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. 

Archives

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..

Market News

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

Dec 24,2010: MAN Industries: 80.95: Poised for a jump in price

Market News: MAN Industries: Poised...

MAN Industries

CMP: 80.95

Market Cap: 443Cr

Reserves: 463Cr

Debt: 308.41Cr

Sales March 2010: 1643Cr (TTM)

Gross profit: 226.89Cr (TTM)

Net Profit : 108.76Cr

Enterprise value 650Cr

was reviewing MAN Industries for one of our blog readers/members..

MAN Industries is doing well has almost 11Cr of forex profits not yet booked.. (as per Sept 2010 results)

shareholding is also getting consolidated  .. along with good cash flows.. all augur well for MAN..

It is not mandatory for consolidated results to be published..on a quarterly basis.. (though might change in the future)

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

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

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

=happy investing

Stock: Jayant Agro: Back Up The Truck!!

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

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

I would buy based on the facts that:

- Jayant Agro is entering into higher value added castor derivatives (Sebacic Acid).. Plant has commenced operations this year as trial runs have been completed.

- Jayant Agro has in 6 months reported profits (13.08Cr) more than profits of last 12 months (Year ending March 2010 12.63Cr)

- Jayant Agro Management has also been upbeat about its future and increased shareholding in the company.

- Jayant Agro Management has eliminated preferential capital and issued equity shares in return to promoters and other investors (indicating that going forward equity shares will outpace the returns on the preferential capital)

- With 6 months consolidated sales at 580Cr full year Sales are expected to exceed 1000Cr

- In the past 2 year Sept 2008 to Sept 2010 almost 10.75 lakh shares have moved from weak hands (small individual investors) into the hands of high networth individuals and promoters.

As can be seen..

1. Small individual investors have reduced from 6087 to 4709 and holdings have reduced by 10.75lakh shares (Small investors are investors holding less than 20,000 shares)

2. HNI (High Networth Individuals) have increased from 24 to 48 and they have increased their shareholding by 4.20 lakh shares

3. Promoters have increased their shareholding by 9.75 lakh shares 6.5%

4. There has been a reduction is shareholding by corporate bodies by 2.99 lakh shares.

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

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

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

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

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

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


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

=happy investing
www.whatsup-indianstockideas.blogspot.com

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

Market is correcting .. and its Crunch time..

The question is what should be our strategy? If you have cash in the bank (Hey u're the smart guy around!!)

For the rest of the folks.. its time to prune the garden..

- Look at your short term gains..

- Look at your short term losses..

- Give a good hard look at your list of investments and select which are your best bets..

- Prune your loss making "So and So" investments

- Increase your investments in your best bets which are available cheap..

- If you have long term capital gains take them as they are tax free and reinvest in your "Best Bets"

Indian economic indicators are:

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

As you can see India has one of the highest interest rates in the world.. Hungary,  South Africa and Pakistan are the only countries with higher interest rates..  Any increase in interest rates is going to increase flow of capital into India .. So I guess what the RBI is trying to do is..

-  Reduce Banks risk taking abilities by asking them to increase their deposit rates and maintaining borrowing rates at the current levels.. reducing their spreads.(sell Bank stocks and other speculative industries like Housing)

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

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

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

Gujarat Ambuja Export and Jayant Agro Organics.

=Happy Investing

Gujarat Ambuja Exports: Dalal Street Journal Article...

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

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

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

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

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

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

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

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

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

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

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

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

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


Previous Article: Gujarat Ambuja Exports: Promoter Guidance for 2010-2011

GAIL: Market News: 1000Cr Net Profit every Quarter starting March 2011

GAIL CMP: 490.50 Market Cap: 62,218.8Cr
Market has that GAIL (Gas Authority of India) is on an expansion mode for past 4 years .. Company has doubled its GAS carrying capacity and Tripp-led its Gross Fixed Assets.. The company is also entering into City gas distribution.. There is an unmet demand of GAS along with falling GAS prices.. GAIL is expected to report net profit of 1000Cr every quarter consistently from year 2011 onwards.. 


The key risk is the subsidy burden..however deregulation of natural gas and petrol prices followed by fixing pipeline tariffs ? have been encouraging for the industry..
Gail is trading at a one year P/E of 17.5 against its five year high P/E of 23.3. Considering its future earnings, reasonable valuations and a low beta of 0.6, Gail is a good bet.

GAIL is using its Operating Cash flows to build new Assets.. It is also using the free Operating Cash flows to pay down its debt .. So this is really great for long term investors in GAIL.

The GAIL Stock is close to its 100 Day Exponential moving Average..where it has always found support This is a great price to enter for the long term..

Company: Nitta Gelatin: Value Buy Shares

Nitta Gelatin:
CMP: 142
Market Cap: 119.28Cr
Reserves: 99.43Cr
Debt: 0.26Cr
Sales TTM: 205.49Cr
Gross Profit TTM: 28.11Cr
Net Profit: 14.47Cr
5yrs Avg Cash Flow from Operations: 19.98Cr
ROCE: March 2010: 27.79%
Last dividend: Rs 6.0
Dividend Yield: 4.23%
http://www.gelatin.in/


Nitta Gelatin India Limited (NGIL), one of the most successful Indo-Japanese industrial ventures, was incorporated in 1975 and started commercial production in 1979. Using state-of-the-art production facilities NGIL manufactures Gelatin, Collagen Peptide, Ossein, Di Calcium Phosphate. and Chitosan.

This downturn has provided excellent opportunities to accumulate great companies at great prices.. Nitta Gelatine would be one such company available close to its 52 Week low. Company dividend payout contained a special dividend so dont expect the dividend yield to continue.

Consistent positive cash flows from operations

80% promoter holding

Zero Debt status..

Introducing new value added products ..

This is a great company at a great price.. and your money is safe the stock will also easily double from these levels in 1-2 years time frame for sure.. Must buy!!

Conclusion: Must buy!! 

Company :Tata Communications: Best Buy Stocks: Long Term only 5-10+ years

Tata Communications:
CMP: 258.35
Market Cap: 7362.98Cr
Following are the Consolidated figures as per Annual Report March 2010
Sales: 11194Cr
Debt : 7308Cr
Reserves : 4249Cr
Profit Before Tax: -ve 681Cr
EPS -ve 20.97

http://www.tatacommunications.com/
Annual Report March 2010


Tata Communications is a leading global provider of a new world of communications. With a leadership position in emerging markets, Tata Communications leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers.

The Tata Global Network includes one of the most advanced and largest submarine cable networks, a Tier-1 IP network, with connectivity to more than 200 countries across 400 PoPs, and nearly 1 million square feet of data center and colocation space worldwide.

Tata Communications' depth and breadth of reach in emerging markets includes leadership in Indian enterprise data services, leadership in global international voice, and strategic investments in operators in South Africa (Neotel), Sri Lanka (Tata Communications Lanka Limited), and Nepal (United Telecom Limited).
===============
Tata Communications looks to be in dumps with a profit before tax of -ve 681Cr but lets dig a little deeper..
- look at Cash Flows from Operations one of the most basic numbers indication actual company health..

Net Cash from Operating Activities: 1552.80Cr
Cash Flow from Investing Activities: -ve 2502.85Cr
Cash flow from Financing Activities: 257.37Cr
Cash & cash Equivalents at the beginning of the year: 863Cr
Cash and Cash Equivalents at the end of the year: 257.37Cr

Tata Communications has invested 2502.85Cr in investment activity (new asset creation)

- To fund this .. cash flow from operations ie.. 1552.80Cr has been used..
- In addition 257.37Cr has been generated from financing activities
- In addition the company had cash in hand of 863Cr ..
So money flowing into the company from these 3 sources (Operations, Financing and Cash in hand from last year) has been used for investment..

So the company is making money at the operating level .. it is just that the company has so many deductions that it can report losses which will help in reducing taxes paid to the govt ..

Another very important number is Current Assets, Current Liabilities and Net Current Assets numbers:
Current Assets: 6141.74Cr
Current Liabilities: 7528.89Cr
Net Current Assets: -ve1387.15Cr

There are different valuation parameters
1. Off the hook valuation parameter is : If the Enterprise Value is less than Net current Assets then the company is selling for less than the cash in the system.
2. A more Sophisticated parameter is: If the Net current Assets is -ve which means you have more liabilities than Assets at the end of the year.. it means the company is in a position of strength (domination) and hence it is able to hold payments to its creditors (increasing liabilities) and extract money in advance from its debtors (reducing Current Assets) this results in a free float which the company can then use..

So a -ve Current Assets scenario shows that Tata communications is generating 1387Cr from its operations just by delaying payment to creditors and accepting cash from debtors .. this is possible only for very large well established companies.. in a commanding position in their area..and will result in interest savings of 138Cr (assuming 10% interest rate on 1387Cr float ..)

For Example let us look at Hindustan Unilever Limited (HUL)
Consolidated Current Assets:  5539Cr
Consolidated Current Liabilities: 6816Cr
Net Current Assets: -ve 1276.73Cr

So even HUL has a Net Current Asset number which is negative indicating it has a strong domination over the market.. can hold its creditors for longer period and expect debtors to pay upfront resulting in cash flows from its operations of 1276Cr which on a yearly basis at 10% interest works out to 127Cr
============================
In addition to the excellent and tight financial operating model that Tata communication has there is another investment bonanza for investors:

When the Govt dis-invested its stake in VSNL to Tata's there was a clause which said Tata's are supposed to release free hold land which measures 773.13Acres 85 acres in Chennai and majority of the rest of the land is in Pune .. some is in Delhi, Mumbai and Calcutta (these are the cities where VSNL had operations before takeover by Tata's)

- Share holders are supposed to receive compensation for the land.
- Since govt holds 25% and also sold 25% to Tata's with the same clause .. the majority of the beneficiary is going to be the Govt.
- Since VSNL disinvestment to public was done before selling of stake to Tata's... Individual investors will also get compensated for the Land bank..
- Individuals who tendered their shares when Tata's took controlling stake will also receive compensation..

Ofcourse the Tata's do say that the major beneficiary of the Land deal is Govt (which is true as the Govt  will receive 50% stake in the 773Acres land company that needs to be carved out of Tata Communication..

However Individual investors will also benefit and for the shares that they own in Tata Communications they will receive equivalent rights to the Property company that needs to be carved out of VSNL/Tata Communications.

So Right now Tata Communications is Tata Communications (operations) + 773Acres and the property company carved out will have Zero Debt...
 Ofcourse Tata Communications will try to wriggle out and try and reduce the amount of actual property transfer but its a long drawn out(Legal)  affair.. as this clause for a separate property company was part of the initial contract.. Also as part of the clause..Tata Communications cannot issue additional equity until the 773 Acres property is carved out of Tata Communications..

So the high debt is because Tata's have no way to grow other than debt..and now Tata's donot have the much wriggle room as debt is already pretty high...

This Value equation is well known to the Institutions..and is visible in the fact that actual Public holding in Tata Communications is  less than 2% and Institutional investors, Govt and Tata's own 98% stake in Tata Communications..

Conclusions: Tata Communications is a well oiled cash generator which is available Very Very Cheap. It also has a 773Acres Property company attached as a free gift. Go and buy !! It is a true Deep Deep discount stock and a multi-bagger but has a gestation period which could run into 2yrs or more..(when the property company is carved out..)  An addition into Best Value Buy For sure!!