GAEL: Gujarat Ambuja Exports Year Ending March 2011

GAEL (Gujarat Ambuja Exports Limited) as most of you are well aware is one of my recommended "Best Buy's"

CMP: 28.30

Market Cap: 391.54Cr

ROCE: 17.01%

Debt Equity: 0.46

Long Term Debt: 9.77Cr

 Here we will have a look at the annual result of GAEL for year ending March 2011.

The year ending March 2011 has been good to GAEL. 

1. Let us start with a "Year on Year" Comparison.

- Topline (Income) has increased by  38.31% to 1951Cr

- PBDIT has increased by 32.01% to 155.10Cr

- Net Profit has increased by 56.75% to 94.10Cr

looking at these numbers that Operating margins are stable (since PBDIT increase (32.01%) matches the 38.31% increase in topline)

Financial parameters such as Lower Taxes it seems has played a major part as Net taxes paid has actually dropped (25Cr as compared to 29.99Cr [2010])even as the PBDIT has expanded. Even Interest payments as percentage of sales growth is lower. So Good financial management has enhanced GAEL Results. (Zero taxes for the Uttarakhand plant could be the driver for lower tax burden..)

2. One must look a little deeper as GAEL has 4 divisions with different (Profit margins) Cotton Yarn(6.44%) , Maize Derivatives(19.85%) , Agro-processing (3.69%) and Windmill(53.36%) The revenue mix for GAEL in March 2011 has been towards the lower margin product. 

- Agro Processing as % of sales: 67.95% [2011] compared to 62.34% [2010]

- Maize Processing as % of sales: 20.83% [2011] as compared to 24.38% [2011]

So GAEL produced more of lower margin products hence the slight decrease in margins. 

Please note Maize division sales increased from 346.8Cr[2010]  to 406Cr[2011]  its just that the Agro Processing division increase in sales was much higher 879.43Cr [2010] to 1325.70Cr [2011]

3. Maize Derivatives business is the money spinning division of GAEL and Maize Derivatives division reported profits of 80.65Cr out of total PBIT of 146.72Cr 

Maize division contributed more than 50% of profits of GAEL while responsible for only 21% of GAEL Sales.. 

Maize division also saw improvement in Profit margin from 12.95%[2010]  to 19.85% [2011] which is more than 690 basis point improvement in margins.

4. Another interesting observation is "Prior Period Items" the numbers reported (for past 2 yrs) invariably match up with the taxes paid in the Quarterly results of March. So GAEL has been front loading the expenses for the past 2 years.. reducing the Q1-Q3 Profits. Infact for March 2010 we did mention in this blog the 10+Cr positive development between Audited and unAudited March 2010 Quarterly results (Link) ..

Annual Report for Gujarat Ambuja Exports Year 2010-2011

Few points worth mentioning from the latest Annual Report (2010-2011)

- Company shares in Demat form are just 40.92% out of which 18.84% is held by Promoters.. shares with public (HNI and individual investors)  in demat form is 13.5% .. So actual  liquidity is pretty low for GAEL shares. (Free Float with HNI, Individual investors: 53Cr)

- Long Term debt is 9.77 Cr (TUFF loans from Govt for Spinning division) 

- Book Value for Rs 2 Face value share is 36.60 [30.39 in 2010]

- Management states: The core activity of the company has gradually been shifted from oil seed extraction to corn processing activities over a period of last few years.

The company has acquired sufficient expertise in this segment and looking to the growth potential of this segment, the company is putting one more corn processing plant. This would eventually replace this segment as the core segment instead of agro processing segment.

The shift has positive impact on the top as well as bottom line in the FY 2010-11. In fact the two corn processing units of the company are the top performers in FY 2010-11." 

- Non Conventional Energy: "The Board of Directors is glad to inform that the Company successfully completed projects of generating power from BioGas for its Corn processing units at Himatnagar & Sitarganj. The Company has installed Bio Gas Engine at both the units for power generation. This initiative also takes care of carbon reduction and environmental friendly approach of the Company. The project is forward integration of the Bio Gas generation from the Corn processing effluent. With the success of these projects, the Company has put additional infrastructure for the bio gas generation at both the units. The generation of additional bio gas has already begun in F.Y. 2010-11 and the Company is also putting engine at each unit for forward integration of bio gas into power in the current F.Y. Such projects are capital incentive and their sustainability is based on CDM/ VCS revenue from such project."

- GAEL has 21Cr of cash in hand, 77Cr of investment in stocks and Bonds,  478Cr of Reserves, Long term debt of just 9.77Cr. Cash Flow from operations is 65Cr[2011]

Conclusion: 

GAEL at CMP of 28.3 Market cap of 391Cr, Book Value: 36.60 is a deep value stock. Management is focused on moving from low margin (5%)"Agro Processing" to higher margin (20%)"Maize Derivatives" business. With increase in Maize Derivatives capacity of current plants and setting up of new capacities GAEL is all set to see better days ahead. Promoter holding is a confidence building 63.95%. Demat levels are low [40%] and actual free float is closed to 14-20%. Investment can be considered for the long term at these price points. 

PN: These are my personal views about GAEL based on my interpretation of publicly available data.

Archives

Gujarat Ambuja Exports: Moneysights Rating: Strong Financials, Strong Upside

Here is a copy of the ratings given by Website www.moneysights.com for Gujarat Ambuja Exports

All Thanks to "Kalpesh Bhai" for sharing his knowledge and info with readers of this blog.

As can be seen GAEL has good financial strength and is poised for a leap in stock price. A "Must Buy" at these prices for any portfolio. Infact GAEL has outperformed Gold also!! 

Gujarat Ambuja Exports: Funds invested in Gujarat Ambuja Exports

Here is the list of funds invested in Gujarat Ambuja Exports.

The list seems to be only of Foreign Funds invested in Gujarat Ambuja Exports as it does not have Reliance Growth Fund listed which holds 4.55% of GAEL's Equity

Dimensional Fund Advisors seems to "Like" GAEL and the Star ratings are Morning Star rating of the funds..

Conclusion: We have good company and we just need to hold on to our "Cheap" GAEL stocks. In case you have not bought you can make an entry at these levels as company is all set to report 85-90Cr net profit(Est. March 2011) and current market cap of GAEL is just 421Cr "Deep Value Buy for a Fundamentally Strong Company" 

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Jayant Agro Organics: March 2011 Quarterly Results and Annual Results

Jayant Agro has reported its Quarterly results on May 14,2011

CMP: 88

Market Cap: 132Cr

Jayant has reported on a consolidated basis:

Year ending March 2011:

1. - Sales: 1171.99Cr (Year 2010: 905.67Cr) Growth of: 29.40%

2. - PBDIT (Profit Before Depreciation Interest and Taxes): 63.45Cr (Year 2010 : 41.32Cr) Growth of  53.55%

A higher PBDIT growth number over growth in Sales clearly indicates that there has been an expansion in margins. (2011: 5.41% 2010: 4.70%)

3. - Net Profit: 24.57Cr (Year 2010: 12.4Cr) Growth of 98.14% 

A Higher Net Profit growth percentage than PBDIT growth indicates there has been a reduction in Depreciation, interest or tax expenses and we can clearly see Depreciation (2011: 0.46% Vs 2010: 0.52%) and Taxes (2011: 0.91% Vs 2010: 1.17%) have contributed to increase in Net Profit.

EPS number for Jayant agro: 

2011: Rs 16.38 (Face Value: 5)

2010: Rs 8.31 (Face Value: 5)

Company has grown Topline by 30% and Bottom line by 98.14% due to margin expansion and somewhat by reduction in taxes and depreciation. Please Note these are "Consolidated" numbers and most of the market data reviewed by analyst is on "Standalone" numbers.

Conclusion: The time is near for Jayant Agro Organics stock price to reflect the increase in fundamentals. 
- Year ending March 2008 Net Profit: 9.51Cr
- Year ending March 2009 Net Profit: 7.49Cr
- Year ending March 2010 Net Profit: 12.63Cr
- Year ending March 2011 Net Profit: 24.57Cr


From 2008 to 2010 in last 3 years Jayant agro has earned 29.63Cr in March 2011 Jayant Agro has earned 24.57Cr. Almost equal to earning for last 3 years!! in 1 Year!!
So Year ending March 2011 Jayant has done exceptionally well. It is but a matter of time before the stock reflects the earnings growth. This is an opportunity for investors to pile on cause the stock is ready to rock. (Psst: Stock seems to remain low till 1st half of the year and does much better in the latter half (link)
- Promoters have also spoken about bonus in the future (link)

Link to Result
Archives

Jayant Agro: Back up the Truck

I was looking at Jayant Agro Organics numbers.

9 month ending Dec 2010 Jayant Agro has:

Consolidated Sales: 843Cr

Consolidated PBDIT: 51.71Cr

Net Profit: 20.31Cr

on an Equity of 7.5Cr and Face Value of each shares as Rs 5 EPS works out to be: 13.54 

Pls note this is for 9 months data. the PE at share price of Rs 100 is 7.38

Now let us look at the historic PE of Jayant Agro Organics.

The highest PE in 4.33 yrs is : 38.62 on Jan 2008

The lowest PE in 4.33 yrs is: 6.28 on Dec 2008

The current PE of 7.38 is actually rock bottom PE of Jayant for past 4.33 yrs.

(Because this PE is calculated over 9 months)  and we still have 1 Quarter of Results "This is Rock Bottom"

if you look at the Big Picture!!

Conclusion: Jayant Agro is a castor derivatives market leader and the market is yet to discount the huge increase in earnings that Jayant Agro has reported in past 9 months (Link). Assuming even a conservative 15 PE  jayant should be valued at 203 (assuming 9 months of earnings data) So this is a conservative estimate and a recommendation to buy with at least 12-18 months horizon and 100% appreciation from these levels..

Archives

Market Rising: Liquidity, Short Term Interest Rates (secret behind market moves)

Markets have made a swift move upward..

Change in Fundamentals?

FII Investments?

NO .. I dont think so.. The secret is "Short term interest rates (Liquidity)"

Just look at the MIBOR (Mumbai Inter Bank Offer Rates) and look at Index movement.
April 2011 3 Month MIBOR Avg (6 days data) :9.055%
March 2011 3 Month MIBOR Avg (22 days data) : 10.16%
Feb 2011 3 Month MIBOR Avg ( 19 days date): 9.48%
Jan 2011 3 Month MIBOR Avg (20 days data): 9.10%
Dec 2010 3 Months MIBOR Avg (22 days data): 8.74%
Nov 2010 3Months MIBOR Avg (20 days data): 8.03%
Oct 2010 3Months MIBOR Avg (21 days data): 7.65%

Conclusion: Liquidity is the medium on which stock prices runs.. drop in liquidity will be reflected by rise in  short term  interest rates.. and fall in stock prices. 
Short term interest rates are leading indicators .. ie 
- Rise in short term interest rates will be followed by a drop in stock price.
- Fall in short term interest rates will be followed by an increase in stock prices


FII Investments.. pulling out or pumping in will directly affect availability of short term credit. So short term interest rates are the catch all indicator of market sentiments..


MIBOR Rates are available here (Link)

Company: Gujarat Ambuja Exports: March 2011 Shareholding

Gujarat Ambuja Exports has just released its shareholding details for the quarter ending March 2011.

Highlights: 

1. Mutual fund ownership has risen by 1,00,000 shares between Dec 2010 and March 2011 (Shares held per Mutual Fund: March 2011: 6,59,481.78 Dec 2010: 6,52,338.92)

2. HSBC Midcap Equity fund now owns 1.03% in GAEL (HSBC Mutual funds as a group own 28.89 lakh shares in GAEL (link))

3. There has been selling by corporates and there has been an increase of 488 individual shareholders between Dec 2010 and March 2011. (shares held per individual investor: March 2011: 616.65, Dec 2010: 619.51)  

4. There has been an increase in the no of HNI by 1 to 28 and avg shares held by HNI is: (1,10,459 shares per HNI  Dec No: 1,10,680shares per HNI)

5. A 1 Year return on investment on GAEL is 92.57% which is exceptional (more because of the low prevailing prices in April 2010 of 17.50 - Dream prices)

Conclusion: Fundamentally CMP: 33.75 MarketCap: 466.94Cr Sales(TTM):1692.83Cr PBDIT(TTM):153.1Cr Net Profit (TTM):86.82Cr  Long term Debt 18Cr (March 2010). GAEL is still a Value story. Also 1st Quarter(Jan -March)  has traditionally been a weak quarter for stock prices because of Tax outflows, Tight market conditions and provides a very good period for buying into Stocks .. I see GAEL rising to target levels of 100+ but would have a target time frame of 18-24 months due to tight liquidity conditions.. (short term interest rates (3 months is close to 9% and was above 10% in March 2011) 

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Company: Jayant Agro: Silver Nano Particle production using Castor

Currently, nanoparticles (NPs) are used in several scientific applications, but among these silver nanoparticles (Ag-NPs) are predominant. This is because of several characteristic features of this type of metal NP.
Antimicrobials and nanocomposite fabrication are some of the highly useful applications, among others, of applications that were attributed to Ag-NP.

In the fabrication of NPs, it is very important to control particle size, shape, and morphology.
Laser ablation in liquid media is a simple and clean method for synthesis of NPs.
In this technique, there is no need to use any chemical reagents (such as NaBH4) in the fabrication process or any purification techniques to characterize the produced NPs.

Conclusion:
Ag-NPs have been successfully prepared in castor oil by laser ablation from a silver plate. The results obtained showed that the produced Ag-NPs were well dispersed and also stable
for quite a long period of time. This ability of castor oil to prevent agglomeration of Ag-NPs is due to the presence of long-chain hydrophobic moieties.

Link to Original article
Jayant agro Archives:

Company: Jayant Agro Organics: CRISIL Report March 2011

I must thank Purushottam for sharing this link about CRISIL Report for Jayant Agro:

Page 1:

Page 2:

Page 3:

Page 4:

Conclusion:

The great part is that the report has been published in March 2011 so its latest report. The only thing I think worth adding to this is the fact that Jayant agro has only 6045 shareholders (link)as of Dec 2010  so the number of shareholders are pretty concentrated and availability of free stock is very low with a surge in demand we can expect Jayant price to spike for sure..

Link to original document

Jayant Agro: Castor Oil derivatives used in Solar panels

One more futuristic uses of "Castor": Reduce cost and also make Solar Panels environment friendly

Photovoltaic Panels used in Solar Energy is wrapped in an insulating environment to withstand the harsh environment this insulating environment is called "Back Sheet"

The purpose of this casing "Back Sheet" is to Protect the Panel, Keep the moisture out and provide a certain electrical value so that solar panels can generate electricity in a conventional manner.

A typical "Back Sheet" uses 8 different layered components. BioSolar will replace the structure with one layer of bio-based material derived from castor bean oil. 

"We buy the resin—a castor bean based nylon 11 resin—and formulate it by mixing other ingredients to enhance its properties. The new product increases its resistance to water and becomes more insulating, and more affordable. We call the product, ‘BioBacksheet.’"

BioBacksheet achieves all three goals for photovoltaic solar panel manufacturers through guaranteed longtime durability, cost savings and the introduction of more green material. 

Conclusion: Castor Oil is a Natural Oil Polyol-There is no substitute in nature for its unique Biochemical structure. Modification of the Molecular Structure by dehydration yields a unique drying oil-that is superior to any other vegetable oil. Castor Oil Derivatives are unique to high performance greases and cannot be substituted. Castor Oil and Castor derivatives are Bio-Renewable, Bios sustainable. Buy Jayant Agro Organics one of the largest players in processing of Castor oil in India. India is the largest exporter of Castor oil in the world with 90% of all exports originating from India.

PN: Link to the original article

Archives on Jayant Agro

GAEL: HSBC Mutual fund buying into GAEL

Looks like there is accumulation by HSBC mutual fund into GAEL ..

at 32 bucks that is 9.24Cr worth of cash into GAEL.. in past 6 months.. WOW!! 

Also the 180 days(6 months) and 90 days (3 months) avg prices are 33.1 and 35.37.

(link to original source in moneycontrol)

Conclusion: This is a great price.. and we are seeing acknowledgement from professionals like HSBC mutual fund.. since they have bought for more than 1 fund which means that its an identified stock by the fund house.

Thanks Purushottam for the follow up and sharing the info with everyone on this blog.

Archives

Company: SKM Egg

March 1,2011: SKM Egg: Margin call to Promoters: Buy SKM Egg

July 7,2010: SKM Egg: Value Buy

Margin Call on Promoters!! Buy SKM Egg

SKM Egg:

CMP: 10.60

Market Cap: 27.67Cr

Sales TTM (Twelve tariling Months): 162.73Cr

Gross Profit TTM: 3.02Cr 

Net Profit: -ve 11.82Cr

Interest Payment TTM: 7.26Cr

Depreciation TTM: 7.56Cr

I had read an interesting article in economic times (Titled:  Margin call - a dreaded term in the market) about how promoters are being taken for a ride. Here is the complete article from economic times

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Scavengers on the Street are fishing for a little piece of information. Something that may appear innocuous, but isn't. Unsuspecting individuals who share it may not anticipate the havoc it can cause. Till the stock market opens the next day. A slice of the information can be accessed from the Internet. The more damaging part is with someone else. The scavenger's job is buying that 'someone' a drink. It's about pledged shares. Not the number of shares that promoters of mid-cap companies have pledged with loan sharks to raise money. That information is in public domain. But what isn't is the price at which a lender pulls the trigger. A short seller who comes to know that price hits the goldmine.

If the stock that's pledged slips below this price or even touches it, the lender will ask the borrower to either pledge more shares or bring in cash. It's called margin call — a dreaded term in the market. If the borrower can't, the lender dumps the stock. An unnerving sequence of events may follow: as the stock falls further, the lender asks for more margin, and as the borrower fails, there's more selling. Indeed, a scavenger who knows the price at which the margin call will take place is the master of the situation.

Once he fishes out that information, he plans for the kill. Before that, some homework has to be done. He must be sure that the promoter who has borrowed doesn't have spare cash or shares to cough up. If he figures out that the borrower is stretched to the limit, he starts going short on the stock. If the price drops to a point where it's at a striking distance to the price at which the margin call will be triggered, he shorts again for the one last time. A small push, before a free fall.

If the lender is a high-street bank and the borrower a big name who has been a client for years, the outcome can be less brutal. But when the borrower is a mid-cap dream-seller and the lender a new-generation finance company or a brokerage arm, there is unlikely to be a prolonged parlay. The scavengers know it all too well.

What has come to their advantage is the comparatively easy access to the 'price info'. Their analysts can chat up with company officials to find out the name of financiers, and others can follow it up with lenders to 'get a sense', as they say, about the price, or at least the range at which margins can be called. In several cases, such queries could even pass as academic interest — a ploy that bond houses once used in a different way. Treasury economists in Mumbai bond desks called up their counterparts in the labour ministry to have a serious conversation about the 'inflation scenario'. Such chats, on a Wednesday evening, inevitably ended with the latter disclosing the inflation number that will be announced on Friday morning. On Thursday, bond traders knew how to use the information. Those were the days when the stock market never cared about weekly inflation numbers. And the world outside Nariman Point was clueless about bonds. It was a neat arrangement that went on for years till too many people started trying it out.

The scavengers in the equity market are still a small group. They prey on small companies backed by cash-starved promoters. Shaky fundamentals about the stock and a bad press on the company do not govern their action, even though such things make their job easier. They are unlikely to touch stocks where the promoter is not leveraged, even if there are enough fundamental reasons to short the counters.

Some of these scavengers had cut a very different deal with company promoters in the heady days of 2007 when every penny stock was up for grabs. That was a time when friendly promoters used them to rig up stock prices before shares can be dumped on foolish late-comers. Today, the promoters are at the mercy of the same people — their one-time partners in crime. In the quicksands of the market, the balance of power has shifted. In an unforgiving Dalal Street, what goes around comes around.

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Here is the link to the original Economic Times Article (Link)

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A more important question is.. can we identify these stocks and take advantage of the situation?.

we do have one stock in our back yard which seems to face this problem (SKM Egg)

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Promoter pledged shares in March 2009: 7,899,000 

Total shares held by promoters in March 2009: 14,028,893

% of shares pledged: 56.30%

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Promoter pledged shares in Dec 2010: 11,242,492

Total shares held by promoters in Dec 2010: 11,744,513

% of shares pledged: 95.7% << Alarm Bells!!

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Let us look at SKM Debt levels:

 Long term Debt to Equity ratio is: 0.79 for year ending March 2010

Short term Debt/Equity ratio is: 1.49 for year ending March 2010

Lets look at interest payments:

Interest PaymentsYear ending March 2010: 8.12Cr

Interest payments for past 9 months: 6.33Cr

so certainly SKM has kept the interest payments in control.

The stock definitely seems to have been hit by scavengers as we can see the promoter pledged shares are more than 95% and any further drop could coincidently trigger a fire sale by the lender.. kicking the promoters out and put the "scavengers" in the driver seat.

Well what's in there for us?. I would say.. a really low price to get in cheap into SKM Egg as the scavengers try to push the stock down.. 52 Week low is: 9.15 on BSE Feb 11,2011 current market cap of: 27.67Cr for the largest exporter of "Egg Powder" from India .. is Cheap Real Cheap.. 

In the past history of 13 years the Avg "Cash Flow from Operations" for SKM egg is +ve 2.77Cr

Conclusion: This is crunch time.. but its actually an opportunity to get in real cheap into SKM Egg. Company is fundamentally sound and we can expect the company to do well in the future.. Scavengers are on the prowl giving us an opportunity to get in cheap. The stock last fell below 10 bucks in July 30,2004. which means even during the carnage of 2008-9 SKM did not touch 10 bucks.. Current stock price is a great buy price

Shareholding with pledged share data of promoters March 2009 and Dec 2010

SKM Egg share price drop below 10 on July 30,2004

Archives

Indian Budget 2011-12

The Indian Union Budget is in our face. The official Govt website where you can get original info along with the economic survey 2010-11 data is here (link)

Indian economy is on a roll and will continue to do so. The youngest working age population in the world ensures India of a strong internal demand for goods and services. Global activities could be the only source for derailment of the Indian story. Here Oil price as well as capital inflows/outflows is what is of prime concern.

My area of investment is targeted on Agro processing (GAEL and Jayant) and energy efficiency (NHPC and Tata Communications)

NHPC which is a largest hydro electric power company in India and since its public sector enterprise has vast experience and access to restricted area's of the nation to setup hydro power plants. With fuel linkages a priority NHPC has the natural Water cycle as its source of fuel which is a big advantage. The govt is no longer shy to charge market rates for power and this is going to benefit large scale producers who have their input costs capped. As fuel prices rise .. hydro power electricity and coal powered electricity will be charged the same rates and we will see NHPC benefit from these actions in the future.

Tata Communications: Its sitting at the junction of the world wide web with the largest submarine cable network in the world. So everytime you google in India or any other country in the world you are paying Tata Communications. Now with 3G rollout in India and other countries bandwidth utilization is going to rise and so will the profits of tata communications.

Jayant Agro and GAEL: We have been concentrating on Agro based industries and with govt emphasizing on agri-infrastructure we could see GAEL and Jayant take advantage of the same (storage godowns). GAEL has a Debt/Equity Ratio of 0.42 and Long term debt equity ratio of 0.03 so is well placed for future expansions. Jayant has a Debt/Equity ratio of 2.1 and long term debt equity ratio of 0.42. So Jayant already has carried out expansion in terms of the new JV which is keeping its debt levels busy. 

Conclusions: GAEL, Jayant, NHPC and Tata Communications are the core holdings one must own Recommended (Best Buy). All are available at fair/discount valuations and are future ready. Current downturn is a great opportunity to add more on all these counters.

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. 
Archives

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. 

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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)

Conclusions: 

- 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

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.

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The good part is the client list .. 

Global Client list :

Ellora Agro industries

Grand mills for flour and feeds

Tata Africa holdings

Katakit

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

IFFCO

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!
Archives

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)

Archives

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.

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..