M.M.FORGINGS LTD - BUY

 

    

Recently many companies from Auto and Auto ancillary space reported decent  gain in anticipation of a revival in demand scenario. Even after such a run up ,some quality companies still available at attractive valuation . This week let us look into one such company – MM Forging ( MMFL).

MM Forging originally started operations as ‘ The Madras Motors Ltd ‘ in 1946 as an importer and distributor of the products of Royal Enfield Motors from UK.Company started manufacturing of forgings in 1974 and later stopped the dealership of Royal Enfield in 1990 and decided to concentrate solely in forgings production.MMFL now producing forgings mainly for auto , engineering and oil industries .Company increased its forging capacity step by step and now operating four factories in Tamilnadu.Company’s product line also expanded and it is now capable produce forgings  varies from 0.20 Kg to 60 Kg in more than 475 categories.Company is one of the largest forgings exporter from India and more than  70 % of total income coming from exports. Foreign auto majors like .Company/s marque clients includes Chrysler Group  ,Ford, GM ,Ashok Leyland  ,TAFE,BEML,BHEL ..etc. MMFL also owns two wind farms one each at Muppandal in Tirunelveli District and other at Meenakshipuram at , Theni District  both in Tamilnadu. Electricity from these units are using for captive consumption and close to 50 % of company’s total electricity requirements are meeting from these wind farms. This is very critical for a company operating all factories in a state like Tamilnadu where power shortage is a big issue.

Amid severe recession in auto sector both in overseas market and local market ,company’s performance was  reasonably good.In last five years MMFL’s top line grown from Rs.215 Cr to Rs.411 Cr and its last year profit was Rs.29 Cr with an EPS of Rs.24 .Promoters are holding close to 60 % stake without any pledge. Company is liberal in dividend distribution and in the case of bonus shares too. Company has given 1:1 bonus two times in last 9 years.

Since MMFL is mainly selling products in export market ,appreciation of INR may slightly affect its margin.But  I believe,revival in US and EU economy and their auto sector will help the company to increase its volume and thus mitigate the effect in profit to a great extent.Once Indian auto sector starts to improve ,company can gain from its already created extra production capacities.All together ,a  good company from auto related sector available at a decent valuation with P/E multiple of just 7 where its largest peer Bharat Forge is trading with a P/E close to 30 . Recommending to BUY and HOLD for long term @ CMP of Rs.187 .Stock listed in both exchanges.

 Link to Company Website HERE

Disc: It is safe to assume that I  have vested interest in MMFL

CANFIN HOMES - UPDATE

CANFIN HOMES recommended on April 20,2013 @ Rs.145 .Today stock hits its life time high @Rs.408 ,close to 200 % appreciation in 13 months .Still recommending to HOLD this stock for long term.

Recommendation Link HERE

ASTRA MICROWAVE LTD / IFGL REFRACTORIES LTD - UPDATE

ASTRA MICROWAVE LTD 

This stock recommended @ Rs.35 . ( Link HERE ) . Today  stock hits 52 week  high @ Rs.125 ,which is an appreciation of more than 250 % in less than one year .Still recommending to HOLD this for long term.


  IFGL REFRACTORIES LTD

This stock recommended @ Rs.49 . ( Link HERE ) . Today  stock hits 52 week  high @ Rs.162 ,which is an appreciation of more than 200 % in less than eight months  .Still recommending to continue  with your remaining holding .

ARROW COATED PRODUCTS / GALAXY ENTERTAINMENT CORPORATION LTD - UPDATES

We have discussed both these stocks in the past and mentioned their uniqueness . I believe at least few of my readers are still holding these stocks and tracking each and every developments happening in these companies. Posting below two interesting  developments which is fundamentally important as far as these companies are concerned . These news are already  in the public domain and I am posting the same only for those who are not aware about it till now.

ARROW COATED PRODUCTS

This company is planning to launch few consumer products using its patented innovative technology .

For more details ,Check the link of their Arrowcare Division HERE

Recommendation Link HERE

GALAXY ENTERTAINMENT CORPORATION

This company is implementing a complete business revamp plan ,and you can read details of some efforts in this direction HERE

Recommendation Link HERE

Both these companies are in niche and high potential business and there is no strictly comparable peers in the listed space.If their management succeed to scale up the business (I expect so ) ,every chance to get premium valuation in future .


Disc: It is safe to assume that I have vested interest in both stocks

EPC INDUSTRIE LTD - UPDATE

EPC INDUSTRIE is one stock recommended more than once in this blog. In my initial recommendation @ Rs.61 itself ,I mentioned the possibility of a take over by some bigger players in future.( Read Initial Recommendation HERE) As expected, later this company acquired by Mahindra ( M&M)  Group.

Later in my second recommendation on this same company @ Rs.141 , ( LINK) I have mentioned the possibility for a consolidation of all Agri related  business of Mahindra group  under the fold of a single company.

Now ,after three years of acquisition of  EPC  ,Mahindra Group expressed  their intention to consolidate all its Agri-business units into a single entity. As a listed company , I believe it will happen under the fold of EPC Industrie .Mahindra's one of Agri Business units  named Mahindra ShubhLabh Services Ltd is the largest exporter of grapes .It also joint hands with  Belgian company 'Univeg' for developing a fresh fruit supply chain.This division also planning big  expansion in seed business and recently formed a joint venture with  Holland based HZPC to provide seed potatoes.


I believe , post consolidation , this company will emerge as an integrated farming company and results another blue chip from Mahindra group in the years to come.

Strongly recommending to HOLD and those with some risk appetite may even buy at current level for a  2+ year HOLD .Currently stock is trading around Rs.200.

Read Latest news below

Mahindra Group plans to consolidate all its agri-business units

Link to Company Website HERE 

Disc: I have vested interest in EPC Ind

GRANULES INDIA - UPDATE

Granules India is one stock repeatedly recommended from Rs.79 onwards .Today stock hits its life time high @ Rs.482 , an appreciation of 6 times in two years .Still recommending to HOLD this stock for long term.


Link to Old posting HERE

EXCEL INDUSTRIES - STRONG PRESENT ,BRIGHT FUTURE

     

Excel  Industries is a group company of Excel Cropcare Ltd . Selecting this stocks at this point of time mainly on three reasons- improving business prospects of its existing specialty chemical segment,foray into Pharma Intermediates and the vast potential of its non core Enviro-Biotech Division. Company own three production facilities one each at Roha ,Lote  Parshuram( Ratnagiri Dt Maharastra) and Ahmedabad.

                                                                          Under the specialty chemicals division ,company manufacturing Phosphorous Derivatives,Agro Chemical Intermediaries, Mining Chemicals..etc. Under the pharma intermediates division  ,till now company was mainly in Veterinary API’s but recently set up a new facility for human API’s at its existing Lote site .Products from this new facility is high margin products and expected to drive company’s NPM from current level once the commercial production reaches full swing. The most exciting part is its Enviro Biotech Division .

Enviro Biotech Division -  A High Potential Business

  

  

This division  may be termed as ‘an idea before its time ‘ .But I believe ,its time is just coming and the potential is very vast.Under the Enviro Biotechh division ,EIL is manufacturing  Centralised waste management plants and Organic Waste Converters .Excel is one of the two top waste treatment plant manufactures in India .Actually managing waste is the biggest challenge of any city administration.Many Indian cities are far behind in cleanliness and effective treatment of wastes compared with foreign cities .This creating lot of health related issues on one side and act as a reason for preventing development of various sectors including tourism ..etc on the other side. We all are aware about the importance and seriousness of this issue and hence I am not writing too much on this.

EIL manufacturing  different types of organic waste converters suitable to treat different volume. Size and model of machine is varied based on the volume to be treated .These machines are suitable for Housing societies, markets, Food processing companies, Slaughter houses,Hospitals,Malls..etc.Using this converter, organic wastes like  kitchen waste, garden waste, food processing waste etc are converted into compost. With the help of strong R&D ,company introduced its most modern fully automated waste converter ‘Bioneer’ in Indian market.This machine is capable to convert waste into compost in just 24 hours. Company already recorded more than 1000 successful installations of its WC’s at various locations.Bioneer is suitable to handle 100 Kg to 400 kg waste per day.If these machines are targeted individual of group customers ,the larger version of this system is the Centralized Waste treatments plants suitable for treating Municipal Solid Wastes upto 500 tons per day.More than 10 such plants already installed in India and Excel supplied one such plant to Solid Waste Recycling Ltd  a company formed to handle waste recycling in Mauritius.Compost manufactured in this facility is distributed by Mauritius Co-operative Agricultural Federation (MCAF) and Roger Fayd’herbe Ltd, all over the Mauritius .In India , Excel’s prestigious CWM Plant established in Ahmadabad and working on a PPP model .( Details HERE  and HERE ) This is considered as one of the most successful waste treatment arrangement established anywhere in India .Bio fertilizer manufactured from this facility is marketed under ‘CELRICH’ brand through its group company Excel Cropcare Ltd. 

                

  

Link to Enviro Biotech Division HERE

   

Financials

For the financial year 2013-14 ,company reported a top line of Rs.417 Cr , net profit of Rs.18 Cr and an EPS of Rs.16.50. Company also declared a dividend of 75 % on FV Rs.5 shares.

Conclusion

Even though I emphasized on the non core – Waste Converter business – above ,please don’t misread Excel as a Waste Converter company. Its core business is chemical related itself .Only close to  5 % of total income came from WC Machine  business in last FY but it reported a growth of  about 50 % compared with previous year. Waste Converter business is at nascent stage and this concept itself is just gaining momentum in India .New government’s initiatives especially Prime Minister’s  personal interest in clean city concept is expected to give a new lease of life for this industry . Government already announced its intention to develop 100 smart cities and waste management will be a crucial and inevitable part of this cities . Being a company successfully handling such a system in PM’s own state ( Centralised waste treatment plant at Ahmedabad) he will be well aware about its possibilities and it will give an extra bias to Excel. Arranging waste treatment facilities at own cost may be a compulsory pre condition for permission for building flats,housing colonies ..etc in all cities in future. This will be an eventuality and there is no other options .Such a situation will create better opportunities for Excel’s non core business and the potential is immense.

                                                            If we look into its core chemical business,the chemical cycle is started to looking up and prices are improving. Company is a prominent player in Mining chemicals and any steps to avoid the uncertainty in mining sector by the new government will naturally increase the demand for Excel’s products.In pharma related space,company recently set up a new API facility and gain from this unit will also start to flow in near future . Company is an established player in  agrochemical and water treatment chemical business and potential of the same is also robust. Company possessing a strong R&D wing for both divisions . As per available information, company’s  R&D division for waste related business is actively working on ' Energy from Plastic waste'  and  'Fuel from Plastic waste' concepts and gained substantial improvement .

Management quality of Company is top most and they are very investor friendly . Since company's chemical business is established and very strong  there is no question of uncertainty even if the WC business needs time to pick up.In nut shell – Excel Industries is a company with good core business ,high potential non core business led by highly professional and ethical management . This stock having many ingredients to become a multi bagger in future .Stock listed in NSE and BSE ( Scrip Code -500650 ) and trading around Rs.127

Link to Company Website HERE 

Disc: It is safe to assume that I have vested interest in Excel Ind.

CROMPTON GREAVES - UPDATE

Crompton Greaves recommended @ Rs,90 which is currently trading around Rs.200 .Stock already appreciated more than 100 % in one year .Still recommending to HOLD this stock

Old Recommendation HERE

DEEPAK NITRITE LTD - UPDATE

Deepak Nitrite Ltd recommended @ Rs.191 which is currently  trading around Rs.920  .Now company decided to  Sub-divide  its  equity Shares of Rs. 10/- each into five (5) Equity Shares of Rs. 2/- each. and also Issue of Bonus Shares in the ratio of one (1) Equity Share of Rs. 2/- for every one (1) Equity Share of Rs. 2/- each held 

Stock already appreciated about 350 % , Still recommending to HOLD the stock.
Link to Old posting HERE 

ASIAN GRANITO LTD - EMERGENCE OF A DARK HORSE ?

   

  

 

‘Own House ‘ is the dream and desire of everyone. Still ,millions are homeless in our country ,this along with shift from joint family concept to nuclear family concept creating never ending demand for construction  sector related themes.Commercial construction is another area creating demand for building products.Due to relatively higher interest rate and policy related matters  growth of housing and commercial construction sectors in past few years were muted . New government already announced its priority to provide house for all and assures positive initiatives in this direction.This does not means government will directly build house for every individual but create a situation which will reduce the burden to build a house like reduction in home loan rates..etc.Let us hope for some bold steps in this direction going forward. Along with this, many commercial construction projects are delayed due to environmental Clarence and other red tape related issues .Any sincere efforts to tackle this issues will revive the building material producer's business prospects. Stock price of many such companies like Cera Sanitary ware ,Kajaria Ceramics,HSIL,Astral Poly techniques,Somani Ceramics ..etc out performed the market in recent times.This week let us look into one such company which is trading at relatively cheap valuation – Asian Granito Ltd

Tile is the most preferred flooring material mainly due to convenience for  installation and maintenance ,cost competitiveness,durability and versatility .Currently ,India is the third largest producer of tiles in the world . Vitrified and porcelain tiles are relatively new addition and the entire tile industry is growing at 15 % per year even during this tough time.In our country more than half of tile production is still with un organised sector and organised players are handling the rest . Share price of largest listed peers ( Company’s with a turnover of more than Rs.1000 Cr /year) appreciated substantially in recent times and currently they are trading at an average P/E of  30 . Kajaria and Somani are the two companies in this category . In the growing mid size companies ( turnover between Rs.500-1000 Cr) segment Asian Granito is an unnoticed player which is trading at relatively cheap valuation.This stock is still trading at less than 10 P/E .It is a fact that market leaders always command premium over others but there is no justification for such a steep difference in valuation.

 

                                         Click on the image for a better view

As per a recent channel check  Asian Granito is the second most aggressive tile company next to Kajaria in marketing efforts in recent times. Company is now planning rapid expansion on a pan India basis .AGL increased  its manufacturing capacity 40-fold in 14 years, from 2500 square metres per day in the year 2000 to 1,00,000 + sq. mtrs per day .AGL recently opened its 52^nd exclusive show room . It is planning  to set up 100 more exclusive show rooms  across India in next one year. In addition to this exclusive show rooms ,company selling its products through 4000 + dealers across the country .AGL exporting its products to over 40 couturiers and AGL is the first Indian company started exclusive show room out side India .Company started 7,000 square feet exclusive show room in Johannesburg, South Africa. AGL reported an increase of more than 50% in export in latest financial year which reached Rs .23 cr compared with Rs.14 Cr in previous yesr. In recent times AGL is very aggressive in product innovation front too.It introduced different variants of  Micro Crystal Tiles, Hi-Tech Tuff Guard, 3rd fire Décor tiles, Porcellanto digital tiles, Digital Glazed Vitrified ..etc. AGL management claiming its latest  ‘Carrara White’ double charge tiles  is the world’s whitest tile in the unglazed larger format category.All these efforts are started to yield results.AGL is the company which reported maximum growth in top line and bottom line even compared with large players from this sector in last quarter  .Company reported a Sales of Rs.252 Cr v/s Rs.207 Cr and a net profit of Rs.5.90 cr v/s Rs 3.63 Cr in March quarter . In FY 2013-14 full year company reported a top line of Rs.771 Cr ,net profit of Rs.14.3 Cr and an EPS of Rs.6.40 . It targeting a top line of Rs.1500 Cr in next four years.

Recently Company acquired 100 % stake in a group company named AGL industries which is in the export  of fresh culinary herbs , exotic vegetables and fruits. This is a high potential business and 3 management having enough bandwidth to develop it.After reaching a critical scale there is chances for value unlocking of this division but which is purely management's decision.( Link to the website of new division HERE )

I believe , from the current position of India’s 5^th largest producer of tiles ,Asian Granito will advance few notch ahead in the times to come and become a dark horse from this sector .Company came out with an IPO in 2007 @ Rs.97 and its current book value is over Rs.120 .Stock is currently trading around Rs.49 .Recommending a STRONG BUY at current market price of  for long term investors.Stock traded in NSE under symbol 'ASIANTILES' and in BSE with scrip code 532888.

# Earlier recommended Orient Bell Ceramics from this same sector . Comparing the growth initiatives taking by both companies in recent past   now requesting to shift from Orient Bell to Asian Granito .

Link to Company website HERE

Link to Facebook page HERE

Disc: It is safe to assume that I have vested interest in AGL