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Saturday, December 25, 2010

Market News

Nov 30,2010: GAIL: 490: 1000Cr Net Profit Every Quarter Starting March 2011

Market News: MAN Industries: Poised...

MAN Industries
CMP: 80.95
Market Cap: 443Cr
Reserves: 463Cr
Debt: 308.41Cr
Sales March 2010: 1643Cr (TTM)
Gross profit: 226.89Cr (TTM)
Net Profit : 108.76Cr
Enterprise value 650Cr

was reviewing MAN Industries for one of our blog readers/members..
MAN Industries is doing well has almost 11Cr of forex profits not yet booked.. (as per Sept 2010 results)
shareholding is also getting consolidated  .. along with good cash flows.. all augur well for MAN..
It is not mandatory for consolidated results to be published..on a quarterly basis.. (though might change in the future)

I would say good choice hold on for better price in the future..

I was looking at technical data and stock seemed to be poised for immediate jump in price. I would buy only for short term.. trade.

PN: this recommendation is a short term play..(10-15% spike) company is fundamentally sound .. so we have a fundamental valuation backstop..

=happy investing

Friday, December 17, 2010

Company: VIP Sell .. Sell Fast..

CMP: 605.25
Market Cap: 17106.5Million
Sales TTM: 6895Million
Gross Profit TTM: 1126.0Million
Interest TTM: 49Million
Net Profit TTM:680Million
Reserves Sept 2010: 1880Million

VIP has acquired a lot of brands and its Vision is "To be the Global Leader in Travel Products Business"
which is also a very focussed and fairly well defined Vision. The question we are trying to address is .. 

Is it worth investing in VIP at these price points. A company with 6,890Million sales and 1,120Million Gross  profit and 680Million Net Profit and 873.1Million debt.. The total cost of acquisition is 17,106.5+873.1 -11(Cash) = 17,869.6Million

That is 15.95 Times Gross Profit and 26.27 times Net Profit (TTM)  a PE of 26.27 means VIP is expected to grow atleast 30% each year 

Now as far as I understand a suitecase/luggage is a product which will last atleast for a few years (Lets assume 5 years) so for VIP to maintain a sales level of 6,890Million it needs atleast 689x 5 = 34,450Million of market which is dedicated to VIP products and will buy VIP products for next 5 years.. 

Now considering that VIP is expected to grow 30% each year VIP needs to have a market of 62,306 Million Rupees. Basically assuming 5 year replacement cycle for luggage by a customer and assuming 30% growth VIP will need a captive dedicated market of 62.30Billion Rupees to sustain 30% growth for the next 5 years..

If the market size is less than 62.30 Billion Rupees then VIP by increasing sales is actually eating its own market for the next year sales.. 

Luggage and "Travel" products are long lasting products not required on a daily basis. Even Regular business travelers do not invest in new luggage for each and every trip. Also with additional baggage cost for extra luggage even Indian have started travelling light.. 

Conclusion: VIP: Enterprise value:17,869 million, Sales: 6895Million 
Gross Profit: 1126.0 Million , Net Profit: 680 Million

VIP is a fully priced share where one is paying 2.59 times Sales and 26.27 times its Net Profit (TTM) with such a high premium it really does not leave much space for appreciation. Also Luggage is not a consumable item  and one does not expect to invest in new travel equipment every time we travel .. 

PN: I do not have any shares in VIP. These are my personal views and opinion based on publicly available information.. Please do your own deep dive before investing.

Sunday, December 12, 2010

Stock: Jayant Agro: Back Up The Truck!!

Jayant Agro Organics was on lower circuit on Friday the stock was down 19.9% and stock closed the day at 87.80 on NSE. The 200 Day Exponential Moving Average "EMA(200)" stands at 117.10 thats 33.37% higher than current market price..

Is this a time to Buy or wait for a further correction? That's a tricky question cause markets always have a way of proving us wrong. Catching the unsuspecting investor on the wrong foot.

I would buy based on the facts that:
- Jayant Agro is entering into higher value added castor derivatives (Sebacic Acid).. Plant has commenced operations this year as trial runs have been completed.
- Jayant Agro has in 6 months reported profits (13.08Cr) more than profits of last 12 months (Year ending March 2010 12.63Cr)
- Jayant Agro Management has also been upbeat about its future and increased shareholding in the company.
- Jayant Agro Management has eliminated preferential capital and issued equity shares in return to promoters and other investors (indicating that going forward equity shares will outpace the returns on the preferential capital)
- With 6 months consolidated sales at 580Cr full year Sales are expected to exceed 1000Cr
- In the past 2 year Sept 2008 to Sept 2010 almost 10.75 lakh shares have moved from weak hands (small individual investors) into the hands of high networth individuals and promoters.

As can be seen..
1. Small individual investors have reduced from 6087 to 4709 and holdings have reduced by 10.75lakh shares (Small investors are investors holding less than 20,000 shares)
2. HNI (High Networth Individuals) have increased from 24 to 48 and they have increased their shareholding by 4.20 lakh shares
3. Promoters have increased their shareholding by 9.75 lakh shares 6.5%
4. There has been a reduction is shareholding by corporate bodies by 2.99 lakh shares.

All in all no of investors have reduced from 6550 to 5242 and shares have changed hands to high networth individuals.. and promoters. 

Jayant Agro closest competitor is a company called "Bitor" formerly known as "Jayant Oil" Bitor is a private company which was the largest exporter of castor meal from India till 2004 SEA(Solvent Extractor Association of India) from 2005 onwards Jayant Agro has been receiving the award of "Highest Exporter of Castor Meal" from SEA

Here is a great article about castor which appeared in Business Standard 2008 and BITOR (Jayant Oil)(Link)

First Call Research has given a buy call on Jayant agro with research report (Link) In Page 10 of the report ..the estimated Net profits for march 2011 is 132 million (13.2Cr) which has been achieved in 6 months itself..

Jayant Agro management recently started better reporting of data such as
- consolidated results on a quarterly basis
- publishing of audited reports for subsidiary companies (Link)

Conclusion: Jayant Agro has been consolidating its position in castor. It is the largest processor of castor seeds from 2005 till date and is now entering into higher margin castor derivatives space. Promoters have been increasing their stake in Jayant Agro and even HNI have been consolidating their position. India has inherent strengths in castor as the largest producer and exporter of castor in the world. 
Jayant has been performing exceptionally well and is on its way to report 100% increase in net profits over march 2010 .. The current steep fall in prices is an opportunity to increase holding in Jayant Agro at prices 33.39% below its 200day EMA .. 

PN: These are my views about Jayant Agro based on publicly available information.. Please do your own deep dive before investing.  Personally I would take this opportunity to "Back up the Truck" and enjoy the opportunity the Market has offered..

=happy investing

Thursday, December 09, 2010

Buy!!: Stock Market Fall.. Where are we heading.

Market is correcting .. and its Crunch time..
The question is what should be our strategy? If you have cash in the bank (Hey u're the smart guy around!!)
For the rest of the folks.. its time to prune the garden..

- Look at your short term gains..
- Look at your short term losses..
- Give a good hard look at your list of investments and select which are your best bets..
- Prune your loss making "So and So" investments
- Increase your investments in your best bets which are available cheap..
- If you have long term capital gains take them as they are tax free and reinvest in your "Best Bets"

Indian economic indicators are:

As we can see the M3 growth is slowing down but still a healthy 16.2% Inflation is still pretty high and that is a cause of worry.. which could be the reason for decrease in M3 growth. But Growth is strong and even Exports is picking up. Are we going to see higher interest rates? I don't think so.. here's why?

As you can see India has one of the highest interest rates in the world.. Hungary,  South Africa and Pakistan are the only countries with higher interest rates..  Any increase in interest rates is going to increase flow of capital into India .. So I guess what the RBI is trying to do is..
-  Reduce Banks risk taking abilities by asking them to increase their deposit rates and maintaining borrowing rates at the current levels.. reducing their spreads.(sell Bank stocks and other speculative industries like Housing)

This Spread tightening by Banks will help the India economy to have stable interest rates but reduce speculative activities (such as hoarding of commodities and maybe also speculative stock market investments) 

All this is good governance.. but with a decrease in money flow FII get to enter into the fastest growing economy at lower price points.. (stock prices..) 

Conclusion: This is a good time to get in as the India growth story is nowhere close to an end.. Look at China with interest rate of 3.99% ..(Image India with 3.99 % interest rate) Indian economy is doing just fine and will continue to do so..  As mentioned above buy what you are certain/confident about. My Personal favorites are 

=Happy Investing

Wednesday, December 01, 2010

Gujarat Ambuja Exports: Dalal Street Journal Article...

The latest Edition of Dalal Street Journal (DSJ) Dated: Dec 5,2010 has 1 page article on Gujarat Ambuja Exports. It is part of a featured article on Gujarat State as the ultimate investment destination. Gujarat Ambuja Exports has been selected as a representative company to portray the great investment opportunities in Gujarat.

There is also a 1 page Advertisement by Gujarat Ambuja Exports. The advertisement states that Gujarat Ambuja Exports is a well diversified yet focussed company. Sept 30,2010 quarterly results are:
EPS: 1.67 per share, Turnover up 27.07% and PAT up 145%

The company MD Mr Manish Gupta has been interviewed by DSJ wherein Mr Manish Gujta has stated the various segments for GAEL i.e. Solvent Extraction, Edible Oil Refining, Starch and derivatives and cotton yarn segment.

Agro Processing Segment: Mr Gupta has also stated that the agricultural output of the country will be good due to good monsoon and soy production is going to be 1Cr tonnes instead of 97 lakh tonnes last year. Soy meal exports prices are stable and hence soybean meal exports will be profitable (+ve parity) The edible oil market in India is also growing strong at 4.4%.

Cotton Yarn Segment: Cotton yarn segment is reporting bullish market conditions.. in-spite of increasing cotton prices.

Corn Starch Segment: Corn prices have been stable, margins are good and continue to be good demand. Due to increase in demand of Corn starch derivatives corn prices are stable but will be trending up. Corn starch derivatives are user industries are: Consumer Goods, Pharmaceuticals, Confectionaries, Breweries.

All segments of operations are having positive encouraging outlook. Corn derivatives and textile yarn segments will have consistent demand higher than supply. Agro processing division is going to have a steady demand in the near future.

Mr Gupta expects all segments to perform on the expected lines during the remaining period of the year. Since Q3 and Q4 are the best performing period for the seasonal period so GAEL will easily report higher turnover and profits for the remaining 2 Quarters .. and this is a conservative statement.

Revenue Mix: 50% agro processing, 30% maize processing, 20% cotton yarn processing

Fund raising Plans: All capital expenditure would be met from internal accruals. It has been company policy to have lowest possible long term debt for future expansion.

Outlook for India Inc: Govt is making all efforts to maintain 9% growth in GDP. Feel good factor across the globe for India is quite positive.

Is there Better demand due to good monsoon: Good monsoon has helped increase demand in various sectors of the economy.. specially soy de-oiled cake and soybean oil.

Conclusion: The company management as always has been modest about the prospects of GAEL with a controlled +ve bias statement in DSJ interview. The management also has maintained good fiscal prudence by keeping very low debt (only 18Cr Long term debt as per March 2010 Annual Report) and continue to keep their eye on financial wellbeing of GAEL which is very good for long term investors. The largest reported segment of GAEL i.e. Agro processing division which is responsible for 50% of all revenues is going to have a good positive margin for this year 2010-2011. We are also aware of new Maize processing plant capacity being setup in Karnataka which is the largest Maize growing state in India so future prospects are good as company is increasing capacity in higher margin maize processing/derivatives segment which will also reduce volatility in earnings. As always GAEL is an agro processing story which will deliver great results for investors due to their focussed approach and fiscal prudence.. Its really surprising why there is such low institutional presence in GAEL stock

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