I am screening company to find long term investment. Currently looking into Agri-Tech (India) Limited to find whether it is a good opportunity for long term buying.
Company Name - Agri-Tech (India) Limited
• From Jan 2016 till date(14 Aug 2017) Price has moved from 7 to 60. An upside of 722.00%(NSE).
• Good profit for last two quarters.
2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1
-0.14 0.39 -0.18 12.93 16.18
• P/E is 1.35 whereas Industry P/E is around 48
• Very Less debt 0.01Cr
• Very bad profit for period before 2016 Q3
• In 2016 Q4 profit has come from sale of a Land
• For 2017 Q1 profit mainly has come from Other Income as per Quarterly Result posted on their website. Means this could also from sale of some asset.
Even though Stock has rallied 722% but still profits are mainly generated from sale of asset. I am not feeling comfortable with a long term investment.
Board members please share your thought/finding on this so that i can decide whether to invest on this or not.
@anupam2valuepickr as you rightly mentioned as a rule of thump its not advisable to invest in companies with high levels of “Other Income” since it is most likely to be unsustainable over a long period of time.
How ever not sticking always with rules of thumps and an always curious mind is required for an investor.
Keeping this in mind, we see from 2016 AR that this company is buying equity stake (along with their associate companies) in a firm called “paithan mega food park PVT limited” (source of this fund is the money from “Other Income”). You can get more details on this from http://paithanmegafoodpark.com
However,will the above be purchase be beneficial for the parent company - only time can tell. So its something you should take note on but not good enough to action up on.
Further, we see that company has been a lot of short term loans have been given to “Associate companies” (which is probably a bad thing,but can’t verify this - since no more details are available on this)
Since investing is a process of probabilistic calls rather than absolute YES or NO statement - My 2 cents is to stay away from investing in the company for the time being,although it looks substantially cheap on PE terms & instead keep tracking it so that things are more clear for you in the future.
The company holds ~10% shares of Nath Bio-Genes valued at ~50 crore and owns a 500 acre land bank in Aurangabad. It also holds 66% stake in Paithan Mega Food Park Pvt Ltd the potential of which is still not known. Taking only Nath Bio-Genes earnings, the subsidiary should contribute 1.5-2 Cr when consolidated with Agri Tech. However I don’t see consolidated numbers anywhere. . Based on the above the company looks drastically undervalued. Can someone through light on the above or the group holding structure between these firms. Thanks!
It seems that finally Paithan Mega Food Park , progress is happening in the food park development , based on the information available in their web site , but to what extent and when it will benefit Agri-Tech needs to be figured out. One might need to buy and hold for few years to benefit.