IDBI @77.50
Indo Rama Synthetics (India) Ltd. @22.03
PTC @ 88.04
TIIL@ 195.42
Ballarpur Industries Ltd. @ 17.12
research is in progress will share soon.
Please share your opinion also.
Discm: Invested
Dear Inderjeet,
I come from a textiles background and I will share the same comments that I did for Zenith fiber. Fibers are hugely commodity-like in nature. I have had a bit of experience purchasing Polyester fibers and I can say with certainty that these companies can neither control raw material price nor do they have any control over selling prices. Further, there has recently been an import duty on PTA in India which is only going to make them more uncompetitive. (Reliance has a PTA plant of its own)
Abhishek
PTC:
- The revenues of PTC India surged by 33% YoY in Q1FY2015, backed by a 22% growth in the volume and a 9% growth in the realisation. The blended margin was around 6.6 paise/unit of power traded. Apart from the benefit of the surge in volume, lower other expenses helped the operating profit to grow by 69% and resulted in a 48% jump in the net profit to Rs43.4 crore despite a higher effective tax rate in the quarter.
- During the post-results conference call, the management of PTC India reiterated its confidence of touching trading volume of 40BU for FY2015 (our estimate was about 39.3BU). Going forward, it sees opportunities to expand the volume in cross-border trades (in Bangladesh and Bhutan) while domestically the retail (direct to business) segment has huge growth potential. The management sees volume potential of 10BU alone from the direct to business segment over the next three to four years. Further, as per schedule around 8,000MW of capacities are expected to come on stream in the next three years and the company has long-term contracts (with higher margins) to sell power produced from these plants.
- The improving outlook in volume and earnings growth over the next couple of years and the receding concerns related to receivables (delayed payments) from the SEBs are the key re-rating factors for the stock. Further, its financial subsidiary, PTC India Financial Services (PFS), is also performing well. PFS expects to expand its loan book to about Rs8,000 crore in the next 12-15 months from Rs5,000 crore in Q1FY2015. Moreover, with gross NPA of 0.09% and nil net NPA, the asset quality of PFS remains among the best in the system. In view of this, we retain our Buy recommendation on PTC India with a price target of Rs107 (SOTP based). PTC India is among our preferred picks to play the policy reforms in the power sector.
TIIL:
Global leader in drum closure space; remains a cash cow: Technocraft Industries India Ltd (TIIL; a diversified player with interests in drum closures, scaffoldings, yarn and garments) is the second largest player globally in the drum closure manufacturing space with an estimated market share of 35%. Thanks to its dominant presence in the existing markets and efforts to penetrate newer markets, the company has been able to report a steady growth in its high-margin cash cow business of drum closures. Drum closures contributed almost 50% of its operating profit in the last fiscal. The revenues from the business are set to grow at 8-10% annually with an OPM of close to 35%.
- Scaffolding & formwork--the growth driver: While the drum closure business is the cash cow, the scaffolding & formwork (S&F) business, has emerged as the key growth driver for the company. Till now, the company was focused on the overseas markets for the S&F business and was catering to the needs of the oil & gas and other corporate clients globally. However, TIIL has also started witnessing a growing demand for S&F among the domestic users especially the infrastructure sector. Thus, the business segment is likely to grow at 22-25% annually for the next couple of years.
- Potential value unlocking to lead to stronger financials: The financial health of TIIL is steadily improving; its earnings are on a strong growth trajectory and cash generation has stepped up of late. This has helped it to achieve a leaner balance sheet and very healthy returns on equity. Going ahead, we expect value unlocking from the hive-off of its low value-added and non-core businesses of yarn manufacturing and garments (23% of the capital is deployed in these low-margin, low-return businesses). The move would have a favourable impact on the return ratios and is likely to result in the re-rating of the valuation multiple of the stock.
- Attractive valuation; a value Buy: At the current market price, the stock is attractively trading at 5x FY2016E earnings and 2x FY2016E EBITDA which is quite attractive for a debt-free company with healthy cash flow and potential to improve return ratios through the hive-off of the non-core businesses. Thus, it is an attractive value pick for patient investors (TIIL is not a growth story). We initiate coverage on TIIL with a Buy recommendation and price target of Rs270.
- Key risk: As reported in the first quarter, the exceptionally robust margin seen in the yarn business in FY2014 is not sustainable and lower profitability of the yarn business would drag the overall growth in the earnings in FY2015. Thus, the stock might not get re-rated to the extent expected if the management does not hive off the yarn business and increase focus on the other two major businesses of drum closures and S&Fs.
IDBI:
Seems I have taken wrong decision to buy not good results may be this is due to I am new and learning stock market.
looking others view on IDBI.
IDBI looks very cheap but the kind of lending they seem to have done in the past doesnotgive confidence. The high NPAs and low ROE ( sub 12% in last 5 yrs) seems they have been destroying value over years. Management is not too exciting. The valuation of 0.5 P/BV is interesting but who has the confidence in the Book value. May be 1.0x ABV that looks high or fully valued. There are better opportunities available in the banking space.
Acquisition strategy. Kotak Mahindra Bank in fray for stake in IDBI Bank
If that happens, IDBI swayambar would have been a hit
