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

Thursday, May 29, 2014

ALPHAGEO INDIA ,GALAXY ENTERTAINMENT CORPORATION - UPDATES

ALPHAGEO INDIA 

  


Alphageo India is a stock  recommended @ Rs.38 about 6 months back ( Link HERE) Today it hits its 52 week high @ Rs.221. Company reported excellent number for the FY 2013-14. Turnover jumped from Rs.24 Cr to Rs.94 Cr and reported a net profit of Rs.26 Cr V/s  a loss of Rs.11 Cr .EPS is Rs.48 . Company also reported a dividend of 20 % . Recommending to HOLD this stock.


GALAXY ENTERTAINMENT CORPORATION 

  


This is one stock recommended long back in 2011 @ Rs.13 ,and mentioned as a potential multi bagger. But nothing has happened as expected so far . The entire future group was in trouble due to huge debt burden and falling revenue mainly on account of recessionary situation for the past few years. Now they are trying for a come back by restructuring of their businesses .This may be the reason they ignored this small company for the past many years.Now , It seems  there is some light at the end of tunnel . Company recently clarified that they are taking this business as serious and planning to expand the business through various initiatives. As part of this ,they already sold some units and acquired some other and planning ambitious expansion going forward .

Read more details in the below link

Future Group’s Galaxy bets big on food courts




Today company reported its March quarter numbers .In this quarter ,Galaxy reported a top line of Rs.22.5 Cr V/s Rs.3.1 Cr  and a net profit of Rs.1.6 Cr V/s a loss ( Excluding exceptional item ) . It seems after long waiting of  four years ,company now started to move through the right track. The potential of industry is very good and if  they can tap it ,stock may be a multi bagger from current level of Rs.24


Related Readings in the below links:




3) Galaxy Entertainment Corporation Limited launches a new sports bar “SBX”


 
4) Sports Box, Finally A Sports Bar In The Eastern Suburbs






For old recommendation on this stock ,Click HERE 


Disc: I have vested interest in both stocks.








 

Tuesday, May 27, 2014

VA TECH WABAG LTD - UPDATE


 This stock recommended @ Rs.539 ( Link HERE)  hits its life time high ( adjusted to stock split)  today@ Rs.1075. STill recommending to HOLD the stock for long term.











Saturday, May 24, 2014

NILKAMAL LTD - REPEAT



  

Nilkamal and Wimplast are two companies I recommended earlier on same day.( Old Link HERE ) Recommended price was Rs.202 for Wimplast and Rs.264 for Nilkamal.But now ,Wimplast turned as a 4 bagger which is currently trading above Rs.800 where Nilkamal is still around the recommended price. This week let us look into the reasons for this under performance by Nilkamal which is almost 10 times bigger than Wimplast by turnover.

                                                                             The brand ‘ Nilkamal’ is familiar to everyone and it is the world’s largest  moulded furniture maker and Asia's largest plastic processor.Company operating through five different divisions viz – Moulded Furniture,Material Handling,Mattress,@home, and Home ideas.Its manufacturing facilities are strategically located at each zones of our country .Company own seven factories in India and one in Sri Lanka. Under the moulded furniture division ,company manufacturing plastic moulded chairs , sofas ,ready to assemble furniture ..etc .Its material handling division selling crates, pallets, Pallet Trucks ,Stackers, Forklifts ..etc. Company is the market leader in each of these products.
    


    

 What  went against managements expectation was the performance of @home division.This division comprises 19 large format retail stores with an average size of 16,000 sq.ft. per store.Even after spending close to Rs.100 Cr for this division ,performance of this division was not up to the mark for a long time.Performance of this division affected company’s over all profitability and its share price.Now management took a decision to control spending for this division and concentrate in other core businesses.It is planning to spend Rs.50 Cr to start two manufacturing facilities for mattresses in next three years.At present company owns two  mattress manufacturing facilities located at Bangalore and Kolkatta . Management is confident to achieve over Rs.100 Cr turnover from this division alone in this financial year (2014-14) itself. Mattress division is comparatively high margin one for the company .After a long wait , company’s @home division also came to profitability in previous financial year (2013-14) .In all other divisions company having enough capacity and hence not expecting substantial spending for capacity addition in near future . This situation will help the company to improve its cash flow and debt reduction going forward. Nilkamal Bito Storage Systems  ( Link HERE) , the joint venture company with BITO Langertechnic of Germany also reported profit in latest FY .Combro Nilkamal Pvt Ltd is another joint venture with US based Cambro Manufacturing Company ( Company Profile HERE)  .This joint venture company is operating in the field of commercial food service & hospitality segment which also reported good performance in FY 2013-14 

 

All together ,this is the changing time in Nilkamal with management’s prudent decisions.Promoters holding about 63 % stake in this company and not a single share pledged..Company reported substantial improvement in its profitability in latest March quarter. For the full year ,Company reported a consolidated top line of Rs.1752 Cr and a net profit of Rs 48 Cr . EPS for the year is Rs.32 .Company also declared a dividend of Rs.4 per share . Company’s book value is close to Rs.300 and currently trading even below this @ Rs.288. Considering the steps taken by the management in recent times to improve its performance ,recommending this stock again as a BUY for long term investors.Stock is suitable to include even in the core mid cap portfolio . Stock listed in both exchanges.



Link to Company Website HERE 

 

Disc: It is safe to assume that I have vested interest in Nilkamal

Friday, May 23, 2014

JAIN IRRIGATION - UPDATE

This stock recommended @ Rs.57  on 6th April ,2013 . ( Link HERE ) which is currently trading above Rs.110  . Company reported good numbers in latest March quarter ( Link HERE ) and declared a dividend of 25 % .This is one of the best agri-related stocks available . Requesting to HOLD it for the long term.

Thursday, May 22, 2014

ASTRA MICROWAVE PRODUCTS LTD - UPDATE



This stock recommended @ Rs.35 . ( Link HERE ) . Yesterday stock hits 52 week  high @ Rs.96.5o ,which is an appreciation of more than 150% in less than one year .Still recommending to HOLD this for long term.

Tuesday, May 20, 2014

SHAKTI PUMPS (INDIA) LTD , APAR INDUSTRIES - UPDATE

 SHAKTI PUMPS (INDIA) LTD


This stock recommended @ Rs.58 about 6 months back. ( Link HERE ) . Today closed in upper circuit at yearly high @ Rs.147.60 .Those with only average risk appetite can sell half of your holding quantity and keep the rest as cost free.

APAR INDUSTRIES LTD 


This stock recommended @ Rs.145 . ( Link HERE ) . Today stock hits its 52 week high @ Rs.218.Stock already appreciated 50 % in 4 months. Recommending to book profit @ CMP , if not interested to take further risk.




Saturday, May 17, 2014

SUNIL HITECH ENGINEERS LTD.- BUY



    
The long wait is over and the outcome is clear. Fortunately it is a clear mandate which may help the government to take bold decisions to revive the economy and that is the need of the hour.Lower number in Rajya Sabha for the ruling party may be an issue in certain cases for the initial years ,but  over all situation will be far better than the recent past . Another threat for economy in near future may in the form of monsoon which is beyond everyone’s control.Let us hope for the best in this case too. As we are aware ,the recent run up was very  sharp on expectation of a strong government . So it is the time to react to the reality. Some profit booking can’t be ruled out once the initial celebration ends.I hope my readers will show enough prudence while selecting stocks in a volatile market condition and give priority to quality and value in stock selection.



‘Power’ is important not only in politics but for the growth of any economy.In recent past ,due to lack of clear majority in parliament govt could not take any bold steps to increase power production .Lot of small and large projects stuck at different stages  due to policy paralysis especially related with land acquisition ,environmental clearance ...etc. I hope ,the new government will give priority to this sector which is the backbone of any industry in any country.So this week selecting a stock which will be a beneficiary for additional capex and expansion in power sector. Sunil Hitech Engineers ( SHEL) is a Maharashtra based company .Hard work,acumen and grace of god is the perfect combination for success in business and growth of this company is a  testimony for that. Started by Mr Ratnakar Gutte ,a high school dropout with just Rs 2,000 as capital ,Sunil Hitech now turned as a Rs.1500 Cr turnover company . Now company is professionally manged with the help of his two sons -one a mechanical engineer and the other an MBA.


SHEL specializing in fabrication, erection and commissioning of  power plants.In addition to power plants ,company executing Lump sum turnkey (LSTK) contracts of Transmission & distribution projects, Steel Plants, Sugar Industries, Process & Piping Industries, irrigation projects  ..etc .Company is one of the few qualified contractors for BOP works  up to 660 MW .Comany’s marquee clients includes NTPC,BHEL,Alstom Energy Corporation,L &T,JSW Steel,JSW Energy ,BALCO ..etc and various state electricity boards.At the end of FY 2013 SHEL’s order book position was Rs.2300 Cr .

In FY 2012-13 ,on a consolidated basis ,company reported a top line of rs.1253 Cr , a net profit of Rs.55 Cr and an EPS of Rs.29 . During the latest March quarter promoters hiked their stake from 53 % to 58 % by subscribing shares on preferential basis .In addition to this ,they also subscribed warrants which will be converted into equity shares within 18 months.On full conversion of these warrants promoters stake will again rise to 66 % .Pumping of this additional funds by promoters will help the company to reduce its dependency on debt and some comfort on working capital side. Ashish Dhawan – a well known investor and co-founder of P/E firm ChrysCapital holding close to 2 % stake in SHEL in his personal capacity .

                                                                                      I believe, the emerging scenario will be very  positive for a company like Sunil Hitech Engineers .Stock is valued cheaply at CMP Rs.76 with a P/E multiple of less than 3 and its current market cap is just  1/15th of its last year consolidated top line  . Recommending as a BUY @ CMP of Rs.76 for long term investors.Stock listed both in NSE and BSE


Link to Company Website HERE

Link to Latest Annual Report HERE 





Disc : It is safe to assume that I have vested interest in SHEL

Wednesday, May 14, 2014

DFM FOODS ,LA-OPALA RG - UPDATES

 DFM FOODS LTD

This stock initially recommended as a  BUY  @ Rs.48/- ( Old Report HERE) which is currently trading @ Rs.280/-. Stock price multiplied by 6 times in 4 years .Requesting to EXIT from the stock .Re-entry may consider after a correction (if any) close to Rs.200 .

LA-OPALA RG 

This stock initially recommended as a  BUY  @ Rs.66/- ( Old Report HERE)

Today stock hits its life time high @ Rs.1004 and closed around Rs.950


Stock price multiplied by 15 times in 3 years .Requesting to book partial profit by selling 75 % of your initial holding


Monday, May 12, 2014

CAPLIN POINT LABOROTORIES - RESULT UPDATE

Company reported a top line of Rs.41 Cr v/s Rs.29 Cr and a net profit of Rs.7 Cr v/s Rs. 3 Cr  for the March quarter compared with same period of last year.Company's year ending is in June and it already surpassed last full year profit in this 9 months itself  ( Last full year EPS was Rs.9.25 where this year 9 month EPS is Rs.12.50) . Contribution from company's recently inaugurated plant is expected to reflect from next FY onwards.Recommending to HOLD the stock.

Saturday, May 10, 2014

PATELS AIRTEMP (INDIA) LTD - BUY




  


 

 
Just imagine the financial picture of a micro cap company operating in capital goods sector  which  exclusively manufacturing products for sectors like Power,Refinery,Cement,Fertilizer ..etc. On the background of prolonged recession in user industries  the company in your mind may be characterised by a bleeding balance sheet ,heavy promoter pledge or even a company referred to BIFR .Accepting , many companies in this sector going through such situations or worse . But let us look into a different story which is showing strong resilience in this tough time . Patels Airtemp (PAT)  is the company which is doing exceptionally well in many parameters .Company is one of the leading producer of  Heat exchangers,Pressure Vessels,Refrigeration and air conditioning equipments.PAT now mastered in the production of Air Cooled heat exchangers ,the product which is expected to replace the widely used water based heat exchangers in future.Company producing standard and custom made products and also offering turnkey solutions for large clients from the above mentioned industries.



                                                                               The most attracting points of PAT is the resilience it showing in this tough times. Company’s close rival GEI Industrial Systems reported pathetic  performance in recent times and going through a very difficult situation and even now it is not clear whether they can sail through the current recessionary period.GEI reported a huge loss in last FY where PAT  survived due to better financial management,clean balance sheet and reasonably good order book position.In FY 2012-13 PAT reported a top-line of Rs.90 Cr ,net profit of Rs.5 Cr and an EPS of Rs.9.75 .Company never skipped dividend in last 7 year but steadily increasing the same over this period.At a time most of the small size companies operating in capital goods sector are struggling to service their debt ,PAT’s debt is very minimum which is below Rs.15 Cr.

                                                                   Changes in promoters share holding is always taken as a benchmark for their confidence in their own company.Promoters of many small size companies - including its rival GEI Industrial Systems – pledged their shares in past few years due to various reasons like collateral for working capital availability ..etc .Many promoters are not in a position to pay  back the amount and lost their shares due to pledge invocation .Here the story is different in the case of Patels Airtemp.Not a single share of this company is pledged and more than that promoters are very aggressively hiking their stake. As per rules, any promoter can hike only up to 5 % stake in any financial year through creeping acquisition route without making open offer. Promoters of PAT bought the entire 5 % in last financial year which increased their stake from 40 % to 45 % during 2013-14 .After completing the maximum permitted stake hike in last financial year ,promoters are again started buying from open market frequently  when new financial year (2014-15) started. ( Verify Promoter Purchase details HERE) This clearly indicating their increasing confidence in the company  even during this worst period for any company operating in capital goods space. In the 9 month period of ongoing FY ,company already reported an EPS over Rs.7 .

I believe ,the worst is over for this company and the credibility it kept even this tough period will surely increase its goodwill .Those who believe in a revival in India’s industrial growth ,this Gujarat based company is a risk-less proxy which is trading around half of its book value @ CMP of Rs.55.Stock listed only in BSE

Link to Company Website HERE

Disc: It is safe to assume that I have vested interest in PAT

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