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Gujarat Ambuja Exports

Gujarat Ambuja Exports Limited is engaged in manufacturing and exports of agro based products. The Companyâs product profile includes solvent extraction comprising of oil seed processing, edible oil refining, cotton yarn spinning, maize based starch and its derivatives, wheat processing, cattle feed and power generation through wind mills, bio gas and thermal power plants. The Companyâs segment includes Agro Processing, Cotton Yarn, Maize processing and Windmills Power generation. The Company has also investment in power generation through windmills and non conventional source of energy (Biomass). The Company is a cotton yarn manufacturers in India producing cotton yarn in the counts Ne 16 to Ne 40, both single and double. The Companyâs manufacturing plants located in states of Gujarat, Maharashtra, Madhya Pradesh, Uttarakhand and Karnataka.

Promoters have increased their stake to 71%.

Revenue from exports is around 25%.

Corn processing segment is major revenue source for company.

Consumer products - Ambuja Gold Chakki Fresh Atta, Ambuja Gold Refined Soyabean oil, Ambuja Vanaspati Ghee

Financials

MCap - 658Cr

CMP - 47.55

P/E - 5.89

Book Value 55.37

ROCE - 22.99

Debt to Equity - 0.28

Yearly Results


FY10
FY11
FY12
FY13
Sales 1408.56 1949.43 2114.09 3004.62
Operating Profit
111.35 153.89 105.76 194.57
Profit Before Tax
77.05 115.55 60.52 145.64
Net profit
60.02 94.10 49.70 113.35
EPS 4.34 6.80 3.59 8.19

3 years compounded sales gorwth - 28%


Management

Vijay Gupta - Executive Non-Independent Chairman of the Board, Managing Director, 40 years of managerial experience

Mohit Gupta - Joint Managing Director, Executive Non-Independent Director, entrepreneur with Diploma in International Business Management and Human Resource Management, Family Business Management from S.P. Jain Institute of Management and Research and Diploma in Computer Information System from University of South Alabama, U.S.A.

Manish Gupta - Managing Director, Executive Director, managerial experience of 21 years.

Negatives

Low operating margin. This is across almost for all companies in sector.

Dependency on weather.

In past the company had labor problems for cotton yarn unit. Those issues are resolved was mentioned by management later.

No mutual fund holding. HSBC exited in Sep'13

Questions to be asked to management for further analysis

Would delayed monsoon have impact on production?

Are there any steps in improve operational margin efficieny.

Disc : Took starter position. Still waiting for more study to be done.

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The company also has a subsidiary named **GUJARAT AMBUJA INTERNATIONAL § LTD **in Singapore.

The promoter Gupta’s take away abt 16 cr as remuneration which I find quite high - abt 15 % of net profit of 111 cr.

the debt has gone up significantly as per mar 14 results. Any expansion plans coming up??

Anybody tracking this co which seem to be performing strongly and has zero debt,promoter stake of 72%, tripled their capacity without diluting,focussing on Maize which has big opp size due to various uses in pharma, starch, food,bakery, liquor manfg, popcorn, breakfast cereals and so on. Soya uses is also increasing due to high nutrition

Valuation is low pe of 8-9 only but poor roce n laggard divisions of yarn n solvent extractions

How is the management quality n track record?

Gujarat Ambuja Exports appears to be attractively valued at current levels. It should do Sales of about 3000 crs for 16-17. EBITDA & PAT of about 277 crs & 185 crs, with EPS of about Rs.15 to 16, thus being available at a PE multiple between 8 & 9 for 16-17. We are already in 17-18 & the growth in the current year will only make the investment more attractive. The current market cap is about 1500 crs with debt of about 250 crs.

The last few years has seen the Co. shift focus from Soya to Corn (Starch) where the operating margins are twice that of Soya. The main investment thesis is based on these margins continuing to improve going forward with more contribution coming from the value added starch derivatives. Its new plant in Maharashtra should be going on stream shortly, giving the growth momentum further boost.

The Co. recently concluded a major buy back worth 225 crs., that was mainly to facilitate the exit of one part of the promoter group, resulting in the share capital down from 27.67 crs to 22.93 crs. & the promoter holding down from 72% to 66%. This will result in a leaner balance sheet & improving the return ratios. With the settlement amongst the promoters coming through, the mgt. focus will be sharper on the business going forward. Also to be noted is that even though the buy back size of 225 crs is quite meaningful, the amount itself is less than the cash profits for the year!

The last few years has seen a continuous disparity in soya crushing making exports of soya de-oiled cakes unviable. This has changed in the current year which is seeing a quantum jump in exports, thereby improving the profitability of the Soya segment as well.

Disc: Invested & continuing to add

11 Likes

Should we read too much into the promoter holding ending in Mar '17 coming down to 66.18% from 71.96% in Dec’16 quarter

Do you think the Rupee getting appreciated would it impact margins and profits.

Disclosure - Interested not invested

@v31
I feel that 66.18% shareholding from the promoter running the Co. purposefully is better than 71.96% split between two brothers looking to divide the spoils between them. As mentioned in my post, going forward the mgt focus should be greater & this will probably get reflected in the results.

@rishi_j15
The name Gujarat Ambuja Exports is a legacy of the past when it was more of a solvent extraction Co., exporting bulk of its sales. The Co. has come a long way since then with exports not being a significant contributor. In fact, the appreciating rupee ought to work to its advantage, with crude oil imported for refining getting that much cheaper.

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Analyst coverage starts on this cheap stock

http://economictimes.indiatimes.com/markets/expert-view/2-stocks-to-make-money-on-in-medium-term-avinnash-gorakssakar/articleshow/58494390.cms

The first stock we would be recommending is an agro company – Gujarat Ambuja Exports LtdBSE 0.56 %. Gujarat Ambuja Exports was incorporated in 1991 and largely specialises in agro processing, especially soya oil processing. It is also into cotton yarn and power generation. In fact, almost 50% of the revenue comes from agro processing. Another 40% comes from a starch through corn processing and this has been a very value added kind of segment for the company.

The cotton yarn busines …
In fact, the company has already recorded a bottom line of Rs 125 crore for the first nine months as compared to Rs 100 crore last year.

Most of the improvement has come in from the maize processing unit where margins are almost as twice as that of the soya unit.

Read more at:
http://economictimes.indiatimes.com/articleshow/58494390.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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Gujarat Ambuja Exports came out with a good set of numbers, if one accounts for the one time provision of 14.16 crs towards interest & 7.9 crs towards penalty, together amounting to Rs. 22.06 crs, made in the quarter. This amount pertains the differential rates of customs duty on imports of crude palm oil during the period 2004 to 2006. Sales for the quarter broke the 1000 crs barrier, perhaps for the first time.

The story should get more interesting going forward, with the maize processing unit at Pune going on stream shortly. This will lead to a substantial increase in Sales with higher margins.

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It seems one can invest on this stock solely on the basis of the maize processing division.

After looking at the recent Q4 results, the % of revenue from Maize processing has come down from 43 % to 38 % largely due to the high demand for Oil meal exports. Also the OPM of maize processing has come down to 11.7 % as opposed to 12.5 % in the previous year.

The new plant in Maharashtra could prove to be a turning point in the fortunes of the company

Disc : Invested @ 130 levels today.

Q1 2018 results declared http://www.bseindia.com/xml-data/corpfiling/AttachLive/8080ee34-3f7e-4a8a-af72-1aad486d8ebf.pdf , results seems to be very poor, revenue as well as net profit both are down for all segments including Maize processing division.

Almost all divisions have taken a hit equally. Can anyone shed some light on this?

As most of the business is done B2b ,i reckon part of a dip in sales and profit is due to GST .

@RajeevJ Rajeevji, How would you view these disappointing Q1 numbers ? A temporary hitch or indicating the loss of sheen.

  1. Who are the major competitors to Gujarat Ambuja’s corn starch and other maize processing derivatives?
  2. Who is the major customer for the maize processed products?
  3. Will there be a concall scheduled for the discussion of Q1 numbers and future quarters? If so, when would that happen?

@james_kerala
Q1 numbers are clearly disappointing, but I gather that as the Co. supplies are still largely B to B, the GST impact was felt more.

I also gather from reliable sources that the new plant has already been inaugurated & commercial production should start shortly. The plant is expected to ramp up production towards the end of the year. I guess the AR for 16-17 should be out any time now & should throw more light on the plans going forward.

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the Q1 margins were down because of

  1. Lower sales due to GST
  2. Inventory losses : they had to take losses on march end inventory as corn/soya prices are down 10-12% in the last 3-4 months
  3. higher cost inventory being used in the last quarter impacting margins

This may have some impact in Q2 as well but longer term margins should be maintained for the maize business.

Would like to understand the dynamics of maize processing in detail - the margins across the different value added products, price trends etc : any help would be appreciated

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The annual report is out and one key management I noticed “Shri Mohit Gupta has resigned from the position of Directorship as well as from the designation of Joint Managing Director (Key Managerial Personnel) of the Company w.e.f. close of business hours of 31 st May, 2017.” Being one of the son of of the Shri Vijaykumar Gupta, it is not clear how it will play out in the business of the company and the role he was playing and how it will impact. The relevant sections talks about new Maze processing unit to start production in Sept/October 2017, which means impact from Q3 onwards. How do you read the business outlook and commentary by management. I could not see much exuberance in the words…

As expected muted results attributed to GST.

Inviting AR review comments from @RajeevJ and others on these or any other important points I missed. I very weak in finance statement analysis as well.

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@james_kerala
One of the brothers quitting the Co. has already been discussed on this thread, if you read my post of April 24, so that is already discounted. Besides, to my mind, the Co. is better off being run by one faction of the family.

One interesting fact in investing is how the same set of data is interpreted differently by different investors, which is why you have a buyer & a seller! I found the AR quite encouraging. You would perhaps be better off going by the facts rather than the tone of the AR.

Lastly, stock investing is 90% common sense, so please don’t worry about not being great at finance statement analysis & start working on it!!

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