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Tuesday, June 29, 2010

Diamines & Chemical: Divident Stripping: Value Buy

Diamines & Chemicals:
CMP: 60.50
Market Cap: 39.46Cr
Sales March 2010: 54.10Cr
Debt: 17.49Cr (March 2009)
Reserves 14.49Cr
ROCE: 20.22%
Debt Equity: 1.33
Long Term Debt Equity: 0.63
Divident Rs 2: Ex- Divident date: July 7,2010 <<==(Changed from July 8 to July 7)

Diamines & Chemicals is the only Ethylene Amine business in India. AlkylAmines Chemicals has a controlling stake in Diamines Chemicals. Alkyl amines is the worlds leading provider of pharmaceutical grade aminehydrochlorides. Diamines & Chemicals is focussed on Piperazine. Ethyleneamines are used in pharmaceuticals, agrochemicals, lubricants, fuel additives etc.

Diamines & Chemicals has reported for the year ending March 2010 a 269% increase in operating profits. There was a one time 8Cr other income related to written back old credit balances. The company operating margins are above 20% which is really good. The negatives are higher debt to equity ratio and reserves of just 14.49Cr (9.66Cr last year). There is also a possibility that the profits could be depressed in the future as Alkylamines is related upstream company. Right now the 3% divident return in 1 week along with good profit margin of more than 20%  are the positives for investment return of 10% or more in one month. Short term Buy!!
PN: these are my personal views please do your own deep dive before investing.

Monday, June 28, 2010

ADC India: Long term Value Buy!

ADC India:
CMP: 124.00
Market Cap: 54Cr
Debt March 2010: 0.47Cr
Reserves March 2010 (6 months): 51.07Cr
Sales TTM March 2010: 71.24Cr
Cash & Bank balances (6 months): 24.16Cr
Profit From Operations March 2010 (6 months): -ve 0.09Cr
Net Profit March 2010 (6 months): +ve0.91Cr

As per ADC india Website: http://www.adckrone.com/in/
(Corrected information posted about ADC India on June 30,2009)
ADC is a world leader in providing global network infrastructure products and services that support our customers’ migration to next-generation networks. ADC plays a crucial role in enabling its customers to deliver dynamic video, data, voice and wireless services that are increasingly essential to Telcos, Enterprises & Infrastructure providers.

The need for ubiquitous access, scalable bandwidth and robust, reliable connectivity is no different for a carrier, cable company or enterprise. All depend on ADC's network infrastructure expertise to help them design and deploy high-speed networks, wired and wireless, offering dynamic video, data, and voice to businesses and consumers.

ADC's industry-leading portfolio of network infrastructure solutions helps our customers to provide advanced, differentiating services to meet their own customers' unrelenting demand for bandwidth along with their employee's need for instant, reliable access to business critical information.

Customers in India: BSNL, MTNL, Ericsson , Nokia Siemens, Bharti Televentures(AirTel), Reliance Infocom, Tata Teleservices, HFCL. Infotel, Lucent, TCS, Barclays, Standard Chartered Bank, Crisil, Common Wealth Games, Alcatel, Cognizant, EMC, Vikas Soudha, Intellinet Global Services, Hexaware, Volkswagen, Vodafone, ITPL, Shell. Indian PMO, Indian Parliament Library, I2 Technologies, Verizon and more

Conclusion: ADC india is definitely not cheap.. but considering that parent ADC is a world leader in next generation networks and ADC Krone is an integral part of ADC. we have a winner in hand. Also considering the fact that ADC has a market cap of 54Cr and 24.16Cr of cash in hand right now ADC India is actually selling for 30Cr. This is a zero debt company and high quality provider of network solutions to telecom companies. Accumulate for long term.

Friday, June 25, 2010

Jayant Agro: Promoters expect 35% compounded growth per year for the next 2 years

On June 24,2010 in an interview with CNBC-TV18 promoters Mr Udeshi has stated:
1. Value added products manufacturing has been started.
2. We should see the impact of this from the 2nd half of 2010
3. Company is expecting 30-35% growth in topline and bottomline
4. Seed crushing capacity has already been increased from 900 MT to 1200MT per day crushing capacity (last year completed)
5. 3rd and 4th generation castor derivatives to be produced in the Mitsui JV: Ihsedu Speciality Chemicals Limited.
6. Operating Margins are going to expand by 150 basis points ie 1.5% from 5% to 6.5%

Conclusion: Jayant Agro had 887Cr March 2010 Consolidated revenues and an operating margin of 4.63% (link) considering 35% growth in topline and 6.5% margins:
March 2011 Sales: 1197.5Cr (Projected)
Operating Profits March 2011: 77.87Cr
Net Profit March 2011: 23.96Cr with EPS of Rs 16/= per share.
The Jayant agro shares should be quoting close to 250-300 levels (1 year target) considering current PE of 21. I am also certain that these are conservative estimates but these are good first level targets for Jayant Agro Organics. Strong Buy

PN: these are my personal views.. Jayant Agro was recommended as a "Best Buy" on May 15,2010 at 81.55 (link) along with Gujarat Ambuja Exports. Target for Jayant is close to Rs 500 per share on a 2 year horizon. Please do your own deep dive before investing

Link to the CNBC TV 18 Interview

Saturday, June 19, 2010

Hydrodrive: Peak Oil: Biofuels, Hydrogen Fuel: Positive Coefficient of Performance

Biofuels have lot of problems associated with their widespread use.
1. Land used for food crops will have to be shared with biofuels
2. It requires more energy to produce biofuels than energy available from biofuels.
3. Biofuels contain water levels which are higher than Internal combustion engines can tolerate and hence require further processing to remove excess water

There is one company in India that has patented technologies which helps in use of biofuels. Hydrodrive is the company which helps in use of biofuels with higher water content. Infact they have said that 25% water can be mixed with diesel and we can still get the same amount of energy/work done.
This technology of mixing water with fuel has already been implemented and device is being shipped by original equipment manufacturers as part of their diesel engines like Triveni Engineering works, Alfa Lava.

Hydrodrive has also created an Electronic catalytic converter which reduces harmfull gases from Internal Combustion Engines with an improvement in mileage for the vehicles (5-10% improvement in fuel efficiency 50% reduction in harmful gases). This technology has been implemented in China, Philippines and in India.

Hydrodrive has also created systems which are being used in Europe for synthetic high octane diesel with cetane index of 80 from straight vegetable oils and is also being used in efficient production of bio fuels from algae.

Hydrodrive is an essential component of the system to produce Hydrogen from water with a positive COP(Coefficient Of Performance) between 1-9 [the best possible]
Positive Coefficient of performance means you generate more energy than what is fed as input energy into the system. Even current gas based power plants and thermal power plants have a COP less than 1.

So folks here is the link to the company website: http://www.hydrodrive.co.in/ surprisingly not well known even when the promoter Srinivasan Gopalakrishnan has been awarded the Gold Prize by Far Eastern Economic Review Year 2001. Former President of India Abdul Kalam had also visited the company and recommended Tata Motors to work on developing a system to implement the diesel/petrol mix with water for Internal Combustion Vehicles.

Friday, June 18, 2010

Peak Oil : Where do we go from here..

- Recently Mr Mukesh Ambani was in the news predicting oil at more than USD 100 per barrel.
- Another news related to the Ambani brothers was that Reliance Power will be provided GAS at 4.25USD from KG D6 but it will not be for 17 years..(infer that the KGD6 does not have enough gas reserves to last 17 years!!!)
- US Military has forcasted that surplus oil production capacity could disappear within 2 years and we could be facing serious shortages by the year 2015 (4.5 years from now!!)

I really do not need to go into what is peak oil..  if you do a google search there are 15.9 million search results. From an investment perspective and an Indian perspective where do we stand? what should we be doing?

Personally I can see that the govt is more eager to develop public transport systems
- Govt run AC buses in all major cities - trying to wean away the individual car owners to public transport.
- Emphasis on Rail and Metro Rail projects in large cities.
- Lot of digging for piped gas (for cooking mostly and maybe other use like transport/heating in the future)
- I also get a feeling that development of new major highways is not on schedule.(don't have any data right now to confirm it..this is just an inclination)

As an investor Reliance was in news for buying a 90% stake in the only licensed All India Wireless broadband company (infotel - Pvt company owned by the promoters of HFCL)
Reliance was also in the news for a possible majority stake in Largest Wireless Tower company in India GTL

I am not recommending Reliance as an investment idea (too expensive for my taste!) but we are looking for direction here.. We really need to understand that current lifestyle (As we know it) is deeply entrenched  in petroleum. We practically live and breath in petroleum.

- Food (Fertiliser, transportation, packaging, distribution)
- Clothes (Cotton - fertiliser, synthetic-petroleum)
- Medicine (Drugs -Chemistry-petroleum, manufacturing)
- Shelter (Brick making, Steel, Cement - Energy, Paint - Petroleum)
In fact the industrial revolution is based on availability of cheap hydrocarbons (Coal, Petroleum) and the ability of an individual to harness this energy to increase his capacity to do work.
The new world which we will all see unfold in front of our eyes (in the next 5-10 years is going to be completely different) because of the restriction in the availability of abundant energy to exploit.
1. Travel as we know it will be a thing of the past.(maybe tele conference, video conference)
2. Growth will be Zero or negative
3. Basic necessities will gain prominence.(food clothing and shelter)
4. Source of Energy?? - Electricity!!
5. Population Control!! - Gain popularity as growth falters!!
It has always been said that development is always progressive .. is always forward looking. So all this is very negative news .. this surely cannot be the path to the future!!

Most likely our taste will change. Like and dislike will change.
- "Bigger the better" will give way to "Small and Beautiful"
- Development Index will change from Energy used to Energy produced/saved!! (already gaining popularity in the name of Global warming)
- Energy which is the driving force of the current development model will be almost exclusively Electricity. (It is the only form of energy that has the distribution network in place to replace petroleum)
- Entertainment will go Digital (Video Games!, Virtual Reality!)

Conclusion: Investment need to be directed to core areas of the future. As can be ascertained from the aggressive steps taken by Reliance Industries.. IT & communication is going to gain prominence as it will replace travel to a major extent and become a core area. Electrical energy will also become core area of the future.. Battery Power (intermittent source of energy needs to be stored) will also gain in strength as Solar/Wind/ Hydro/Nuclear will be the future source of energy. Basic necessities such as Food, Medicine will be critical for sustenance. Stem Cell therapy and new development could really change human thought about medicine and regenerative medicine.

Japan as a country has minimum natural resources and at its peak epitomised the hydrocarbon economy. It also has been planning for the Peak Oil (from the previous oil crisis in 1973) we can look at Japan for the model of future cities and also from resource utilization perspective.

Thursday, June 17, 2010

Value Investing in MidCap and SmallCap universe...

Here is some interesting stats with regards to Indian market. It has been observed over a span of 10 years that the mid and small cap stocks is the place where there has been the greatest increase in market capitalization. ie. Maximum potential for making money by increase in share price.

This is listing of stocks as per market capitalization..
- If you had bought the top 50 stocks by market capitalization (that would generally mean the blue chip stocks) you would have made the least amount of money.(26.7 %CAGR)
- If you had bought the cheapest stock ie stocks which are below the rank of 301 .. you would have made the most money (48% CAGR)

what are the important factors that we can infer from this stats..
1. Large Cap/Blue chip stocks are well known names and their growth paths are well documented and a fair bit of growth projections are already priced in.
2. Small cap stocks are generally the least known ones and here is the place where you can find multibaggers which are not discovered .. over a period of 10 years these stocks will be discovered and we can expect great returns.
3. This is just a general categorisation based on price (Market Cap) .. so we can also concur that its important to get the right price .. infact discounted prices are more easily available at the bottom of the heap rather than at the top of the heap.

Conclusion: Add a pinch of fundamental analysis and if you can find deep discounted stocks which have a history of growth, dividend paying and not yet discovered ..(no FII/DII Investment) you can sleep in peace for a decade and still you will come out with flying colours beating the NIFTY hands down. Of course all this has happened over a period of steady growth enjoyed both by large cap and small cap companies.

Monday, June 14, 2010

Venkys India: Year End March 2010 Result Review: Hold

Venkys is the largest chicken company in India.
- Venkys was first recommended on May 29,2009 at Rs 147 per share.
- Venkys was recommended as a hold on Dec 25,2009 at a price of 239 per share.

Venkys today is quoting at Rs 420.45 per share and today we will review March 2010 results.
Market Cap: 394.87Cr Annual March 2010 Sales: 705.47Cr, Debt March 2010: 89.92Cr

The results are great in all sense..
1. Operating profit margins have improved from 7.3% (2009) to 12.92% (2010)
2. Taxes paid as percentage of sales has also improved from 1.84% (2009) to 3.96%(2010)
3. Reserves have also increased from 147.68Cr (25.94% year 2009) to 197.21Cr ( 27.95% year 2010)

I think right now Venky's has put its best foot forward.. and all weak hands have sold off.
Infact Serum institute one of the largest vaccine manufacturers in the world (pvt company) has sold off its 1+% stake in Venky's..

The stock could go up further from these levels because we have not seen the pump yet (Flow of positive news in the media) Also the stock was previously available at a deep discount and right now the valuations are normal.. Enterprise value: 394.87+89.92-62.5 = 422.29Cr which is still 0.59 times its March 2010 sales(705.47Cr).

I must also warn you that the current levels are multi year high for Venky's stock..so buying now and if the stock turns negative you could see your stock value fall dramatically...
There has been some news flow about Venky's.. recently
1. Company is setting up a 4500Tonnes animal feed plant in Vietnam
2. Company is planning additional ventures in Bangaladesh and Philippines
3. Company is also going to set up an animal vaccine plant in Switzerland

Conclusion: Venky's has a lot of depth and I am sure the company is capable of providing further growth.. With a growing Indian economy it is a know fact that protein consumption increases dramatically with increase in per capita income levels..however ..at these levels we also need to consider how to retain the stock price appreciation as profits..

If you expect Venky's to do exceptionally well (which I do!!) then you can have the following strategy.. every 30% rise in profit sell 10% of your holding till you reach 50% of current holdings..
So 1000 shares: CMP 420.45
Next Sell price: 546 Sell 100 shares
Next Sell Price: 672.72 Sell 100 shares
Instead of 30% you could set 20% or 50% as your sell target depending on your comfort level with company fundamentals..

PN:Here is the link to the CNBC TV18 interview of Venky's management(Link)

Saturday, June 12, 2010

Heart Healthy: Nitric Oxide: Garlic + Onions

Cardiovascular disease is the single largest cause of death in India 29% of all chronic diseases. Diabetese in urban India is second highest in the world. These are statistics provided by the Govt. of India in their website.

It seems Garlic is the answer to both these problems..

In 1998 Nobel prize for medicine was given to 3 doctors(Robert Furchgott, Louis Ignarro, Ferid Murad) for discovering Nitric Oxide as the signalling molecule in cardiovascular system. Here are some important observations.

- endothelial cells of arteries makes nitric oxide..
- when you exercise nitric oxide is produced by arteries in the endothelial cells (that is why exercise is good for the heart)
- Nitric Oxide is the best vassal dilator
   - widens the blood vessels ..increasing blood flow throughout the body
   - Soften the blood vessels ..reversing the hardening of arteries
   - Relax the blood vessels ..help to overcome high blood pressure
- Nitric Oxide also inhibits and melts away plaque formation ..prevent and reverse atherosclerosis, coronary artery disease, heart attack, stroke, impotence, peripheral artery disease..
- Diabetese problem also can be solved as L-arginine helps in production of insuline

If you do a lot of search on the net..this is the conclusion that I came up with..

1. To produce the Nitric Oxide the body needs L-arginine.
2. precursor to L-arginine is L-citrulline.
3. L-Citrulline is found in large quantities in Garlic, Onion and Watermelon (watermelon shell [which we generally throw]contains 60%)

Nitric Oxide is what Viagra supplies to targeted parts of our body using L-citrulline. There are a host of very special drugs developed to target Nitric oxide supplies (just like Viagra) to specific parts of the body (heart)

So here we have it .. the best natural medicine to have is raw garlic (with water) 3 times a day.
You can see some observations:
1. You will be more energetic.. (if you find yourself out of energy before garlic)
2. Your blood pressure will be down  (if you have high blood pressure before starting garlic)
3. You will also observe that your breathlessness while climbing stairs will reduce (Stress on heart when you exert additional pressure before starting garlic)
4. You will have the Viagra effect !! (If you do face any problems in bed .. before starting garlic)
5. You will be less susceptible to allergies and viruses (flue et cetera)
6. Loose fat and develop more muscles (you will have to do some excercise to build muscles but fat will be chewed by Garlic without any effort will take time though)

Take raw garlic ..4 pieces every time & chew it .. gulp it down with water 3 times a day and within 3 weeks you will see a different you. Tell me about it!! Raw unwashed Onion also helps .. but RAW Garlic is the best.

Please Note: This is my free advise.. I have old parents and I was looking for more info on heart and blood glucose problem and move them away from the medicine cycle.. As always please do your own deep dive.

Dr Ignarro Interview 1 (youtube)
Dr Ignarro Interview 2 (youtube)
Dr Ignarro Interview 3 (youtube)

Monday, June 07, 2010

Gujarat Ambuja Exports: Promoters buying from the Open Market June 1,2010

Gujarat Ambuja Exports Limited (GAEL)
CMP: 23.25
Market Cap: 321Cr.
As per SEBI requirements promoter buying into GAEL has been reported to the Stock exchanges.
- Promoters have bought 9480 shares from the BSE (Avg Price: 22.04 per share)
- Promoters have bought 19700 shares from the NSE (Avg Price: 22.04 per share)
These shares were bought in the week of May 21 to May 27. and reported to the stock exchange on June 1,2010.
Promoter Name: Manish Kumar Gupta (Managing Director)
Shares before acquisition: 3,40,64,993 (24.62%)
Shares after acquisition:    3,40,94,173 (24.64)

This 22.04 will act as the low water mark for new and old investor to accumulate more GAEL stocks. Promoters buying into a company is one of the strongest indicators specially when they already own 63.87% of the total equity of the company as of March 2010.

Conclusion: This is one of the best time to accumulate the stock for long term appreciation we can easily expect the stock to give more than 100% appreciation from these levels.

Saturday, June 05, 2010

Pitti Lamination's : March 2010: Quaterly and Annual Results review.

Pitti Lamination's is one of the recommended stocks for value investment. In the Dec 2009 Quarterly results review we had dissected the poor results with Net Profit -ve3.47Cr. The conclusion drawn was that Pitti Lamination's had improved its profit margins and the -ve results were due to one time exceptional expenses related to GE business (one of the largest clients of Pitti Lamination's) Link

Pitti Lamination's March 2010 annual results are out and we can now confirm that the margins have been sustained and the March 2010 Quarterly results were really good.

1. Expenditure as a percentage of sales has dropped from 90.44 % in year 2009 to 84.7% in Year 2010
2. Depreciation has increased as a percentage of sales.. One must remember that the sales for year ending March 2010 is 152.99Cr while March 2009 it was 267.02Cr .. due to this huge drop in sales certain numbers will look inflated.. (such as depreciation..)
3. Interest Payment has also been inflated by the drop in sales. The actual interest payment has reduced in March 2010 (10.64Cr) from March 2009 (10.93Cr) 
4. Profit Before tax for the full year is down to 0.60 percentage in March 2010 due to the large one time exceptional losses in Dec 2009 Quarter.
5. Last but the most important the Profit Before Interest & Tax. We can see that for the Quarter ending March 2010 and Dec 2009 the margins are 12.31% and 13.13% respectively which is way above the Annual March 2009 margin of 7.49%
This improvement in margin was disclosed in Dec 2009 Quarterly result update and March 2010 Quarterly results now confirm that the margins are being maintained..

Conclusion: Pitti is already on its way to recovery.. It has expanded its capacity and the value added products are improving its operating margins. Right now the one time exceptional expenses related to GE is distorting the excellent operating margin improvement.
March 2010 Quarterly results the top line has also recovered which was one of the remaining concerns.. 
This is a good time to accumulate Pitti.. Margin improvement will really improve the ROCE  and we can easily expect Pitti to hit triple digits within 12- 24 months time frame.

Thursday, June 03, 2010

Universal Cables: Divident stripping + Value buy

Universal Cables:
CMP: 79.90
Market Cap: 184.81Cr
Sales March 2010: 515.66Cr
Gross Profit: 66.05Cr
Net Profit: 27.14Cr
ROCE March 2009: 12.17%
Debt to Equity March 2009: 0.73
Long Term Det to Equity March 2009: 0.15
Company website: http://www.unistar.co.in/

Started in 1962 and part of the MP Birla group. The company is one of the largest power cable manufacturers in India producing low voltage, medium voltage and Extra high voltage (upto 500KV)
It also manufactures capacitors and Optical fiber cables. The company in recent years has concentrated on improving its bottomline and concentrated on high margin Extra High voltage cables. This quarter March 2010 company has reported a net profit of 11Cr which is its highest ever quaterly net profit reported by Universal Cables.

Conclusion: Universal cable is a strong established player in the Indian Power cables industry. The company has also distanced itself from other players by entering the higher margin extra high voltage power cable business. Considering its current discounted valuations and improving results we can consider investment in Universal cables at these levels. Divident payout is Rs 2.50 with record date of June 21,2010. So investing now will also provide us the cushion of 3% return within next 19 days.

Wednesday, June 02, 2010

Q&A Confidence Petroleum: Result Analysis March 2010

Confidence Petroleum has reported March 2010 Quaterly and yearly numbers and first look gives us a great picture.(These are consolidated numbers)

Quaterly sales up 128.14% , Annual Sales up 125.45%
Quaterly PBDIT up 120.68%, Annual PBDIT up 98.69%
Quaterly Taxes paid up 1751.84%, Annual Taxes paid up 272.78%

The numbers look great and it certainly looks good but we really need to look at the numbers from another angle.
Expenditure as a percentage of sales increased from 89.87% to 90.27% on a quaterly basis
Expenditure as a percentage of sales increased from 87.07% to 88.60% on a yearly basis

PBDIT as a percentage of sales decreased from 10.13% to 9.80% on a quaterly basis
PBDIT as a percentage of sales decreased from 12.93% to 11.40% on a yearly basis

Interest payment as a percentage of sales increased from 1.80% to 1.97% on a quaterly basis
Interest payment as a percentage of sales increased from 1.26% to 1.76% on a yearly basis

Profit Before tax as a percentage of sales decreased from 6.18% to 5.84% on a quaterly basis
Profit Before tax as a percentage of sales decreased from 10.00% to 7.07% on a yearly basis

Taxes as a percentage of sales increased from 0.35% to 2.81% on a quaterly basis
Taxes as a percentage of sales increased from 1.02% to 1.69% on a yearly basis

Net profit after minority interest decreased from 5.84% to 2.60% on a quaterly basis
Net profit after minority interest decreased from 8.98% to 5.23% on a yearly basis

As you can see once we compare the profits with the sales for the same quarter/year we get a completely different picture.. confidence petroleum Net profit margin (after Minority interest) has dropped from 5.84% to 2.60% which means it is making less money for every additional sale this quarter as compared to last quarter. And the profit margin has dropped by 55.5% on a quarterly basis and dropped 41.79% on a yearly basis.. clearly this is not good news..

I would advise people to lighten their holdings if the stock appreciates with the results.
Another point which I would like to bring to the notice of investors of confidence petroleum is the following balance sheet information published by the company for the year ending March 2010

1. Equity Capital has trippled from last year
2. Reserves have increased..  but when compared to equity capital reserves have dropped from 4.3 times equity to 2.97 times equity in 2010
3. Secured and unsecured loans have both more than doubled
4. Inventory and sundry debtors have also increased substancially.

Conclusion: Confidence is expanding .. trying to reach a critical mass.. and for that it needs Auto LPG dispensing stations. Bottling segment has better margins while LPG  segment has lower margins and is high volume low margin business. It will definitely take a few years for confidence to reach a firm/stable condition..
Right now the management does not have much room to make any mistakes..we can expect equity dilution as company will need equity to expand its footprint.. Would suggest selling and keeping the company under watch for the next few years before investing.