NEW YEAR WISHES

ONWARD TECHNOLOGIES LTD - TURNING AROUND

I.T. Companies are catching the attention of market participants mainly because of the expected favorable change in demand from foreign economies and some stability in exchange ratio. Onward Technologies Ltd is a small size IT company started by Mr Harish H Mehta Co-Founder & Former Chairman of the National Association of Software & Service Companies (NASSCOM).Company is offering solutions for sectors like Engineering Design Services ,Banking and financial services ..etc. Company is operating through various subsidiaries and associate companies namely Onward  eServices Limited (OeSL) , Onward  Technologies,  Inc.  North   America (OTI),Onward Technologies   GmbH Germany  Onward Technologies Ltd., UK and Onward Technologies Ltd., UAE. Company recently concluded a restructuring process in its subsidiaries and streamlined its operations. Cost cutting efforts and efficiency improvement steps helps the company to report better performance in recent past after a long time. For the six months ended September qtr company posted a turnover of Rs.46 Cr and a net profit of Rs.2.85 Cr ,which was in red in last year. After a gap of three years company is expected to came back to black in this FY .Keep an eye on this one which is currently trading around Rs.44/-

X' MAS GREETINGS

PAACEA BIOTEC - BUY

Panacea Bio-tec is the second largest vaccine manufacturer in India. About  70% income of the company is generated from vaccine sales and rest from formulations. It is one of the largest oral polio vaccines (OPV) maker in India .In the formulation division, company is concentrating in medicines for pain management, cardio vascular disorders and diabetes. Company is a supplier to various UNICEF projects , and recently received an order for’ EasyFive’ vaccines worth $ 222 Million .For oral polio vaccine ,Panacea received an additional order for $ 120 million which is to be supplied in 2010 itself. Government’s thrust in vaccination is a big positive for the company. Due to heavy forex loss ,company posted loss in last year but returned to profit in this FY. Slightly higher debt level is a problem for the company at present. Higher growth rate with improving margin and a cash balance close to Rs.100 Cr mitigate this risk .For the September qtr ,company posted a turnover of Rs.256 Cr ( Rs.169 Cr) and a net profit of Rs.17 Cr ( Rs.2 Cr) . Company is expected to post an EPS of Rs.20+ in FY 2012 .One may BUY at CMP of Rs.192/- for a 50 % appreciation by the end of next FY.

ROYAL ORCHID HOTELS- A VALUE BUY

Hotel industry ‘s fortunes are closely related with the growth in Tourism and Business Travel. After many  years of lackluster  performance, due to recession in western countries which reduces the chance of  higher spending for  vacations in one side and limited chances for business travel on the other side,now this industry  started to show some early signs of revival. Royal orchid Hotels (ROH) is a Bangalore based hotel chain running around 15 hotel properties across the country. Royal Orchid having presence in major Indian Cities includes Bangalore,Mysore,Mumbai,Ahmedabad,Jaipur,Pune,Goa,Hyderabad and Hospet.

Company is now  adding new properties in cities like Mumbai and entering into new locations like Shimoga , Mussoorie ..etc either directly or through joint ventures.It is planning to raise the inventory of rooms to 2000 by this FY and 4000 by 2015.Almost 70% income  of ROH  is generated from business travelers and balance from tourists.It is a point to note that ,major properties of the company is located around IT hubs like Bangalore ,Hyderabad and Pune. Any revival in IT Sector will positively impact the business fortunes of the company. For the financial year ended March 2010 ,on a consolidated basis ROH posted a turnover of Rs.120 Cr and a net profit of Rs.7 Cr which was one of the worst performance in recent past .For the half year ended Sep 2010 ,ROH doubled its net profit compared with last year. Company’s well known brand, good repute ,pan India presence ,revival both in tourism and mainly in IT sector related business travel ..etc are expected to make it an industry out performer going forward. At CMP of Rs.73/- .it is a value BUY.

INTERNATIONAL TRAVEL HOUSE - REPEAT

I have recommended a BUY on this ITC Group company @ Rs.165 /- on 25 th April ,2010.After touching a high of Rs.316/-  ,currently it is trading around Rs.240/- .Considering the better performance of the company  and the bright prospects of the Travel and Tourism industry , I reiterate a BUY at current level.For the Six month ended September ,ITHL posted a net profit of Rs.8.17 Cr v/s Rs.3.64 Cr for the same period in last FY.

Old Report Can be accessed HERE

ADVANTA INDIA LTD - BUY

 

 

 

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 . I feels ,Since company’s major  operations are out side India and its standalone results not showing  much improvement ,  this company is not catching the investor attention till now. The only negative is the huge debt of the company - interest of the same is eating a major part of its profits. In order to reduce the debt ,company is now planning a rights issue in near future .On realization of the amount , Advanta is planning to repay its debt in a big way to reduce high leverage . This will dramatically improve its financials going forward . 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 Sep , Company posted  a sales of Rs.176 Cr v/s Rs.133 Cr and a net profit of Rs. 10 Cr v/s a loss of Rs. 2 Cr . Really it is not a good number for a company like this size  , but we should consider certain facts. Company is in the process of the integration of its international businesses and it also faced  some  issues like unfavorable weather condition ,exchange ratio and some quality issues of the old stocks etc .. . Weather condition is the only main issue which is beyond the control of any company operating in the agriculture related  sector. Most of the other mentioned factors are changing favorably to the company along with the vast opportunities emerges because of the rise in food inflation world wide. Considering the huge potential in this sector , the proven management abilities of United Phosphorous group and its world wide presence, this is really a stock to included in the portfolio of any investor for reaping the long term gains . Currently Advanta is trading around Rs.389/-

KENNAMETAL INDIA - UPDATE

Kennametal India is one of my old recommendation around Rs.350/- (Old Report Can be accessed HERE) .Currently it is trading @ Rs.505/-.In a latest development ,company announced its parent's decision to de-list the company from stock exchange .This will be followed by reverse book building process and the rate is expected to be higher than the current market price of Rs.505/-

ARIES AGRO - REPEAT

Aries Agro is one of my old recommendation at 100-110 level.After touching a high of Rs.203/- in the month of September , currently it is ruling around  130/- . Aries showing  good performance in its operations in quarter after quarter and also having a transparent management.I reiterate an ACCUMULATE at current level for decent return in  long term.

Old report is Reproducing Below
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Mounting food inflation is a serious threat to the economies worldwide. But some companies are benefiting from this situation .All governments are forced to take steps to improve food production using scientific methods and most modern techniques. Companies from the agri- related sectors are the major beneficiaries of  government’s such efforts.In India micro irrigation sector is getting very big boost in every budget .Even though fertilizer companies are also important in this perspective ,government control on fertilizer prices limiting their potential. Along with fertilizers, micronutrients  are  also gaining acceptance among Indian farmers. Moreover micronutrients  are not subject to the regulatory constraints that fertilizers face. The micronutrients business has considerable potential in the Indian context. Factors such as low yields of major food grains and horticultural crops, high soil alkalinity and intensive cultivation are the key demand drivers for micronutrients. The market for micronutrients such as zinc, iron and copper in India, is expected to double over the next two decades. ARIES AGRO is the largest player in micronutrients from the organised sector in India. The other two players in this sector(from organized space)  is Ranade Nutrients and Karnataka Agrochem ,but both are only regional players. Aries has 65 branded products coming from six  manufacturing units in India , one each at Mumbai, Kolkatta, Hyderabad , Bangalore ,Ahmedabad ,Lucknow and one new factory in UAE which is mainly for catering middle east region and North Africa .Aries is in the process of launching new products which include Natural amino acid chelates,Boidegradable chelates and Boidegradable plant protection products. With the inauguration of its Ahmedabad factory company entered into a new space of  Bio fertilizers too. Company’s largest  distribution network of 5500 distributors and 76500 (seventy six thousand five hundred) retail outlets  across India  is the main attraction for a rural centric business like this. In future company can easily roll out allied products throughout this network without much marketing efforts. In addition to this distribution points company has added a fleet of 100 rural retail vehicles called ‘Krishi Vinjan Vahan ‘ in 9 states in India.This is mainly for improving company’s rural reach and advisory services.

Going forward big corporates are expected to coming into the farming  sector of India in a big way. This will surely improve the prospects of  the products of  companies like Aries along with the initiatives of governments to increase food production. 

CHEMBOND CHEMICALS LTD - BUY

Some Companies are always like tortoise, hiding the most exiting part of their business under a shell called either subsidiaries or joint ventures till a critical size is  achieved. When such business grows these subsidiaries will eventually merged with the main company or de-merged to unlock the valuation. Till such a merger/de-merger  happens, the main company will known for its boring business and enjoying low valuation. But on merger/de-merger the entire picture rapidly changes and catch the market fancy in a short period . Meanwhile, utilizing the low valuation as an opportunity ,promoters may mop up the entire floating stock from market .CHEMBOND CHEMICALS ( BSE CODE - 530871) is such a play which is unnoticed by most of the market participants ,even if its main business is growing decently.Even if this company have six divisions including its subsidiaries and joint ventures ,it is known as a Construction Chemical manufacturer. 

Under this fold company is making construction chemicals, water proofing compounds, concrete repair products..etc.Major clients of this division includes  RDC Concrete Ltd,          

J K Laxmi RMC ,Birla Readymix , Larsen & Tubro Ltd., Oriental Structural Enginerring Quark City India Pvt. Ltd., Sunway Constructions Ltd. , Unitech Ltd. ACC RMC , Hindustan Construction company, Nagarjuna Construction Company , Gammon India DLF Laing O" Rourke India Ltd..etc.  Chembond have a nationwide distributor network and known as a quality producer in this category. Another division of the company is Coatings division which is making corrosion protection coatings for structural s  and industrial floor coatings materials. Under the trading division company offering various types of construction chemicals and representing ‘Peramin AB’ of Sweden ,a leader in this industry- in India. Chembond’s biotech division is through an associate company –Chembond Enzyme Company Ltd- supplying products which are widely used in industries like Textile,Distillary and Animal feed. Company also having a joint venture with chemical major Henkal for manufacturing metal treatment chemicals known as Henkal Chembond Surface Technologies Ltd.

The promising part of Chembond is its increasing  presence in the Water,Waste water and Effluent treatment business. Chembond Ashland Water Technologies is a company jointly promoted with Chembond Chemicals (55 %) and Ashland Inc of USA .This company is manufacturing various type of water treatment chemicals for cooling water treatment,boiler feed water treatment,waste water treatment..etc and finds applications in industries like Chemicals,Power generation ,Refinery ..etc.

                                                              In the beginning of 2010, Company started a 51 % joint venture (H2O  innovations India Ltd) with H2O Innovations Inc of Canada for equipment based solutions for Water treatment ,recycle and re-use. This industry having tremendous potential in India and the overwhelming response to the recently concluded public issue of VA Tech Wabag is an indication of  the potential of this sector. Within a short span of time this new company already received prestigious orders.

Financials

Company is performing very well in financial front and rewarding share holders accordingly. For the financial year ended March 2010 ,Chembond posted a turnover of  Rs.118 Cr and a net profit of Rs.5 Cr.For the latest September qtr , it posted a sales of Rs.35 Cr v/s Rs.27 Cr and a net profit of Rs.2.13 Cr v/s Rs.1.20 Cr  and an EPS of Rs.3.34 .Company also declared a bonus issue in this year in the ratio of 1:1 along with dividend.

Conclusion

Based on the  bright prospects of the industries in which company is operating, with a  share holder friendly management ,aggressive open market purchases by them – this is a perfect fit for  long term portfolio.But one should note that ,since the floating stock is reducing by the continuous purchase of promoters on a day by day basis ,it turned as a low liquid counter .CMP is Rs.190/-.

NEULAND LABORATORIES LTD - BOOK PROFIT

I have recommended a BUY on Neuland Laboratories on 27.11.2010 @ Rs.119/-.(For the report just scroll down) .Today it closed at Rs.156/- an appreciation of more than 30% in just three trading days. Requesting to book profit at current level,re-entry may consider below Rs.130/-

ARIES AGRO - REPEAT

Aries Agro is one of my old recommendation at 100-110 level.After touching a high of Rs.203/- in the month of September , currently it is ruling around  140-145 range . Aries showing  good performance in its operations in quarter after quarter and also having a transparent management.I reiterate a BUY at current level for decent return in medium to long term.

Old report is Reproducing Below
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Mounting food inflation is a serious threat to the economies worldwide. But some companies are benefiting from this situation .All governments are forced to take steps to improve food production using scientific methods and most modern techniques. Companies from the agri- related sectors are the major beneficiaries of  government’s such efforts.In India micro irrigation sector is getting very big boost in every budget .Even though fertilizer companies are also important in this perspective ,government control on fertilizer prices limiting their potential. Along with fertilizers, micronutrients  are  also gaining acceptance among Indian farmers. Moreover micronutrients  are not subject to the regulatory constraints that fertilizers face. The micronutrients business has considerable potential in the Indian context. Factors such as low yields of major food grains and horticultural crops, high soil alkalinity and intensive cultivation are the key demand drivers for micronutrients. The market for micronutrients such as zinc, iron and copper in India, is expected to double over the next two decades. ARIES AGRO is the largest player in micronutrients from the organised sector in India. The other two players in this sector(from organized space)  is Ranade Nutrients and Karnataka Agrochem ,but both are only regional players. Aries has 65 branded products coming from six  manufacturing units in India , one each at Mumbai, Kolkatta, Hyderabad , Bangalore ,Ahmedabad ,Lucknow and one new factory in UAE which is mainly for catering middle east region and North Africa .Aries is in the process of launching new products which include Natural amino acid chelates,Boidegradable chelates and Boidegradable plant protection products. With the inauguration of its Ahmedabad factory company entered into a new space of  Bio fertilizers too. Company’s largest  distribution network of 5500 distributors and 76500 (seventy six thousand five hundred) retail outlets  across India  is the main attraction for a rural centric business like this. In future company can easily roll out allied products throughout this network without much marketing efforts. In addition to this distribution points company has added a fleet of 100 rural retail vehicles called ‘Krishi Vinjan Vahan ‘ in 9 states in India.This is mainly for improving company’s rural reach and advisory services.

Going forward big corporates are expected to coming into the farming  sector of India in a big way. This will surely improve the prospects of  the products of  companies like Aries along with the initiatives of governments to increase food production.