Profit lies where no one is watching: some turnaround plays

HELLO, TODAY I WANT TO DISCUSS SOME STOCKS THAT ARE COMPLETELY AVOIDED BY ALL BUT THEY ARE GOOD TURNAROUND PLAYS.
POWER SECTOR
WE ALL KNOW ABOUT THE PROBLEMS BUT THERE ARE SOME HIDDEN GEMS.
RATTANINDIA POWER
BY DEC,15 WILL HAVE 2700 Mw CAPACITY. PUTTING HUGE LOSSES SINCE LAST FEW QUARTERS BECAUSE AMRAVATI PLANT COMMISIONING IN Q4FY15 BUT RECIEVED COAL BY TRAIN IN LAST DAYS OF PREVIOUS QUATERS.
HAVE GOOD PPA WITH MAHGENCO AND FSA WITH CIL. IT ALSO GOT RS 1.55 AS COMPENSATORY TRAFFIF FOR IMPORTED COAL.
LIKELY TO BE PROFITABLE IN 1-2 QUARTERS.
XPANSION IS NOT A ISSUE BECAUSE IT HAS LAND AND CLEARANCES TO DOUBLE THE CAPACITY TO 5400Mw.

KSK ENERGY VENTURES
KSK HAS THE INDUSTRY MOST ENVIABLE PPAs OF MORE THAN Rs 5 WITH MOST GENCOs FOR ITS MAHANADI PLANT. WILL BE PROFITABLE IN 1 YEAR. ALSO ITS WARDHA POWER PLANT OPEN ACCESS ISSUE IS LIKELY TO BE SOLVED BY 2016E
IT WILL BE ONE OF THE LARGEST POWER PRODUCERS IN THE COUNTRY.

RPOWER: SENSIBLE PRODUCER
MOST OF THE CAPEX IS OVER.
HAS THREE MAJOR PLANTS. ROSA(1200 Mw) AND BUTIBORI(600 Mw) HAVE COST PLUS PPA AND SASAN IS A INTEGRATED PLANT. CONTINUOUSLY PROFITABLE. ALSO LEFT 2 UMPP DUE TO LOW PROFITABILITY.
SAMALKOT PLANT IS THE BIGGEST DRAG AS 8000Cr EQUIPMENTS ARE LYING IDEAL AND THAT IS ALL QUITY. NOW THESE EQUIPMENTS WILL B SHIFTED O BNGLADESH FOR A NEW POWER PLANTS.
GOOD PLAY FOR 1-2 YEARS AS TURNAROUND IS NEAR.

REALTY SECTOR

ANANT RAJ INDUSTRIES- MINI DLF
DELHI/NCR FOCUSED PLAYER HAS ONE OF THE LOWEST GEARING OF 0.2. ALSO HAVE THE RENT GENERATING PROPERTIES THAT CURRENTLY GNERATE Rs 100 Cr RENT BUT AT PEAK OCCUPANCY WILL LIKELY TO GENERATE Rs 275 Cr RENT.

ALSO MANESAR SEZ HAS A OCCUPANCY OF JUST 40% THAT IS SEENG RAPID DEVELOPEMENT CONSIDERING THAT GURGAON HAS TURNED EXPENSIVE.

HAS Rs1000 CR DEBT BUT HAS 500 Acre PRIME LAND IN DELHI THIS INCLUDE A 2 ACRE PLOT ON BHAGWN DAS ROAD WORTH 1000 crore AND 2 Acre IN HAUZ KHAS WORTH 800 Cr.ALSO A 131 Acre PROJECT IN GURGAON IS CURRENTLY UNDERWAY.

DB REALTY: MINI OBERIO REALTY

IN NEWS DUE TO 2G CASE.
HAS LOWEST DEBT OF 362 Cr. PROJECTS AT MAHALAKSHMI, MARINA AND BKC AR CURRENTLY UNDERWAY. MAHALAKSHMI PROJECT IS ALONE WORTH 7000CR AT 50% DISCOUNT TO CURRENT PRICE. IT ALSO HAVE 1000cr BOOKING AMOUNT WITH IT. CAN GIVE HANDSOME RETURNS AS THE MARKET TURN AROUND. IT HAS ALSO RECIEVED ALL THE NECESSARY CLEARANCES AND A FCA INCREASE.

REFINING AND PETROCHEMICALS

MRPL: MINI RIL
MRPL IS 71% OWNED BY ONGC. LATEST EXPANSION IS COMPLETE INCREASING ITS CAPACITY TO 3lbpd OR 15 Mtpa. THSI INCREASE COMPLETITY OF REFINERY TO 9.8 ALSO A PROPLYLENE UNIT IS ADDED.
RECENTLY ONGC APPROVED MERGER OF OMPL UNIT WITH IT THAT IS A PETROCHEMICAL UNIT THUS MAKING IT A INTEGRATED REFINER.
FUTURE LOOKS GOOD AND IT IS AVAILABLE FOR A CHEAP PRICES. ALSO KOCHI MANGALORE PIPELINE IS UNDERWAY THAT WILL REDUCE RAW MATERIAL COSTS.

GNFC
ONE OF THE MOST PROFITABLE AND CONSISTENT CHMICAL PRODUCER. commisioned a tdi plant in q2 fy14. but in december 14 there a major fire. THEN DUE TO THIS THE DAHEJ PLANT POST LOSSES OF MORE THAN 800Cr INCLUDING 330Cr WRITEOFF. BUT KNOW IT IS BOUGHT BACK ONSTREAM IN JANUARY 2015. AND ITS PERFORMANCE IS ALSO INCREASED.
CAN BE A MULTIBEGGR.

VEIWS ARE INVITED

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Do you have any updates/information on the Dahej TDI plant of GNFC ? Q1 losses this year were almost the same as q1 of last year in that plane. when do you expect it to turnaround?That is the key to the numbers turning around i guess as other divisions of the compnay are consistently profitable. Wouldbe great if you share any insights on it.

I think you should also consider corporate governance issues in these firms. People have burnt their hands in the past, hence they avoid these kind of companies.

According to me it will turnaround in one two quarters.
Also these stocks have more of regulatory issues than corporate governance

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Mrpl post q2 loss at 901 cr. But most of it of foeeign exchange and inventory losses. So donot worry

GNFC turn around. Pat at 52cr vs 30 cr loss.
Bharuch plants profits double. Dahej plants loss halved. Also got 60.58 cr insurance claim but that is not recognized in this quarter. It is a definate multibeggar.

Again a good news.
Rattan power amrawati plant turned around.
Generate fcf of 40cr at 54% plf.
Share up 18% since results.

Rpower results are good.
All money hungry projects are scrapped. Declared first dividend. Also bangladesh project to cost just 10000cr as 8000cr equipments are lying packed at samalkot.
Available at a pe of 10.

Ksk energy post good results. Losses reduced. Real show in 2016 when ppa of TN and UP come into force.

@ASHISHGUPTA

Friend you are doing a good job. Can you add more flavor to KSK Energy post? (or for matter all the post). Why would the real show in 2016 change and what is PPA of TN and UP? OR are you doing it on respective threads and I should check there?

Thanks
GreyCells

Anant Raj- any idea when the rental income of 100 cars will increase to 275 crs…based on the info in the post, this seems to be hugely underpriced. RJ also holds a chunk of it at an average of Rs 60+ levels. Any idea if the Company is planning to do a REIT for its commercial rental assets?
Another interesting bet seems to be KSK- Management has converted warrants at Rs 99 per share against the current market price of Rs 37. The latest quarter numbers are very encouraging with Mahanandi plant increasing its PLF (currently running at 90% PLF in Oct/Nov) against last quarter of 46%. QIP 12 months back was done at Rs 99.00…dirt cheap. Any news on the Open access issue with Mag govt will be the near term trigger.

Can you post the source link? I did not find it in latest qtrly results available on bseindia.com

http://www.moneycontrol.com/stocks/reports/ksk-energy-vent-financial-results-limited-review-report-for-sept-30-2015-2265741.html

ksk has a rs 5 plus ppa with up of 1000mw and 500mw with tamil nadu.
ppa are scarce today. also numbers may vary a little as i am busy today.

wait for 2 years. it will be earning pataka.
simple logic: let asset to start and sweat the asset till you get sufficient returns.

in case of anant raj industries

it has several sez. specifically manesar one.

it has a occupancy of 40 odd percent which can increase due to congestion in gurgaon.
also land in bagwandas road is worth more than debt.

once real estate market looks up, it will become multibagger and in bad times it has a lifeline in form of rent.

KSK has huge debt so how will it become profitable? Any earnings calculations for 2016?

All power projects have hige debt because of sheer size of operations.
Like ksk has about 2200mw active capacity and a loan of about lets say 10000cr.
But at full capacity it will genearte a revenue of 10000cr a year.
So we are betting on increase in utilization.

Ashish about 1000 crore is taken up by interest cost every year. I am also very sceptical about such huge debt as sheel choksi above. By when is full capacity likely to be achieved. Can you help us with some EV/Ebitda calculations or maybe EV/MW calculation comparison with peers to show us some undervaluation and chances of a good turnaround. Thanks.

Yes why not.
I dont do it for ksk as its power plants are still in commisioning stage but for rattan power as one of its plant is fully commisioned.
For amaravati plant(1350 mw)
Net sellable enrgy will be 1302mw.
Assume 80% plf due to restructuring of discoms and india growing power demand.

As a thumbs rule, 1mw plant at 100% plf generate 10 million kwh

At 80% capacity, it will generate
0.8X1350 = 1080mw or 1080cr units of electricity.

These 1080mw of plant generate a profit of approx. Rs 2 per unit.

So net ebitda reaches 2160cr.
Now interest expense of 800cr. as it will reduce after first year of operation.
Depr. Of 500cr.
Profit of about 800cr before tax.

The trend can be seen in current quarterly results of rattanpower.

The amaravati plant has acheived cash breakeven and profits have started to increase.

Also we cannot take EV/MW comparison as older units have less capital cost as compared to new ones.

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How did you arrive at this Rs 2 per unit profit?

It would be helpful to understand that also so as to watch event unfold in the stock

According to MOTILAL OSWAL REPORT AVERAGE FUEL COST IS ABOUT 1.5RS UNIT.
AND SELLING PRICE IS 3.4