GOODYEAR INDIA - ONE TYRE FOR YOUR PORTFOLIO ..

At least some of you may raise your eyebrows for recommending a stock related with automobile sector at this juncture.Yes,automobile and related sectors in India are passing through a tough time but I believe it is a special case and there is some strong rationale for recommending this stock.Goodyear India is a 74 % subsidiary of world’s largest tyre company US based ‘ The Goodyear Tire & Rubber Company ‘. Company having two manufacturing facilities in India located at Ballabgarh and Aurangabad. In addition to this, company sourcing part of its requirements from Goodyear South Asia Tyres Private Limited  Aurangabad.About 65% of Goodyear India’s turnover coming from the tractor segment and it is the market leader in this category for the past many years.All major tractor producers including Mahindra,TAFE,Eicher,Escorts ..etc  are the customers of Goodyear. Apart from tractor segment ,company having commentable presence in passenger segment and a preferred supplier of many foreign companies operating in India like Volkswagen, GM, Toyota , Ford..etc. Now company  very aggressively expanding into replacement  market too by establishing  marketing network throughout India.

                                                                                Even at this over all tough time for tyre industry what is special for Goodyear is a possible chance of  good growth in  its major segment .ie,tractor  tyres.Due to very good monsoon and better  price for products, farmers are expected to benefit substantially in coming years which will directly impact tractor sales going forward.If we analyse the data of tractor sales for the past few months it is evident that there is good spike in it for all major players. Being a supplier to OEM’s in this segment this will directly help Goodyear for better sales. Another positive factor is the softening in the price of its major raw material – natural rubber.In last FY ,company depends import to meets its requirement due to higher price in local market.But this year natural rubber price came down and it is expected to range bound at current level .This situation will surely help the company to  source natural rubber from local market itself and improve its margins. Another factor is the increasing presence of foreign players in Indian Automobile sector .Many multinational auto companies are coming to India and launching their latest models here.Most of these overseas companies having strong business relations with the parent company of Goodyear .The Indian unit succeeded to continue their good relations with this auto majors here in India too.In recent times Goodyear India emerged as the preferred supplier for many  such OEM’s . Parent company’s most modern technology and support of good R&D helping Goodyear India to launch many new products .Actually Goodyear is the pioneer in tubeless tyre technology in India .Company is in advanced stage to launch radial tyres in farming sector.

                                          All these factors helped the company to outperform the entire tyre Industry in the latest June quarter.Company reported a whopping 80% increase in net profit to Rs.26 Cr .Its year ending is in December and company is expecting to  report an EPS of Rs.35-40. It is a debt free company with a clean balance sheet  consisting cash and cash equivalents of Rs.238 Cr .Company is an uninterrupted dividend payer for the past many years which paid 70% each in last four years.This MNC super brand is eligible to be included even in your core portfolio at CMP of Rs.300/- ( Stock listed in BSE only with scrip code - 500168)

Link to company website HERE

Link to last Annual Report HERE  

Disc: I have vested interest in Goodyear India.

SASKEN COMMUNICATION LTD - FIGHTING FOR A COMEBACK

  

 

 

Sasken Communication was a sizzling stock in Indian bourses for a long time.Once it termed as one of the most promising mid size IT company from India .In 2007 its share price touched a high of even Rs.624. which later plunged to Rs.40 level in 2009.Sure, it is not without any reason. Sasken is a  communication software company with considerable presence in the broadband and wireless software space. Its core expertise lies in developing embedded communication software for companies across the communication value chain-network equipment manufacturers, semiconductor vendors and mobile terminal vendors.Sasken is also present in application software development for communication service providers.Many once well known companies  like Nortel, Nokia, Motorola ..etc were the prime customers of Sasken.Sasken's strategy to depend on very few customers for its revenue growth  came as a big blow on the company when Nortel filed for  bankruptcy protection in 2009.Nortel was the largest customer and a minority share holder of Sasken. The change of equations in telecom sector also affected the growth of sasken in recent years.In the past five years company reported continuous fall in revenue and exit of some high profile executives from the company.After a long gap promoters are now taking some proactive steps to prevent further fall and bring back growth.Sasken is now planning to diversify into more new areas and more customers  to de-risk by avoiding the earler situation of depending only on handful customers.

                                                    The most important decision by the management  is to induct more professionals in  the company.Recently ,its founder CEO Rajiv Mody  resigned from the post and appointed Mr Anjan Lahiri as the CEO.Mody will continue as the CMD of the company.Mr.Anjan Lahiri is a well known figure as the CEO of MindTree Ltd’s information technology business.Only recently he quit Mind Tree  and in last week joined in Sasken as Whole time Director and Chief Executive Officer. Anjan is  one of the 10 professionals from  Wipro and  Cambridge Technology Partners who came together to start Mindtree in 1999, and also known as the main piller who stabilised the business of  Mindtree post departure of Ashok Soota in 2011.He is also known as one of the best Sales guy in IT Industry .Sasken is expected to gain from the experience and expertise of Anjan at a time when the company  desperately needs a lifeline.

                                                                                                  On the financial side ,Sasken reported  a turnover of Rs.475 Cr ,net profit of Rs.32 Cr, and an EPS of Rs.13 in FY 2012-2013.In the latest quarter, Company reported  some improvement in its top line and bottom line compared with March quarter. June qtr sales were Rs.115 Cr and net profit is Rs.17 Cr and qtr EPS is Rs.8 .Company is continuously paying hefty dividend .In last two years company distributed 70% each and in this FY, already declared an interim dividend of 45%. In the past few days promoters started purchasing shares from open market which is another positive sign.

I believe ,promoters are now taking some serious  efforts to bring back the company into the right track and the result of such efforts will start to reflect in coming years.Those with some risk appetite can take limited exposure in Sasken at CMP of Rs.118 with a long term view.

Link to company website HERE

Link to latest AR HERE 

 

BLUE STAR INFOTECH - GOOD TIMES AHEAD

In a difficult economic environment like the present one, stock selection for investment needs  extra care ,especially in the case of  small and mid caps.At present there are many challenges for Corporate India like slowing demand,mounting interest  burden,sharp fall in Rupee value ..etc.etc..As far as the investors in small and mid caps are concerned another important threat is the frauds and foul plays by the promoters and  fudged balance sheets.

                                                                    This week, let us look into a company – BLUE STAR INFOTECH(BSIL) - which is suitable for Investment on many counts in this tough situation.This Mumbai based mid size IT company belongs to the reputed Blue Star Group .Considering the history and reputation of promoters there is no chance for Zylog Systems,Glodyne Techno ..etc  type developments in this company .Company operating in different verticals of  IT  like Business intelligence and Analytics , Cloud computing,Mobility Computing,Product Engineering,Testing ..etc. Company concentrating mainly in Healthcare,Pharma,Manufacturing ,Travel and Hospitality and Media and Entertainment sectors.BSIL’s  operations span across USA, UK, Europe, India, Japan and Singapore. A major portion of income is deriving from US market.Revival in US economy is expected to bring more growth opportunities for the company going forward.In recent times company also trying to grow through inorganic route.Last year BSIL acquired Singapore based Infostack Solutions, that specialises in providing value chain management solutions.Recently company invested in the equity of Activecubes, which is a global firm  operating in the Decision Management space. In the last few quarters ,company reporting  out performance and high growth rate compared with other companies from the same space.In the latest June quarter ,on a consolidated basis ,company reported a turnover of Rs.47 Cr ( Rs.31 Cr) and a net profit of Rs.4 Cr ( Rs.89 lakhs) .BSIL already reported an EPS of Rs.4 in June quarter alone which is close to its last full year EPS. Company having an un interrupted dividend paying record for the past 13 years.

                                                       A zero debt company with good balance sheet from a reputed business group and earning major portion of income from overseas is a good choice in the current circumstances.Stock is currently available even below its book value @ Rs.72.Recommending a BUY for long term @ CMP.Stock listed both in NSE and BSE

10 Year Performance at a glance :

 Link to Company Website HERE

Disc: I have vested interest in BSIL

BRITANNIA INDUSTRIES - RESULT UPDATE

Britannia Industries earlier  recommended @ Rs.493 which is currently trading around Rs.730 .For old posting Click HERE .Today company reported very good numbers for the quarter ended June .

Recommending to HOLD the stock for long term .High risk takers may even consider Buying at current level.

 Disc: I have vested interest in Britannia

ASHAPURA MINECHEM - REPEAT

Ashapura Minechem earlier recommended as a BUY @ Rs.42 which is currently trading @ Rs.38 . Company reported excellent numbers for the June quarter even  excluding exceptional item .On a consolidated basis company reported a turnover of Rs.324 Cr ( last year same period Rs.150 Cr) and a net profit of Rs.49 Cr ( last year same period Rs.88 Lakhs) .(All figures excludig extraordinary items) What is more important is - this stunning performance is reported at a time when the mining and metal industry is going through the worst period in last 10 years.Reiterating BUY at current level with substantial upside potential in long term .Old posting on this stock is re-producing below.

Check latest result HERE

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This company along with its subsidiaries are the largest exporters of bentonite from India and one among the biggest five in the world.In addition to bentonite, company is in the production of many other minerals like Bauxite , Kaolin, Attapulgite, Barites..etc.Its major product –Benonite- is widely used in metal casting, iron ore pelletizing, civil engineering, drilling,   paper, detergents, cosmetics..etc. Bauxite is the basic ore for producing Aluminium.Company was a darling of investors till 2008 and its share price (post FV split) was around Rs.400-500 level.A big blow came in the form of the  ban on export /sale of bauxite by the government of Gujarat in 2008-09.Only because of this unexpected ban many issues followed in the form of forex losses and claims by few shipping companies.Kaolin plant in Kerala went into trouble on account of some local issues.All these incidents derailed company’s operations and ends in big losses.New mineral policy announced by Gujarat Government in  2009 -10 bring clarity in mining policy and permitted bauxite mining again.But by that time company’s financial health eroded a lot and it declared as a Sick company in 2012.After many month’s sincere attempt by the management, now the company is in a recovery mode.Debt of the company restructured and promoters brought  more funds into the company by way of subscribing 40,00,000 Equity Shares of Rs. 2 each at a price of Rs. 36.83 per share and 40,00,000 Convertible Warrants to be converted into equity shares.Claims by shipping companies are challenged by the company in court and case with one company  already settled out of court.Management of Ashapura expecting a favorable verdict in other cases too.On the financial front company showing sharp improvement in past few quarters.In latest full year company reported a Sales of Rs.771 Cr and its bottom line also showing remarkable improvement even excluding other income component.

                                                         Due to environment related issues ,entry of new players in this segment is not very easy now and probably in future.This situation giving special advantage for existing miners .I believe ,the testing time of this company is over and it is the time for a new beginning in the history of this company .

Link to company website HERE

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 Disc: I have vested interest in Ashapura Minechem