Ambika Cotton Mills

Just adding to discussion .
Yes bank just released its un-audited quaterly results.See the link below


So I think it is allowed by sebi.
If its a good management practice is up to each persons interpretation

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Each one has a way to value a company . This company has shown good gr , has been debt free but it still will get influenced by sector characteristics in bear market

So simple way to look at any stock is to see how much a stock can fall in bad times from its peak

In case of Ambika cotton 2007 to 2009 - this stock fell from Rs 320 odd to Rs 40 odd – so if you look at recent high of Rs 1600 it can max fall to 180 / 200 - and if you are ok to hold through these times , you should not bother about current prices as long term as many has said it will do well …

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Yes, it appears so.

“Yes Bank officials told Moneycontrol that the disclosure of Q2 numbers, ahead of the official declaration of earnings, is not in violation of SEBI norms.”

I agree.

In my opinion, declaring it during AGM is not advisable since, as someone rightly mentioned, people who attend the AGM will be able to act on information which others don’t have access to until the post-AGM disclosure is made to the exchanges.

Latest credit rating report - https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Ambika_Cotton_Mills_Limited_October_03_2018_RR.html

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Thanks for the update.

The last credit report from CRISIL seem to have been released on August 24th https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Ambika_Cotton_Mills_Limited_August_24_2018_RR.html

Both reports look identical.

How often do they release these credit reports?

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My impression Limited pricing power so gain will be one off on inventories & will come probably in the next two quarter results.

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Q2 FY19 result. Decent Numbers.

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Topline grew by 20+% even before the capacity expansion completed :thinking:
Thoughts?

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Another steady performance from Ambika -

  • Revenue increased to Rs. 175 cr from Rs. 163 cr in last quarter
  • Gross Margin reduced to 31.6% from 35% compared to last quarter. GM in H1-2019 is similar to H1-2018 ~33%
  • EPS of Rs. 29.6 compared to Rs. 29.4 compared to last quarter. H1-2019 EPS of Rs. 59 compared to Rs. 51 in H1-2018!
  • Receivables reduced to Rs. 8.3 cr in Sept end from Rs. 13.6 cr in March end !
  • Cash and bank balance of Rs. 31.6 cr. No long term borrowing. Short term borrowing of Rs. 55 cr up from Rs. 28.5 cr in March end.
  • Interestingly, Trade payable reduced from Rs. 6 cr from Rs. 61 cr in March end . This is too big a change. My sense is Ambika is under pressure to pay in advance to secure supplies of raw material.
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Could be higher share of knitting contribution as it had not reached optimum capacity and may be some currency benefits though not sure if euro n other Asian currencies were relatively up against rupee .
Also, had other expense not been 60-70% up , PAT growth would have been much higher. Possible reasons could be

  1. Initial expenses due to capacity Ramp up which would later contribute to revenue
  2. Traditionally, power n fuel, freight , packaging n brokerages ve constituted 80% of other expenses. So, crude may have had some impact on few of these items
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Thanks for sharing the key highlights.
Since payables have shrunk drastically, it is impacting their working capital cycle, which is getting funded by short-term borrowing that has doubled.
Hoping it to be a one time blip due to as you mentioned the need for secure supplies.
Will need to keep a keen eye on these variables in coming quarters to judge the direction of the business.
Also a bit surprised to see both cash and debt increased substantially this quarter.

Disc: Invested and it forms 10% of the portfolio.

Hi, thanks for valuable points. However, I think for a business like textile both from output as well as raw material perspective , seasonality could be an inherent aspect of business and hence a YoY comparison could be more relevant than QoQ. Also I think 1 quarter is too small to conform any trend on working capital, receivables related things but as you rightly pointed out let us watch this for next few quaryers. The debt could also be for expansion rather than any working capital stretch. So let us watch for few more quarters .

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Does anyone know what contributed to higher “Other expenses” this quarter?

Results are in line with expectations. Top line growth is strong but margins have fallen. The newer investments in knitting are lower margin, so this is expected. Yet, overall quarterly EPS has grown by around 15% which is good for this business. Increase in Other Expenses needs to be probed further though.

Balance Sheet also throws up no surprises. Inventories had gone up sharply in March but have come down now despite higher production volumes. As a policy, company discounts its receivables and converts into cash immediately. Hence receivables are miniscule. Cash & bank are around Rs.32 crore of which Rs.20 crore would have gone out for Dividend in October. This Rs.20 crore would also be the main component in Other Financial Liabilities of Rs.26 crore. Bank Borrowing and Trade Payables are interchangeable, and they are down from Rs 89 crore to Rs.61 crore. GST Receivable is the only problematic component (included in Other Current Assets Rs.23 crore) and the main reason for higher bank borrowing and doubling of interest costs.

At a little over 10X TTM EPS, I think the stock is undervalued.

Disc: Invested

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Just my 2 cents on the results:-

  1. Reasons for the higher other expenses could be that Ambika is expensing the cost related to capex on knitting and spinning. YoY basis the amount of assets are flat in spite of the Capex is down. Question is - is this allowed from an accounting standpoint?
  2. @Chandragupta: Could you please explain the GST receivable issue here? Does it mean because of GST, Ambika’s WC cycle is longer (also trade payables have reduced massively)

The break up of Other Current Assets is given in the AR, and GST Receivable is the new entrant there. It seems to be the most likely reason for the increase in OCA. I don’t know how much further this will go, but if there are delays in government releasing any refunds, then it surely will strain working capital to that extent.

Can anyone please answer me why inventries is increasing yoy? I found it in Ar 201718 note 6.

Indian Cotton Output may hit 9 year low in 2018-19

https://economictimes.indiatimes.com/news/economy/agriculture/cotton-association-of-india-cuts-2018-19-production-estimate-by-3-lakh-bales/articleshow/66987624.cms