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Monday, February 21, 2011

Company : Pitti Laminations: Dec 2010 Result review

Pitti laminations Dec 2010 results were out on Feb 8,2010. the results are great and Pitti is a value buy.
Is it or is it not? 
Pitti Laminations:
CMP: 38.50.
Market Cap: 36Cr Free Float: 21Cr
Debt March 2010: 75Cr
Reserves: 50Cr
ROCE March 2010: 12.57%
Enterprise Value: 111Cr

If we look at Pitti Laminations based on 9 months earnings: Sales: 174.16Cr, PBDIT: 21.93Cr Net Profit: 5.59Cr. Here are the Dec Quarter results and lets look at them from a different set of eyes

As you can see:
1. March 2010 Pitti had a PBDIT/Sales Profit margin of 15.28% while for the 9 month period ending Dec 2010 PBDIT/Sales Profit margin is 12.59% so compared to last year this year Pitti is actually making less money as margins are down 
This fact can also be confirmed if you compare (A):
On 9 months ending Dec 2010:sales of 174.16Cr  Pitti has a PBDIT of: 21.93Cr
On year end March 2010: Sales of 152.99Cr Pitti has a PBDIT of 23.38Cr
So Pitti made more money last year at a PBDIT level on a lower sales level. 

2. Depreciation as percentage of sales is down from 4.14% for year ending March 2010 to 2.69% for 9 months ending Dec 2010. This is helping Pitti report higher profits.

Conclusion: Pitti is doing as good as last year.. the only difference is the exceptional Expense item of 5.6Cr which had made Pitti report a loss. Actually Pitti's margins have contracted even as its topline is growing... Also looks like the expansion plans have been completed and depreciation levels and interest levels are dropping indicating that going forward we can expect Pitti to mainatain its current margins of 12.59% (PBDIT levels) at the same time report higher profits by keeping depreciation and interest expenses under check.

Stock prices will also react favorably as people look at topline and bottomline completely missing out the margin picture.. Hold on to your stocks as the stock seems to have been accumulated and will move up as it reports +ve numbers each quarter. 

Sunday, February 13, 2011

Company: Jayant Agro Organics: Largest Castor Oil & Derivatives manufacturer in India

Here is some interesting info I found.. in a presentation about Vadodara - Gujarat.

Mr Vithaldas Udeshi and his family identified Vadodara’s potential before 50 years, and set up Castor Oil Refinery as a Small Scale Industry. In early 1990s, they set up Castor Derivatives Plants (one 100% EOU and one DTA Unit) at Ranoli, Vadodara. Today, his company Jayant Agro-Organics Ltd, Mumbai is the largest manufacturer and exporter of Castor Oil and Derivatives to over 50 countries.

It’s subsidiary Ihsedu Speciality Chemicalsis setting up a Sebacic Acid (derivatives) plant near Baroda with Chinese Technology at an investment of Rs 55 Crore. Ihsedu is also planning to set up Rs 2,300 Crore (US$ 500 million) Ihsedu Castor Oil Derivatives Project near Vadodara with backward integration by contract farming over 5,000 to 50,000 acre land in North/West Gujarat under MOU signed in Vibrant Gujarat 2007 with Gujarat Agro Industries Corporation Ltd, Government of Gujarat

 Another company Jayant Oil Mills (now Bitor) , also 50 year old at Vadodara is also an equal player with large castor oil refinery for exports and domestic sale. Above two companies account for a dominant 2/3rd share in India’s total export of castor oil & derivatives. It is also setting up Sebacic Acid plant near Baroda at an investment of about Rs 70 Crore. 6.3.10 Jayant Oil Mills recently proposed to set up a Rs 550 Crore (USD 110 million) Castor SEZ (Special Economic Zone) at Vilayat (Bharuch District)

here is the link to the document (Link)

Conclusion: India is the largest producer and exporter of Castor oil.. soon will be largest exporter of castor oil derivatives (3rd generation castor oil derivatives i.e sebacic acid). One must remember Castor with its 18 carbon structure allows chemical derivation which is not practical with other oils making castor oil and ricinoleic acid valuable as chemical feedstock. 

Thursday, February 10, 2011

Peak Oil is here ..

International Energy Agency IEA has a presentation on World Energy Outlook.
(Link) dated Nov9, 2010 London. 

Here are some points which I would like to project:
- Oil Demand and supply are becoming less sensitive to price.
Basically supply is short and demand is becoming price insensitive
- Copenhagen Accord & G20 subsidy reform are key advances.
Current subsidy removal seems to be part of a global effort to reduce/discourage oil consumption by reducing oil subsidies.

Oil Production Becomes Less Crude:
If you look at the presentation slide .. we can clearly see that there is an assumption that "Crude Oil Fields yet to be developed or found" is what is balancing the equation .. without which supply is going to fall dramatically.

International Oil Price Assumption:
As can be seen .. the future is oil above 100 USD Guaranteed!!

More Oil from few producers:
If you see .. Iraq and Kazakhstan are the "new" major oil producing countries of the future
Kazakhstan is a neighbor of Afghanistan..
So now we know .. why US is in Iraq and Afghanistan.
I think Saudi production figures are "Place holders" and actually production is going to be well below projected levels (my take)

- The future is going to be vastly different from the past..
- The current financial turmoil seems to be more of an asset change effort.. to move assets from a "abundant oil business environment" to new assets for "controlled oil business environment"
- Some type of assets are just going to be worthless.. and this financial turmoil is part of the facade to shield the actual pricing of assets. 
- Ashland Inc which used to own "Marathon" brand of gas stations and refineries in US has sold its "gas station and refinery business and moved into chemicals (valvoline brand of lubricants). 
- US is planning to set up a high speed passenger train system 
- Essar Oil plans to buy Shell's European refineries.. (sounds a lot like Videocon buying Thompson's colour picture tube business becoming the largest picture tube manufacturer in the world just a few years before  "LCD" systems became the norm..)
- My take is "Jayant Oil" is going to be grow to be a major player in the world of chemicals by virtue of being one of the largest castor oil derivatives producers.
- Gujarat Ambuja Exports is a globally competitive agro processing company which produces value added  agro based products.
- NHPC : Hydro power .. well that's like free energy!!
- Tata Communications: The future is digital and they own the largest submarine cable network in the world!!

The Best Buy recommendation are all "Future Ready" Grab then in this downturn (the underlying reason for these financial turmoils is to mis-price future assets so that the transfer of assets is smooth..)

PN: These are my personal views based on my interpretation of publicly available information.. please do your own deep dive before investing

Tuesday, February 08, 2011

Company: Gujarat Ambuja Exports: Company Product Video

Please find Updated Link to Gujarat Ambuja Exports Product video.

Transcript of the product video..
Just like we need air to breath.. air too needs oxygen..
Just like we need water to survive water too needs hydrogen

likewise there are several such unseen elements that  continue to perform silently  and add tremendous value to the final product..  here is an inside story of few such products

Confectionery manufacturers that believe in enhancing the shelf life of their products do so.. by believing in the power of our non GMO Soya lecithin..liquid glucose and maize starch

Thick mouth watering ice creams do not happen by chance..but are a result of the conscious decision of using. our non GMO Soya lecithin, Liquid Glucose, Maize Starch and Dextrose Monohydrate

The controlled ice crystals in frozen dairy products .. the tenderness and sweetness of marsh mellows the glossy finish of gums and candies all possible because of our one multi-faceted product ..Dextrose Monohydrate

Crunchy cookies and biscuits are now everyone forte largely due to the large scale acceptance of our non GMO De fatted Soya flour toasted..and non GMO Soya Lecithin

And the baby foods enriched and fortified with our non GMO De fatted soya flour toasted and non GMO soya flour full fat enzyme active and Maltose Dextrin .. who wouldn't wish to be a baby again ..

Steaming hot pasta's and gravies are now increasingly tempting owning to emulsification action of non GMO De fatted soya flour untoasted..and maize starch 

Our NON GMO Full fat soya flour enzyme inactive and maize starch keeps pastries and cakes fresh for a long long time..

namkeens are endowed with unmatched crunchiness and lesser oil consumption thanks to our non GMO Full fat soya flour enzyme inactive and maize starch ..

Free from cholesterol, low in saturated fat and rich in Tocopherol (vitamin E) our refined soya bean oil has redefined good health ..

while our vanaspathi ghee owning to its shelf life enhancing properties is the product of choice for puff, nankhatais and khari manufacturers 

Pets and fish now have a healthy alternative that ensures lower mortality and higher immunity because pet and aqua food brands now rely on our feed grade non GMO Defatted soya flour toasted and our non GMO Full fat soya flour..

Think of any food products and you will find our products right inside..

yummy ice creams 
sinful chocolates
finger licking pastries
golden brown biscuits
spongy cakes
delicious soups
mouth watering biryani
mind blowing pastas
frozen deserts
cool beverages
soul caressing jalebis
tongue tingling samosas
smooth icings
crunchy chips
fortified cereals 

apart from foods you will find our products empowering many an industry ..

- most crayon brands that kids love are in love with our dextrines
- leading textile brands depend upon our sorbitol for a superior sheen and on our maize starch for a permanent smooth finish of their fabrics..
- the cool cool sensation that most shaving creams and toothpaste deliver are largely due to our magical sorbitol
whatever be the industry ..what ever be the application needs we have the right products that fit in just perfectly..we are gujarat ambuja exports limited

with exports to over 60 countries and an ever increasing list of clients ..we are india's leading manufacturer and exporter of essential ingredients that help you create brands out of your products.. brands that your customers will remain loyal to .. for a long long time..

gujarat ambuja exports limited.. products that enrich your brands.

The good part is the client list .. 
Global Client list :
Ellora Agro industries
Grand mills for flour and feeds
Tata Africa holdings
Strategic foods international Co LLC
Modern Co for food products
Refined food company
National Biscuit and confectionaries co
English Biscuit manufacturers pvt ltd
Carton products ltd
Kuwait Biscuit and food manufacturers co
Omani packaging company
San Miguel foods incorporated
National company for sponge and plastics
Kuwait flour mills and bakeries co
MS unipex dairy products co ltd
AB Mauri lanka pvt ltd
Ceylon biscuits limited
Fooz factory for biscuits
Nizwa food industries llc
Mufindi paper mills limited
Myanma pharmaceutical industries

Indian cleints:
- ITC Limited
- Amul Dairy 
- Heinz India
- Britannia Industries
- Dabur India
- Hindustan Lever ltd
- Parle Products
- Vadilal Industries
- Priya Gold Biscuits
- Colgate Palmolive India Ltd
- Paras Pharmaceuticals
- Goodrick Group of Companies
- Biocon Ltd
- British Biologicals
- P&G Pharmaceuticals
- Choice Laboratories
- Balsara Home Products
- JP Laboratories
- Agiomed Ltd
- Manisha Pharma Plast
- Goran Pharmaceuticals
- IPCO Industries
- Anchor Health and Beauty

Conclusion: Well GAEL is like a consumer goods company.. the good part is because its an ingredient manufacturer .. for complex products ..whether you have biscuits from Britannia or Priya Gold biscuits, toothpaste from P&G or Ancor .. the real winner is GAEL. So the important task for GAEL management is to concentrate in maintaining margins i.e. increasing efficiencies and GAEL will do well.. as the Indian and worldwide consumption story unfolds.. Deep Deep Value Buy!

Thursday, February 03, 2011

Company: Gujarat Ambuja Exports: Dec 31,2010 - Segmental reporting...

Gujarat Ambuja Exports GAEL segmental data review is as follows:

1. Revenue breakup for Dec 31,2010 quarter is as follows:
- 75% of the sales are from the "Other Agro Processing Division" (Profit Margin: 4.88%) 
- 15% of the sales are from the Maize Processing (Bio Chemical) division. (Profit margin: 18.56%)
- 10% of the sales are from the "Cotton Yarn Division" (Profit Margin: 4.82%) 
- 0.20% of the sales are from the "Wind Mill Division" (Profit Margin: 35.36%)
As can be seen Other Agro processing division has driven the Dec 2010 quarterly revenues.. Company management had clearly stated that Dec and March quarter are the best 2 quarters for GAEL.

Looking at March 2010 Full year revenue breakup (Other Agro Processing: 62.34%, Maize: 24.38% and Cotton yarn: 12.80%) I would expect Maize division to contribute more for the next quarter of March 2011.
Also Maize division enjoys tax free status for Uttaranchal plant and we can expect the margins to be maintained.

2. As we can see the margins are as follows:
- Highest margin in Wind Mill division 35.36% but it is variable and dependent on wind patterns and other parameters out of company management control.
- Maize processing division Profit Margin is 18.56%. dropped from 20.40% in Sept but for the whole year April 2010 till date company has been reporting steady operating margins of around 18%
- Agro Processing division  Profit Margin is 4.88% which is slightly below year end march 2010 5.22% .. Also year end March 2010 Agro processing division margin was 9.18% so definitely in quarter ending March 2011 we should see higher margin around 5.5 to 6%

3. Increase in sales of lower margin "Agro Procesing Division" as compared to "Maize Processing Division" has changed the revenue mix .. resulting in lower "Net Profit Margin" as percentage of sales!!

Would expect GAEL to maintain margins and with expanded capacity in Agro processing division (new solvent extraction plant) we should see higher topline.. and as mentioned before we should be able to see 1900Cr to 2000Cr topline for GAEL for year ending march 2011. Year end March 2011 Net profit should also be around 90-100Cr.

In my previous article we were focussed on Quarter on Quarter growth numbers which are impressive to say the least.. the year on year numbers are even better (as last year results were subdued due financial crisis and global trade issues impacting trade for GAEL) Generally analyst look at "year-on-year" considering the fact that GAEL business is seasonal in nature.. here is the Y-Y and Q-Q % change data for everyone's consumption..

Conclusion: GAEL is a Strong Strong player.. much stronger that the other popular commodity companies. 
- GAEL has zero Long term loans (except for TUFS loan Technology Upgradation Fund Scheme) 
- All GAEL plants have co-generation plants which bodes well in a future where energy is bound to be scarce.. 
- GAEL has a judicious mix of segments (Spinning Division, Agro Processing division, Maize derivatives [Bio Chemical division] and Windmills) 
- GAEL is also expanding capacity in Maize Derivatives division by 70% by 2012. Maize Derivatives division is a higher margin business and has number of downstream application industries.
- GAEL is focussed in taking advantage of agricultural diversity of India and benchmarking itself to global standards.
- GAEL has also entered the markets of Sri Lanka with Agro processing plants.
- GAEL is also one of the largest castor oil and its derivatives producer. 
GAEL is a deep value stock yet to be discovered.. and the best part is a focussed and conservative(low leverage) management. A Stock that still qualifies for "Best Buy" rating as the best years are still ahead for GAEL.

Link to Dec 31,2010 Published Result (Company website)


Wednesday, February 02, 2011

Company: Gujarat Ambuja Exports: Dec 31,2010 Quarterly Results Review

Gujarat Ambuja Exports (GAEL)  CMP: 35.75 (Market Cap: Rs 4.95 Billion) reported its Dec 31,2010 results.

The following are the observations.
Quarter-Quarter Report:
- Topline (Sales) has increased by 63.81% (Rs 6.49 Billion)
- Bottom line has increased by 23.96% (Rs 286.92 Million)
- Largest percentage increase on a quarterly basis has been in other income by 251.21% (Rs 1.74 million). The other income is still very small component of total income and not a cause of worry.
- Taxes have also increased by 75.36% (Rs 101.5Million) but as a percentage of sales still within normal range (1.56% of sales)

December 31,2010 Vertical Analysis.(VA)
- Company management has not provided a breakup of sales numbers for the various divisions.
- looking at PBDIT number of 7.60% as compared to Sept 2010 9.58% provides us an indication that the increase in sales are driven by the low margin "Other Agro Processing Division" 

GAEL management had stated that December and March quarters are the best quarters for the "Other Agro Processing Division" and for the company .. this is reflected in the fact that Dec 31,2010 has been "till date" the most profitable quarter for the financial year April 2010 to March 2011.

Forward looking statement: 
Looking at last year (year ending March 2010) tax payment of Rs 299.9 Million and the fact that GAEL has paid taxes of Rs 204.4 Million (9 months ending Dec 31,2010) we can expect GAEL to report more than Rs 100 Million in taxes for next quarter March 2011
Also considering the fact that March 2011 is going to be similar to Dec 2010 we can expect GAEL to report Rs 250-300Million in Net profits for quarter ending March 2011 

Full year ending March 2011 will see GAEL reporting Rs 19 - 20 Billion in Sales and Net profit in the range of Rs 900 to 1000 Million. EPS of Rs 6.5 to 7.22. at CMP of Rs 35.75 (F.V Rs 2) and market cap of just 4.95 Billion we are getting a solid company at 26.05% of sales and PE of just 4.95- 5.5

Conclusion: GAEL is a fundamentally sound company with very little leverage(March 2010 longterm debt Rs 180 million). Company has been expanding its capacities with internal accruals and is scheduled to expand its Maize processing capacity by 70% in 2011-2012. Maize/Corn starch derivatives is a high margin business which will help increase GAEL profit margins in the next year. This year figures have been impressive and company has been able to exceed last years profit figures of 600 Million in 9 months and will end the year with 20-30% higher profits. Add to this the 60 paisa dividend with a record date of Feb 11,2011. This is a great stock for the long term.