Hitesh ji, Any reason to buy companies producing asbestos sheets ??
Can you pls explain some tailwinds the sector has ?
basically its more to do with the results these companies have been posting. Plus stocks in the sector are already in uptrend and seem to be consolidating at current levels without giving up too much of their gains.
Ramco is top amongst top 10 Diwali picks of centrum
http://indiaer.blogspot.co.uk/2012/11/ramco-industries-centrum-wealth-top-10.html
hitesh sir,
Lakshmi energy and foods.
you know about the company very well.
There is a possibility of a turnaround for this company. 2QFy13 results - consolidated revenue was 671 cr , net profit of 10 cr, eps 1.5. EPS for six months is 2.8. Net profit margin is still low due to high finance cost (34 cr). The annual report is not yet released.
But one good sign is Promoter Uppal had made open market purchase of 1% equity and now 1.92 %. total 2.92 % has been bought by promoters which i feel is a positive sign.
I cannot ascertain how the company will expand its NP margin as info available is limited. But it appears that the company has been shifting focus to Basmati rice as it is not regulated by govt (being premium category) whereas the normal rice is banned for exports at times leading to pricing pressure. The company has launched several types of Branded Basmati rice (Lakshmi foods) in market but i dont know the response to their products.
Unfortunately the stock has already rallied from Rs 18 to 25.
Please do express your opinion on this one.
Disc : i own the stock.
Hi,
I had a look at LT Foods Ltd. It looks like a well managed com aiming at retail foray with branded snacks. Its already having tieup with Pepsico for pvt label manufacturing of its snacks. It also has got into a tieup with Future ventures recently for supply side infrastructure. The com seems to be on the move to better its business.
The basmati brands of this com are good - Dawaat, Devaaya etc. The issue I found in the current rice business is thin margins with high currency exposure. There is high dependence on export market.
Also since basmati rice production cannot be scaledup due to its geographical dependence on himalayan regions I do not see how this com will expand business in Basmati. How long can it keep increasing the price to increase sales? The thin margin shows basmati rice producers probably have less pricing power.
If the retail foray and trading initiatives help increase margins for LT Foods, it can be a good bet. But that is to be seen.
If Lakshmi Energy is only into rice processing, I am not sure if the prospects are good.
Cheers
Vinod
HItesh,
Have you looked at Finolex Cables? It seems the co. is in for better times as indicated in heir AR as well as recent Chairman’s speech. Q2 results were also quite gud.
In the past they hv hade a better div payout track record, and the mgt seems to hv shown intent to return to maintaining the same payout in times to come.
However since I dont understand the sector, would request your views.
Hitesh bhai,
I have posted a thread for HSIL in special situation . would request you to have a look at it .
HSIL looks like a oppurtunity with high margin of safety .
regards
ranvir dehal
Hi Hitesh, I wonder why you do not like Everest Industries in the cement sheets sector. Theyhave a 5 year CAGR of 33% in sales and 39% in net profit and have been posting great results of late. They are aiming to be a complete building solutions company and are into other segments like steel buildings as well.
They also have a great pedigree. It used to be ACC group company. The current promoter is also the founder of Ambuja Cements. He has put professional mgt in place instead of running the show himself.
Hi Hitesh
What is the trigger now in Supreme that you have started liking it? It has been a solid compunder over the past many years.
Thanks
Sunil
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Hi Hit Bhai,
I completely missed your “Diwali picks” and would have pickedup Shilpa at 290 levels.
You have Ramco, HIL and Visaka among the picks which are all in the asbestos sheet business. Are all three equally good or is it just for spreading the com specific risks in a sector you are really convinced about?
Initially I thought Visaka is in the cement sctor. It is the most undervalued among the three.
Cheers
Vinod
i think hyderabad inds is the best among the lot bcos it is market leader and has low debt. plus it also has a good div yield. visaka does look cheap based on conventional valuation parameters. I am also impressed by the info they share in the AR.
i have been holding hyderabad ind for quite a while now (2years++)- but return on investment has not been handsome
Quick comparison of the three companies pitted against each other
https://www.edelweiss.in/market/compfundcomp.aspx?co_code=1926,259,1052,165
Hyderabd has lower debt, higher ROCE, available cheaper. All the three have similar sales 750-850 Cr while profitability has wide differences.
Hi Rudra,
The link posted by you does not include Visaka Ind. Here is the correct one
https://www.edelweiss.in/market/compfundcomp.aspx?co_code=1052
It shows Viasaka having better valuation. But HIL has better ROCE, lower debt/eq and higher margins.
Cheers
Vinod
Hi Vinod,
You need to copy paste the entire URL. Clicking won’t do.
"https://www.edelweiss.in/market/compfundcomp.aspx?co_code=1926 Link: https://www.edelweiss.in/market/compfundcomp.aspx?co_code=1926 ,259,1052,165"
It contains info about all three and Everest Ind.
Visaka’s low margins, lower ROE and slower growth results in the lower valuation.
https://www.edelweiss.in/market/compfundcomp.aspx?co_code=1052
Hi Hitesh Bhai,
Here is a half-year comparison of Visaka and HIL which more relevant. There has been considerable margin improvements in Visaka figures leading to doubling of profits. The Q-2 presentation shows yarn division contribution to net profits as 58%!!! I think they got the figure wrong as revenue contribution of yarn is 20% and last year's NP contribution is some 10% only.
| Visaka | HIL | ||||||
| H-1 FY 12 | H-1 FY13 | Growth | H-1 FY 12 | H-1 FY13 | Growth | ||
| Sales | 3615 | 4777 | 32% | 4155 | 5476 | 32% | |
| EBITDA | 408 | 605 | 48% | 456 | 644 | 41% | |
| EBITDA Margin | 11% | 13% | 11% | 12% | |||
| NP | 179 | 393 | 120% | 324 | 432 | 33% | |
| NP Margin | 5% | 8% | 8% | 8% | |||
| EPS | 11.25 | 24.73 | 120% | 43 | 58 | 35% |
I think this year both cos will have similar ROCE and ROE and once we know the source of margin improvement by Visaka we can conclude if this can be sustained. Like you said the AR is very well presented with loads of information and analysis too.
Why do you think these companies are showing so much growth in sales?
Cheers
Vinod
Hi,
Got a reply from Visaka Industires (very fast response!) that the Net Profit contribution by Yarn division was indeed 58% in Q-2. That makes it around 5.2 Cr for Q-2 alone. The net profit from this division in Fy-12 full year was only 5 Cr.
So this com has its yarn division contributing during the asbestos off-season time and also pushing the margin higher.
This looks quite attractive to me with the com firing hard on both cylinders - the asbestos business and the yarn business. If it sustains the momentum the full year EPS will be close to 50. At CMP company is available at 2.4 times.
Cheers
Vinod
Discl: Starter position taken
Thanks for the picks hitesh. If one asked you to choose one out of 1,2,3 and 8 and one out of 4,5 and 6 in terms of potential for returns over 1 year, which ones would you choose?
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Hi Hitesh Bhai why would one prefer unichem over torrent?
Torrent has better growth visibility and is quoting at under 12 times next year
torrent also looks a good bet in pharma space. there seems to be some other income component in first half results. op profit is 268 crores and other income is 116 crores. Now I dont know what this other income is – whether it is related to pharma revenues or licensing income or something else. if this is not recurring in nature then corresponding results for next year will not look all that impressive.
In unichem I think chances of positive surprises are much higher though I confess I have not looked at torrent in too much detail and hence cant comment on it too much.