Top Mispriced Bets for next 6-9 months. 50% upsides?

Hi Ayush & Donald,

Agree on allbut not too confident onOriental. With purchase of Schrader Duncan, net profits are gonna drop in near term, debt is gonna increase (organic capex debt,inorganic capex debt& debt on balance sheet ofSchrader Duncan).

Makesme worried… Better look for AR beforebuying.

Thanks,

Jatin

quiteoptimisticon

Hi Ananth,

Who are its close competitors??? At what PE, PBare they available?

Nice thread containing several multibaggers.whats the view on solar industries,hikal,Astra microwave and saraswati industrial

Wonderful thread. This shows the power of serious value investors. The accuracy of this thread is faboulous with Indag, Wockhart, Atul Auto, shanti gears, IFB Agro and many more growing b/w 50~100% in such depressed market conditions.

I feel Saraswati industries is similar kind of company, with high operational cash flows and lots of cash on books, it can be a great investment bet from here on.

1 Like

Friend how do you see IGARSI MOTORS as short term picks.

Last twoquartersresults looks good.

Mr Nohira is adding stock regularly from market.

Only question mark is company is in now hands of HBL Grp Chennai and Igarsi Motrs holds 12 % shares in same JV.

Good point is BOSCH is having JV in R & D of Micro Motors for Automotive sectors.

Stock looks good to add at 70 and if everything goes well may see decent growth in business as well as shareholders wealth.

Friend how do you see IGARSI MOTORS as short term picks.

Last twoquartersresults looks good.

Mr Nohira is adding stock regularly from market.

Only question mark is company is in now hands of HBL Grp Chennai and Igarsi Motrs holds 12 % shares in same JV.

Good point is BOSCH is having JV in R & D of Micro Motors for Automotive sectors.

Stock looks good to add at 70 and if everything goes well may see decent growth in business as well as shareholders wealth.

Hi Donald,

Excellent topic to participate in.The stock which i think will rerate is WIMPLAST.

Wimplast manufactures and sells plasticextrusionarticles namely moulded furniture and Bubble guard sheets.It’s having debt free balance sheet and posted 168 cr sales and 18 cr NP.Eps is 30 and announced rs 4.5 dividend.So it’s trading at 6* PE.

Hi,

We need to seriously re look this again. WIMPLAST actually gave net profitin the range of 25-30 percent for the last few qtrs. And the recent quater sales and net profit are up by 52%.

I have been watching this stock by more than 2 years. I was always concerned by their sales and net profit growth. But i guess they have changed their trajectory with the latest quater results.

After the results stock went from 250 to 300. But currently trading back at 265. Looking at PE terms it is still at ~6 levels.

I was checking the figures, in today date the best i found of is Mayur. And the second i found is of WIMPLAST. looking at all the space there are hardly any companies with decent fundamentals.

Thanks Om.

-Donald

WIMPLAST. plasticextrusionarticles profitin

**Comments based on quick check of numbers:
**

**Positives:
**

Wim Plast might look interesting - at current market cap of 161 crores, the stock is trading at 0.7x P/S (net debt negligible so 0.7x EV/S as well), 6.4x P/E, 3.9x EV/EBITDA. **The company is debt free and has grown its topline at a CAGR of ~30% from FY2008-12. During the same period, PAT margin has increased from 4.4% in FY2008 to 11.3% in FY2012. As such, RoE and RoCE has improved to well above 20% and 30% respectively in FY2012
**

**Negatives:
**

*** Look at the figures for free cash flow to the firm - in the past three years they have averaged a meagre 0.5% as % of sales, with fcff being (1)% of sales in FY2011. FY2009 comparatively was a good year when the company generated about 11% of free cash and the price chart clearly shows that the stock reacted quite well in 2009. From ~48/share at the start of 2009, it closed the year well over 160/share. The market does pay for free cash, no? :slight_smile: However, how would things look like in the future? Would it continue to generate only 1% of sales as free cash or would it not generate free cash at all or would it generate 10-15% free cash in one or two years and then get back to 1-2% free cash generation? I don’t know if there is a visibility around it.
**

*** Working capital as % of sales have averaged at about 28%, which is not comforting, but at the same time it hasn’t gone up abruptly either. To give credit to the management team, they were able to bring down this ratio from ~31% in FY2011 to ~24% in FY2012**

*** It seems like the company has been investing capital to increase capacity etc. and maybe they are putting in efforts regarding brand building as well. But at the end of the day, I think the market is perceiving them as a company that just deals with plastics, a la commodity play. And I will do the same. There is a misconception that this is a brand play - while it is not! Brands generate free cash, this one doesn’t. I am not really sure if in a highly competitive market they have an edge or not
**

*** On the face of it, dividend per share has doubled from 3/share in FY2008 to 6/share in FY2012. Great, no? No. During the same time, EPS has increased from 5.1 in FY2008 to 37.9 in FY2012. An increase of more than 7 times! The payout has been ~15% in the past 3 years. One might argue that the payout can increase if free cash goes up as well but then it is relying too much on hope**

_"The company has had an erratic performance in the past. Most of the analysis you will find on the web and in broker reports talks about the great performance since 2007). These reports breathlessly report the doubling of the sales in the last 3 years and a 60% per annum growth in profits during the same time. This is a perfectly idiotic way of analyzing a company

One has to look at a much longer time period to analyze the performance of the company. I typically look at the last 10 years of performance (nothing sacred about that). A long term performance shows how the company has done during past slowdowns and gives a much better idea of the sustainability of the current performance.

The 10 year performance of WIM plast shows a very different view. The topline -sales dropped from 80 odd crores in 2000 to around 56 Crs by 2006). The profit also dropped during this period from 11 crs to around 2 Crs in the same period. I have not been able to find why the topline dropped over the span of 6 years. Most likely it looks like a combination of increasing competition in moulded furniture and slowing demand."_

*** The promoters are related to Sanjay Dangi case. Read here Link: http://watchoutinvestors.com/press_release/sebi/sanjaydangi.pdf?cntrl_no=BRK5077 :
**

**“Mr. Pankaj Rathod and Mr. Pradeep Rathod, belonging to Ackruti group, are
shareholders in Pacific Corporate Services Limited and are directors in Cello Group of Companies, to whom the promoters of Ackruti have pledged their shares.”
**

“The entities belonging to Ackruti Group viz. Khandesh Builders Limited , Sureshkumar Bikamchand Jain, Naresh Jayantilal Shah, Sangeeta P Rathod, Pankaj G Rathod, Pradeep G Rathod and Cello Finance Corporation, are prima-facie connected with the promoters/company (as described in Annexure B) by way of off-market transfers and have traded in the scrip of Ackruti City Ltd.”

The most this stock might do is continue to grow with the bottomline and trade at cheap valuations owing to the reasons mentioned above and maybe others as well. I will stay away from this one.

twoquartersresults

The company which is in the field of exporting dc motors abroad is expanding majorly with increased usage of these motors in all high end cars. With Rs new normal at 50 being the new normal all exports co thanks to low labour costs in India and RM as well the future is bright. But the lates results were not well specially on q on q basis.any analysis of the same.

The promoter HBL group too needs to be examined but first gen Mr Prasad appears to be a competent IITian technocrat.

Hi rohit,

**
**

Really enjoyed your comprehensive analysis.I will try to share my views for some of your arguments.

**
**

)- First one is reg Comments on Promoters.They are cash rich and holding 75 per stake in Wimplast ( Infact they rise their stake of almost 5 per in last year alone ). We can observe their capabilities by taking ex as cello pens company.At the time of 90’s Reynolds was the leader.They bring new technologies and made Cello as leader.Few years back they sold their stake to MNC BIC for few hundred crores( 800 cr fo just 40 per stake).In the entire Cello group only wimplast is publicly listed.So with 75 per stake in company and being cash rich i don’t expect they do any stupid things to destroy their wealth.No pledging , no subsidiaries , no debt ,no cross holdings, good dividends ,paying full taxes what else do we want to judge them.

**
**

-Here my betting is on management capabilities to bring new technologies like bubble guard sheets.I don’t look this company as just plastic chairs and furniture moulding company.My argument is that in this whole sector Why Wimplast is enjoying highest opm’s of almost 18-19 per , it is due to bubble guard sheets.

**
**

-Bubble guard sheets technology is latest in plastics and wimplast is the only company manufacturing in our country (Some claim first in Asia).They have multiple applications in packaging,advertising, housing ,printing.http://www.cellobubbleguard.com/ Link: http://www.cellobubbleguard.com/

-They areaggressively increasing capacities and they spend almost 28 cr in one year alone that too with debt free status.With such a capital expenditure also they enhanced dividend from 45 per to 60 per.

**
**

-Working capital management is the best in entire sector andcertainlycello brand has good brand recall.

**
**

-Perception’s are temporary and earnings will drive the valuations.Even most trusted groups and wealth creators are linked to some kind of malafide practices.Now a days we are hearing numerous stories regarding these groups.I will be happy to invest as long they run the company with full of commitment.Lot of people including me missed TTK with these type of perceptions.Management commitment is important in creating wealth.

**
**

-By reading first QY results they will do almost 50 eps this year.So i expect all their efforts , brand promotion , new capacities , new applications for bubble guard sheets culminates very good results for Qy 1 and am expecting it to continue.

**
**

**
**

**

Comments **
**Positives:
**Wim **** EV/EBITDA. The ****
**Negatives:
*** ** :))

**


** FY2012* **

**


hope **

_ blog Link: http://valueinvestorindia.blogspot.in/2010/12/short-analysis-wim-plast-ltd.html and I quote:"The _

2007). ** The 2006. period. ** ** Most

** demand."* **

** here Link: http://watchoutinvestors.com/press_release/sebi/sanjaydangi.pdf?cntrl_no=BRK5077 :
"Mr. **

**
"The **

** Ltd."The **

one.

Hi Rohit,

Thanks for such a comprehensive analysis.

There are few things here;

1). We are trying to find something for the short term may be 6-9 months. So definately not looking for few years time frame.

2). Even if i have to check historical performance of a company I would go for 3 years maximum is 6 years. By going for 6 years i can comfortably cover one business cycle.

3). Also historical performance period will depend on what company we are analysing. Let us say for Tata motors, Tata steel; 10 years performance is worth looking. but may be not for a small or mid cap company.

4). I would agree with Om that as long as company is performing we can be happily investing even if promoters are little doubtful. This risk can be reduced by not exposing too much of our portfolio to a such stocks.

I can recall symphony comforts was discovered around 60 rs and and from that level it went for 1500 rs. i did not took any position only reason was i was not sure about the promoters.

**

Good discussion. I think we should try digging in deeper as the past performance has been fantastic and I think one should get decent compounding here.

The plastic furniture industry is highly competitive and has low margins but Wim Plast has been able to deliver high margins consistently. So there has to be some reason behind it.

Ayush

Excellent thread on which unfortunately not much activity has happenEd.

We need to complement Omprakash specially for his prescience in picking 2 multibaggers Kaveri seeds n Wimplast real early n highlighting them on this thread more than 1 year back. These 2 stocks IMHO are still very good stories.

Also Astral Poly our perenniall favourite needs to be highlighted in view of Blazemaster and Bendable launches n continuous strong performance of Flow guard and huge size of opportunity still staring in face.

Views invited.

J2EE Professional at October 11. 2011

I think one can have a look at Cravatex and Wockhardt … Wockhardt has turned around very well churning NP quarter after quarter and now the debt problems seems to be practically over now. With reduced debt burden, ever growing business and almost certain re-rating, i believe this one shall go very far.

Cravatex, will be doing great with opening of new FILA stores. Apart from that its gym equipment business would also grow very fast. Since its got a strategic tie up with the Talwalkars, and with Talwalkars opening around 30-35 gyms in next 6 months, Cravatex will surely get a good earnings booster.

For very very very high risk takers one could also look at a super micro cap - Kilpest …

Hats off to you sir .

Wockhardt is up 4 times from october 2011 price and 7 times from december low , Why we missed this one .

Premier Ltd (BSE Code - 500540) - Land Sale Maybe Near ?

See Title Search Advt that appeared on Saturday in Economic Times (pg 11):

http://epaper.timesofindia.com/Repository/ml.asp?Ref=RVRNLzIwMTIvMTEvMjQjQWQwMTEwNw==&Mode=G&Locale=english-skin-custom

IMHO that generally these formalities happen_ after a deal is agreed_, and when the lawyers take over. So it looks possible the deal will materialise in the next 6 months

If the deal value (official) for the 218 acres of land is close to Rs 600 Cr, as was rumoured when the deal news was doing the rounds last year, it will work out to Rs 200 per share, there being 3 Cr shares. But all depends on whether & if so how much cash the promoters may want to pocket . Greedier the promoters, lesser the money to Premier & vice versa happy.gif

They will i assume use the same primarily to retire debt , which should do the financials a load of good.I am not good at in-depth analysis of balance sheets, s no numbers & scenario’s from my side.

But my instinct tells me that IF & ONLY THE DEAL MATERIALISES, there is a good 50% upside in the stock.

Disc : I hold

Strides could possibly be looked at with the pfizer due diligence in progress. Taking some data in from ET25thJan;

Agila’s sale of 1000cr for nine months (~1250 annually).
if the sale is equivalent to Piramals’ deal (which happened at ~9 times), it could fetch strides ~11000Cr.
Agila is only 74% of Strides which currently is ~6000Cr mcap.

Can this be a 2-3 bagger from here?

~Supratik

Picked up that article from DH, a little old. I think 5 times the deal might be quite conservative. Even with that worst case, we are still discounted.

~Supratik

Add to that…

http://www.business-standard.com/india/news/pfizer-might-be-close-to-buying-strides-unit/493894/

Could Strides fetch a mcap of ~13-15k Cr with this deal?

Seniors plz comment!!

Thanks and Regards

Supratik

I think since nov there has not been any further developments on stake sale front.

Upsides will come about only if the proposed deal materialises.

I think there will be many ifs and buts here.

Dear Hiteshji,

I googled and found that Pfizer due diligence started on 15thJan2013

Please suggest!!