studio in Castellon,Spain. Orient is  present in Ceramic ,Vitrified ,Ultra vitrified and Decorative Categories.

Financials

From the major companies mentioned above I am selecting orient on the basis of its cheap valuation .The No.1 Company in this sector – Kajaria Ceramics- with a sales of Rs.1300 Cr is trading with a market cap of Rs.1825 Cr where Orient  with a Sales close to Rs.600 Cr is trading with a market cap of just Rs.122 Cr. We may find that Orient’s lower bottom line may be a reason for this, but more than 10 fold difference is difficult to justify. When we take the Cash EPS for Orient and Kajaria ,it is Rs.31 for Orient and Rs.16 for Kajaria and EPS is Rs.13 for Orient and Rs.11 for Kajaria .It is clear that Orient’s Rs.180 Cr debt is playing the spoilsport .Orient is an uninterrupted dividend payer  too for the past many years.

My observations

Orient is a company driven by professionals and it is taking each and every step with utmost caution.Their recent acquisition of  loss making Bell Ceramics which is bigger than Orient in size  and the business acumen to turned it around to profit  within one and a half year without any additional investment is an excellent example for their ability to spot out opportunities and utilize it properly.Fuel cost consists about 35 % of the production cost of Tiles manufacturing .On commissioning of Ratnagiri- Bangalore Gas pipe line in 2013 ,fuel cost of ‘Bell ‘ unit will drop substantially.Orient is now concentrating in value added premium segment where competition is less from small players.Orient is silently taking all efforts – capacity addition,expansion of dealer network,establishing state of art design studio,filing patent application for tile with uniqueness like ‘germ free’ ..etc – to reap the benefit when the construction sector revive. As I mentioned above ,higher debt is the only concern at this point .But I believe promoters will take  steps to reduce it once they fully integrate the ‘Bell’ unit in near future.Before taking over ‘Bell’ ,Orient bought real estate with an intention to start a plant at Kakinada .After the take over of Bell manufacturing facility they dropped their plan and this asset is not a necessity for them now.Company’s another two plants are established in 75 acre land and I believe part of it can be used to retire a portion of debt.It is clear from available data that the promoters are buying its shares from open market even near its 52 week high price.Now their holding reached  near to the maximum permissible limit of 75 % .I believe promoters have some plan to raise funds by issuing fresh shares once its share price reached some higher level  to retire debt and their market purchase is an indication in this direction.Company is targeting  to reach Rs.1500 turnover by 2015 and its current equity is just Rs.13.5 Cr .Once company reduce its debt through any of these methods that will be a game changer for Orient.Any revival in construction sector will be an added advantage . Considering the nature of promoters and their sincere efforts  I believe  Orient Bell will emerge as a dark horse from this sector in another few years and is the best pick from this sector for long term investors at CMP around Rs.90/- .Stock is listed both in NSE and BSE.

TO WATCH CORPORATE VIDEO*(14 minute) CLICK HERE



Since company is maintaining an up-to-date website I am not explaining more about its product line .You can check it HERE

Latest Annual Report HERE
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* created by company itself 
Disc: I have vested interest in OBL.
 


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