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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
www.whatsup-indianstockideas.blogspot.com

7 comments:

Purushottam said...

If any stock is tanking 20% a day there should be a reason. Looking at financials we are sure it is good. Now why did stock go down.?. Only reason i can see is they are doing it to supress the stock to acquire at low prices.. Why would they do it ? Might be Bonus is on cards.. They even mentioned about it.. So keep your fingers crossed.. I belive stock can tank till 72 and then rebound.. Dont worry abt short term loss. When a stock can tank 20% a day without any news.. it has capability of coming up 40% in no time... Hold on to your fort.(Buffets words" the stock market does not exist. It is there only as a reference to see if anybody is offering to do anything foolish".)

Prahalad as always you are gr8...

What'sUp Prahalad said...

Purushottam:

Once we have data and the ability to analyse the data then abnormal price changes can be considered as an opportunity to buy or sell..

Most likely the fall in price is to get margin calls for the buyers at the higher levels..

if you see the bulk deal for jayant agro
- Buy on 15/09/2010 of 75,000 shares @ 139.52
- Sell on 15/09/2010 of 75,000 shares @ 139.00

So the stock has fallen a lot from 139 levels..
I would suggest start investing from this level itself cause the recent high of 160 and current price of 87.8 is a 45% correction..

which is pretty big.. and it's just not possible to catch the bottom..

Invest 50% now and rest in installments..

=happy investing
whatsup-indianstockideas.blogspot.com

Vijay Chandrakar said...

Dear Prahalad,

I have started liking jayant agro after reading your posts. Thanks for this. Just few things prevent me from taking an exposure into this script:
1. Debt of around 150 Crores.
2. Very very low profit margins. Are these guys under reporting the bottom line. I guess they will improve on bottom line when they move to value added castor derivaties, as suggested by you.

Another thing that I noted of late is the VC group is active on oil industry..Just check out Siva Group picking up 10% stake in KS Oils and Ruchi Soya..Hope something great is on the cards for Jayant...

Whats you take on the debt factor that I mentioned above..

Regards,
Vijay

What'sUp Prahalad said...

Vijay:

This was raised before also.. by other investors..

As per march 2010 annual report.
Secured loans:
Long Term: 4.48Cr
Short term: 132.36Cr

If you see Inventories is: 92.7Cr (March 2010)
Last year inventories was: 43.16Cr (March 2009)

Conclusion: Most of the loan is short term .. which seems to be mostly related inventory (92.7Cr)

Also long term debt is: 0.42
short term debt ratio: 2.10

This is for Standalone.. consolidated numbers are:
==========================
Loans 237Cr
Inventory: 126Cr
Cash 11.38Cr
Long term loans: 54.5Cr
Short Term: 153.88Cr
=========================
I would not worry.. about the debt levels as the next 2 years are going to be golden for Jayant Agro..

=happy investing
whatsup-indianstockideas.blogspot[dot]com

Vijay Chandrakar said...

Thanks for the prompt reply Prahalad..

Regards,
Vijay

Pawan said...

Prahlad,
The company has very high debt. How do you think that would impact the company?
Regards,
Pawan

What'sUp Prahalad said...

Pawan:

- Debt levels are high for jayant agro..
- Debt levels have been discussed before .. and are mostly short term and inventory related (according to what I could see from the annual report)

Also in the annual report March 2010:
(Consolidated)
Secured loans: 209.9Cr (March 2009: 47.6Cr)
Secured Long term: 54.5Cr (March 2009: 26.2Cr)
Secured Short term: 153.8Cr (March 2009: 21.0Cr)
Unsecured loans (from banks): 27.5Cr (March 2009: 43.0Cr)
==============================
That was loans lets look at what has increased:
Inventory: 126Cr (March 2009: 46.20Cr)
Sundry Debtors: 44.1Cr (March 31.6Cr)
loans and advances: 73.2Cr (March 28.4Cr)
Loans and advances can be further drilled down to:
Excise and other taxes recoverable: 26.9Cr (March 2009: 12.8Cr)
Advances recoverable in cash or kind: 27.6Cr (March 2009: 1.8Cr)
Deposits: 3.74Cr (March 2009: 2.9Cr)
Advance payment of taxes: 14.7Cr (March 2009: 10.7Cr)
==============================

(I think) the increase in debt is mainly from inventory purpose.. as the company is gearing in for higher sales due to the new derivatives plant..

The company has made income tax provisions of 16.3Cr (March 10.3Cr)

In past 6 months Jayant agro has paid income tax of: 4.84Cr which leaves 11.46Cr for the next 2 quarters... :-) So lets see the results are due end of this week..

There has been considerable selling of stock by HNI, corporates .. as per Dec 2010 shareholding report.. I am trying to get the data up on my blog..
(dont know why they would sell? do they know something we dont? or its just a ploy to get the weak hands worried and make them sell.. there are only 6000 shareholders.. so I really dont know how much smaller an investor community do these MM want for Jayant agro?..

Anyway I am confident of long term prospects and am sticking on with Jayant Agro..

=happy investing
whatsup-indianstockideas.blogspot.com

Pls note: This is my understanding of Jayant agro Annual report.. Please do your own deep dive