nobody is saying that their good work is not appreciated. i was just giving views of day specific movement.
Any recent management interview/commentary/anlayst meet notes on the current market conditions or the q1 results? I can see that the AR is not yet out.
The AR is out. Link below:
Surprisingly, there is no mention of the slowdown in the global market (which they mentioned during the results last year) in the AR.
Also, it seems that they are still continuing with the trading business (low margin). It will be really helpful if someone can please confirm.
**After reading the Annual Report 2016, found following red flags:**--
• Rs. 2.79 crs taken away by the Promoters by way of Remuneration & commission ( 1.89 crs ) and Bank guarantee commission ( 0.90 crs) against Net Profit of rs. 14.73 crs.( almost 19% of net profit), which is very high considering the size of the company.
• Debt outstanding for a period exceeding six months from the
date they are due for payment increased to 6.57 crs. ( previous year 1.91 crs.)
• Manufacturing expenses includes anti-dumping duty of Rs. 1.91 crs.( cause not known)
Their remuneration policy will hurt company more in coming times as both Maneks have increased their salary to double form previous year and commission to whopping 5% from 2%. This will damage the bottomline for a longway to come. What can we interpret from here? They are the major shareholder of the company and getting rewarded for their work as per the dividend policy, which is very liberal. I think we should look at this company with some doubts now onwards.
i hope and expect abhijitchoksi to put some light on this topic and participate in healthy discussion.
Discloser: invested from lower level but divested recently due to above mentioned doubts.
Taking a step back from recent demands, if we look at the bigger picture,
In 2005 they had about 1.5% market share, now they have around 10% market share, so I don’t expect the sales to grow at same rate, however I believe the bottomline can be maintained it being the only synthetic dye manufacturer in a low cost country.
Growing Market share to 20% by 2020 is achievable, if they can keep margin to 20% and assuming debt remains same, ROCE comes around 24% and the leverage they have from debt ROE comes around 33% which means it can still be 3-bagger by 2020, if there is no futher PE expansition or conraction.I dont believe PE can expand any further last 4 years it has alrady expanded from 4x-5x to 18x-20x now. However if there is slight PE contaction to 10x-12x say it will still be a 2-bagger by 2020.
Disc: holding small quantity
One more thing i want to share that as per the company announcement sometimes in last Financial Year company has stopped trading but in the latest AR16 they have mentioned high trading revenue then last year and one can also see that the manufacturing has gone down in terms of revenue.
18 Revenue from Operations
Revenue from Manufacturing Activities of food colors FY15-16 FY14-15 (In Lacs)
Export Sales 10,564.03 11,327.61
Local Sales 469.77 669.52
Less: Excise Duty 418.36 394.56
(A) 10,615.44 11,602.57
Revenue from Trading Activities of chemicals
Local Sales 8,521.55 7,363.06
Less: Excise Duty 1,095.26 665.42
(B) 7,426.29 6,697.64
(A + B) 18,041.73 18,300.21
This shows that the company is not on right path to achieve what ever they are targeting, may be due to bad economic of world.
But it is cause of concern for Vidhi investor and it is to be answered by the management. One thing is positive that the receivable have come down.
Let see what happens in future.
I may be wrong in interpretation but keen to learn my mistake. Please post if there is something wrong.
Disc: Have some small quatity.
Sharp increase in CMP yesterday (8%). Do we have any news on Vidhi or it is sheer Operator’s strategy to jack it up?
I attended Vidhi AGM and here are the few points discussed during AGM
- There was volume growth of 7% in sales in FY 16. They sold around 2450 Tons in FY 16. However, topline is lower due to decrease in realizations due to its linkage with oil
- Major RM for the company are crude derivatives such as napthelene and benzene
- Company has decided to build its presence in domestic food color market- which is around 2500 tons. They have hired a marketing professional having experience in the industry to spearhead the domestic marketing efforts. They have started operationalizing this initiative just one month back
- They see enough opportunities in the synthetic color market and have established core competence in the segment. Hence, in medium term, they want to focus on the same and are not considering entering into natural food color market
- According to mgmt, Both Sensient and Emerald (Top 2 players in market) are losing market share while Roha and Vidhi are gaining market share
- Trading actvities will continue to remain - as management sees it as complimentary due to two reasons
- it helps them procure RM in larger quantity- a part of which is utilized for manufacturing while the remaining quantity is traded
- It provides them as hedge against the price fluctuations in RM - as they may divert the trading volume for manufacturing if the price of the RM increases sharply
- Management claimed the utilization of 80%- on capacity of 4200 tons- though numbers don’t add up to 80% and suggest lower capacity utilization. Management however mentioned that a part of new capacity addition is under stablization
- They have adopted a distributor led marketing model- they appoint one or two distributor in each country and sell it to distributor which in turn will serve the end users
- There was impact on business in FY 16 due to non availability of foreign exchange/sharp forex movement - especially in many Latin American countries. A large MNC food company is ready with order in Venezuela, however is not able to place order due to non availability of Forex
- GST will positively impact company- especially for domestic business- as the competitive intensity from
unorganized player will reduce
- Import from China is not a threat at all. In fact, 4 companies (Sensient, Emerald, Vidhi, Roha) command most of the market share and China is a lucrative market for export
- Top 10 customers- are located mostly in developed markets
- When we raised the point about insufficient information available about the business and need to improve communication- management promised that they will come out with detailed investment communication periodically- highlighting key developments/details of the business
My personal take from AGM
- they seem to be operating in oligopoly market with decent prospect for growth. However, this business by no way will have pricing power.
- Growth will be largely driven by taking away market share- and not due to inherent growth in the industry
- Crude oil and Forex remain key variable in the business
- I felt that the organization preparedness to take the business to next level of growth was missing - especially in terms of coherent marketing/business development initiative
- Lastly, I was not able to buy the rationale for continuing the low margin trading business and tie up the capital earning mediocre return when there seem to be good prospect for growth in mainstream business.
If we think from the owners perspective there is no reason from his side to close the trading business. The business is almost completely funded by banks through WC limits (WC usually can be 70-80% of inventory+ debtors). This leverage ensures that even though the business is low margin the returns on promoter equity is quite decent.
The quarter numbers often miss this aspect as they represent the debt outstanding at that point in time which can be misleading.
The latest results seem quite decent.
Can anybody throw more light on the reasons for the good quarter & is this sustainable in the coming quarters ?
Has management given more clarity on the same ?
any idea what’s cooking here. Technically stock has confirmed its breakout of its medium term consolidation and has started its long term upmove again. The stock is looking too strong to ignore for me. Fundamentally, anything that anyone is aware of, please share. I was hoping for something to come from news angle.
What you have taken into consideration to calculate Manufacturing cost?
did anyone attend the AGM?