Sunday, December 25, 2011

SABERO ORGANICS GUJARAT LTD - BUY FOR LONG TERM




Sabero Organics Gujarat is an agrochemicals manufacturer promoted by Chuganee family.Company producing various fungicides, herbicides , insecticides and other speciality chemicals. Company having manufacturing facilities in Gujarat,Jammu Kashmir ,Tamilnadu and marketing offices in Europe, Brazil, Argentina, Phillipines and Australia other than various parts of India..Sabero's products includes Acephate, Mancozeb, Chlorpyriphos, Glyphosate, Dichlorovos, Methamidophos and Propineb.A major portion of its products are exported to various countries in their own brand names and also supplying products to other companies including well known MNC's.About 65% of its total sales is generated from exports and company's major asset is its product registration of more than 250 products in 50 countries.Company having many products registrations and strong presence in Brazil which is one of the biggest agrochemical markets in the world.Sabero came to limelight in recent past after the acquisition of the company by south based Murugappa group .'Murugappa group'is a well reputed business group from South India with deep knowldge in Agriculture related businesses along with others.Success of companies like Coromandel International and EID Parry is best example for their expertise in this field.Other listed companies from the same group includes Carborundum Universal,Cholamandalam Investment,Tube Investment,Coromandel Engineering..etc
Coromandel bought this company at a steep premium of 80 % to then prevailing market price and the deal concluded @ Rs.160/- per share.Also it paid Rs.38.47 extra per share as a non compete fee to the promoters of Sabero.Coromandel's strong marketing network is a big boost to Sabero where the largest customers are more or less the same.Management expertise and deep pockets of Murugappa group is added advantages.Due to lower capacity utilisation and higher overhead costs Sabero posted losses in first two quarters of this FY.In a recent interview Mr.Kapil Mehan MD of Coromandel indicated that they have took over the management of Sabero only in third week of December and their first priority is to enhance the capacity utilisation.He also mentioned that they are expecting the company will back to black in another two quarters. Earlier in FY 2011, Sabero posted a turnover of Rs.412 Cr and a net profit of Rs.10 Cr.I believe the massive capacity of its plants and the ability of Murugappa group will create  a multibagger from current price of Rs.55/-

Wednesday, December 21, 2011

ORCHID CHEMICALS & PHARMACEUTICALS LTD - UPDATES

Share price of Orchid Chemicals crashed from a level of Rs.300 to Rs.115 in this calendar year. Overall market crash and not so encouraging second quarter result was a  reason for this down trend .But the most important reason was the uncertainty  related with the redemption of FCCB ,which is due for redemption in February 2012.Now in a filing to stock exchanges , company informed that they  have already tied up funds for FCCB redemption . This is a good news and share price is expected to recover .Those with a long term view may enter @ CMP of Rs.136/-

Saturday, December 17, 2011

BIOCON LTD - BUY






Biocon is  one of the  largest Biopharmaceutical company in India.Till recently company was mainly concentrating in statins which is a cholesterol lowering drug .But now company is seeking various growth opportunities in other segments and paying much attention for developing  other biotechnology based branded formulations and contract research activities through its subsidiary  Syngene and Clinical research through Clyngene.Branded formulation business is expected to grow about 30% in the coming year.Recently company launched 'INSUPEN' which is a reusable insulin pen.Company's agreement with foreign pharma companies for supply of products are also a positive step.Biocon's overseas operation in the countries like Malaysia ,Germany..etc are also moving in the right direction.Oral insulin is another important step which is going through clinical trials.Biocon's last quarter performance is a tad below expectations but the sharp cut in its share price makes it an attractive buy for long term investors .CMP is Rs.261/-

Tuesday, December 13, 2011

The Ups And Downs Of Investing In Cyclical Stocks

Courtesy :Investopedia



 Imagine being on a Ferris wheel: one minute you're on top of the world, the next you're at the bottom - and eager to head back up again. Investing in cyclical companies is much the same, except the the time it takes to go up and down, known as a business cycle, can last years.

What Are Cyclical Stocks?Identifying these companies is fairly straightforward. They often exist along industry lines. Automobile manufacturers, airlines, furniture, steel, paper, heavy machinery, hotels and expensive restaurants are the best examples. Profits and share prices of cyclical companies tend to follow the up and downs of the economy; that's why they are called cyclicals. When the economy booms, as it did in the go-go '90s, sales of things like cars, plane tickets and fine wines tend to thrive. On the other hand, cyclicals are prone to suffer in economic downturns. (For more on the business cycle, see Recession: What Does It Mean To Investors?)

Given the up-and-down nature of the economy and, consequently, that of cyclical stocks, successful cyclical investing requires careful timing. It is possible to make a lot of money if you time your way into these stocks at the bottom of a down cycle just ahead of an upturn. But investors can also lose substantial amounts if they buy at the wrong point in the cycle.

Comparing Cyclicals to Growth StocksAll companies do better when the economy is growing, but good growth companies, even in the worst trading conditions, still manage to turn in increased earnings per share year after year. In a downturn, growth for these companies may be slower than their long-term average, but it will still be an enduring feature.

Cyclicals, by contrast, respond more violently than growth stocks to economic changes. They can suffer mammoth losses during severe recessions and can have a hard time surviving until the next boom. But, when things do start to change for the better, dramatic swings from losses to profits can often far surpass expectations. Performance can even outpace growth stocks by a wide margin.

Investing in Cyclicals
So, when does it pay to buy them? Predicting an upswing can be awfully difficult, especially since many cyclical stocks start doing well many months before the economy comes out of a recession. Buying requires research and courage. On top of that, investors must get their timing perfect.

Investment guru Jim Slater offers investors some help. He studied how cyclical industries fared against key economic variables over a 15-year period. Data showed that falling interest rates are a key factor behind cyclicals' most successful years. Since falling rates normally stimulate the economy, cyclical stocks fare best when interest rates are falling. Conversely, in times of rising interest rates, cyclical stocks fare poorly. But Slater warns us to be careful: the first year of falling interest rates is also unlikely to be the right time to buy. He advises that it's best to buy in the last year of falling interest rates, just before they begin to rise again. This is when cyclicals tend to outperform growth stocks.

Before selecting a cyclical stock, it makes sense to pick an industry that is due for a bounce. In that industry, choose companies that look especially attractive. The biggest companies are often the safest. Smaller companies carry more risk, but they can also produce the most impressive returns.

Many investors look for companies with low P/E multiples, but for investing in cyclical stocks this strategy may not work well. Earnings of cyclical stocks fluctuate too much to make P/E a meaningful measure; moreover, cyclicals with low P/E multiples can frequently turn out to be a dangerous investment. A high P/E normally marks the bottom of the cycle, whereas a low multiple often signals the end of an upturn.

For investing in cyclicals, price-to-book multiples are better to use than the P/E. Prices at a discount to the book value offer an encouraging sign of future recovery. But when recovery is already well underway, these stocks typically fetch several times the book value. For instance, at the peak of a cycle, semiconductor manufacturers trade at three or four times book value.

Correct investment timing differs among cyclical sectors. Petrochemicals, cement, pulp and paper, and the like tend to move higher first. Once the recovery looks more certain, cyclical technology stocks, like semiconductors, normally follow. Tagging along near the end of the cycle are usually consumer companies, such as clothing stores, auto makers and airlines.

Insider buying, arguably, offers the strongest signal to buy. If a company is at the bottom of its cycle, directors and senior management will, by purchasing stock, demonstrate their confidence in the company fully recovering. (For more on how to research insider activity, see Keeping An Eye On The Activities Of Insiders And Institutions.)

Finally, keep a close eye on the company's balance sheet. A strong cash position can be very important, especially for investors who buy recovery stocks at the very bottom, where economic conditions are still poor. The company having plenty of cash gives these investors more time to confirm whether their strategy wisdom was a wise one.

Conclusion
Don't rely on cyclicals for long-term gains. If the economic outlook seems bleak, investors should be ready to unload cyclicals before these stocks tumble and end up back where they started. Investors stuck with cyclicals during a recession might have to wait five, 10 or even 15 years before these stocks return to the value they once had. Cyclicals make lousy buy-and-hold investments.



Sunday, December 11, 2011

TATA CHEMICALS - REPEAT

Tata Chemicals is a familiar company for Indian Investors.Considering the potential of Agriculture related sectors worldwide , this company deserves a position in the portfolio of any investor. Company is a leading manufacturer of  Fertilisers and Soda Ash even in a global level.Through several acquisitions company has grown many fold in  recent years. Company is also selling Iodised salt in different brand names like "TATA SALT','I-shakti''TOPP SALT'..etc.In the Fertiliser sector TCL manufacturing and selling Urea,Single super phosphates,Di-ammonium phosphate,Nitrogen phosphorous potassium complexes..etc The sharp rise in fertiliser prices in recent times is expected to help the company to post improved realisation in this sector.Company also having a joint venture with Ireland based Total Produce . Total Produce is the third largest fruit and vegetable distribution company in the world and Europe’s largest fresh produce provider.Through this joint venture company - named 'Khet Se '- Company offering fresh fruits and vegetables.As a brand extention , Tata Chemicals recently started selling pulses like chana, toor, urad and moong under the brand name I- Shakti.Along with its subsidiary Rallis India , Company is initiating a campaign called 'Grow More Pulses' as a knowledge sharing platform for farmers.Company's another initiative is  'The Tata Kisan Sansar'which is a network of about  nearly 700 farmer resource centers that caters to more than 3.5 million farmers in 22000 villages in the northern and eastern part of India.Since it is not a micro cap and  lot of reports are easily available about this company, I am not explaining much on this,but I feels this is the company from TATA group having maximum potential to grow in the next 10 year period.For the latest quarter ended September , on a consolidated basis  company posted a jump of 116 % in its net profit. One should include it in your portfolio at CMP of Rs.350/-

Tuesday, December 6, 2011

HI-TECH GEARS - BUY





Hi-Tech Gears is one of the largest manufacturers of  auto components in India .Its product list includes Precision forging components,Engine Components and two wheeler parts.Company is a major supplier to Hero Motocorp,Honda Motors,Tata Motors,Caterpillar, Cummins..etc.It is also in export market and recorded a jump of 80% in exports in last financial year.Now company is developing some new products and also adding new markets like Brazil and U K. Company's management is share holder friendly and paying good dividend and issuing liberal bonus in regular interval.For the financial year ended March 2011 , Company posted a turnover of Rs.427 Cr and a net profit of Rs.35 cr .In the latest September quarter Sales were Rs.118 Cr and net profit were Rs.10 Cr .At current market price of Rs.121, Hi-Tech Gear is one of the safest bet from auto component sector.

Saturday, December 3, 2011

STOCKS TO BUILD A PORTFOLIO

We have discussed many small and micro cap stocks in the past few years.As you are aware, these type stocks are generally  not suitable for investors with low risk taking capacity.In recent times I am receiving lot of requests from our friends to suggest few stocks with reasonably good growth prospects and relatively low risk - to build a portfolio . Find below few such stocks ( some of them are  already discussed). Considering the current volatile situation, it is better to avoid buying the stocks in one go .


COMPANY NAME             SECTOR                         CMP

1) YES BANK                     BANKING                        290            

2) CAIRN INDIA                 OIL/GAS                          316            

3) TATA CHEMICALS        COMMODITY/CHEM        352             

4) WABCO INDIA                 AUTO PARTS               1277              

5) ADITYA BIRLA NUVO     DIVERSIFIED                910            

6) KAVERI SEED COMPANY  SEEDS                         460           

7) MADRAS CEMENTS           CEMENT                      115              


8) GSK CONS.HEALTHCARE  FOOD                          2480               
       
9) M& M                  AUTO                                       748              

10) FORTIS HEALTHCARE      HEALTH CARE              114              

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Tuesday, November 29, 2011

AGROTECH FOODS - UPDATE

PROMOTERS OF AGROTECH FOODS - CAG TECH MAURITIUS LIMITED - A HOLDING COMPANY OF CON AGRA FOODS USA  PURCHASED 893465 SHARES OF AGROTECH FROM ITC GROUP AT A PRICE OF RS.580/- SHARE THROUGH OFF MARKET .NOW CON AGRA'S HOLDING IN THEIR INDIAN SUBSIDIARY REACHED 51.77 % .

For the old Posting on  Agro Tech Foods , Click HERE


Saturday, November 26, 2011

SUNDARAM BRAKE LININGS LTD- SOMETHING SPECIAL








Sundaram Brake Linings is a major producer of friction material, consisting of brake linings, blocks, disc pads and clutch facings that are used in automobiles.Ashok Leyland and Tata Motors are the major customers of this chennai based TVS group company.SBL is also exporting its products to various countries and almost 40 % of its income is from exports.Enthused by the increasing demand,recently company started a new production facility in SEZ, Mahindra World City ,Tamilnadu.Now company's all   manufacturing plants  are producing ASBESTOS-FREE products which will help to increase its exports.

                                           Sundaram Brake Linings was an outperformer from TVS Group till 2008.Its share price never came down below Rs.400 Mark during 2005-2007 period.But it crashed from a level of Rs.440 to just Rs.98/- in 2008 alone .These type of crashes in share price are common today because of share pledging by promoters or various type of frauds.But nobody is expecting such actions from one of the most conservative group from South India - the TVS Group .There was nothing wrong with the Sales and profitability of this company but a special reason for this poor performance of stock price.SBL is a victim of mis-selling of complex derivative products by banks which came to light  during 2008.Many other companies like Rajshree Sugar,Precot Meridian..etc are also in news related with such transactions during the mentioned period.Anyway , their efforts to protect from  foreign exchange fluctuation ends in huge losses for SBL.Then the company filed cases against these banks and at last it ends in an out of court settlement.As per the terms company is liable to pay only one tenth of the actual loss .Now, company is making provisions in each quarter for this payment and the said amount is mentioned as extraordinary item in the published results.An amount of Rs.5.60 Cr provided last year under this head .After this provision company made a net profit of Rs.6.30 Cr in 2010-11.EPS for last year including special provision is Rs.16 and that excluding this provision is more than Rs.30/-.Even in a tough time for auto parts makers, last quarter company improved its performance.This special provisioning will end in next 18 months starts from September 2011 onwards (in March 2013). The true picture of this company's earnings will reflect in its financial result only thereafter.Company having very small equity base of just Rs. 3.93 Cr and consistently paying dividend of 40 % or more for the past many years. Actually it was more than 125% each before 2008 incident .Considering the Cyclical nature of auto and auto ancillary business and the trend in interest rate , 2013 may be a good year for this sector.After the end of this provisioning , I feels the market will realize the true picture of this company and it will go back to its past glory.At current market price of Rs.155/- it is even quoting very below its book value of Rs.250/-.Company 's debt equity ratio is just 0.38 and not even a single share is pledged by the promoters. Those who are willing to show some patience , this is one of the best bet from this sector @ Rs.155/-

Thursday, November 24, 2011

The Farmer and The Calf: An Investment Story

Courtesy : The Unknown Author


This story is about a farmer who received a calf from a rich man. Hopeful that the calf will be able to help him have a better life, the farmer did his best to take care of it. But as the calf grew, so did the farmer’s expenses.One day, he said to himself, “I don’t want to wait anymore for this calf to become an ox. I’ll just sell it and buy several sheep which are easier and much cheaper to take care of.”And so he did just that.After several months, he realized that breeding sheep were not as easy as he thought. And so he said to himself, “It takes too long for these sheep to give birth. I better just sell them and buy myself several hens which can lay eggs for me everyday.”And so he did just that.The plan worked very well, he was earning good from selling all the eggs. Life improved for the farmer. But after several months, the hens started to lay less and less eggs until one day, the hens couldn’t produce anymore.The farmer was devastated. In his anger, he cooked all the hens and had himself a feast.Later that week, he remembered the single calf that started it all and realized that after all his hard work, nothing had changed in his life.




Sunday, November 20, 2011

GODREJ INDUSTRIES Ltd - BUY ( REPEAT)

For many of us , Godrej Industries  Ltd (GIL) may be a chemical company.But it is more than that .Its stake in Godrej Agrovet(75%),Godrej Consumer products (22 %),Godrej Hershey (43%),Godrej properties(70%) and Natures Basket(100%) makes it an interesting company..Godrej Agrovet is mainly in animal feeds and agri inputs ( mainly herbicides).Company also owns 37000 hectare oil palm plantation in various states like Andhra,Tamilnadu,Goa..etc.Godrej Agrovet also having a joint venture with ' Tyson' in poultry business which is selling processed poultry products under the brand name "Real Good" and value added ready to eat products under the brand name "YUMMIEZ" Company is now planning to expand the operations of this division to many more cities which is limited till now.'NATURE'S BASKET' is a subsidiary of GIL which is operating around 13 stores currently for selling organic fruits and vegetables,beverages,dairy products..etc.Company's this division is expected to brake even shortly and new shop additions are planned. The agri centric business of GIL through Godrej Agrovet having huge potential in India ,and company's latest financials is a reflection of this fact. FMCG  business of Godrej CP  is also growing rapidly For the Second  quarter of this financial year  GIL posted a turnover of Rs.1413 Cr  over last year same period  and a net profit of Rs.82 Cr  . EPS for firstSecond  is Rs.2.92.This professionally managed company having huge expansion plans it its various businesses and it is expected to show decent growth going forward.GIL can be included in your portfolio at CMP of Rs.186/-

Wednesday, November 16, 2011

India Inc's MTM losses may worsen next year if rules are not changed

Courtesy : ET


Few things in recent times have foxed companies and rattled investors like the mark-to-market (MTM) losses caused by a surging dollar.

Businesses of all kinds are grappling with the phenomenon and looking for ways to soften the blow. Some were caught on the wrong side of the currency movement, with their forex loans bloating in rupee terms while for others, profits dipped even after taking a forward cover - an instrument that is meant to shield them from exchange rate swings.

Indeed, MTM losses on foreign loans will multiply from next year if book-keeping rules are not changed and the rupee fails to recover. On one hand, discussions are underway to make accounting rules more realistic and allow companies to spread out MTM losses on foreign loans in the coming years; on the other hand, many companies are slowly discovering the maze of hedge accounting - a subject that few CFOs took the trouble to grasp, but a complex process that can lower MTM losses.

The flexibility that companies have in amortising losses on foreign loans will end in March. At present, a 10-crore MTM loss on a five-year loan can be absorbed at 2 crore every year over the life of the loan - a practice that cushions the bottom line. If rules are not changed, then from next financial year, the remaining loss (of 8 crore) has to be booked at one go, which can severely impact profitability.

The Accounting Standards Board, a body of senior professionals that initiate changes in accounting norms, is taking a close look at the matter, along with another accounting treatment that artificially inflates fixed assets.

"We should come out with a clear rule so that MTM losses on loans don't have to be provided in one quarter in the times to come. This will lower panic and volatility," said S Santhanakrishnan, a senior chartered account and member of the board.

In preparing balance sheets, companies match the higher loan liability by increasing the value of fixed assets, which many feel is misleading, particularly to lenders, and should be corrected. "If your loan goes up by 10 crore, is there any justification for raising the value of your asset which was financed with the loan? ", said Santhanakrishnan. Perhaps, a more prudent way would be to lower a company's reserves in balancing a higher loan liability.

According to G Ramaswamy, president, The Institute of Chartered Accountants of India (ICAI), the issues are being debated. "No decision has been reached. This has also assumed significance because several companies have booked MTM losses." So far, 12 Nifty companies have booked 3,120 crore MTM losses this quarter against a gain of 2,225 crore in the year-ago period.

HOW MTM LOSSES ARISE

With the dollar at 50, there will be 10-crore MTM loss on an unhedged $10-million foreign loan taken when dollar was 40. Here are other cases where MTM losses can crop up:

1) A company entering into a forward contract in early August with a bank to sell its export receivables (that's expected in December) will have to book an MTM loss when it announces the results for September 30. If the rupee has dipped 4 between August and September 30, the MTM loss is 4 for every dollar as on September 30.

But this is a notional loss that reflects a lost opportunity for the company to sell at a more lucrative exchange rate. Even though there is no real hit, stock prices fall as soon as results are announced. But a company is not required to show the MTM loss if it pursues hedge accounting which only some large companies have adopted.

"One reason for this is the level of complexity involved and the awareness. Although hedge accounting can be complex, for simple transactions (like sale of export receivables), it can be simplified and implemented on a larger scale," feels Kumar Dasgupta, partner, Price Waterhouse.

2) Companies that have swapped their expensive rupee loans into cheaper dollar loans through currency derivative deals also lose out badly when dollar gains. In a sharp depreciation, the loss on account of a stronger dollar can more than offset the savings in interest outgo. There is MTM loss on the derivative (like the forward contract) at the quarter end.

3) Since commodity prices are closely linked to global prices, commodity companies often pursue a different strategy. For them, a rise in dollar (say, from 40 to 50) is actually a gain: if the global price is $700 a tonne, then the local price rises from 2,800 to 3,500 a tonne.

But many of these companies swap their rupee loans into dollars to offset the loss from a weakening dollar. They book MTM loss on the loan swap derivative. Also, when dollar appreciates sharply, the local price of the commodity corrects only after a month or two.

Sunday, November 13, 2011

TOKYO PLAST INTERNATIONAL - BUY (REPEAT)

Tokyo Plast International is the manufacturer of “PINNACLE ‘ brand Thermoware products. Company's main products are Thermo Containers,Insulated coolers,Beverages containers..etc. considering the increasing popularity of Pizza Consumption ,recently company introduced  single and double layered Pizza containers .Company having two manufacturing units – one located at Kandla and other at Daman. Company is concentrating in exports and earned an income of Rs.45 Crore (out of total sale of Rs.50 cr ) from exports last year  . Its total income tripled in last five years where sales improved from Rs.14 Cr to Rs.50 Cr and bottom line from just Rs.7 lac to Rs.4.3 Cr in the said period. In last few years promoters also hiked their stake marginally.  Chances are also there for expanding the business into the manufacturing of other related housewares in future  . Company is expected to close this full year with an EPS of Rs.6+  . At current market price Rs.15/-  it is trading at a P/E multiple of just  2.5  on the expected full year EPS of FY 2011-12 . Considering the steady growth of topline  it shows in the past many years and recent efforts to introduce value added new products – which is expected to improve the margins-  Tokyo plast is a suitable low priced scrip for investors with patience . Currently trading both in NSE and BSE at a price around Rs.15/-

Friday, November 11, 2011

HARITHA SEATINGSYSTEMS - BUY (REPEAT)

Haritha Seating Systems is a Chennai based company belongs to TVS Group.
This company belongs to the well known TVS Group and promoted by Sundaram Clayton Ltd. Harita makes seats for two-wheelers, commercial vehicles,tractors and buses.  It is also in the field of poly urethane products businesses to different segments of the auto industry . Harita Seating Systems has manufacturing facilities in Hosur, Ranjangaon near Pune and at Nalagarh in Himachal Pradesh. It was earlier known as Haritha Grammer and had a joint venture with Grammer AG of Germany till 2002.In 2002 company pulls out of joint venture and its name changed to Haritha Seating Systems.Company has another joint venture with German based Fehrer for making two wheeler seats ,which is known as Harita Fehrer Ltd.Company’s client list consists of auto majors like Tata Motors, Ashok Leyland, Mahindra & Mahindra, Tafe, John Deere, New Holland TMTL, Escorts, Caterpillar,BEML, Telcon, L & T Komatsu and  Volvo.Company also suppliers seats to body builders Jaico, SM Kannappa, ACGL, Amar Coaches, IRIZAR TVS Veera Vahana, HNS Coaches, Damodar coach,Bharat Coach etc. Last year company posted a turnover of Rs.225 Cr and a net loss of Rs.5 Cr .Company is in a turnaround path in this FY and posted a sales of Rs.104 Cr and a net profit of Rs.5 Cr in the first half itself.In the short to medium term auto ancillary companies may face some margin pressure , but long term investors may take it an opportunity to buy good auto ancillary stocks like Haritha .It is currently trading @ Rs.72.

Thursday, November 10, 2011

STOCK PICKING STRATEGIES :GROWTH INVESTING


 COURTESY : INVESTOPEDIA

In the late 1990s, when technology companies were flourishing, growth investing techniques yielded unprecedented returns for investors. But before any investor jumps onto the growth investing bandwagon, s/he should realize that this strategy comes with substantial risks and is not for everyone.
Value versus Growth
The best way to define growth investing is to contrast it to value investing. Value investors are strictly concerned with the here and now; they look for stocks that, at this moment, are trading for less than their apparent worth. Growth investors, on the other hand, focus on the future potential of a company, with much less emphasis on its present price. Unlike value investors, growth investors buy companies that are trading higher than their current intrinsic worth - but this is done with the belief that the companies' intrinsic worth will grow and therefore exceed their current valuations.

As the name suggests, growth stocks are companies that grow substantially faster than others. Growth investors are therefore primarily concerned with young companies. The theory is that growth in earnings and/or revenues will directly translate into an increase in the stock price. Typically a growth investor looks for investments in rapidly expanding industries especially those related to new technology. Profits are realized through capital gains and not dividends as nearly all growth companies reinvest their earnings and do not pay a dividend.

No Automatic Formula
Growth investors are concerned with a company's future growth potential, but there is no absolute formula for evaluating this potential. Every method of picking growth stocks (or any other type of stock) requires some individual interpretation and judgment. Growth investors use certain methods - or sets of guidelines or criteria - as a framework for their analysis, but these methods must be applied with a company's particular situation in mind. More specifically, the investor must consider the company in relation to its past performance and its industry's performance. The application of any one guideline or criterion may therefore change from company to company and from industry to industry.

The NAIC
The National Association of Investors Corporation (NAIC) is one of the best known organizations using and teaching the growth investing strategy. It is, as it says on its website, "one big investment club" whose goal is to teach investors how to invest wisely. The NAIC has developed some basic "universal" guidelines for finding possible growth companies - here's a look at some of the questions the NAIC suggests you should ask when considering stocks.

1. Strong Historical Earnings Growth?
According to the NAIC, the first question a growth investor should ask is whether the company, based on annual revenue, has been growing in the past. Below are rough guidelines for the rate of EPS growth an investor should look for in companies of differing sizes, which would indicate their growth investing potential:


Although the NAIC suggests that companies display this type of EPS growth in at least the last five years, a 10-year period of this growth is even more attractive. The basic idea is that if a company has displayed good growth (as defined by the above chart) over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.

2. Strong Forward Earnings Growth?
The second criterion set out by the NAIC is a projected five-year growth rate of at least 10-12%, although 15% or more is ideal. These projections are made by analysts, the company or other credible sources.

The big problem with forward estimates is that they are estimates. When a growth investor sees an ideal growth projection, he or she, before trusting this projection, must evaluate its credibility. This requires knowledge of the typical growth rates for different sizes of companies. For example, an established large cap will not be able to grow as quickly as a younger small-cap tech company. Also, when evaluating analyst consensus estimates, an investor should learn about the company's industry - specifically, what its prospects are and what stage of growth it is at. (See The Stages of Industry Growth.)

3. Is Management Controlling Costs and Revenues?
The third guideline set out by the NAIC focuses specifically on pre-tax profit margins. There are many examples of companies with astounding growth in sales but less than outstanding gains in earnings. High annual revenue growth is good, but if EPS has not increased proportionately, it's likely due to a decrease in profit margin.

By comparing a company's present profit margins to its past margins and its competition's profit margins, a growth investor is able to gauge fairly accurately whether or not management is controlling costs and revenues and maintaining margins. A good rule of thumb is that if company exceeds its previous five-year average of pre-tax profit margins as well as those of its industry, the company may be a good growth candidate.

4. Can Management Operate the Business Efficiently?
Efficiency can be quantified by using return on equity (ROE). Efficient use of assets should be reflected in a stable or increasing ROE. Again, analysis of this metric should be relative: a company's present ROE is best compared to the five-year average ROE of the company and the industry.

5. Can the Stock Price Double in Five Years?
If a stock cannot realistically double in five years, it's probably not a growth stock. That's the general consensus. This may seem like an overly high, unrealistic standard, but remember that with a growth rate of 10%, a stock's price would double in seven years. So the rate growth investors are seeking is 15% per annum, which yields a doubling in price in five years.

An Example
Now that we've outlined the NAIC's basic criteria for evaluating growth stocks, let's demonstrate how these criteria are used to analyze a company, using Microsoft's 2003 figures. For the sake of this demonstration, we'll discuss these numbers as though they were Microsoft's most current figures (that is, "today's figures").

1. Five-Year Earnings Figures


• Five-year average annual sales growth is 15.94%.
• Five-year average annual EPS growth is 10.91%.

Both of these are strong figures. The annual EPS growth is well above the 5% standard the NAIC sets out for firms of Microsoft's size.

2. Strong Projected Earnings Growth


 
• Five-year projected average annual earnings growth is 11.03%.


The projected growth figures are strong, but not exceptional.

3. Costs and Revenue Control

 
• Pre-tax margin in most recent fiscal year is 45.80%.
• Five-year average fiscal pre-tax margin is 50.88%.
• Industry's five-year average pre-tax margin is 26.7%.


There are two ways to look at this. The trend is down 5.08% (50.88% - 45.80%) from the five-year average, which is negative. But notice that the industry's average margin is only 26.7%. So even though Microsoft's margins have dropped, they're still a great deal higher than those of its industry.

4. ROE

 
• Most recent fiscal year-end is ROE 16.40%.
• Five-year average ROE is 19.80%.
• Industry average five-year ROE is 13.60%.

Again, it's a point of concern that the ROE figure is a little lower than the five-year average. However, like Microsoft's profit margin, the ROE is not drastically reduced - it's only down a few points and still well above the industry average.

5. Potential to Double in Five Years





• Stock is projected to appreciate by 254.7%.

The average analyst projections for Microsoft suggest that in five years the stock will not merely double in value, but it'll be worth 254.7% its current value.



Is Microsoft a Growth Stock?
On paper, Microsoft meets many NAIC's criteria for a growth stock. But it also falls short of others. If, for instance, we were to dismiss Microsoft because of its decreased margins and not compare them to the industry's margins, we would be ignoring the industry conditions within which Microsoft functions. On the other hand, when comparing Microsoft to its industry, we must still decide how telling it is that Microsoft has higher-than-average margins. Is Microsoft a good growth stock even though its industry may be maturing and facing declining margins? Can a company of its size find enough new markets to keep expanding?

Clearly there are arguments on both sides and there is no "right" answer. What these criteria do, however, is open up doorways of analysis through which we can dig deeper into a company's condition. Because no single set of criteria is infallible, the growth investor may want to adjust a set of guidelines by adding (or omitting) criteria. So, although we've provided five basic questions, it's important to note that the purpose of the example is to provide a starting point from which you can build your own growth screens.

Conclusion
It's not too complicated: growth investors are concerned with growth. The guiding principle of growth investing is to look for companies that keep reinvesting into themselves to produce new products and technology. Even though the stocks might be expensive in the present, growth investors believe that expanding top and bottom lines will ensure an investment pays off in the long run.


Monday, November 7, 2011

ADVANTA INDIA - BUY ( REPEAT)


Advanta India is a true  MNC in agriculture sector from United Phosphorous Group. It  is the holding company for the global business of Advanta. Company is operating in various countries includes  India, Australia, Thailand, Argentina USA ..etc .Company is a major player  in research, production and marketing of hybrid seeds and oilseed crops . Company also  having a very good R&D and in India it is collaborating with universities like University of Mysore and University of Dharwad for developing new varieties. Company is producing wide variety of seeds include sunflower, corn, rice, rapeseed mustard, sorghum Oats ..etc. This geographical and product diversification reduces the risk of  seasonality to a certain extend in this business. In Thailand ,company is operating through Pacific Seeds(Thai) Ltd ,in Australia it is with Pacific seeds Pty Ltd, and in Argentina it is through Advanta seeds and Advanta Semillas . Company also made some acquisitions in USA like Crosbyton Seed Company and Garrison & Townsend Seed Company along with a subsidiary Advanta US Inc. Many more mid size companies are also in its fold as step down subsidiaries like Nutrisun oil . A major  negative of this company till now is the  huge debt of in its balance sheet . Interest of the same is eating a major part of its profits. Advanta is now  planning to de- leverage .As a first step company recently re-structured its debt by issuing FCCB and  repaying part of debt carrying high interest rate  .Effect of this arrangement is already visible is latest September qtr result. On a consolidated basis company posted a turnover of Rs. 696 Cr and a net profit of Rs.27 Cr in last year  .For the latest qtr ended September , Company posted  a sales of  Rs. 254 Cr v/s Rs.176 Cr. and a net profit of Rs.13 Cr v/s Rs.10 Cr After a long period  of up and downs in its performance, it is expected to show a steady growth from here on.At current market price of Rs.395 , it is a good BUY for medium to long term investment.

 

Friday, October 28, 2011

COCHIN MINERALS AND RUTILE LTD - BUY




As the name indicates, this company (CMRL) is based in Cochin,Kerala having manufacturing facilities to produce Synthetic Rutile (45000 TPA), Ferric Chloride (24000 TPA), Ferrous Chloride (72000 TPA) and Cemox18000 TPA.These products are made from Ilmenite using indigenous technology.These products are used in Welding electrodes,abrasives,paints,Effluent treatment,inks,pigments,bricks and tiles..etc.Raw material for these products - ilmenite-is mainly sourced from the beach sands of Kerala.Water desalination plants in Gulf countries are one of the major customers of company's products.Since the number of companies producing these products are very few in India , company is enjoying good margins.For the latest quarter ended September 2011,CMRL posted a turnover of Rs.47 Cr v/s Rs.31 Cr and a net profit of Rs .8.2 Cr v/s Rs.90 lac .Six month EPS is Rs.13.75/-Company is a consistent dividend payer too.Since company is earning major portion of income from exports ,favorable exchange rate situation also helped the company to post good results.Proximity of the source of raw material is one of the biggest advantage of CMRL .One of the major concern about the company is the frequent opposition of local people against sea sand mining.There is also some allegations about some transactions between a public sector unit and CMRL.Being a 20 year old company ,it is expected to handle these local issues effectively .Based on the robust performance there is reasonable chance for appreciation from its current market price of Rs.78/- 

Wednesday, October 26, 2011

WISHING A HAPPY DIWALI TO ALL MY READERS...










Happy Diwali
Diwali wishes, scraps graphics


 
MY DIWALI PICKS 


KAVERI SEED COMPANY

FORTIS HEALTHCARE

 ADITYA BIRLA NUVO

TATA CHEMICALS

YES BANK



Sunday, October 23, 2011

ZICOM ELECTRONIC SECURITY SYSTEMS LTD - In an Industry- with- Good potential and not so good Promoters.




Zicom Electronic Security Systems  is probably the only pure BSE  listed company from the   Electronic Security systems manufacturing industry.It produces various security systems solutions includes Home Alarm Systems,Video door phones,Fire alarm Systems,CCTV Surveillance,Fingerprint Locks,Metal Detectors..etc.Due to the increasing number of theft and burglary incidents scope of such business is increasing in recent times.Company recently introduced 24 x 7 burglary protection at a cost of Rs.16/- per day in the name of of '8 Ka Dum'.Zicom also introduced Security systems for telecom towers.All together the prospects of industry is very bright .The negative side of this company is the background of promoters and some of their recent actions which is not minority shareholder friendly. One of the promoter Mr Pramoud Rao earlier promoted a company(jointly) named Jayanthi Business Machine .After collecting money through an IPO company vanished in few years.In recent times Zicom sold its Building Solutions Group and Special Projects Group,which are mainly focused on government and institutional sales to Schneider electric and now left with retail business.The sold division had a turnover of approximately Rs.180 Cr and the business sold for Rs.224 Cr.In many recent cases this type asset sales are benefiting only the promoters and nothing to the minority share holders and this case too may not  an exception.If promoters are really like to save the minority share holders there were many other options like de-merge this business into a separate company ,issue the shares of this company to all share holders in proportion and then sell the entire company to the foreign buyer...etc. Another cause of concern is the lowest promoter holding as low as 20 %. But two points are attracting at this point of time.First one is its improving financials and second is the effort of promoters to hike their stake through open market purchases.We don't know what they are planning now but one thing is sure - this company is in an industry with good potential.If promoters are ready to change their attitude towards minority share holders and willing to utilize the amount generated from the sale of institutional business to grow the retail business, still there is chance.Only high risk investors can take limited exposure at CMP of Rs.38/-

Tuesday, October 18, 2011

SRI ADHIKARI BROTHERS TELEVISION NETWORK LTD - BOOK PARTIAL PROFIT

I have recommended a BUY on SRI ADHIKARI BROTHERS TELEVISION NETWORK LTD @ Rs.27 on
February 7,2010 . Currently this stock is trading @ Rs.80/-. One may book at least partial profit at CMP and keep the balance cost free.

Old Report HERE

Tuesday, October 11, 2011

INDAG RUBBER - RESULT UPDATE

I have recommended a BUY on Indag Rubber @ Rs.95 on July 2,2011. Company reported good numbers for the quarter ended September , where its turnover moved from Rs.36 Cr to Rs.54 Cr and net profit rose 136 %
to Rs.5.24 Cr from Rs.2.22 Cr . Six months EPS is Rs.17.25 v/s Rs.8. Today Indag closed at its all time high @ Rs.143.25 ( up 20%). Long term investors can still HOLD the same .Company also declared an interim dividend of 15%

For old posting , Click HERE

Saturday, October 8, 2011

HONDA SIEL POWER PRODUCTS - BUY














Honda Siel Power Ltd ( HSPPL) is a 67% subsidiary of Honda Motor Company Japan  and it is the largest manufacturer of portable generators, water pump-sets  in India .Company also producing general-purpose engines.HSPPL enjoying very good market share it all of its categories .Company is enjoying very good support from its parent Honda Motors which is the second largest engine maker in the world.Very strong R&D of the parent company is helping it to introduce new products time to time and also increasing the fuel efficiency of its best selling portable genset range.Mechanization of farming activities is unavoidable due to scarcity of labourers and the entry of corporates into the farming sector.Company's newly introduced products like Brush Cutters and Small Tillers are very helpful even for small farmers.Due to increasing food inflation, government is expected to give special attention in farming sector going forward.Government's decision to give subsidy to farmers to buy agriculture equipments like pump sets, brush cutter..etc will help the company in a big way. In a power deficient country like India , Honda Siel is the undisputed leader in the portable genset manufacturing.Company having a strong network of 800 dealers all over India.HSPPL posted a turnover of Rs.412 Cr and a net profit of Rs.30 Cr in last year .This debt free company having a reserve of Rs.213 Cr as on 31 March 2011.Modernization and Mechanization in agriculture space is offering excellent opportunities for this MNC subsidiary .One can consider buying it at CMp of Rs.337 or in  further dip.
                                                                               

Wednesday, October 5, 2011

IN A FALLING MARKET ......


 COURTESY : THE BUSINESS LINE.



Pranay, who started investing in equities in mid-2010, is worried. With almost 25 per cent shaved off from the BSE Sensex's November 2010 peak of 21,005, the markets now seem to be on a downward spiral. Pranay's portfolio of blue-chip stocks, acquired after a good deal of research, has also taken a sharp knock. Adding to his unease is the opinion in some quarters that the markets have entered a bear phase. Unnerved, Pranay is thinking of liquidating his equity investments to cut losses, and also permanently staying away from the stock market. Is this the correct decision?

What's a bear market?

First, let's consider what constitutes a bear market. A sharp, prolonged decline in the price of assets (stocks, in the case of equity markets) is a defining feature of a bear market. Though not cast in stone, it is generally believed that when equity markets fall over 20 per cent from their peaks, they are in bear territory. By this yardstick, the Indian markets, having lost more than a fifth of their value since last November, could be said to be in bear zone. However, this fall has neither been continuous nor prolonged (as yet), and has been interspersed with some strong comebacks - the latest in July when the Sensex closed above the 19,000 mark. So, strictly speaking, our markets still have some way to go (down) before being categorised as being in the ‘bear category'. That said, a growing sense of despair - another leitmotif of bear markets - is beginning to make its presence felt in the Indian markets, with many participants having a negative outlook on the future direction of the bourses. Such pessimism is often self-feeding and results in spiralling market declines.
Bear markets are different from ‘corrections'. The latter are relatively minor declines in prices, do not last long, and mostly serve to remove froth (unjustifiable price increases) out of overheated markets. Bear markets, on the other hand, result when fear sets in among a large section of the investor community about the future prospects of the economy and companies.

The trigger

A deterioration in economic fundamentals which impacts the prospects of companies is often the trigger for bear markets. For instance, the recent sharp market dip in India has been precipitated by a steep rise in raw material costs, rising interest rates, global economic uncertainties, and fears of a domestic slowdown. The uninspiring results posted by India Inc. in the recent quarters have also contributed to the pain. With panic setting in, even stocks of companies which are otherwise sound are beaten down hard. During the last major bear market witnessed by the Indian bourses in 2008 and early 2009, the Sensex tanked from around 21,000 to below 8000, dragging down in its wake the bluest-of-the blue chips.

Dealing with it

Bear markets can have a profound detrimental effect, both financial and psychological, on investors. Some such as Pranay in the example above lose all appetite for investing. However, this may not be an optimal decision, for often in adversity lies opportunity. Market cycles turn, sometimes slowly but surely and bear markets, once they run their course, inevitably give way to revivals. Given that equity as an asset class has proved itself to be among the best wealth-generators over the long-term, investors would do well to continue allocating a portion of their assets to equity. For the discerning investor, bear markets may provide attractive opportunities to pick up good stocks cheap. Being greedy when others are fearful can be quite profitable in the long-run.That said, it may be impossible to predict when the market has hit rock-bottom. A bear market can be like a falling knife, and attempting to catch it could leave your hands bloodied. So, instead of attempting to ‘time the market' and investing a lump-sum at a perceived bottom, investors may be better off adopting a policy of staggering their purchases and buying on dips. Unit cost averaging (reducing overall average cost by investing same amounts periodically to buy more at lower rates and less at high rates) can be put to good effect in bear markets. However, caution needs to be exercised. Not everything available cheap has value. Some questionable stocks, which may have also run up sharply in buoyant market conditions, will invariably be beaten out of shape in bear markets. Such stocks may be permanently de-rated and would likely languish even after the market revives. There are umpteen examples of stocks which never revived from their 2008 and 2009 lows. So it is essential to choose your picks carefully in a bear market; the operative phrase being ‘invest only in fundamentally sound companies available at a discount.' Also, Pranay's idea of selling off his blue-chip stocks to cut his losses may not be a good one. Akin to tough people, good companies will invariably tide over tough times. Difficult as it may be in a falling market, as long as Pranay holds on to his blue-chips, his losses would be unrealised and there is a good possibility of it being recouped in the future. Once sold, notional losses become real and cannot be recouped. That said, if Pranay had initially invested in questionable stocks without adequate research, he may be better off making a switch, by selling the duds and buying into good stocks. The latter are likely to revive faster and stronger when the market's fortunes change for the better.

Saturday, October 1, 2011

ENKEI WHEELS - STARTING TO MOVE









Enkei Wheels is de-merged from the erstwhile Enkey Castalloy Ltd. This company is a 35% subsidiary of the Japanese wheel maker Enkei Corporation .Its parent company having operations in more than 15 countries around the world and it is one of the prominent maker of wheels with specialization in Racing wheel.
This is only the second year of operations of the standalone entity and its operations are just stabilizing.At present ,popularity of motor sports is very limited in India compared with developed countries.But the chances are very high for rapid changes in motor sports sector in our country going forward. Company also producing alloy wheels for other automobile sectors like Car's and two wheelers .Since the sports vehicle sector is not enough developed in our country , at present Enkei is concentrating in 4 wheeler and 2 wheeler alloy wheels here.Major customers here includes Honda,Maruti,Hero Honda,Nissan,Toyota ..etc.Company is also supplying part of its production to its sister concerns outside India.Because of the higher interest rate in India and sluggish economies worldwide,growth of automobile sector is negatively affected now. But even in this not so good conditions ,with the strong support of parent company Enkei Wheels is improving its performance.Since the parent company is keen to develop business in India , possibility of a buy out and delisting  can't be ruled out in future.Currently promoters jointly holding about 72% of the total equity.For the full year ended March 2011, company posted a turnover of Rs.262 Cr v/s Rs.180 Cr and a net profit of Rs.27 Lac v/s a loss of Rs.9 Cr .This is not a stock to buy today and sell in near future but only for real investors who are willing to hold for long term.This FV Rs.5 stock is currently trading around Rs.64/-

Wednesday, September 28, 2011

Understanding the GDR scam

Courtesy - The live Mint


The regulator’s investigations reveal that Pan Asia arranged GDR issues for a few firms in 2009, and in each of these issues the proceeds of the GDR issue were held by European American Investment Bank AG, Austria (Euram Bank).

It’s heartening to note that some of the triggers for the investigation were alerts from Sebi’s Integrated Market Surveillance System (IMSS), which noticed unusually large orders as well as large-scale off-market transactions in a few stocks between January 2009 and May 2010. It sends a vital message to market participants that the regulator is watching. And when this is followed up by thorough investigations, such as in the above-mentioned GDR case and the one related to insider trading in HDFC Mutual Fund, it is sure to cause market participants to think twice before breaking the law.

The GDR case is quite interesting. Sebi has nailed a merchant banking firm, Pan Asia Advisors Ltd, and its founder and owner Arun Panchariya and entities that worked closely with him. The regulator’s investigations reveal that Pan Asia arranged GDR issues for a few firms in 2009, and in each of these issues the proceeds of the GDR issue were held by European American Investment Bank AG, Austria (Euram Bank). Euram is linked to Panchariya. Its website lists one of its two offices as Euram Bank Asia Ltd in Dubai. Sebi discovered this is a joint venture between Euram and Pan Asia, and Panchariya and his brother are directors of Euram Bank Asia.
One of the distinguishing factors of each of the GDR issuances investigated by Sebi was that each was very large in relation to the size of the company. The number of GDRs issued was almost always higher than the existing paid-up capital of these companies. In one case, Asahi Infrastructure and Projects Ltd, the GDR issue was eight times the total equity of the company prior to the GDR issue. Its paid-up equity went up from 37 million shares to 336 million shares after the GDR issue.
Another common feature was that the initial subscribers to these GDR issues almost always the same set of investors. One large investor among them, India Focus Cardinal Fund, is a sub-account of Euram bank AG, which has already been linked to Panchariya. Besides, India Focus and another FII (foreign institutional investor) sub-accounts who initially bought the GDRs, were found to be following a similar pattern with their investments. Not very long after the GDR issuance, they would cancel their GDRs, convert them into Indian shares, and then sell them in the Indian market. Sebi found a large portion of these sales were in the form of synchronized trades with the same set of stock brokers based in India. Even the brokers were found to be connected to Panchariya and his family.
Thus, entities related to Panchariya and Pan Asia formed a whole chain— facilitating the GDR issue, arranging for investors, and then providing an exit for these investors in the Indian markets through a chain of known stock brokers. These brokers would eventually exit their positions by selling the shares in the open market to hapless investors, who would be lured in by the sudden surge in volumes and activity in the stock and on the false impression that the stock must be a decent bet given its large GDR issuance and FII investments. According to one market expert, it’s possible that Euram funded the investments of the GDR subscribers, with a lien on the GDR securities.
The outcome of all this from the GDR issuing company’s perspective is that they can completely avoid the regulatory process and due diligence that is required while raising funds in the Indian market. Issuing GDRs are a much simpler process, especially when they are listed in exchanges such as London Stock Exchange’s Alternative Investment Market. Indian regulators have allowed this since it pertains to securities that are listed in markets outside their jurisdiction and are bought by investors who are not regulated by them.
But as the recent investigations show, some market participants are using this as a loophole. And ironically, it’s Indian investors who end up with the short end of the stick, when these GDRs are quickly converted into Indian shares. In sum, while it’s made to look like an issue of GDRs, in essence it’s an issuance of Indian stock, given the fact that most GDRs are cancelled and converted into shares.
Sebi’s investigations also showed that Pan Asia and allies weren’t the only ones following this modus operandi. Another company it investigated, Cals Refineries Ltd, had a similar GDR issue which wasn’t managed by Pan Asia.
Needless to say, Sebi and the central bank will need to look at plugging these loopholes. As a Mint report in July pointed out, regulators are looking at imposing stringent conditions on Indian companies issuing GDRs. But while doing so, policymakers should be careful that genuine users of overseas equity and equity-linked instruments aren’t turned away. Some of the above-mentioned loopholes can be fixed with just better reporting standards, rather than having to get involved in extensive screening.









Saturday, September 24, 2011

FAIRFIELD ATLAS - A GROWING MNC ASSOCIATE






Many of the investors are interested to invest in MNC Companies mainly because of higher level of corporate governance and better professional business approach.But price of most  MNC stocks are ruling at higher level and  beyond reach of an average retail investor.Still there is some exceptions like Fairfield Atlas.Fairfield Atlas Ltd. is a subsidiary of U S based  Fairfield Manufacturing Co.Switzerland based Oerlikon Group is the ultimate parent of Fairfield. Automobile and Industrial Transmission Gear is  the main product of the company and it also producing planetary gear boxes and planetary sub-assemblies and input adapters.Its plants are located near Kolhapur in Maharastra.Fairfield  is a priority supplier to well known companies like M&M,John Deere, SAME, KAMCO, TAFE, TELCON ..etc . With the strong support of the parent ,Fairfield  is generating almost 60 % of its income through exports and  foreign companies like GKN,TMA..etc.are its customers.Even in a tough time in overseas markets , Fairfield is displaying satisfactory performance.Concentration in off road equipments like tractors and other agricultural machines ,heavy engineering equipments..etc  may be a reason for this out performance.In order to reduce the cost of production, parent company is now more interested to source products from India.This is visible in the latest financials of Fairfield Atlas.What catching our attention at this point of time is the good performance of the company at this particular time.This is really a tough time for any engineering company which is deriving  majority of Income from US market.But Fairfields performance is good even now and revival in overseas market will really help the company to perform even better.For the June  qtr company posted a turnover of Rs.50 Cr v/s Rs.34 Cr and a net profit of Rs.3.70 Cr v/s Rs.2.5 Cr In the last FY company posted a net profit of Rs.18 Cr on sale of Rs.163 Cr and the EPS were Rs.6.45. Foreign promoter is holding close to 84 % stake in this company. Considering the strong marketing and financial support of the parent company Fairfield is a good low priced  MNC stock to BUY for investors with long term view which is currently trading at Rs.69/-

Thursday, September 22, 2011

TATA CHEMICALS - EVENT UPDATES


Links to  two latest  developments  connected with TATA CHEMICALS

Link  1

Link 2

A Good BUY for long term

Monday, September 19, 2011

PITTI LAMINATION - INCREASING PROMOTER INTEREST




This company started its operations in 1987 at Hyderabad .Pitti Lamination  manufacturing Electric laminationsused in Motors and alternators.Pitti also in the field of Press tools, Progressive tools Jigs, Fixtures ..etc.Company having strong business alliances with world renowned companies like GE,Alstom,ABB..etc.After few dull years , by extensive marketing efforts company back to growth path.In June quarter Company posted a turnover of Rs.98 Cr v/s Rs.45 Cr and a net profit of Rs.6 Cr v/s Rs.1.7 Cr .EPS in June quarter alone is above Rs.4.Company is projecting a net profit of Rs.19 Cr and Rs.26 Cr for the next two years.Recently promoters hiked their stake from 40% to 60 % which is also a positive point to note.At current market price of Rs.42 ,company is trading at very low P/E .If the promoters can achieve atleat part of the projected turnover and profitability there is enough scope for appreciation from current level.CMP is Rs. 42.50/-

Saturday, September 17, 2011

TATA CHEMICALS LTD - A MUST BUY







Tata Chemicals is a familiar company for Indian Investors.Considering the potential of Agriculture related sectors worldwide , this company deserves a position in the portfolio of any investor. Company is a leading manufacturer of  Fertilisers and Soda Ash even in a global level.Through several acquisitions company has grown many fold in  recent years. Company is also selling Iodised salt in different brand names like "TATA SALT','I-shakti''TOPP SALT'..etc.In the Fertiliser sector TCL manufacturing and selling Urea,Single super phosphates,Di-ammonium phosphate,Nitrogen phosphorous potassium complexes..etc The sharp rise in fertiliser prices in recent times is expected to help the company to post improved realisation in this sector.Company also having a joint venture with Ireland based Total Produce . Total Produce is the third largest fruit and vegetable distribution company in the world and Europe’s largest fresh produce provider.Through this joint venture company - named 'Khet Se '- Company offering fresh fruits and vegetables.As a brand extention , Tata Chemicals recently started selling pulses like chana, toor, urad and moong under the brand name I- Shakti.Along with its subsidiary Rallis India , Company is initiating a campaign called 'Grow More Pulses' as a knowledge sharing platform for farmers.Company's another initiative is  'The Tata Kisan Sansar'which is a network of about  nearly 700 farmer resource centers that caters to more than 3.5 million farmers in 22000 villages in the northern and eastern part of India.Since it is not a micro cap and  lot of reports are easily available about this company, I am not explaining much on this,but I feels this is the company from TATA group having maximum potential to grow in the next 10 year period.One should include it in your portfolio at CMP of Rs.328 and add more in any dip.

Tuesday, September 13, 2011

AVANTI FEEDS LTD - CHANGING FORTUNES








Most  of the industries are moving through cycles.Sometimes the length of a cycle is short lived and sometimes it lasts long. We have seen this in IT,Real estate ,Infrastructure ..etc in  recent past.About ten years back aquaculture was a hot industry and many companies from this sector came out with IPO's and listed in stock exchanges.But few years later fortunes of this industry faded and many of the listed companies vanished .Even in a tough time which extends for many years, very few companies managed to survive and ultimately emerge as winners when the entire industry turned around ( Survival of the fittest itself) .I strongly feels Aquaculture/Sea food and allied products is one such industry which is going to start the next up move after a long down trend which lasts more than 5 years.Changing the variety of shrimp , introducing value added products, finding new geographical areas to export ..etc helping  to re capture the past glory of Indian Sea food exports.Being investors in stock market , now our options are very limited in this sector.As I mentioned above there were many listed companies in this sector  about 10 years back.But now there is only three remains with any operations in this field. Out of these three companies Avanti feeds having integrated facilities and better financials.This Hyderabad based company having facilities to manufacture prawn and fish feed and  also in processing and exporting of shrimp.Avanti is jointly promoted and having technical and marketing alliances with worlds largest sea food processing company - Thai Union Frozen Products.TUF holds about 15% of the total equity of the company.Citing the revival in the industry  company is now expanding its operations into Gujrat, Maharastra and Goa for white shrimp farming. Being a producer of feed for entire aquaculture sector ,company will enjoy the benefits of the expansion of other aquaculture ventures.For the last quarter ended June Avanti posted a turnover of Rs.113 Cr V/s Rs.49 Cr and a net profit of Rs.5.4 Cr v/s a loss of Rs.68 lac. EPS for the first quarter is Rs.6.7. After a gap of 3 years ,company declared a dividend of 10 % for last FY. Indian promoter is hiking his stake in the past few quarters. MPEDA is projecting very good growth for this sector in the coming years.In addition to this ,sharp depreciation of Indian Rupee will surely help exporting companies to post improved margins . The other  two listed companies from this space are  Waterbase and Uniroyal marine exports. Considering the nature of operations,marketing and technical tie-up,new initiatives,financial position..etc, Avanti is the best among them.This scrip is traded both in NSE and BSE around Rs.68/- .Medium to long term investors may consider @ CMP or lower level.

Saturday, September 10, 2011

KAVERI SEED COMPANY - BUY





I know , this company need no introduction to my regular readers .We are discussing about it from a level of Rs.272/- and now it is trading around Rs.470/- near to its all time high of Rs.494/-. Why it is again after a rise of about 70% ?. It is not only because of the robust result in first quarter  but due to some additional reasons too.Kaveri Seed Company  posted a turnover of Rs.Rs.241 Cr  v/s Rs.148 Cr , net profit of Rs.47 Cr   v/s Rs.31 Cr and an EPS of Rs.34.5 v/s Rs.23 in the latest June quarter compared with the same period last year.The latest news is that- the first phase of company's mega Olericulture project is nearing completion.This 100 Cr project is set up with  the technical collaboration of world leader in green house technology - Netaphim of Israel - on a turn key basis and the production from this facility is only meant for exports.This is the only listed company taking some serious steps in this field at a time of mounting food inflation pressure worldwide.In addition to this , now company is exploring opportunities in Ethiopia, Tanzania and Uganda for olericulture projects where land is available at cheap rate.Company's R&D is recently expanded and it is working on developing new variety of seeds.Indian Council for Agriculture Research recently accepted company's new variety seed KMH-3712 for using in various northern states which will help the company to ensure a pan India presence .Other new varieties KPH - 216,KPH -199 ,KPH - 272 and KPH -37 are entered to the next stage of evaluation by ICAR. These paddy varieties are expected to clear the final stage and hit the market soon.Company's R & D efforts are now more vibrant than ever and it is very important for an industry like this.There is lot of controversy about the use of BT seeds.But it is a fact , to tackle the serious situation in food production some compromises are necessary.Any decision to permit BT technology in vegetables will change the fortunes of companies like Kaveri.Considering the entry barrier of the industry and tedious process from R&D to  commercialization ( about 5 to 7 years for a new variety), all well accepted seed companies will be in a sweet spot in the years to come.Even if the management of Kaveri Seed is a bit media shy and believing only in their business and not in dialogues ,I strongly feels investors will ultimately realise the potential of this  company and the sector itself will re rate in not so distant future.Hence I reiterate a BUY on  KSCL @ CMP of Rs.470/- for long term investors.

For old posting on this company ,Click HERE




Wednesday, September 7, 2011

Sunday, September 4, 2011

LOTUS CHOCOLATE - A POTENTIAL TAKE OVER TARGET





















Lotus Chocolate company is one of the very few listed players from Confectionery segment.This Hyderabad based company is jointly promoted by Mr. N Vijayaraghavan and well known southern film artist T Sharada in 1988.Lotus' manufacturing plant is located in Medak district of Andhra Pradesh with technical and consultancy support from Chocolate Confectionery Consultancy, U.K and Plantek (M) SDN BHD of Malaysia . Company producing various types of chocolates and related products for the retail sector and some cocoa based products  for bulk users.Even this company started commercial production in 1992 , it could not show any notable performance for a long time. Company changed hands more than once from the original promoters .In 2008 ,Hyderabad based ,Puzzolana Group took over this company .Currently company is selling its retail products in different brands - Chuckles ,Superr Carr, On & On,High 5,Kajoos,Gobble,Milky Punch,Maltys,Tango,Eclairs ..etc. Its industrial products includes Cocoa Mass,Cocoa Powder,Cocoa Butter,Chocolate Chocotreats ,Plain Chocopaste ,Ice Cream Coverings ,Drinking Chocolate Powder Chocolate Sauce and Chocolate Decoratives. Company's retail products are now selling only in south and central India due to limited marketing network. After a long time , now this company is showing some signs of improvement.Now company is planning to set up a pan India marketing network and increase its offerings by adding new brands.In the latest June quarter , Lotus posted  a turnover of Rs.14.60 Cr v/s Rs.9.75 Cr and a net profit of Rs22 Lac v/s a loss of Rs 54 lac.It is a fact that , there is some accumulated loss in its balance sheet.But ,Since  many MNC confectionery makers are planning to enter in India  ,with  a good manufacturing capacity and some existing brands - Lotus may turn as a take over target.After the open offer by the current promoters @ Rs.16/- , they bought its shares from open market even above Rs.40/- to further hike their stake.At current market price of Rs.26/- it is a scrip to watch.

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