Saturday, May 31, 2014

UNITED DRILLING TOOLS LTD - ONE STOCK TO WATCH



 

 





Self sufficiency in energy resources is the key for the growth of any economy.Unfortunately ,at present , position of our country in this matter is a reason for concern. Lack of  framing and implementing  policies, red tapism..etc are the major reason for our failure. Be it coal or oil our policies are vague  and can be interpreted in different ways. Only these type vague policies will help to earn maximum bribery for the officials and hence majority of the babu’s are not interested to frame a concrete policy which is clear and without any doubt. Take the case of oil exploration ,where no major global players are keen to explore in India when our government invites tenders for NELP .In the past ,our govt announces one policy at the time of inviting tenders and change that policy when a company identify oil after spending crores for exploration activities. Even after finding oil ,it will take years to get permission to erect pipes and other facilities to link the well with refinery  .This is why  still we meets close to 80% of its oil needs and half of its natural gas requirement through imports. There is  lot of tax,environment related issues  which is quite natural but the  time lag to sort out such matters makes global giants desperate to bring their technology and efforts to a country like India. Any govt with a vision should be  aware about the  importance of energy security and the importance of the same  to become a super power.In  a recent interview ,our new minister emphasizes the importance of this factor and let us hope for the best going forward.

                                           Any positive effort in this direction will revive many sectors like mining ,oil exploration,shipping,engineering..etc. About six months back we have discussed some companies like Alphageo, Selan Oil Exploration etc from oil exploration and allied sectors. This week let us look into one more company related with this sector- United Drilling Tools. This company may be  an unknown one to the investor fraternity and I believe it even not discussed anywhere in message boards  or discussion forums.In one sense it is a niche company in the listed space from the oil exploration related business.Company manufacturing many sophisticated equipments used in oil exploration industry like Winches,Gas lift valves,mandrels,sliding sleeves ..etc. These equipments are critical parts of oil exploration industry , sophisticated in nature and manufactured by very few companies in India.Earlier company was supplying products mainly to ONGC and Oil India but with the completion of its two units one each at Kandla and Noida ,company is planning to ramp up exports.In another move ,promoters are merging  privately owned companies with the listed entity .Recently they merged P&K Hitech Systems P. Ltd and another one Macro Steel engineers is in progress.Post merger UDT’s equity will be close to Rs.8 Crore.


Financials 

 


2013-14 was the first full year of operations post merger of P&K hitech systems . Company reported a Sales of Rs.78 Cr and a net profit of Rs.4.72 Cr in this years .In the previous FY ( Prior to the merger of P&K hitech systems ) it was Rs.36 Cr and Rs.87 lakhs. It is noted that in this FY’s numbers there was an extra ordinary income of Rs.1.96 Cr . Clarity on this point will be available only on receipt of latest balance sheet.The next company to be merged (Macro Steel Engineers) seems small in size but as per management claim  they are holding some  patented niche technology in this field.Post merger of this company, promoter’s stake will be close to 74% and non promoter body corporates’ stake will increase from less than 1% to more than 13 %  .I believe ,this non promoter corporate entities are linked with promoters itself and the share holding pattern arranged in a manner to avoid the violation of public share holding norms of listed entities.Other than this corporate entities ,general public will hold less than 15% stake post merger.



Conclusion

Potential of oil exploration sector is bright especially if the government is committed and the power to implement policies . Company producing niche and import substitute  products for this sector. Starting of export from new units will minimise the uncertainties of local market and reduce the volatility of earnings .In many other cases promoters merging their loss making private companies with the listed ones but here the top line and bottom line improved substantially post merger.Company’s results are volatile on a quarter to quarter basis, profit margins are also highly volatile.Management clarified that this is because of the tender based purchasing method by oil PSU’s  and hence there is no rationale in analysing company’s performance on a quarterly  basis . This volatility is expected to come down once there is improvement in earnings from exports going forward. This is an unknown company with unknown promoters which always increase the risk of investment,but at the same time it is a niche one with good potential.Last year company reported an EPS of Rs.8.72 and currently trading with a P/E multiple of close to  3.Even if we reduce the entire other income and re calculate the EPS ,P/E is only 6 at current market price of Rs.30 .All together ,a high risk high profit kind opportunity and suitable only for investors with high risk profile  . Others can keep this stock in your watch list and take decision after seeing the consistency in performance for the next few years. Stock listed only in BSE with trade code .522014 and CMP is Rs.30


Link to company website  HERE


Disc: I have vested interest in this stock

68 comments :

  1. Sir,
    At which level one can buy J&K Bank?

    ReplyDelete
  2. vpji, would love to hear your comments on cravatex results

    ReplyDelete
  3. Sir
    Can one buy SKS Microfinance at CMP?

    ReplyDelete
  4. Sir i hold srei infra and irb infra...please share your views on both

    ReplyDelete
    Replies
    1. Positive on IRB ,not tracking Srei

      Delete
  5. Sir,
    Is united drilling under tr to tr ? Also the market lot seems to be 100. What would you adivise on Dr. Agarwal.

    ReplyDelete
  6. Sir, what is ur view on V2 retail after the results now. Is it not below the general expectation?

    ReplyDelete
    Replies
    1. No idea about general expectation but not too below my expectation.In fact sales is above my expectation.

      Delete
  7. sir,your views on marksans pharma post result???

    RAHUL BABA

    ReplyDelete
    Replies
    1. This stock already given more than 500% return in less than one year. In last FY ,the base was low and the growth in percentage was very high. We can't expect similar performance going forward.

      Delete
  8. Hi VP Sir,

    What you think of V2 Retail result? I just felt they have performed very well and gained double the sales as last year. I believe it is just a matter of time to gain profits. Please provide your opinion sir.

    Thanks,
    Prakash K

    ReplyDelete
    Replies
    1. At the earlier stage of turn around ,the process will be painful and may test our patience .

      Delete
    2. Thank You sir! I am very happy with management recruiting new director, expansion after achieving a proper revenue per sqft etc. I can wait for few quarters, or even 1-2 yrs for the company to turn profitable(yearly basis). I would add more quantities whenever there is a huge slide(25-30%). Thanks for letting us know about this gem sir

      Delete
  9. Very kind of you to give detailed explanation on stocks, most of which have given great returns.
    Thanks

    ReplyDelete
  10. Respected Sir,

    Please your view on IRB Infra and ITNL.I want to buy these before elections...Please please do reply

    ReplyDelete
  11. Respected Sir,

    Please your view on EIL Elecon engineering and PTC India.I want to buy@CMP.
    Sir please do reply as you had not posted my queries in the last 2 weeks.Please do share your view on these stocks.

    ReplyDelete
    Replies
    1. Not strictly tracking any of these stocks ,hence not in a position to comment on.

      Delete
  12. Sir your view on Sunil HitechEng result

    ReplyDelete
  13. Sir,

    Panacea Biotec has come out with their annual results. Auditors have put adverse comments on the Company's performance however, Management is much positive on Company's outlook. Can one stay invested or right time to entry / exit. For your valuable comments please.

    With regards,

    Shrikant Joshi

    ReplyDelete
  14. Hi Sir,

    What is your view on Jyothy lab.I bought @202 and now it is 182.I checked the result, its aquisition and future prospect and it looks good to me.I invested for 3-5 years considering the growth in future.What is your view on this.

    PS : Sorry for posting again.

    Thanks in advance
    Tarun

    ReplyDelete
    Replies
    1. Not a bad company but not expecting any out performance in medium term

      Delete
  15. Sir, will you please share your views on Mafatlal results?
    awaiting reply.

    ReplyDelete
    Replies
    1. Same question answered in last two days .Please check whether the same q answered in recent days and avoid repeating it.

      Delete
  16. Sir ur view on cox n kings post results?

    ReplyDelete
    Replies
    1. Stock appreciated more than 100 % from recommended level ,One may book profit and re-enter at lower level.

      Delete
    2. But u recently asked to hold cox for long term

      Delete
    3. Consolidated numbers may affect due to rupee appreciation in medium term

      Delete
  17. Dear Sir,

    What is your view about SMS pharma latest quarterly results. Is it good or below expectations. What should be the strategy for investors, hold / buy.

    Regards,
    Imran

    ReplyDelete
  18. Hi sir I have hold bankbaroda pls suggest sl and targets

    ReplyDelete
    Replies
    1. Sorry ...I am not a technical analyst to suggest targets,SL ..etc

      Delete
  19. Dear VP Ji,
    Your opinion on Apar Ind. after results is appreciated. Do u think to hold or exit? Thank you sir,

    ReplyDelete
    Replies
    1. I don't know why you are asking this question even after a separate posting on this in the below link

      http://value-picks.blogspot.in/2014/05/shakti-pumps-india-ltd-book-partial.html

      Delete
  20. Bought a small quantity at 31.55 in the morning at upper circuit

    ReplyDelete
  21. do you have any paid stock recommendation service or portfolio management service , i am looking for portfolio manager who can manage my big portfolio. please reply on my mail- bob_w1120@yahoo.com

    ReplyDelete
    Replies
    1. No paid or personalised services

      Delete
    2. even though you carefully select message for replying it on blog , you should had reply me on my email if u were interested, as you not interested you need not to reply my message on your blog , a lot of unnecessary junk mails flow to my mail claiming for providing portfolio management service after you post my message, if you wanted to reply on your blog , you should had removed my mail address

      Delete
    3. If that's the case ,Why you didn't opt the email id provided at the top of blog rather than posting it as a message here ?

      Delete
    4. nice nose cut :) VP... u r simply rocking!!!!
      Tamil

      Delete
  22. Sir Gud Afternoon.
    Can u let me know your Views on Welcast Steel and Jindal Poly Films?

    ReplyDelete
  23. this is not moneycontrol or cnbc awaaz for SL and Targets. Please check on internet you will find many ...

    ReplyDelete
  24. Sir,
    did you go wrong in analyzing Cox & Kings result as teh stock moved upwards...due to sell of their one of the properties.

    any idea sir?

    ReplyDelete
    Replies
    1. Not the result but company's decision to sell one unit and reduce debt help the stock 's recovery which announced during market hours today.

      Delete
  25. Hello Sir,
    I am a beginner who is still reading books on value investing and learning to read annual reports. Thank you for sharing your valuable outlook towards stocks in detail.. They are really insightful!
    Do you have any suggestions for me before I get started. I want to begin with Rs.50,000/- but am confused with the number of options available.

    ReplyDelete
  26. Sir plz update v2retail result...

    ReplyDelete
    Replies
    1. If you want to make big money in turn around stocks,you should take above average risk and good patience .Turning around is not a process which will happen overnight.Almost 100 % increase in top line is not a small point to note.

      Delete
    2. Dear VP

      I humbly differ from you. V2 Retail has 536.6 Cr accumulated losses and 169.5 Cr contingent liabilities. I dont think a dramatic turnaround is possible and in the best case scenario it will take atleast 2 years for share price to cross Rs 20-25 range. What do you say ?

      Delete
    3. @ Rs.25 what is the percentage of gain in 2 years ?

      Delete
  27. Thanqfrombottom of heart for anlalising and your patience I bought canfinat 140rotopump110,java sree110,liberty100 each 100 pl suge hold r exit once ag tanq

    ReplyDelete
    Replies
    1. Only in case of Jayshree ,take a decision based on weather condition .One can hold all other stocks.

      Delete
  28. Dear VP ji,
    I am repeating my querry. Hope this time it will be posted. Your views on Mangalam Cement & HEG. Both recommended by you almost 2 years back. Now it is above the recommended level. Your views. Thanks.

    ReplyDelete
  29. Sir, I am holding Bharat Gears Ltd at 74. The company posted loss continuously since last two quarters. What is your take behind poor performance ? Should I hold or add more ? I am ready to hold it for long term...

    Regards,
    Avani

    ReplyDelete
  30. Hi VP sir,
    Can you please update on Crompton Greaves after the latest results? Is it still Hold or Sell now and buy later at lower price?
    - Sanju

    ReplyDelete
  31. Dear Mr Value Pick,
    Kindly explain how the Defense sector is going to benefit from FDI cap increased from 25 to 100 percent.
    Regards
    MVReddy

    ReplyDelete
    Replies
    1. Discussions and explanations by various experts on general subjects like this one are easily available in the web itself

      Delete
  32. HI VP. its really a grt to see ur reco. but its of no use because whenever u posted a share then on next day it has a upper circuit and investors are not able to buy it. and after having a 20 30% aprreciation it started falling. please suggest those stocks which are in good volume so that we can buy it. I have also examples: Gujarat Borosil, united drill, himalaya international.

    ReplyDelete
    Replies
    1. Many stocks recommended earlier turned as multi baggers .But none of them moved from circuit to circuit to reach here . There were corrections and consolidations in between which offer opportunities to enter

      Delete
  33. Sir your views on Zicom results ? I asked this query many times...Pls guide us.

    ReplyDelete
  34. Dear VP,

    What is your view on entering in this stock now when it is already appreciated more than 100% and currently declining.

    ReplyDelete

Followers

Tweet TopOfBlogs