AMD Industries Ltd

AMD Inds. Is a packaging Co. catering mainly to the beverages industry. It manufactures plastic closures & PET performs. The beverages industry in PET segment is growing @ 15% per annum. In addition, there is a gradual shift from glass to plastic bottles for packaging of water, juices, edible oils etc., aiding this growth.

The Co. is also a significant player in Crown caps used as metallic closures for glass bottles. The beer market, growing @ 12% per annum is perhaps the largest user. However, due to a shift from glass to plastic bottles, this segment is facing head winds & going forward itâs contribution to the Co.âs top line is expected to decline steadily.

The Co. has been expanding capacity every year. The 7th line of Performs is being currently added to the existing capacity of 21,600 tons. This should be operational by March 2015 & will add 3500 tons to the capacity.

A comparison with the market leader Manjushee Technopack makes for an interesting reading. For the year 2013-14 Manjushree, is about 2.3 times in Sales, but has a much higher leverage of 1.7 as opposed to 0.81 for AMD. Further AMDâs debt is largely to fund its real estate investments. Manjushree pays a negligible dividend, while AMD has a div yield of about 3.3%. On any valuation parameter, Manjushree is hugely more expensive.

AMD has a lot of hidden value in terms of its investments in real estate through itâs subsidiary AMD Estates & Developers Ltd. It has entered into collaboration for developing its 3 acre property in Sector 114, Gurgaon into a commercial complex cum service apts. This property is located near the International airport. The project has already started giving returns & should be ready in the next 12-18 months. The Subsidiary has also entered into collaboration for developing another property owned by it in Rewari. These investments in real estate have the potential to generate decent returns as all future investments are to be made by the developers.

The promoters have been steadily increasing their stake in the Co. & currently hold about 66.75%. The book value as on March 2014 is Rs. 56 per share.

Coming to the negatives, the promoters have been rather liberal in paying themselves about 3 crores a year. Another negative could be the seasonal nature of the business, where the second & third quarters are pretty lack luster.

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Hii Rajeev,

Comparing with Manjushree… there are certain qualities of PET bottles which manjushree seems to have no competetion… especially in the high grade ones… also i have not yet heard any non Real estate company ever giving minority shareholders spoils out of real estate business… in fact RE business many times is a way to remove cash by some …

Hii Rajeev,

Comparing with Manjushree… there are certain qualities of PET bottles which manjushree seems to have no competetion… especially in the high grade ones… also i have not yet heard any non Real estate company ever giving minority shareholders spoils out of real estate business… in fact RE business many times is a way to remove cash by some …

Disc: I am invested in AMD Industries. Forgot to mention it while initializing the thread.

Hi Gaurav,

Manjushree is a much bigger player & you are probably correct about it being the only player in some segments. I was trying to bring out that AMD is also a player in the industry, & being some what unknown, is available at an attractive valuation relative to Manjushree. The sector itself seems to be catching the fancy of the market & AMD could be viewed independently.

About the mgt. sharing the spoils from real estate with the minority share holders, I guess we’ll have to wait n watch. I am in no position to give the mgt. a clean chit! For the year March 2014, the AMD has shown as income an amount of 3.8 Crs. as revenue sharing from the project. In fact, on a closer scrutiny of the accounts of the subsidiary AMD Estates & Dev. Ltd. (available on the Co. website), an amount of Rs. 9.23 crs. is due from the Sale proceeds to AMD from the subsidiary as of March 2014, which makes me believe that this year should see substantial inflows from the project, which could be used to retire debt. I guess a share buy back is also a possibility.

Some more info on AMD’s real estate investment in Gurgaon:

The Co.'s share in the project comes to about 1 lakh square ft. (Balance 2 lakh sq.ft. belong to the developer). This translates to about 80 to 100 crs. in terms of revenue. The project itself is more than 60% complete, but with the real estate market being somewhat slack at the moment, it could take up to 18 months before this money comes in. The entire market cap of AMD Inds. is about 50 crs. Revenues from the Rewari project are extra.

http://www.amdindustries.com/gurgaon.htm

The stock is trading at attractive valuation @24 with a PE of under 6 well tad below the manjushree valuations

AMD Inds. has announced expansion plans of setting up a PET Preform manufacturing facility in Bengal to cater to the growing needs of Coca-Cola. It plans to add about 10,000 to 11,000 tons of capacity, thereby increasing its overall capacity by about 50%. This will also help AMD service a much wider market. It was so far limited to North India. Meanwhile, plastic bottles continue to replace glass ones across sectors.

The Co. expects 80 to 100 Crs from its real estate operations, that it may be expecting this year, & hence this expansion is timely.

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Respected Rajeev Sir,

This quarter results have been good for the company,
Its been long that you have updated anything about this company…
Just wanted to know are you still tracking and invested in this company !
I am new to VP forum and in markets , your Guidance and Expertise will be much appreciated :slight_smile:

Regards,
Manish.

Hi Manish,

I had managed to exit the counter, but not without difficulty! The mgt. credibility is suspect. The three generations of the Gupta family have been pretty generous when it came to their own compensation!

Not tracking the story for the last few qtrs.,so would not be aware if the mgt. has turned over a new leaf! Caution!!!

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Respected Rajeev Sir,

Thanks for taking out time and replying me with your humble insights…
Your reply is enough for me to give it a Red Flag !!

Sir i have recently joined this blog which i curse myself should have joined much earlier ,
cause there are depths of knowledge shared and I sadly missed many great investing opportunities :frowning:

Sir like you had found out a great stock pick at its initial stage " Cupid Ltd ", which are the next new stocks you are working on, if you could share so that we at this forum study it too !
if you are comfortable and i believe this will not go against Forum laws…

Awaiting your Experienced Guidance,

Regards,
Manish.

@RajeevJ Company is posting strong results since last 2 quarters but I am not sure what is the reason. Are you still tracking this company?

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