Saturday, December 15, 2012

ORIENT BELL LTD ------- BUY





Tiles become the preferred flooring material of Indian’s mainly due to its variety,affordability and durability.Led by Kajaria Ceramics  Indian organized Tiles industry showing decent growth in past few years which now stands around Rs.6500 Cr.Somany Ceramics,,Orient Bell,Nitco, HR Johnson..etc are the other major players in this industry..Orient Bell is one of the largest player in this industry with a market  share close to 12 -15 % .In 2010,company acquired Bell Ceramics and later merged this company with itself.With this acquisition Orient becomes a company with largest installed capacity in India and one and only company having plants in North ,West and South India and becomes the fourth largest Tiles company by sales in India.Orient’s manufacturing facilities are located at Sikandrabad (UP) ,Dora ( Gujarat) and Hoskote (Karnataka) with a total production capacity of 30 million square meter per annum. Company having a strong marketing network with 2500 direct dealers and 9000 Retailers and 30 Stock points across the country. Region wise contribution of sales is close to 41% from North India ,33% from South,17 % from East and 9 % from West.OBL selling its products under three different brands – Orient,Orient International and Bell.Out of these orient International is selling premium imported tiles from Italy ,Spain ..etc..For introducing most modern trends in tiles industry company operating a full fledged design studio in Castellon,Spain. Orient is  present in Ceramic ,Vitrified ,Ultra vitrified and Decorative Categories.

Financials

From the major companies mentioned above I am selecting orient on the basis of its cheap valuation .The No.1 Company in this sector – Kajaria Ceramics- with a sales of Rs.1300 Cr is trading with a market cap of Rs.1825 Cr where Orient  with a Sales close to Rs.600 Cr is trading with a market cap of just Rs.122 Cr. We may find that Orient’s lower bottom line may be a reason for this, but more than 10 fold difference is difficult to justify. When we take the Cash EPS for Orient and Kajaria ,it is Rs.31 for Orient and Rs.16 for Kajaria and EPS is Rs.13 for Orient and Rs.11 for Kajaria .It is clear that Orient’s Rs.180 Cr debt is playing the spoilsport .Orient is an uninterrupted dividend payer  too for the past many years.

My observations

Orient is a company driven by professionals and it is taking each and every step with utmost caution.Their recent acquisition of  loss making Bell Ceramics which is bigger than Orient in size  and the business acumen to turned it around to profit  within one and a half year without any additional investment is an excellent example for their ability to spot out opportunities and utilize it properly.Fuel cost consists about 35 % of the production cost of Tiles manufacturing .On commissioning of Ratnagiri- Bangalore Gas pipe line in 2013 ,fuel cost of ‘Bell ‘ unit will drop substantially.Orient is now concentrating in value added premium segment where competition is less from small players.Orient is silently taking all efforts – capacity addition,expansion of dealer network,establishing state of art design studio,filing patent application for tile with uniqueness like ‘germ free’ ..etc – to reap the benefit when the construction sector revive. As I mentioned above ,higher debt is the only concern at this point .But I believe promoters will take  steps to reduce it once they fully integrate the ‘Bell’ unit in near future.Before taking over ‘Bell’ ,Orient bought real estate with an intention to start a plant at Kakinada .After the take over of Bell manufacturing facility they dropped their plan and this asset is not a necessity for them now.Company’s another two plants are established in 75 acre land and I believe part of it can be used to retire a portion of debt.It is clear from available data that the promoters are buying its shares from open market even near its 52 week high price.Now their holding reached  near to the maximum permissible limit of 75 % .I believe promoters have some plan to raise funds by issuing fresh shares once its share price reached some higher level  to retire debt and their market purchase is an indication in this direction.Company is targeting  to reach Rs.1500 turnover by 2015 and its current equity is just Rs.13.5 Cr .Once company reduce its debt through any of these methods that will be a game changer for Orient.Any revival in construction sector will be an added advantage . Considering the nature of promoters and their sincere efforts  I believe  Orient Bell will emerge as a dark horse from this sector in another few years and is the best pick from this sector for long term investors at CMP around Rs.90/- .Stock is listed both in NSE and BSE.

TO WATCH CORPORATE VIDEO*(14 minute) CLICK HERE



Since company is maintaining an up-to-date website I am not explaining more about its product line .You can check it HERE

Latest Annual Report HERE
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* created by company itself 
Disc: I have vested interest in OBL.
 


60 comments :

  1. Sir,

    Can you please suggest whether to buy Sequent at present stage. Your recommended price was Rs. 150 and now it has reached Rs. 209.

    Please provide your valuable input.

    Thanks in advance.

    ReplyDelete
    Replies
    1. I think VP sir recommonded at 139 and after it went to 221

      This can be bought at this level if we can wait for 2 3 years

      Prasad

      Delete
  2. One more thing.

    I sent one to you kindly check if you got time.
    As subject: general but very much important for me.
    Thanks and regards,

    ReplyDelete
  3. Dear VP, Sundaram Brake Linings, one of your old reccomendations. March 2013, will this month change its fortune.

    Is this the time to look onto the auto industry.

    Regards

    Neil

    ReplyDelete
  4. What you make of the Claris Lifesciences sale of infusion biz?

    ReplyDelete
    Replies
    1. how many times VP sir has mentioned it. Even last week he had responded to 1 query. Pls check.

      Rishant

      Delete
  5. yes dear u can also buy at 2000 also,becz u do not know story going to be generated.

    ReplyDelete
  6. Why do you always recommend microcap/smallcap stocks? and that too with limited liquidity?

    Why not some good stocks from midcap space having good liquidity?

    ReplyDelete
  7. I don't think stock of a good company MUST be highly liquid and not much bothered about it . I am bothered only about the business behind the name and not about stock volume and my recommendations are only for investment purpose ,not for traders. Many of the now large caps were small caps once and gave maximum return to investors who invested when it was small caps.I think you are more concerned about good stocks ,but I am concerned only about good Companies.

    ReplyDelete
    Replies
    1. Ok cool. I might have said something sensitive. Anyway, reply confirmed your motives.

      Delete
  8. VP sir,
    Well said. I checked the video and the company details. Its an excellent company catering to premium segment in tiles. There are many companies in organised and unorganized sector of tiles but this company Orient Bell is into premium segment and any news of sale of lank at Kakinada will be a game changer.
    Also the company can grow much higher then Kajaria ceramics and fundamantaly better then it except for the debt portion which will be taken care of sooner or later.
    Additional land at 2 locations gives enough comfort. I expect this company to be in range of 300-500 levels in next 3-4 years as people are ready to pay more for excellent products.

    Excellent pick as always..

    Mohan

    ReplyDelete
  9. @Rishant

    I remember him telling about Claris that he does not speculate on rumors but not the sale of Infusion biz is not officially declared. So want to know his view on the same.

    ReplyDelete
    Replies
    1. Dear Friend

      As Rishant mentioned , I already expressed my opinion about Claris after this development as a reply for comment below the posting of TIL Ltd

      Delete
  10. VP Sir,
    PITTI LAMINATION
    Dec11 Mar12 Jun12 Sep12
    Net Sales Turnover 107.58 98.01 75.58 84.33
    Interest 10.23 6.06 7.00 3.68
    Net Profit 6.11 6.31 0.88 3.88
    from dec11 to sep12 sales and net profit is declining in spite of decreasing of interest. What could be the reason? Do you see any reversal in this pattern in near future?
    Regards
    Pawan Kumar Verma

    ReplyDelete
  11. Hi VP,
    Your views over Money Matters Financial Services Ltd. Continuously good growth in sales and net profit from last 4 qrt.

    ReplyDelete
  12. View on granules at current price

    ReplyDelete
  13. Still do you see strength in GEI industry ? Should i enter at these levels for long term.

    ReplyDelete
    Replies
    1. Not strength but potential.It is a fact the company facing lower order intake due to over all sluggishness in user industries , but I believe their innovative technology having good potential in future.

      Delete
  14. Hi Sir..
    Pls suggest me abt Wheels India.. Foreigner Promoters r buying 14.38 % stake @ 725.

    ReplyDelete
    Replies
    1. Major portion of positives already discounted .

      Delete
  15. Hi VP Sir,

    What do you think about Emkay Global at the current price? If we ignore the cost of that punching error recently, overall how is their business and the management?

    ReplyDelete
  16. Sir, do you track SEAMEC? Do you think the French parent is committed for the listed company?

    ReplyDelete
  17. HI
    WATS UR VIEW ON Himatsingka Seide Ltd: at CMP OF RS 42..

    ReplyDelete
  18. VP,

    Couple of points:

    1. Any reason they do not have annual report for year 2010-2011 on their web site? I want to go through this AR, to know more about Bell takeover & integration.
    2. Valuation difference between Kajaria and Orient may not be due to debt only but reason could be different. For me debt is not too much. I will try to dig out.

    Regards

    ReplyDelete
    Replies
    1. 2010-11 Annual Report is available in BSE website itself.

      Delete
  19. Hello VP sir,

    I started reading your blog just few days back and I am amazed of reading it and is becoming your fan..excellent work sir.. I need your view on two scripts I am following and have postions..
    1. Rolta india limited
    2. Tulip telecom

    Regards
    Sourabh

    ReplyDelete
  20. I am not much positive on these two.If Tulip can reduce its FCCB related issues ,some upside may possible.

    ReplyDelete
  21. Vp ji,
    Is rapicut still a buy at cmp of 130.

    Manmohan

    ReplyDelete
    Replies
    1. Recommended below Rs.86 /- @ CMP Rs.125 ,it is not a buy for me.

      Delete
    2. so shall we book partial profit @cmp? or wait for further gains? pls. advise sir

      -Mayur

      Delete
  22. Hello! Guide @ VP,
    Casually saw your blog accidentally and was awestruck to see such kind of social service is rendered to help and guide the small investor? Great job! Pray for your good health and long life!
    Your recommendation of Orient Bell has caused a mild tremor upward today the very first day after your post. 1) Going through your old recommendations what is your opinion today 17/12/12 reg ARIES @66/- do you suggest? Just buy/add or accumulate?
    2)Have you any idea about the strength and reliability of "Omkar Speciality" @ 125/- today though I very strongly like this counter but your opinion can help me to look at it more reasonably?
    Wishing you all the best,
    REGARDS,

    CV KUMAR @PUNE

    ReplyDelete
    Replies
    1. Aries repeatedly discussed even in last week.Not tracking Omkar Speciality.

      Delete
  23. Dear Value pick

    I have a suggestion ... can you plz send a common email to all your subscribers about your forthcoming recommendation before publishing on your website.. The reason is as soon as you recommend it runs 15-20 % and its difficult to catch the stock.

    I was lucky to buy Orient at 70 odd as you had indirectly recommended while talking about brand value..

    Pl send email about you future recos to all your subscribers.

    My email is drravi21@gmail.com.

    Thanks
    Ravi

    ReplyDelete
    Replies
    1. Not expecting any change in impact due to such an effort.

      Delete
  24. dear VP,I am tracking your blog recently.First look lot of shares you recamented i can see in your blog. If you dont mind can you tell us your most conviction stocks? or top 5 holdings..I think it will help me short list from entire selections!!!

    ReplyDelete
    Replies
    1. Don't select stocks for your portfolio based only on my conviction.I am sharing my opinion ,do own homework and take a decision if and only if you are convinced.

      Delete
  25. Hello Sir,

    Which will have more impact on SBI. A Rate cut of CRR or No change in Repo rate? I am expecting there will be no change in Repo rate but will be a cut in CRR. Will SBI fall or rise in the above scenario?

    ReplyDelete
    Replies
    1. In most of these type cases ,Short term price fluctuation of large caps just before or after important events depends on the positions created in F&O segment . So what we can say ...?

      Delete
  26. hello,
    It seems you are recommending here for trading your stocks, look at the volume and price went up after your recommendation so every monday your team will make some 20% neat money.

    -Arjun

    ReplyDelete
    Replies
    1. Hello arjun.

      There is reason behind stock going up..not all just blindly following..try to understand the reason and ask questions. .I m sure your questions will be answered..

      Delete
  27. I can't change any one's belief .If you feel so just ignore my recommendations.One more thing , I have no team to support ,It is only a one man effort.

    ReplyDelete
  28. Sir,
    you thoughts on Infra stocks and PRAJ Ind if you think one can buy the stock at current price as it has fallen and seems like a bottom. But I am not sure of future outlook as its more ethanol based.
    Need your guidance.
    In Infra I am looking at Sunil Hitech.

    Warm Regards.
    -Saket

    ReplyDelete
  29. Dear VP,

    We really appreciate your efforts to show up the golden stocks to the small investor like us.keep up the good work which you are doing.Dont mind for such kind of allegation from some unknown guys.Once again we appreciate your hard work!!hats off to you...

    ReplyDelete
  30. HI Sir..
    why my comments on Wheels India r not being approved..
    Pls suggest me abt this scrip..

    ReplyDelete
  31. Dear Aman

    Pleaaase check whether it is answered before repeating.It already answered yesterday itself.Please co-operate to avoid repetition and save time and effort . :)

    ReplyDelete
  32. Hello! VP The Guide!
    One point regarding OB financial while comparing with KJR: EPS of OB is Rs 13/-(@Rs 10 FV) but the EPS of KJR why not it should be read as Rs 11x5=Rs 55/-(@ Rs2 FV)
    The debt of both the cos is almost same. BV of KJR is 38 times of its FV.
    THE VALUATION OF KJR is so high may be bcoz of its tremendous NPM (Net profit margin)

    Please confirm your view?
    REGARDS,

    CV KUMAR

    ReplyDelete
  33. Hello Sir,
    What is your veiw about electrosteel casting at CMP as a medium term investment. Pls. advise. Thanks

    ReplyDelete
  34. Hello Sir, What do you think about Paper Products and Mayur Uniquoters.?

    ReplyDelete
  35. Since the time of your publishing views in December 2012, Oriental Bell seems to have dropped 20%. Has any thing changed in terms of fundamentals?

    ReplyDelete
  36. The stock seems to be trading at Rs 66 now. Down from Rs. 100. Do you think it is worth buying a good deal more to reduce average purchase price?

    Any opinion?

    ReplyDelete
    Replies
    1. Nothing has changed for company except the market mood towards small cap stocks.So no change in my previous opinion and still believes this will give decent return for long term investors.

      Delete

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