GRANULES INDIA - RESULT UPDATE

Granules India  recommended @  Rs.79  ( Click HERE for old posting ) hits its 52 week high today @ Rs.230. Company reported very good performance in latest December quarter . Sales improved from Rs.195 Cr to Rs.284 Cr and net profit shot up from Rs.5.8 Cr to Rs.21.8. Nine moth EPS is Rs.26 which is more than last full year EPS of Rs.16

Recommending to HOLD it for long term.

SAKSOFT LTD - BUY

 

IT stocks are attracting renewed buying interest due to more than one reasons . Possibility of revival in Western economies after a gap of few sluggish years is the major reason for this bullishness .A favorable exchange rate is also helping IT companies  to expand margins.In addition to such factors ,IT is a sector which may not affect much due to any political changes or uncertainties  in the centre, post parliament election.In recent times ,many readers requested to suggest some good IT stocks from small/mid cap space .The biggest challenge in selecting listed IT companies for investment purpose from mid/small cap is the integrity of promoters. During 2000 IT bubble many companies from this sector collected money through IPO and then disappeared even without any trace.Most of the  small and mid size IT companies following asset light business models and only the human resources are their asset which is prone to attrition.Hence promoter integrity is most important in such businesses compared with asset rich business models.So, evaluating a small IT company is more challenging  especially at a time most of them are trading around their highs.Considering all these factors , this week recommending a Chennai based small IT company– Saksoft Ltd.

Saksoft is a company promoted by the erstwhile joint  Indian Promoters of WIDIA INDIA  (joint venture  with Meturit A.G. of  Switzerland-subsidiary of Friedrich Krupp GmbH) .Later they divested their stake in Widia in  favour of foreign promoters and now this company is listed here as ‘Kennametal India’. Thereafter, Saksoft is the second company came out with an IPO from the same promoters in 2005 at a price of Rs.30.While large IT companies operating in different verticals ,small and mid size IT companies co-existing and growing in niche sectors.Saksoft is one such company specialising in Information Management solutions and Business Intelligence .In large size companies ,French MNC Capgemini  is a company specializing in this space.Saksoft offering services for various sectors including Banking,Telecom,Retail,Logistics..etc.Recently company entered into Mobile application development .Company having three development centers one each at Chennai,Noida and Manchester and sales offices in various countries at London, Manchester, New Jersey, Chicago, Pennyslvania, Singapore and in India. Company operating through five subsidiaries and three step down subsidiaries located  in different countries.Last year Saksoft acquired 100 % stake in US based Electronic Data Professionals (EDP) through its US subsidiary Saksoft Inc.

                                                               From an investor’s perspective one interesting fact about this company is the low valuation market assigning to this stock. Even when many mid and small size IT companies promoted by promoters with suspicious background  are getting a P/E of 15 or 20 ,this stock is still trading at a one year forward P/E of  just around 5 .That itself only after recent up move when it came out of periodic call auction.I believe , a major reason for such a low valuation is the working structure of this company. As I mentioned above ,it is operating through various subsidiaries hence only the consolidated result reflecting the true picture of the company . But in many sources where data about company results are published ,only the stand alone result is available which is not attractive prima facie .For the FY 2012-13 ,Saksoft reported a consolidated turnover of Rs.160 Cr and a net profit of Rs.11 Cr where its stand alone sales was only Rs.42 Cr and profit was mere Rs.2.8 Cr.This difference is very huge and only few investors may be aware about this . ( Comparative consolidated yearly result HERE) Another fact is ,it  is a low liquid stock where floating stock is very limited due to high promoter stake.Promoters are holding near the maximum permissible limit of 75 % and large share holders holding another 11 % stake.Mr Ajit Thomas ,major promoter of south based well known AV Thomas group is a director of this company and he purchased 2 % stake in Saksoft from open market in last FY.

                                                                              In the first half of this FY,company reported a consolidated Sales of Rs.112 Cr and a net profit of Rs.7.6 Cr . ( Consolidated qtr results HERE) . I expect ,company will cross the last full year profit figure in this 9 months itself and report a full year EPS of Rs.15 in FY 2013-14. It is consistent dividend payer for the past ten years which paid 20 % in last FY, an increase from 10% from preceding years .In a recent interview , ( Read it HERE ) founder and MD of the company projected a turnover of Rs.1000 Cr in next 5 years.It is not impossible considering company's past efforts through inorganic route . Company also started to merge its subsidiaries and recently merged one of its subsidiary Synetairos Technologies Limited with itself . I believe it is one of the quality IT companies available at cheap valuation even after recent run up from small cap space .One major risk is low liquidity but it may be a blessing too for a performing business.Expecting at least 50 % appreciation from current level and  recommending as a strong buy for risk takers due to its low liquid nature.Stock is currently trading around Rs.82 and listed in NSE and BSE.

Link to Company Website HERE 

Link to company's Subsidiaries  Link1 ,Link2

Link to latest Annual Report HERE

Disc: I have vested interest in Saksoft. 

                                                

DFM FOODS - BOOK PROFIT

DFM FOODS recommended @  Rs.48  ( Click HERE for old posting ) hits its 52 week high today @ Rs.250. Requesting to book profit by selling at least half of your holding and keep the rest as cost free.

UPDATES ON FEW STOCKS HOVERING NEAR 52 WEEK HIGH

LA OPALA RG

Initially Recommended Price : Rs .66

Today's High Price : Rs. 691

Current Recommendation : HOLD

Old Recommendation Link HERE

SEQUENT SCIENTIFIC LTD

Initially Recommended Price : Rs .138

Today's High Price : Rs. 210

Current Recommendation : HOLD

Old Recommendation Link HERE

SASKEN COMMUNICATION TECHNOLOGIES LTD

Initially Recommended Price : Rs .118

Today's High Price : Rs. 216

Current Recommendation : HOLD

Old Recommendation Link HERE

GRANULES INDIA LTD


Initially Recommended Price : Rs .79

Today's High Price : Rs. 226

Current Recommendation : HOLD

Old Recommendation Link  HERE 

PAUSHAK LTD


Initially Recommended Price : Rs .74

Today's High Price : Rs. 226

Current Recommendation : HOLD

Old Recommendation Link HERE



________________________________________________________________________
Current recommendations are for investors with medium risk .Market may turn volatile  when we approach election period .Those who are not interested to take risk may cut part of their holdings to recover initial investment and keep the rest as cost free .I believe ,as a company , every one  of the above having potential and ability to recover from any knee-jerk reaction post election result .
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MAFATLAL INDUSTRIES LTD - BUY

  

  

Even though we turned as parents or grandparents , how many of us can forget our old school days. For many of us ,the first entry into school by hanging on the finger tips  of our father ,our old teachers , our loved school mates  ..etc are still part of  of our sweet nostalgia. The special smell of new text book and new uniform is always part of our fond memories. At that time we were not bothered about brands of anything .But even if you are  at 100 now ,uniform brand you used in those days may be the same one your grand children using now  - MAFATLAL .

                                                               'Mafatlal' is a brand need no introduction to Indians. Mafatlal Industries Ltd (MIL)  started operations in early 1900's  and still this brand is a synonym for quality fabrics. Company is the supplier of corporate uniforms for well known firms like Toyota ,HP ,Intel..etc. It is not only producing uniform textiles but is an integrated player manufacturing Shirtings, Suitings, Voiles, Prints, Linens, Bleached White Fabrics, value added and fashion Denims, Corduroys, Bed & Bath Linen and Readymades in Cotton, Linen, Polyester/ Cotton, Polyester/Viscose, Cotton/Lycra, PV/Lycra, Terry Rayon and Polyester wool blends...etc . Ready made men's wear is  selling under the brand 'TRENDZ' .Even if this company still keeping the quality of its products ,its financial performance was not so bright for many years. Old machinery,out dated technology,excess work force ,lack of focused approach by the management ..etc derailed the operations of the company .Company ended in deep trouble  mainly due to its mounting debt burden and later referred to BIFR in 2002.Even management tried to revamp their company in the past they could not succeed due to many reasons.The real turning point came in the form of monetizing its 7 acre land at Mumbai for Rs.605 Cr in 2011.Ever since they realized this amount ,management started many steps to bring back the company into past glory.

                                                          Company paid back substantial portion of its debt and this once debt ridden company’s debt equity ratio now brings down to just 0.25 .During last year ,an amount of Rs.43 cr spend for installing State-of-the-art machines in place of out dated machines.This helps the company substantially to  reduce the workforce and it reduce the strength of workers by 37% .More than 1100 employees removed from pay roll by offering VRS in last year.In order to reduce power cost ,company is now setting up a 3MW co-generation plant which will be operational within 3 months from now. In last year MIL merged two companies – Mafatlal Denim and Mishapar investments -with itself. Company spend Rs.25 Cr in last year to expand this denim production facility at Navsari and now it is running at 100% capacity utilisation.Mafatlal Denim supplying its products to renowned brands like Wrangler ,Lee,Mark & Spencer..etc and also selling under own brand. With the merger of this denim facility ,MIL become a one stop shop for all textile needs having presence in the entire value chain which extents from spinning, weaving, dyeing, processing to finishing.Management’s efforts to revamp the company not only limited to  production side but many new initiatives introduced in marketing part too.Many new products introduced during last year including home furnishing items,linen fabrics..etc.Company is now in the process of expanding the number of its retail outlets (Mafatlal Familiy Shops ) from the current 100 to 150. In addition to family shops ,its products are currently available through 400 dealers and 35000 (Thirty Five Thousand) approved retailers across India. MIL also exporting products to various countries and reported a jump of more than 100% in exports during last year over previous year. As a result of all these efforts ,Company’s overall financial performance started to improve from FY 2012-13 .After a gap of many years company reported sharp improvement in sales and profitability in last year.Click on the below image for comparative data .

 

  
* FY 2012 figures for 9 months only

If the better performance in 2013  included an other income component ( Out of this Rs.15 cr is interest income from bank deposits) MIL reported  its good numbers  in the first half of this FY  even after deducting such items.( Some seasonality is  there in the sales of MIL  due to uniform sales ). Stability in cotton price due to good monsoon is also expected to help the company to protect their margin in the coming year.

I believe the brand ‘Mafatlal’  having very good brand recall  and now promoters are taking every efforts to renovate the company and exploit the potential of this brand.Actually they are working one by one and already turned around their another company Navin Flourine.Another point to note is ,management is very liberal in dividend distribution. After a long gap of many years MIL declared a dividend of 50 % ( 30 % + 20 % special dividend) in last year ,as soon as they returned to profitability. Other group company – Navin Flourine- distributed a dividend of Rs.75 ( not 75 %) in last year. Mafatlal Industries is one of the very few companies which is integrated by all means (from spinning to own shops)  .Company  is now ready for a second innings  and it is the time to buy this stock for long term . MIL listed  only in BSE (CODE :500264) @ CMP is  Rs.148

  

 

Link to Company's new website HERE 

Disc : I have vested interest in MIL

LIBERTY SHOES - RESULT UPDATE

Liberty Shoes recently recommended @ Rs .112 ( Link HERE) reported an increase of 23 % in Sales and 82% increase in net profit in December quarter.Company's OPM also improved from 7.48 % to 8.36 %

Today stock closed @ Rs.147.75 a decline of Rs.8 from previous closing.In a recent interview ,company officials projected a turnover of Rs.500 for the full year.In the first 9 months ,company reported a sales of Rs.320 Cr and prima facie it is difficult to achieve the projected sales in full year.This may be the major reason for today's profit booking . But now company clarified that the reported numbers are only the standalone numbers and not considered the sales of its erstwhile subsidiary Liberty Retail Revolution ( Only recently this company merged with Liberty) and the sales of LRR will be accounted only from next quarter onwards in the stand alone result .Hence they are optimistic to reach the projected figures in the full year.
Even still the Rs.500 Cr figure seems  bit difficult to achieve in this FY , recommending to HOLD the stock for long term .

PAUSHAK LTD - UPDATE

This Alembic group company recommended @ Rs.74 ( Old posting HERE) which hits its 52 week high today @ Rs,200. Paushak's all  time high is Rs.359 .It is one of the rare producers of Phosgene and its Intermediates in India .Company reported an EPS of Rs.20.50 in this half year itself against an EPS of Rs.24.30 reported in the entire last year.Company is expected to report its best ever performance in this full year.It also distributed a dividend of 30 % .Still recommending to  HOLD the stock for long term 

Disc: I have vested interest in Paushak

ONE BOOK WORTH READING ...

Dear Friends

In recent times many readers ,especially new investors are suggesting to recommend some books worth reading.As you are aware,most of the popular books on Capital market and related subjects are written by Western authors and the terms and terminologies are explained   in such books are based on Western background .Some of them are with lot of technical jargon ,chart and equations ..etc which are beyond the reach of an average reader and only  to create more confusion .So I would prefer to suggest a small book name "HOW BUFFETT DOES IT " written by James Pardoe.This is a small book with  just 150 pages and costs around Rs.300 ( Online store link HERE) .I believe this book will help you a lot to become a disciplined investor .

* This is only for Investors ( Especially for beginners ) and not for Traders

APAR INDUSTRIES - REPEAT

  

Companies showing resilience during tough business environment always deserving attention.Last few years were very bad for many industries mainly due to global recession and policy paralysis here. This week let us look into a company which not only shows good resilience during this tough period but shows decent growth .Apar Industries is the company and it is one of my old recommendation too. Now I feel ,with improvement in the economies of overseas countries and the formation of new government in the months to come in India ,this is the perfect time to look into it again.

                                                                                          Apar is a diversified company ,mainly operating in four segments – Automotive and industrial Lubricants,Specialty Oils,Aluminium Conductors and Cables. Aluminium alloy rod and conductors were developed first in India by this 58 year old company  through its own R&D initiatives and now Apar is one of the largest and low cost producer of Aluminium Conductors in the world .Apar having strong technical collaboration with Alcan (Canada) and Properzi (Italy) .Company selling its products under’POWERLINE’ brand in India and exporting the same to more than 80 countries  including US, EU, Africa, CIS Countries etc..  . Company also producing different new  variants of alloy conductors  like High Conductivity Alloy Conductors, High Temperature Thermal Resistant Alloy conductors , High Temperature Low Sag conductors ..etc as per the requirements of customers.

                                                            In the specialty oil segment ,company producing Transformer oil,Rubber Process oil..etc.Apar’s POWEROIL brand commanding leadership position in Transformer oil segment. Company is the largest manufacturer in India and fourth largest in the word .Its strong presence in overseas market helping the company to report better performance amid tight business conditions in India.

     

                                                                   In the automotive lubricant segment ,AGIP brand is manufactured by the subsidiary of Apar named APAR CHEMATEK LUBRICANTS LTD .It is a joint venture between ENI of Italy and Apar .Recently company increased its stake in this subsidiary from 50% to 97.5%.

In cable segment ,company producing Electrical & Telecommunication cables and supplying products to industries like Power Utilities, Petrochemicals, Steel, Cement, Nuclear Power, Defence, Telecommunication, Metros, and Shipbuilding etc.This division added to the company by the take over of Uniflex cables in 2008 . After five years under Apar Management its turnover improved from a mere Rs.31 Cr to Rs.408 Cr. 

Why this stock is interesting :

·         Apar is leader in many segments in which it is operating in India and one among the five in the world.

·         Well diversified Geographical presence – exporting products to more than 80 countries which is minimising risk of concentration in any region and thus the possibility of recession. Apar reported sharp  spurt in export ,which increased more than 45 % in last year.

·         Showing strong growth even tough times.Company’s total turnover increased from Rs.3453 Cr to Rs.4532 Cr (31%) in last FY  . ( Transformer and Specialty oil segment 6% growth,Conductor Segment 63% ,Cable segment 18 % ,Auto Lubricant 30% growth)

·         Stock is available at cheap valuation .Company reported a net profit of Rs.110 Cr and an EPS of Rs.28.50 in last year on a consolidated basis .At CMP of Rs.145 ,stock is available at a P/E of just 5 and also below its book value of Rs.163

·         Company following a liberal dividend policy ,which paid 52 % dividend in last FY 

·         Promoters very aggressively purchasing shares from open market which indicating their confidence . ( Check the details HERE) . Now their stake reached close to 60 %  and not a single share is pledged .Also ,Templeton Asset management company hiked their stake by subscribing shares on a preferential basis at a price of Rs.220 per share.

Conclusion:

As I mentioned above ,revival in foreign countries and the emergence of a new government in India few months down the line are expected to result in a positive demand scenario in the industries in which company is operating . Raw material prices of company is also showing a steady trend .Company already proved their competency and efficiency in tough times .Stock is a value buy @ CMP Rs.145 for long term investors .Listed in NSE and BSE   

Link to Company Website HERE