Company: Jayant Agro Organics: Castor oil use/derivatives

Here is an interesting writeup about Castor Oil 

1. Spilling the Beans

2. Derivative Products of Castor oil

I hope the links are available for a long time to come so that everyone gets to read them.. Please download a copy of the documents (just in case) 

- Tooth brush bristles, food grade plastics all are end products that use castor oil derivatives

- Baby Diaper for prevention of rashes use Sebacic Acid

- Skin Cream, lotions, Dettol and other antiseptics use castor oil derivatives

- High performance polymers are derived from castor oil derivatives.

- Castor oil derivatives is being used in road construction as it reduces the temperature requirement for melting tar (bitumen) from 160C to 120C reducing energy requirements.

- Lubricants, adhesives, Polyurethane resins, paints, ink.

- Castor due to the fact that its a biodegradable product is being used in stents (which dissolve after some time, stitches that are not required to be removed (MIT Link)

Jayant Agro has in Dec 2010 Quaterly results also announced formation of a new subsidiary Ihsedu Itoh Green Chemicals Marketing Pvt Limited another venture where Jayant agro is the majority partner.

Conclusion: Jayant agro is in a sweet spot Rs 100-110 levels a great entry price for long term multibagger returns.. Please note best results are by holding the stock for long term as these JV and subsidiaries will deliver results and improvement in balance sheet and acknowledgement by market for a market cap to reach 1 times sales will take a few years.. 1 year 100% return is very much present from current levels.

Company: Jayant Agro Organics: Dec 2010 Results Review.

Jayant Agro Organics CMP: 104.55 Market Cap: 156.82Cr

 Debt: 297.6Cr (Consolidated as of Sept 2010)

Jayant as we are all aware has recently commissioned a subsidiary company Ihsedu Speciality Chemicals Pvt. Ltd. manufacturing castor oil 2nd generation derivative Sebacic Acid. Keeping this in mind we shall first review the consolidated numbers for Jayant Agro.

1. On a Year-On-Year (Y-O-Y) basis we have 33% increase in top line and 69.5% increase in Bottom line (Net Profit) [Results are for 9 months ending Dec 2010 against Dec 2009] So on a yearly basis Jayant Agro Organics is doing pretty well..

Jayant Agro has not published Quaterly consolidated numbers but we do have 3,6 and 9 months consolidated numbers.

2. The consolidated PBDIT margin for:
9 month ending Dec 2010 is 6.13%
6 month ending Sept 2010 is 5.80%
3 Month ending June 2010 is 5.47%

This clearly means that there is a substantial growth in consolidated operating margins with each quarterly results .. because the 9 month margin is an avg for sales of 9 months.. but within 3 months the margins have expanded significantly (5.80% to 6.13%)  to increase the avg for the last 6 months by (6.13-5.8 = 0.33%)

So in the last quarter consolidated margin is higher by 6.13+0.33+0.33 = 6.79% which means the margins have expanded by a full 1% in the last quarter to raise the avg margin up to 6.13%

3. Interest payment has also been rising and as % of sales has been rising steadily with each passing quarter.
This I believe something we need to keep track off.. cause it could derail the Jayant Agro story.

Standalone numbers:

1. Standalone numbers are also pretty decent with increasing margins..
2. In addition to increasing margins we can see that the higher margin Derivatives business has been increasing   revenue share while the lower margin castor oil business % revenues share is decreasing.
3. Interest as a percentage of sales in increasing .. which is the most important parameter to keep under constant watch.

We do have CRISIL ratings for Jayant Agro and Ihsedu Specialty Chemicals Pvt limited. which are reported to be stable.
Ihsedu Specialty Chemicals Pvt limited Credit rating:

Jayant Agro Credit rating:

Jayant agro Organics with its Sebacic Acid Castor derivatives plant in place is set to report higher margins. Please note that the Sebacic Acid plant is not yet at full commercial production.. which basically means that the plant is producing Sebacic Acid but it is more of an ad-hoc manner and profits are reported based on the sale of trial batches.. commercial production as of Sept 2010 had not yet started..

Conclusion: Jayant agro Engine is rolling and we can see the profits increase as expected. We should be keeping a close watch on interest payments which is the only negative. Sebacic Acid plant commercial production has not yet started so we can expect the revenues to grow.. for the next year also.. with higher percentage of derivatives sale. HOLD on to your Cheap Stocks.. and If you have not yet bought any shares.. then this is a very good opportunity.

Company: Jayant Agro Organics: Dec 2010 Shareholding Review

Quarter Ending Dec 31,2010  Jayant agro shareholding report has been released.

Jayant Agro Organics Sept 30,2010 Stock price: 140.35

Jayant Agro Organics Dec 31,2010 Stock price: 110.55

Jayant Agro Organics stock price has fallen 21.23%  in the Quarter Oct 1,2010 to Dec 31,2010

Comparison of shareholding report for Dec 31,2010 and Sept 30,2010 gives us some insight.

There has been selling by HNI (High Networth Investors) and Corporates big time..
Sept 2010 HNI Corporate shareholding: 3,374,791 shares
Dec 31,2010 HNI, Corporate shareholding: 2,461,954
ie a decrease of 912,837 shares worth atleast  91.28 Million Rupees.

So 100.91 Million (10.09Cr) worth of shares have been dumped in Sept 30,2010 prices (140.35) the stock was worth 128.11 million (12.8cr) making a cool 2.8Cr on paper.. (but will they get back 912,837 shares if they want to buy back from the market.. (I don't think so.. )

Conclusion: Selling has happened in Jayant agro no doubt about it .. the question is.. Is it panic button or just part of the cycle.. (credit lines tightening, short term swings, shake the tree) 
No doubt Jayant Agro due to its commanding position in castor oil derivatives and the fact that its the largest player in castor oil /seed processing it should have a much higher valuation... My take is this is credit cycle.. short term trading.. 
As per March 2010 Jayant has made provisions for taxes at 163 million (16.3 Cr consolidated ) and in the past 2 quarters it has paid out 5.16Cr(consolidated)  only so the next 2 quarters we should expect payment of taxes of 11.14Cr ie atleast 5.57Cr per quarter which is higher than the 5.16 Cr paid in first half??.. (These are consolidated tax levels mentioned so we need to look at consolidated results)  So keep your fingers crossed.. and buy before results!! its just 4 days to go..


PN: These are my personal views about publicly available information.. Please do your own deep dive before investing cause its your money..not mine!!
Jayant Agro Blog Archives

Company: Gujarat Ambuja Exports: CRISIL Rating upgrade Jan 2011

CRISIL has upgraded the Credit rating of GAEL citing..

- No Derivatives contract other than forwards in the future.

- Business risk profile will be less due to increasing contribution from maize processing division

- GAEL has un-utilised bank credit limit of 476Cr (Wow!!)

- GAEL has unencumbered cash and bank balance of 8Cr as of March 31,2010

- GAEL is setting up new Maize processing capacity of 250,000Metric Tonnes in Karnataka, with commercial operations starting on Dec 2011 Current maize processing capacity is 350,000Metric tonnes.. so Karnataka plant will increase maize processing capacity by 71.4%

Original CRISIL report is available here (Link)

GAEL Archives

Company: Gujarat Ambuja Exports: Dec 31,2010 Shareholding data review

Gujarat Ambuja Exports latest Shareholding report has been published in National Stock Exchange (NSE) website www.nseindia.com

We compare the shareholding data for Sept 30,2010 and Dec 31,2010 for Gujarat Ambuja Exports

As we can see.

1. Total number of shareholders has reduced further from 56690 to 56156 .. which means consolidation is still "on"

2. Individual shareholders (Weak hands) are the largest sellers. No of Individual investors has reduced from 55949 to 55362 a decrease of 587 individual shareholders.. In terms of  number of shares shareholding reduced from 35,284,376 to 34,297,786 reduction of 986,590 shares. 

3. High Net-worth Individuals (HNI) who hold more than 100 thousand  (1 lakh ) face value equity ie 50,000 shares (Face Value = 2). HNI have reduced from 28 to 27 but the number of shares held has increased from 2,701,554 to 2,988,361 an increase of  286,807 shares even as number of shareholders has reduced.

4. No of corporates have increased while the % shareholding has reduced.. 

5. Mutual funds have also entered into GAEL and no of MF/UTI has increased from 11 to 14 also the number of shares held has also increased from 6,353,255 to 9,132,745 an increase of 2,779,490 shares.

6. Promoters have also increased shareholding from 63.93 to 63.95 an increase of 25,000 shares.

Conclusion: Public shareholding is decreasing and decreasing fast. Individual shareholders avg shareholding was 630.65 in Sept 2010 and in Dec 2010 avg. has fallen to 619.50. Weak hands are defined as fickle minded short term oriented and Individual investors are living up to that definition. 

Another thing which is not being considered is that even within individual investors holding of 34,297,786 only 15,234,216  are in demat rest are in physical form and cannot be traded.. Actual liquidity in GAEL is pretty low and any concerted buying is going to push GAEL easily above 50 levels.. 

This is a great entry price 35-38 level. 50 is given and it would be advisable not to sell at 50 levels.. Investors who bought low and are planning to enter again at lower levels are waiting and the wait is getting longer and longer.. It always make sense to play for the long term specially when we are confident of the company financials and the overall health of the economy.

GAEL Archives

Stock: Agro Dutch Industry: Dark horse ...soon Black Beauty

Agro Dutch Industries:

Stock Price (CMP): Rs 15.20 

Market Cap: Rs 826.3 Million

Debt: 4.154 Billion

Reserves: 523.3 Million

Sales TTM: 1.31 Billion

Gross Profit: 97.6 Million

Net Profit: -ve 476.8 Million

ROCE: -ve 9.02%

http://www.agro-dutch.com/

Well looking at the company.. one can easily state that this is a stock which is in the dumps.. 

- Huge pile of debt 4.154 Billion 

- Reserves just 523.3 Million

- Gross Profit just 97.6 Million

Lets start with an introduction about Agro Dutch Industries..

Agro Dutch Industries Limited is an Indian company, listed on the stock exchange. In 1992, Agro Dutch, was the first large company to bring the concept of integrated, year round, climate controlled Mushroom production to India, with complete traceability.

The company processes and markets a range of sizes of canned and frozen mushrooms, conforming to international quality standards.

Agro Dutch is continually focused to be the most efficient Mushroom Company in the world. From a mere 3,000 Tons per annum capacity, today Agro Dutch has grown to 50,000 Tons per annum.

Agro Dutch is 14 Mushroom Years and 5 CAN years old, the world’s largest integrated mushroom producer, with an average daily production of 125MT. It is also India’s finest and largest food-can maker. First in India to manufacture FP Easy Open Ends at a speed of 1500 ends per minute.

With 10000 Tons chilling capacity, 200 Tons boiler capacity, and 10MW captive power plants, Agro Dutch serves a key food segment globally and earned a reputation as a reliable, quality can maker and enjoy “partnership relationships” with suppliers of equipment and raw material.

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I know that is a lot of storytelling with nothing to prove on the ground level.. 

We just need to go back in history to see how the company was doing in the past when it started with 3000 Tonnes per annum capacity..

Here is a snapshot of Agro dutch for the past

Agro dutch was making more money when it had a 3000 tonnes mushroom capacity. now it has 50,000 Tonnes capacity and a can making facility.

Recent news flow is positive:
- Oct 12,2010: Agro Dutch Industries Ltd has informed BSE that the Company has bagged the approved supplier status from General Mills Inc, a US$ 17 Billion Fortune 500 company, for supply of its mushrooms. The company will now be the sole supplier to General Mills out of India. Agro Dutch expects orders to be placed and shipped to General Mills in the coming weeks.

General Mills team took this decision after visiting the Company's facilities on separate occasions over the past two months and after analyzing the company's quality standards. This positive development is part of Agro Dutch's overall strategy to win back strategic clients over the world.

Due to the recession and consequent crash in world mushroom prices, the Company was forced to sell at lower prices and scale back on its expansion plans. However, with the increase in mushroom prices and their stability thereafter, world demand has picked up and orders have been robust.

Agro Dutch plans to reach optimum capacity utilization towards the end of the current fiscal year.

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Conclusion: This is a dark horse with a stock price very close to its historic lows.. Company has during the past few years expanded capacity to become the largest integrated mushroom manufacturer in the world with captive power plants.. promoter shareholding is also comfortable at 57.39% 
Total shareholder Sept 2008: 23,129 Individual shareholders stake: 31.23%
Total shareholder Sept 2010: 19,180 Individual shareholders stake: 15.26%


Debt rescheduling and additional preferential allotment of shares has been done successfully..
I would suggest buying 1000 shares at current market price for long term 5+ yrs when Agro Dutch Industries could be a 5 bagger or more..