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Aimco Pesticides - Growing & Debt-Free Agrochemicals

Aimco pesticides in an Agro chemicals company and is one of the major players in Insecticides, Pesticides, Herbicides and fungicides. Aimco was also the first company in india to produce Chlorpyrifos, Triclopyr and is a leader in its formulations. Aimco is founded by a well-known industry leader Pradeep Dave who has been a president of PMFAI, chairman of CAPMA etc. The company got into trouble because of debt and the entire last decade and earlier part of this decade was taken away by this. In FY13-14 Aimco went ahead with one time settlement with the banks and settled its obligations. After this whatever little debt was left with Aimco, it has now managed to pare it and is now completely debt free. I think the best thing to do to understand the industry and business is to go through the AR (no need for me to repeat everything here).

The financial ratios are also pointing towards a strong and sustained business growth.

In the last five years the revenues have grown from 49cr to 96cr and bottomline has gone up from a loss of 6.7 cr to profit of 4.25cr in FY16. Importantly, the Operating margins are increasing consistently for last
few years and even in this FY, it is much better than previous FY. I also want to highlight the aberration that we had in the last FY when the topline had significantly de-grown. Their main export market brazil, was severely affected because of crude crashing and causing significant damage to its economy and
currency. A few quarters earlier with crude stabilizing, the exports to Brazil normalized and its realization have also started going up. Aimco derives around half of its revenues from exports with Brazil being its biggest export market. It has completed an expansion this quarter and plans to commence another expansion in next two quarters.

Aimco is the only Debt free Agro-chemicals company (as far as i know). It is also now diversifying into speciality chemicals and through its subsidiary, moving into micro-nutrients and bio-nutrients which is even higher margin and
growth area. Aimco expects FY17 to be an important year for its subsidiary where the visibility has now built up and expects a 100% grown in its turnover (of its subsidiary) from FY18-20, starting with 3cr, in next FY.

One other significant thing that I want to highlight is the rise of Sameer and Ashit dave, where one is technically brilliant and the other is a very good capital allocator. Their business acumen also seems to be good.Most of the turnaround started in the last decade when these two assumed more significant roles within the company. Their role in OTS settlement negotiations was also the highlight of entire settlement episode.

Positives

  1. Dave family bought their stake back from Excel family and is now the sole owner of the company.
  2. Debt-free and looking to grow with a hawk eye on profits.
  3. The new breed of top management is very capable as i am told.
  4. The subsidiary is a dark horse.
  5. Specific focus on EPS accretion as mentioned in AR. Always a good sign.

Concerns

  1. Right now around half of exports are to brazil. should diversify for risk mitigation.
  2. Being a small company, its not very well covered and not much information is accessible.
  3. May not give scroaching growth as company intents to grow only profitably with commensurate increase in EPS.

Basically my investment thesis is simple here, the business is doing good and is getting better with every quarter. With increasing cash balance every year plus RoE and RoCE of around 75%, I think it deserves serious attention. Most importantly, the stock is roughly valued at 9-10 FY17 PE and is available at just 74cr market cap. Given the high valuations of the markets, I believe people will start looking for such value cum growth stocks with high margin of safety.

Disclosure- Invested & looking to add more

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why is there so much fluctuation in its CFO(-ve in 2016).

As regard “invested” I believe the price and time period with which each and every one is invested will please be disclosed.

on a thoughtful note, how would it be helpful? Although the forum rules asks people to just disclose whether they are invested or not.

look at the cash flow statements in the AR and one can understand. Also, as regards to cash flow, its important that one takes into consideration the context, and the context is “turnaround”.

The word “invested” from some senior fellow members is taken as investment advice by fellow members and results in blind buying at current price, without seeing the margin of safety and period of holding of other members.
Nowadays seeing lesser contribution from senior fellow members and new members are creating additional thread by copying content from all over the blogs and using the clean forum as Pump & Dump ground of their private advisory.
Strictly my views, please don’t feel offended.

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Agree with your viewpoint and feel we should implement this - at least for the new thread on a company.

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Discussion thread “category” changed to Stock Opportunities - from Q&A.

There was no Question in the initiating post. This is as good as a regular idea initiation, with a particular thesis.

@j2eeprofession_ requested to provide a proper write-up with brief SWOT analysis. The whole idea is about taking forward our work - with other member help. Looking at the strength of the idea from different angles. And certainly be willing to engage with audience queries. Be willing to take some responsbility.

Else it can be seen as using the VP Platform - only for the purpose of pushing one’s idea.
When can Q&A section be used ofr Idea Initiation - when query is captured in 1 or 2 paras - asking perhaps “why is this not a good idea” - and shouldn’t contain a definite view or slant, like it seems apparent here.

It is difficult for a single person to research on a stock (mostly applicable for Small caps) and come up with a stock specific story. It will be good if three-four people come together and after doing initial research for that sector and specific company come up with a proper writeup which can become a base for further research. This way other members can take that research further and go deeper to analyze.

ok, so should i change the content and make it small and ask in a way, why i find it interesting and invite counter views? this would be better for me as well, because writing that much was a project in itself for me. pls advice.

totally agree. I was hoping for some sane discussion on the company, but everyone has taken this thread for some moral policing. So many thread where i have participated, noone has been asked to tell the purchase price etc, but unfortunately here other than the company we are discussing everything.

Sorry if you have felt offended.But my reply was not specific to your post but a generic one. I was rather asking opinion from Admin.

on the contrary, i didnt feel offended by you at all and actually liked your point :slight_smile: … but i think the seniors have taken a liking to this post which i feel is sad.

I think it is bizarre to ask anyone about their entry price to a stock … A disclosure about their holding is good enough to understand their interest in the stock. I think these posts are meant for discussion and view points and it has nothing to do with the price some one has invested in the stock.

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@sagarbhadury @j2eeprofession_

Additional disclosures never hurt anybody; and its a usual norm if you are promoting/ advising/ reporting on a stock. “Invested” could be just one share to the entire portfolio; also entry price (or rather average holding price) helps understands holding levels of a person. This brings in more comfort/ clarity for person reading the post.

@manish962 and @adminph2, if possible we should have a proper disclosure norms like, average holding price, percentage of portfolio, and any activity in last 30 days or planned in next 30 days.

something like in one line: 10% of portfolio, at 70/ share. No activity in last 30 or planned in next 30.

I don’t see any reason, why anyone would have an issue sharing these basic details.

If i have understood this forum correctly for the last few years. It was never been a forum for promoting or advising on any stock ideas…Many senior forum members mentions this in particular to their posts as disclosures. If you think this is a forum for advising and promoting a particular stock… i guess you are wrong…

Has any one in these type of threads provided their entry price to any stock in VP till now?I guess not

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What do you guys want? A police state :laughing:
One could easily lie.
Next thing then one would demand would be proof.
So would demat screenshots do?
Go easy on the guy who did all this research and created a nice initial story.
If the way he constructed his story is not appropriate. I.e. It’s open ended, it can always be explained as to how to then add a question to get feedback.
And yep… disc-invested is the most that is needed.
If people jump in to buy when they see a senior comment with disc-invested then maybe we need to ask seniors to mention the date purchased and price etc. it’s not required of someone who no one will follow… is that not correct?

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Gents, relax. that was a suggestion; lets not fight. and yes, anyone can lie. I am well aware of that.

Also, what i asked was something i normally would do, example below on the time techno post i initiated (you can search the entire article).

Disclosure: I am invested in the stock at an average price point of INR50.6/ share (c.5% of my portfolio), invested over last two months.

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That’s a wonderful disclosure. The only issue is one can sell anytime. Do we do a disclosure at the time sold? Should it be on the day sold? This goes away from the spirit of conversation and discussing stocks. Of course a good disclosure is cool and one may even mention that amount invested if one feels like it, but these things cannot be required on a forum. One can disclose whatever they feel like :slight_smile:

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@narender, i think that’s not required. why should it matter to people if the thread initiator has bought the stock, at 1rs, 10rs or 100rs, that’s gross invasion of privacy. What the idea of the forum should be the see, whether the worth of the company is worth 100rs, 1000rs 10000rs or 1rs. That should be the jist. My two cents @adminph2 @manish962.

Guys, Can we now discuss the company ?

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