ValuePickr Forum

My top 5 Picks

My Portfolio

Stock % of total Holding Buying Price

Modison 12 % 31 Rs.

Graphite India 12% 74 Rs.

Precision Wires 64% 67 Rs.

Ador Welding 12% 123 Rs.

I have accumulated the have stocks in the past one and half year…

I track Precision wires very closely as we are in similar business line… and understand their balance sheet. Fantastic Management … very good dividend payer.

Currently my portfolio is giving 30 % absolute return (Including Dividends)

Modison is also very strong fundamentally and has very sound management.

Graphite India and Ador welding , I understand the sectors and feel they have huge growth potential ,… but no idea on management.

Would like Seniors views. as I have been studying there stocks for 3 years and am very sure they are good growth stories…i feel all their prices have not factored in stable growth potential.

Please advice

2 Likes

Hi,

Due to better operating and return ratios, I prefer Ador Fontech over Ador Welding.

What are the prospects for scalability on Precision Wires and Modison?

Precision wires : Is stable growth company, They are not very aggressive… My reading of the sector and the company is …last two years climate has been slow so they have not expanded…They are 100% market leaders in their segment… evident from there ratios…Further they are producing higher end cables (more value addition) in the last few years… This knowledge come from being in a similar sector… they are definitely ahead of the curve… all monies made are reinvested in the company … they are not diversifying into real estate etc etc… like most other companies facing slow down… that makes me comfortable … that they are focused on creating better value within their business

Modison : again niche producer … high quality products for the electrical industry … slow down in the power sector has affected both these companies … Modison faces competition mainly from Chinese producers but the Chinese quality does not match up to them… I have heard this from multiple of their customers.They create custom made products which really helps the company…

To answer your question on scalability… i do not think either will be doubling their capacity in the near future… but should see stable 15-20 % growth year on year.

has anyone else analyzed any of these companies … would like to have a fresh perspective

Hi ,

I have exited Ador welding @ 74% return over a year.

  • poor profits in 13-14
  • Unsure of future prospects

And put the funds in additional Precision wires.

I believe its a sound investment strategy to book profits at regular intervals, based on macro factors and setting a threshold for profit for oneself (say @ xx% profit, I am getting out). It is my hunch that the market will correct after the Budget because in reality, the macro factors that existed during the previous regime have not changed. This will take a long time to correct.

Now I may be totally wrong, because the Indian stock market is more like a casino than a stock market.

You may want to consider booking profits.

I agree, 60-70% price rises in 6-8 months, without change in fundamentals is absurd (In fact in Ador’s case deteriorating profits). I also believe corrections are due, I do believe in the India Growth story but its definitely not happening overnight.

Dear aditi

Stocks move from a period of underownership to overownership. What we have seen in last few months is only a slight change in ownership. Markets discount everything what is avb on media …inflation macros fed fomc iraq etc …its the surprise which moves them. And in hindsight everything seems explained .A bull market will always start on skepticism ( like we all are ryt now) will mature on good news coming out and will blow out on euphoria.we ll know of euphoria when every tom d…and harry will be suggesting stocks for quick money. People in india are stilll fearful of owning stocks. We need to wait for the frenzy.

The above talk is completely independent of fundamental stock picking. A good scalable business with honest management should be brought a good price and should be hold on to irrespective of market cycles. The eight wonder of this world is power of compounding.

So buy right and sit tight .:slight_smile:

Regards

Divyansh

Graphite India has very compelling numbers : A value Stock

Name Sales Turnover FY 14 Net Profit FY 14 NET PROFIT MARGIN FY 14 Total Assets P/E D/E ROCE 5 YEAR AVERAGE
CURRENT FY 13
Graphite India 1,768.08 170.92 9.67 2,212.61 12.47 0.35 17.3
HEG 1,466.81 86.62 5.91 2,078.42 12.70 1.41 15.2
Esab India 435.55 33.12 7.60 267.27 32.79
Ador Welding 368.92 4.23 1.15 186.03 69.77 0.01 18.47

Bomi,

I am surprised by your advice. It makes sense to book profit if the stock is overvalued or fundamentals deteriorated. But booking profit just because it is gone up by 50-70%? In mid, small and micro stock universe when the gap between value and price is closed you often see huge run up. Some times in multiples. Recent examples that I can share from my portfolio- SRF, Ajanta Pharma, Atul auto , Aurobindo etc. Typically you see power law in your portfolio returns. Few stocks give you most returns. If you happen to sell those early because they have gone up by 50-70% then you may lose out on returns in the long run. I understand traders frequently say you can’t go broke by taking profit. It makes lot of sense there because chances of going broke are very high in trading as you are not investing but speculating and it makes sense to take the money and run.

My two cents.

very true.

very true.

In lynch’s words it is like plucking the flowers and watering the weeds.

Girish, my view is based on the belief that the markets will correct after the budget. Presently, almost every scrip is trading near its 52 week high or lifetime high. Time to take money off the table and return later.

I do not disagree with what you have stated. We are both entitled to our view.

Well when i said , it has appreciated 70 % and I am looking to exit,

I didn’t clearly mention, its fundamentals have deteriorated considerably also.

It made large losses in a subsidiary, which has impacted its cash flows. In my opinion it will take company 2 odd years to recover.

I put additional money in Precision wires @ 100 Rs/ share.

Its giving me a dividend yield of 14% (Dividend of 10 Rs. in the previous year)

My average purchase price with new stock is 70 Rs.

And at todays Price 124 Rs/share it has given me better appreciation than ador welding.

Aditi

If possible can you give a write up on what precision wires is about and their competitive advantage

Aditi,

I like graphite india. A solid company in a very cyclical slow growing industry. They are mostly depended on Steel industry growth.

They have moat which most people do not realize inthat the industry is slow growing so adding new capacity is not much interest to new players. So this way the company has good down side protection. Graphite India management understands this and manages downturn well.

But to make money in this company, in my opinion is to catch the cycle of steel industry growth.

Abhijeet S

Hi Venkata

_PRECISION WIRES INDIA LIMITED _

__

  • PWIL, incorporated in 1989, manufactures copper winding wires, Continuously Transposed Conductors (CTC) and Paper Insulated Copper Conductors (PICC) which are used in manufacturing of rotating as well as static electrical equipment.

  • Installed capacity of 34,140 metric tonne per annum.

  • Demand of PWILâs products is linked to the investment scenario in power sector, transformers, automotive and consumer durables.

  • Established track record in manufacturing copper winding wire

  • Established and repute clientele

  • Strong distribution network.

  • Low profitability due to limited value addition and its presence in a competitive industry.

MARKET CAP (Rs Cr): 148.01 Crore

P/E: 10.25

BOOK VALUE (Rs): 174.86

INDUSTRY P/E: 27.46

EPS (TTM): 12.49

P/C: 5.64

PRICE/BOOK: 0.73

FACE VALUE (Rs): 10.00

Their growth has been constraint last 2-3 years, I believe the power sector should pick up now and they are poised for good growth then.

Very sound management, Debt Free company, with good dividend policy.

They are a cut above their competitors due to established position in the industry, due to margins not being very great very few people entering this industry. Takes a large capex to set up new facility.

I do not follow Graphite India but took a quick glance at the financials after this thread. Immediately observed that ROE is low. It is barely around required return on equity for this firm in my opinion. Yes it was a value buy below Book value (< 84) with good dividend. I agree. Now it is 1.36 times BV. It looks overvalued for current profitability. I assume people presume profitability on equity capital will improve going forward. But 10 year average ROE is only 17%. So we are expecting the future that is lot different than the past decade.

Again these thoughts are only based on a quick glance.

Massive reduction in debt will be a big plus:

GRAPHITE INDIA
2014 2013
Secured Debt 357 500
Unsecured Debt 106 243
Total Debt 464 743
Cash and equivalents 410 276
Net Debt 54 467
Net Worth 1759 1712
D/E
0.03x 0.27x
Dividend per share 3.5 3.5

I am accumulating more Modison on declines.

Rgds

Aditi