I generally invest in those companies which come under following parameters:–
ROE should be more than 20%
ROA should be more than 20%
Company’s Top line and Bottom line is growing at more than 20% CAGR in last three years.
Promoter’s holding is more than 50% or Promoter and institutional investor collectively hold more than 75%.
Debt-equity ratio is less than one.
One year Forward PE to PEG ratio is less than one.
My investment thesis in MBL is:–
As on 31.03.2015 there was shareholders’ fund of Rs. 191 crs in the B/S and company earns net profit of rs. 50.56 crs for FY 2016. So, my calculation of ROE is 26.47%.
Similarly there was Fixed Assets of Rs. 216 crs in the B/S AS ON 31.03.2015. ROA for the year 2015-16 comes 23.41%( 50.56*100/216).
MBL has been charging accelerated depreciation on Fixed Assets on a triple shift basis as per the accounting policy adopted by the company. As per the stated policy the depreciation charge will be higher in the first few years as the WDV is high for fixed assets. Going forward the depreciation charge will cool down and result in a higher PAT. So, I have chosen to value the company using Cash EPS rather than the traditional EPS method.
Because of seasonality of Business majority of Sales and PAT comes from Q1 and Q4 indicated below in green color. We can see that with the increase in sales, Q2 and Q3 results started contributing to the Bottom Line indicated in red color. All figures in crs except OPM
After launching FRUITS UP and penetration into urban areas sales and PAT figures of Q2 and Q3 will improve significantly. So, in coming days all four qtrs. should show improved sales figure and PAT and consequently bring down the PE Ratio.
Differentiated strategy of being a tier II and tier III player and having a strong rural presence viz a viz its larger competitors Maaza and Slice which are more urban centric . Further MBL derives 40% of revenues from below 200ml size of SKUs, an area where competition like Maaza and Slice is not present. I think this is good strategy because if you are not able to beat competitor in Football, play Cricket match with them and MBL is doing same thing here.
Fruits Up has been a huge success for Manpasand clocking a turnover of Rs. 110 cr (FY16) in just 2 years post launch, that too without an aggressive marketing campaign. Fruits up being a premium category drink was launched in the urban centres and will gradually move to rural markets.
I have not done any scuttlebutt in terms of the product tastes and perceptions, as it is not available in my home town Ranchi.
This is a slight off take from the current topic and please feel free to delete if inappropriate but I think indirectly this could provide some insight-
This article is about how soft drink manufacturers in South Africa are facing a tough time due to increase tax on “sugar sweetened beverages”
Kerela has already introduced fat tax on junk food, and in this budget FM increased the taxes on aerated drink to 21% as sin tax. with GST coming in the future sin tax may increase and hopefully it could help players like MB who are focusing on healthier options such as Coco Sip. However, probably long long way to go
Yes, I think currently aerated beverages are proposed to be taxed as sin tax, expected to be at 40%. This might be untrue as well, please correct me if I am wrong. MANB should benefit since they are fruit based beverages - contains fruit pulp.
Lot of doubts raised by this report. But on the flip side, the company has Deloitte as statutory auditor and Sharp & Tannan as internal auditor. Both these are quite reputed audit firms. Something to think about.
Not saying that there is something cooking here, but we should be not be comforted by a company having ‘reputed’ auditors. Even Satyam had PwC before hell broke out.
Motilal Oswal has come out with point to point rebuttal of the blog… however their view may be biased as Motilal MF are one of the largest holders of the same
auditor audits the hisaab kitaab that is provided by the management. I
don’t think the mandate of the official auditors is to conduct forensic
audits of these companies.
Dont have full thing but this is some concise version … FACTS OF MANPASAND
Total Topline INR 5.5 Bn
Mango Drink INR 4.4 Bn
Other Fruit Based INR 1.1 Bn
Auditors are Deloitte for the last 5 years
Total Fruit Juice Market size estimate varies between INR 63 Bn to INR 100 Bn. If we take the midpoint, we get INR 80 Bn and hence the market share of Manpasand is 7% which is in the realms of possibility. One of the key reasons of the same has been the small pack size which is a USP of the brand. Also, importantly due to the small pack size, the acceptability in railway channel is very high. ~20% of the sales is through this channel.
The crux of the report is comparison with Parle Agro topline of INR 12.7 Bn. This itself is open to debate. We believe this number is much higher than as described by the site in reference to the below said sources
** If you would go to Parle Agro website, they have mentioned themselves as a INR 25 Bn topline with 81% as fruit juice share implying that topline is INR 20.3 Bn - http://www.parleagro.com/business.html
** The other source also points towards INR 15 Bn topline of Frooti in FY14 itself! http://www.business-standard.com/article/management/frooti-grows-up-with-a-new-look-115031500742_1.html [Scroll Down for FROOTI FACTS]
** We have also learnt that Parle Agro works on a Franchisee model and their sales may not get FULLY booked in their company itself resulting in the difference between BRAND SALES and COMPANY SALES. An example of a franchisee - http://siddhivinayakgroup.com/agro/orangecity_beverages.htm
According to the blog post, total market size includes retailer and distributor margins, which can be very high. So the actual market size could be less than 50% of 8000 crs, in which case Manpasand’s share would be more than 15%.
“Exception proves the rule”. Since promoters have choice to hire auditors, generally they do not go for reputed auditors as these auditors are "less flexible " and have their own reputation to protect. This is just one data point along with many others to define promoter integrity.
It is quite a shocker that motilal also came out with the reply to that blog. When you are confident, why you need to reply each tom, dick and harry in the market ?
MO has not come out with a company update as such officially. It is just a sales note that was circulated to clients, which is necessary since institutional clients might have taken positions based on MO’s servicing and initiating. It is not released officially to public at large, unlike other initiating coverages, result updates and company updates.
I think except big metro clients based in smaller cities are serviced by associates of big 4 audit firms. Their standards are not as good as the parent firm. One can go through the link below.
this is very unique problem and can’t judge based on salary levels alone. Next step is to understand their lifestyle and sources of other way to sustain if they love spending.They have average set of RoCE and the clue might lie there. If they are crooks, siphoning seems to be happening from aggressive capex which is typical of Indian promoters. We must note that aggressive capex is being facilitated by massive fund raising. I am not implying that they are crooks rather I find them very humble people. The blog has certainly created doubts and I have little faith in brokerage reports. Even top analysts don’t read annual reports of all companies they cover and parrot what managements have to say. If the charges stick, the cut will be deep here as almost all good investor names here already.
Disc: I don’t own it myself but have small allocation in managed accounts.
@raajjai
This link is same as in Message 25. I would request all not to post a link without even reading thread and request Raajai to delete this post to avoid repetition.
