Impressive! If Pokarna is the only player for quartz in India then we are in here for a bumper results.
Do you know any other company which supplies stone and granite to US from India?
Caserstone is a big fish and it seems they are in trouble. That means better scope for and chance to penerate into B2C model.
no wonder why Ashish Kacholia has increased the stake in Sep Q as well.
Though there is a risk of Chettinad cutting supply to Pokarna but I see risk and reward hugely in favor of investing in Pokarna. I will increase my stake tomorrow. The only thing now left is the cleansing of Balance Sheet, which is messed up due to related party transactions and their cloth business (atleast this was the case when I checked last time).
You are stakeholder and buying more that means you are convinced about its prospects. At the same time you are raising doubts and confusing others? You are mixing balance sheet issues with related party transactions? Apparel business is about corporate strategy and very well known and adequately discounted. I wonder what is the real purpose of writing posts like this.
Disc: Invested with conviction
Thought the following information will help analyzing Pokarna (w.r.t availability of Quartz mines)
Googled and found the below PDF (available from Indian Bureau of Mines - IBM)
http://ibm.gov.in/writereaddata/files/05082015162012EXPIRY%20AFTER%202014.pdf
This PDF has information on the lease expiration for various mineral types (for companies/lessee). Couldn’t find an easy way to export this info to XL for better processing. On manual search I found one entry under “Quartz” for Pokarna
Company (Lessee) Area (in Hectares) Lease Expiry date
POKARNA LIMITED 21.86 05-MAR-18
and multiple entries for Chettinad (or entries with keyword Chettinad) with a total area of ~20 hectares or so. But I did notice few other companies/individuals having leased out in 50s/100s of hectares of Quartz quarries.
Used the following link to query on any pending applications with IBM and couldn’t find any hits for Pokarna
http://mcas.nic.in/Mining_plan_web_Query.asp
Based on the above info, Pokarna + Chettinad (related groups) seem to have around 40+ hectares of Quatz quarry leases and from one of the above posts I did read that Pokarna’s Quartz quarry is not active, which leaves them with around 20 hectares of quarry from Chettinad group (out of which Pokarna might be using few of them). It does look like that Pokarna should look for other sources for raw material (Quartz) sooner/later…how soon is a question to be answered.
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1.
Can you kill it?
Cyclicality and spurts of growth can be mistaken for quality.
***Slowdown in US (Very less chance)
***One black swan like Mining Ban
***Increase in Royalty
***Supplier might FORWARD INTEGRATE/EXPORT
***Regulatory issues might crop up
2
Is the company’s success depends on subsidies, loopholes or tax treatment, it’s vulnerable.
VERY LOW ROYALTY hence high OPM ,NPM
Govt Intervention in mining
3
Reason for Purchase:-
Increase in demand domestically and internationally(US Recovery) too
Good Quarterly Report(Base Effect)
4
Is management honest?
Yes Put there own Money in business
5
Catalysts?
***I think catalyst might be over.
***Price appreciation is too early too much
***It shows good quarterly report might be due to low base
***Huge debt
***All profit for next few years will go to serve debt
***If company try to reinvest it will have to keep debt on books
6
For such companies we need to be very careful
Need to monitor>>>>
1…Debt
2…Interest Coverage
3…Is there any capex?
4…How company finance capex?
5…Royalty issues
6…Any Environmental issue
7…How long query ie…mines will last ie…2018
8…US Mkt Recovery
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Cons. Revenues up 20%
Pat up 240%
Quartz grew 50%+
Granites Degrew
I think there must be competition for the quartz business in India. As per Stoneupdate content, if they were monopoly, they should have grown by more than 100%
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I have 3 observations
- There has to be other competitor in India which is exporting engineering quartz because number do not match up. (Asian Granito also makes quartz as I read in their investor’s presentation).
- Their Apparel business remains a drag with 4 cr loss in this quarter. (may be promoter is siphoning money off from there).
- Finance costs has increased from previous quarter with more or less same structure. I think last time also management were charging the interest which they were supposed to, so why there is an increase in Finance Cost?
Would be glad if you can throw any light on this.
Disc. Had increased my holding to 15% of my portfolio from 5% after looking at the stone update data. Considering to reduce the allocation because my assumptions (like monopoly in engineered quartz, etc) appears to be wrong after watching today’s results
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The stock hardly reacted to stellar set of nos. Seems everyone is buying or selling with one eye on index. On company’s part they have fallen short somewhat in deleveraging the balance. This is largely due to earnings have gone into building working capital or reducing some other liabilities. On longer term folks need to worry about rising rates and impact on housing.
Results are little bit disappointing but not bad. Their overall EBITDA is about 33% this quarter in spite of Rs 3.2 crores loss from Apparel business. Yes Granite degrew, I have a feeling, going forward, their Granite segment will not grow much or will grow slower(I mean exports, but domestic granite business could still grow). Good thing Quartz grew, its their rising star, but I expected it to hit Rs 60 crores revenue this quarter considering their claim of Quartz plant running at 80%., either I overestimated, or they misrepresented the capacity utilization, will have to find out. I think Quartz EBITDA for this quarter are about 40%. Which is very impressive. Its encouraging to see how their Quartz segment margins are expanding. Compare the margins for last few quarters of quartz, you will notice. There is 2 months data on stoneupdate.com for this quarter, for July and August it shows 490k (july 175K and August 315K) square footage of quartz imports from India, for now , lets assume September did another 350k square feet (giving some monthly increment ) that makes it 840K square feet for the quarter from India. Give it a realization of $10 per square feet and and Rs60/USD exchange, that makes it little over Rs 50 crores in Rupee terms. That brings us to believe Pokarna is the only exporter of Quartz from India…would like to know if I am getting it wrong.
But most disappointing thing is their apparel business, Rs 1.5 cr revenue and Rs 3.2 crore loss?? Really??
I haven’t had a chance to look at the other Balance sheet details yet. Will spend some time over the weekend.
Management expecting to close the year at 400 crores!
I think the article(interview) above has some factual errors regarding FY15 topline. The revenue split for FY15 as per AR is (Granite - 183Cr, Quartz - 135.73Cr, Apparel - 7Cr). From the above interview I understand that FY16 split would be(Granite - 200Cr, Quartz - 200Cr, Apparel - 7Cr). So growth YoY would be (Granite - 9.74%, Quartz - 47.4%, Apparel - 0%). I am assuming Apparel would remain the same as last year. I hope I am reading the data correctly or am I missing something?
Pokarna and Asian Granito play in different segments/geographies of market due to technology, so its not apples to apples.
@kanvgarg123 Pokarna uses Breton Stone technology which is the best in the world and allows it to compete in US market (high margin) with the biggest names (at least it can try).
The monopoly questions needs to be looked differently. Pokarna is the only player in India with Breton Stone tech. But it sells in export markets where it competes with players with Breton Stone tech from other companies. There is good discussion in this thread regarding the geographic competitive advantages with risks that Pokarna might be leveraging.
@jatin Pokarna does not need to compete in India (lower margins) as it can sell in high margin export market (esp US). Asian Granito can’t in that high margin US export segment due to quality difference (refer technology difference above)
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Great then, MD said they will be doing similar numbers for Quartz for the next 2 quarters and at the same time he said last time that they are not running at the full capacity. Plus why the hell nobody asks them about their Cloth business? Stupid channels
Last year AR had a line item for Other Long-Term Liabilities to the tune of Rs.21 crores which is cleared now in the last quarter.
Other Long-term Liabilites had 2 items:
Security Deposits : Rs.06.0 crores
Interest accrued but not due on borrowings: Rs.20.92 crores.
I guess this must be the interest that was due to the promoters for their loans to the company. Not sure how the market will read it :
a)Why they paid their due first when they have over Rs.100 crores outstanding long-term loans.They really worked hard to keep the company going during tough times,they do deserve it.
b) They still have Rs.200 crores long term loans ( Term loan Rs.110 crores and Unsecured loans from directors/inter corporate depositsRs.87.16 crores)
and Rs.59 crores short term loans(working capital loans).
From next quarter onwards,it will be interesting to see which one they will pay back first.
Now coming to the valuations,Pokarna currently trades at an Enterprise value to sales of 2.33 ( Market cap of Rs.673 crores + Debt of Rs.260 crores) / Sales of Rs.400 crores.
Despite having superior margins of OPM over 25% and net profit of over 10%,end of the day it is a building materials company.So,not sure if it will get better valuation than this.Going forward,growth will be incremental tracking the earnings data.
Other building material companies like Kajaria,cera are trading at 3 times the market cap to sales.
Disclosure: Invested.
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US import nos. look good for India particularly quartz slabs which is up 7x in Sep-15
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Any reason for the fall in price !! Anyone who can provide the valuable insights??
Disc : Invested and want to accumulate further !!
Only thing I can think off is imminent rate hike in US and expected impact on US housing but IMO it deals with luxury houses which are not much impacted by rates. Marginally, some investors are unhappy how they reimbursed their own debt first during H1. I think they have given loan repayment schedule in latest AR and I will be watching how they behave. Additionally, CRISIL raised their debt rating yesterday.
Thanks Sumit. Yes probably these might be the reasons…
Quartz imports from India to US continue to increase. Much better than sept.
http://www.stoneupdate.com/us-stone-imports/statwatch-monthly-report/989-statwatch-spooky-october