Sanwaria Consumer - Re-branding their way to survival & growth

Sanwaria has updated that they are gonna launch 10 new products.
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=8A519132-ACB9-4824-9482-15E1648F11A3

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Sanwaria has posted its Unaudited results for Q3-2017-18.

  1. Revenue up to Q3FY18 has increased by 53.23%
  2. Net Profit up to Q3FY18 has increased by 155.47% to Rs. 73.67Crore from Rs. 28.83 Crore up to Q3FY17.
  3. Annualized EPS on the basis of result up to Q3FY18 is Rs. 1.33 as compared to Rs. 1.19 for FY 2016-17-Audited.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/a4170a53-4068-4aad-9d52-a51574708355.pdf

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That’s really stellar numbers !! Few concerns for me here is:

  1. The liabilities are not included in the results.
  2. Why the numbers are being not certified by any Charted Accountants, is this because un-audited (I’m confused, saw few companies posting as un-audited results, but still I used to see CA’s note there) ?
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i am holding sanwaria past 3months. still can i hold or sell?
Can anyone suggest on this stock.

Sanwaria has updated the revised nos. They’ve posted that, there was an error in calculation (YTD ended Dec-17), hence corrected the same and updated.

Everything stays the same except the Q3FY18 net profit %. Previously it was mentioned as 155.47%, post correction it is 124.48%.

Updated result: http://www.bseindia.com/xml-data/corpfiling/AttachLive/acd496f6-a438-412f-9a0c-bcb7ee7ef8b5.pdf

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Thank you. On the back of strong result , hopefully there will be few more Upper Circuit and stock can move up fast.
Disclosure : Invested at lower level.

I don’t think it can move fast since we are locked at 5% circuits :slight_smile: Not sure will that be revised. But as @Nolan said, it’s good to have it in T group, to avoid the “pump and dump” folks.

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Yes 5 % is Circuit …5 * few days …agreed it cant be super fast :joy:

Hi

Unless you need the money, hold on to it.

Thanks!

Thank you for updates @adiparihar

Another strong set of quarterly numbers by the Company in Q318:

  1. A 12% increase over previous year quarterly revenues cannot be called great but it shows settling down of the revenue stream from current product basket. With more product launches, rising basmati prices, large export potential and retail store expansion, 10000 crore target in 3-5 years looks quite possible. Other income almost tripled. Despite being an insignificant proportion of revenues, other income would have a substantial impact on net income due to razor thin margins of 1-2 percent net margin at which the company operates.

  2. Operating profit showed a healthy jump of 46% Y-o-Y basis but operating margins were still below expectation. Company’s facebook page has been quite chatty with all investors and has been throwing tall claims of matching KRBL’s double digit margins. The claims still are way off target as the operating margins showed only marginal improvement from 3.1% to 4.1%. With maximum revenues coming from Basmati Rice and with Basmati prices shooting up in export markets, such lowly margins are still not justifiable. Also, to all the queries regarding the reasons for low margins, Company has not given satisfactory responses. They have only defended themselves by claiming to have a better margins in future, which still seems a farce compared to its peers.

  3. A 7% improvement in Purchase-in-Trade shows inventories getting cleared but a negative change in inventories still shows that company is producing more than it is selling. Change in inventories to (656.88) lakhs over last year’s (2227.99) lakhs however reflects a lower inventory build up. This phenomenon of inventory build up can be discounted considering the Company’s expanded product basket in last one 1-2 years. Also the high quality basmati rice needs storage time for better effect and the increased quantities would increase inventories too till the Company’s basmati sales and inventory levels settle down to optimum levels.

  4. Net profit showed an improvement of 120% which is quite healthy but the margins stayed at 2% improving from 1% in the last year.

  5. Finance cost reduced by 13%. It would be heartening to see reduced debt levels in FY18 balance sheet.

  6. GST has had an enormous adverse impact on the bottomline showing tax liability increasing by nearly 366% from previous quarter

  7. An annualized EPS of 1.36 and a PE of 30-33 can see the stock price hovering between 40-50 till year end numbers come in

  8. New product launches announced for January could trigger further growth in FY19. This story still needs close tracking as having multiple products in the kitty is one thing and managing working capital and operations for all of them is another. Even HUL, when it transitioned from the leadership of Keki Dadiseth to Manvinder Singh Banga, realized that having too many products is making them loose focus. This prompted a huge product line restructuring where the company cut down its product line to 30 power brands. Would be interesting to see how Sanwaria manages its expanding product line efficiently alongside other growth levers of retail and geographic expansion.

  9. The valuations are not anymore cheap as PE hits nearly 30 from a single digit level in just 3 months, PB is at 5. The re-rating seems to be complete. Valuations and price movement would henceforth depend upon future growth which I believe would have several triggers in upcoming year. Also the shareholding pattern would be eagerly awaited to see the institutional/HNI investor interest in the stock.

Cheers,
Nolan

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I think, they’ll reveal it when the stock hits few more LCs :wink:

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Your number crunching and analysis are commendable, which raises more and more questions. My hunch is some round tripping of funds is happening or may be the funds are just being siphoned off.

I am still learning the ropes of financial analysis from wherever I can.

https://www.quora.com/What-is-Gopal-Kavalireddis-outlook-on-Sanwaria-Agro-Oils-stock-Is-it-a-long-term-buy


May be a through forensic analysis of the earlier ARs are needed before we come to a right conclusion.

A VERY BIG ?

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The shareholding is still not out on BSE - the last is long over.

This company releases results before it releases the Shareholding pattern which is a pretty curious thing. Last couple of quarters, the results have come in the first week and the shareholding pattern about 8 weeks later. Even creating the half-yearly balance sheet along with the Q2 results, took only like a couple of days for the company.

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I agree with all the concerns being shared here. These are not new. I have already highlighted the shallow corp. governance standards of the management and other risk factors in my initial write up and updates.

Now when I invested in Sanwaria at 7 odd levels, it was grossly undervalued. It has already given multifold returns now. Sanwaria is now fairly valued/slightly overvalued in my opinion, hence much would depend on future financials and on how Company’s growth plans unfold. Fundamentally, growth can be seen in past results although there may be a few concerns here and there. And that is why I haven’t exited yet.

But now at 24-30 levels it can either be a hold for investors who are invested from lower levels of 7-12 (purely because of the high margin of safety) or an entry level for those who booked profits at 30 or higher level and wish to reenter. But I am not too sure on what a fresh entry at these levels would fetch in future. Still, if someone is not comfortable with their corporate gov standards, then there is no point holding it due to the Management’s not so clean past.

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Your pick at 7 was excellent in respect of Sanwaria. Which other stock, in
your opinion, is grossly undervalued at present.

I just went through the in-depth analysis done by SEBI along with bank account details, shareholding patterns, specific orders along with times and quantities traded and so on, for the manipulation that was done by the promoter on Sanwaria Agro Oils between 2009-2010. Pretty interesting read.

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Was reading some articles on the web chanced upon this… very interesting and eye opener

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Undoubtedly doubts the credentials of Sanwaria. I am not a finance expert.
Can a finance expert share his views on the contents of the blog please.