Jocil
Are there any value picks in this market? Yes, I believe there are a few options like – Jocil. Most of us would be hearing this name for the first time 
The company is a subsidiary of Andhra Sugars (55.02% stake) and is listed only on NSE. The company specializes in manufacturing of Stearic Acid Flakes, Fatty Acids, Toilet Soap, Soap Noodles and Refined Glycerine. The company has been doing contract manufacturing of toilet soaps for leading FMCG brands such as – HUL ( Liril, Lifeboy etc), ITC (Vivel, Superia etc), Marico ( Manjal, Jasmine etc), Johnson & Johnson (Savlon) etc.
Very strong financials:
- Jocil has been growing at a CAGR of 51% for last 3 years and a CAGR of 25% for last 5 years, yet it is available at a P/BV ratio of just 1.25, TTM PE of just 6.
- It is a debt free company. Has excess cash of 25 Cr on Balance Sheet (as of 31st March 2009)
- Has limited investment in inventory and debtors. Hence the business is not working capital intensive.
- Has a track record of excellent dividend payout ratio. (Payout ratio has been around 35% for last two years)
So at CMP of 265, we are getting an FMCG related company at a M Cap of about 115 Cr having atleast 25 Cr as cash on Balance Sheet, turnover of approx 300 Cr, Operating profit of approx 35 Cr and a Net Profit of 21 Cr. Isn’t it a value pick?
Other trigger could be – If the company maintains the div payout ratio of even 30%, it means a 150% dividend this year :)
Company’s website: http://www.jocil.in
Views Invited.
Happy Investing
Poly Medicure – Aiming to global medical devices market
“In the next three to five years, our focus will be on safety devices market. We are expecting our revenues to grow from Rs 135 crore to Rs 300 to 400 crore by 2013″ - Rishi Baid, executive director, Poly Medicure Ltd
We recently discussed about Poly Medicure which is one of the biggest exporter of IV Safety Cannulae and other healthcare disposable products. Now it is looking to expand in global markets too and targeting a 10% global market share.
If the company is able to do a turnover of even 165-170 Cr next year, the stock is trading at just 5-6 times FY11 expected earnings.
Pharmabiz discusses about the talks with management:
The New Delhi-based Poly Medicure Pvt Ltd, manufacturer and supplier of medical devices and disposables, is planning to invest Rs 100 crore by 2013 to expand its presence in overseas market with a thrust on safety medical devices and outsourcing manufacturing and research activities.
The company, which currently has almost 75 per cent of its total Rs 135 crore revenue from exporting products to more than 80 countries including US and Europe, is planning to invest around Rs 100 crore within 2013 to increase its presence in global market and to explore the potential of outsourcing market, said Rishi Baid, executive director, Poly Medicure Ltd. The company is also mulling on acquiring a medical devices company with research and development focus in US, by spending around USD 20 to 30 million.
“In the next three to five years, our focus will be on safety devices market. We are expecting our revenues to grow from Rs 135 crore to Rs 300 to 400 crore by 2013,” Baid averred. The target for the financial year 2010-2011 is fixed at Rs 175 to 200 crore.
The company sells its safety device products to almost 30 countries including South America and Middle East. The safety devices portfolio is expected to increase to 30 to 40 per cent of its revenue in next five years, from a meager eight per cent reported at present, he added.
Poly Medicure is currently operating on selected medical devices and disposables segment, which has a potential up to Rs 1000 crore and currently has five per cent market share. Through the capacity expansion, the company is targeting to bag 10 per cent of the market share by 2012.
Sunflag Iron & Steel – CMP 31
Dear Friends,
Steel Sector has been witnessing a lot of price hardening due to both input price rise and demand. Stocks of this sector are finding interest.
One company which has good fundamentals and looks interesting is – Sunflag Iron & Steel. Sunflag is part of the Bhardwaj group having presence across 6 Countries in 3 Continents. The company manufactures high quality alloy steel which finds usage in Automobile Industry and Infrastructure sector.
The company has grown steadily over the years and should be able to post a turnover of close to 1300 Cr this year- FY10. Over the last few years, company has tried to go for backward integrations – for eg: expanding of captive power plants, acquiring coal blocks etc.
Attractive Valuations:
1. Stock is available at 7 times expected FY10 earnings.
2. Stock is trading at just 3 – 3.5 times FY10(E) EBITA margins.
3. If one analyses last few quarters, it seems the effect of backward integrations are fructifying and if the company can continue the same, the company may be on its way for yearly net profits of more than 100 Cr.
Another positive is – increasing shareholding of promoters (from 42.39% to 49.03% within one year).
Financial snapshot:
Interview of ER Shekhar, Director. | Company Website
Majestic Auto – Updates
We earlier discussed about Hero Honda and Majestic Auto at our blog and the valuations just keep improving.
As expected, Hero Honda has appreciated from approx Rs 1,600 to Rs.1935 i.e. a gain of 21% in less than 5 months; while Majestic Auto is yet to follow. The current upside in Hero Honda is creating fresh opportunity for Majestic as the gap between the Market Value of Investments (16.25 lac shares of Hero Honda) and the companies own market cap is widening everyday.
The valuation of Majestic as of today:
Own Market Cap of Company: 65.50 Cr
Value of investment in Hero Honda (16.25 Lakh shares) : 314 Cr
Apart from these investments, the company also has a factory, land and other assets.
Discount: >80%
Poly Medicure
Poly Medicure is one of our favourite small cap stock which has carved out a niche for itself and has grown well over the last few years.
The company is the one of the biggest exporter of IV Safety Cannulae and other healthcare disposable products. This business segment is always growing and with development of better medical facilities, this segment should grow faster.
Few worthy points:
- The company has grown at a CAGR (Compounded annual growth rate) of 30.75% over last 10 years. (From turnover of 10 Cr in FY 2000 to 112.22 Cr turnover in FY 2009)
- The company is expected to grow at 20% YOY (Year on year) for next 2-3 years. This year the company is expected to do a turnover of 135 Cr with a net profit of 15 Cr, thus implying an EPS of 27.
- The CMP of 200 discounts the immediate EPS of 27 by just 7.5 times.
The last two quarters have been very good due to the backward integration efforts of the company done in the last few years and hence the company may be able to sustain operating margins around 20%.
Recent Developments
- The company has won series of patent infringement cases against major B Braun, after which the company is free to sell the advanced IV Safety Cannulae with the inbuild safety feature (http://www.expresshealthcare.in/201002/market26.shtml). This product has potential to sell at a very remunerative price in the developed nations.
- The company has been strengthening its sales network on the domestic front and tying up with major hospitals.
- The company is looking to expand its capacities and targets to double turnover in next 3 years. For they same they are also looking to put up a new factory.
Challenges:
Being a high volume low price product, the scaling up of the business is not easy. The company has been trying to develop new products to overcome the same.
Here is a company with strong financials, good business model, high margins, good return on equity, good cash flow yet available at less than 8 PE.
BNK Capital – Hidden deep value
BNK Capital is a small finance company with experience of over several decades. The company provides brokering services across the various products such as equities, commodities etc and serves several HNIs and corporates.
The interesting part is the market value of the investment the company holds. Some of the major investments are:
| As on 18th Feb, 2010 | |||
| Name | Qty | CMP | Value (Cr) |
| CESC Ltd | 30,17,351 | 378.00 | 114.06 |
| India Foils Ltd. | 2,24,000 | 10.00 | 0.22 |
| Mcleod Russel Ltd. | 2,74,205 | 234.00 | 6.42 |
| KEC International Ltd. | 3,75,105 | 577.00 | 21.64 |
| Zensar Technologies Ltd. | 4,200 | 286.00 | 0.12 |
| Jaipraksh Associates | 37,500 | 135.00 | 0.51 |
| Total | 142.97 | ||
| * Co holds a lot of other investments also totalling 4-5 Cr |
At CMP of about 42, the co’s own Mcap is close to 25 Cr while the value of marketable investments on Balance sheet is 143 Cr!! Hence the company is available at a discount of 82.65% to the value of investments. Similar valuations were once found in CHI Investments too, which was then our favorite and yielded very good returns.
Yes, many of the similar finance companies trade at discounts to their market value of investments, but such discounts are usually not more than 30-35%. Here we are getting a company at 83% discount.
Balkrishna Industries – Not just any regular tyre company
Its logical not to go for tyre companies as long term investment as the business model is not very attractive cause:
1. No competitive edge hence no pricing power and high competition
2. ROCE are low
This is where Balkrishna Industry (BKT) stands out. This company has had a spectacular track record of:
1. Growing at 30.47% CAGR for last 11 years!!! Yes, the company had a turnover of just 98 Cr in 1999 and last year, the company was able to post a turnover of 1407 Cr.
2. Net profits have also grown at the same pace.
3. ROCE has on average remained in the range of 20-25% for last 5 years.
4. Consistent healthy margins
5. Good dividend pay-out.
WHY is the the difference between Balkrishna Ind and other tyre cos so huge?? Reasons:
BKT operates in the OHT (Off Highway tyres) segment i.e.. the tyres find application in the agricultural and construction equipment segments. BKT exports 90% of its production to developed countries and 75% of the sales are to the replacement market.
Globally this industry is leaded by Bridgestone, Good year and Michelin…and as this business involves high customisation and labour, these global companies are unable to maintain their competitiveness. BKT has been able to provide the quality at 30% cheaper prices and hence is gradually gaining market share. As of now, BKT has a market share of 2-3% and the company aims to increase the market share to double digits in next 5 years.
The company has 1900 SKUs – one of the highest in the industry and the company claims to have an expertise in developing the new SKUs in-house in the least time.
Other positives:
During the crisis last year, BKT prudently held back the planned expansions to better the balance sheet. Result – the interest cost has reduced majorly and so has the debt equity ratio. The cash flows are coming in.
Going ahead, I feel the company will be back on growth to gain market share.
At CMP of 590 and declines, the company is available at attractive valuations for a long term investment perspective.
Jaihind Projects – Update
There’s a whole ocean of oil under our feet! – Plainview in “There Will Be Blood” (Oscar Winner)
We had recommended the stock earlier on our blog here. Though the stock is up more than 65% now, it still has a lot of potential.
The company had held an analyst meet yesterday and the updates are very encouraging. Few highlights:
- Jaihind Projects is into Pipeline EPC business and has vast experience in pipeline construction segment having laid down more than 10000 km of pipeline. The company has 2nd largest equipment base for execution of pipeline EPC contracts.
- There is a total proposed investments of more than Rs 200 billion in developing and expanding the existing pipeline network in India over next 3 to 4 years, adding up to more than 10000 km of additional cross-country natural gas pipeline across the country. Further more than 60 cities are earmarked to get CGD (city gas distribution) networks by FY’12, along with proposed implementation of National Gas Grid by GAIL and capacity expansion of the LNG terminals, the demand for natural gas pipelines is slated to grow.
- Total order book position of the company as on Dec’09 stands at Rs 943 crore.
- In addition to the above, the company has bid nearly Rs 1000 crore of domestic orders on its own and more than Rs 1000 crore of international orders along with the alliances.
- The company intends to invest in windmills and generate about 12-15 MW using wind power.
- The company has target of net sales of more than Rs 475 crore for FY’10 with better margins.
Post Demerger impact of Asian Hotels – Unlocking the hidden value
Hi friends, this is exciting!
Asian Hotels (which we recommended recently for its demerger news) has filed a document with BSE detailing the post-demerger financial aspects including the post-demerger balance sheet of the three new companies. We were flirting with the data to guess the post demerger scenario and here are the possibilities (provided in the excel sheet below).
As per the announcement, a shareholder holding 100 shares of Asian Hotels will get:
– 50 shares of AHL residual company
– 50 shares of Chillwinds
– 50 shares of Vardhman Hotels
The new figures show a significant rise in the book values, as during the demerger, the assets are transfered at their fair values.
Do give it a look at the above numbers and share your comments.
Update on Q3 nos
“Its’ the work on your desk…It’s the work on your desk. Do well with what you already have and more will come in.” – Charlie Munger
Dear Friends,
This post is to bring an update and review of all the stocks discussed till now.
Performance till now:
| S.NO | SCRIP NAME | Date of Recommendation | Price of Recommendation | CMP | Percentage Returns | Remarks |
| 1 | CHI Investment | 11-05-2009 | 25 | 45 | 80.00 | Exit was advised earlier at higher price |
| 2 | Shilpa Medicare | 26-07-2009 | 93 | 239 | 156.99 | Hold |
| 3 | Jaihind Projects | 02-08-2009 | 95 | 173 | 82.11 | Hold |
| 4 | Albert David | 25-08-2009 | 75 | 119 | 58.67 | Book partial profits |
| 5 | Siemens Healthcare | 14-09-2009 | 1100 | 1270 | 15.45 | Exit was advised earlier |
| 6 | Ahlcon Parentals | 28-09-2009 | 37 | 47 | 27.03 | Hold |
| 7 | Fresenius Kabi | 28-09-2009 | 80 | 120 | 50.00 | Book partial profits |
| 8 | Majestic Auto | 22-10-2009 | 68 | 62 | -8.82 | Hold |
| 9 | Suprajit Eng | 26-10-2009 | 90 | 155 | 72.22 | Hold |
| 10 | IST Ltd | 16-11-2009 | 100 | 140 | 40.00 | Buy |
| 11 | Manjushree Technopack | 18-11-2009 | 32 | 46 | 43.75 | Hold |
| 12 | Asian Hotels | 01-12-2009 | 425 | 508 | 19.53 | Buy on declines |
Individual Updates:
1. Shilpa Medicare: This stock has been a wealth-creater. The company has yet again posted excellent Q3 nos. Based on the same, the future looks bright and the stock is getting the attention of bigger investors (Read: ICICI Prudential mutual fund ). On repeat or better financial performance, the stock has potential to reach 350 levels.
2. Jaihind Projects: The company has been doing well. As per a recent ET article, the co has to complete major projects by mid this year. One should continue to hold.
3. Albert David: This stock was picked as more of a value pick to park idle funds. One can consider booking partial profits.
4. Suprajit Engineering: The company has come out with excellent Q3 nos. The stock has also done well. To reward the shareholders, the management has proposed 45% interim dividend, 1:1 bonus and stock split. Though a bit aggressive than required, all these developments can take the stock to higher levels.
5. IST Ltd: As per the recent updates, the construction activities are going at good pace and co has built almost 10 lac sq ft of space. Leasing out of the same in due time will be a very positive development. If things keep going as per the plans, the stock has all the potentials of becoming a multi-bagger.
6. Manjushree Technopack: We have been providing updates in other threads.
7. Asian Hotels: Usually demergers create lot of shareholder wealth. So one should remain invested and look forward to buying on declines.
We are trying to bring some new picks from the Q3 nos. In the meanwhile some of my other favourite cos have come out with very good numbers and investors can consider them for investing: Balkrishna Industries & Poly Medicure.
