@Capsule91 wrote:

HINDUSTAN CONSTRUCTION COMPANY
cmp=34.3
pe ratio=44.7
peg=2.26
ebit/ev=6.8%
p/b ratio=1.29
face value=1
market lot=1

Will Start with some interesting projects…
1954: first project…Vaitarna Dam, mumbai
1971:Words longest barriage, Farakka Barriage,WB & first nuclear power project,Rajasthan
2000:Mumbai-Pune expressway
2005:Delhi Metro
2009:Worli sea link
2010:2x 1000MW Kudankulam Nuclear power plant, First &Largets Light Water Reactor

Domain of work
Roads, Railways including metro, Ports and terminals , Dams and Hydro Power
Nuclear projects-HCC has built over 65% of India’s nuclear power generation capacity.
Tunnels , irrigation and water supply
Mass Rapid Transit System (MRTS)

attached here the projects with landmarks-projects.pdf (2.7 MB)

Stand alone specifications-
orderbook update-

project.png894x540 82.9 KB

order back log update-

back.png958x600 70.7 KB

Financials (Why is it a Valuepot now!)

YoY 9m ending comparison…

topline growth- 10.39% (excluding other income)
EBIT growth-38.7%
EBITDA margine-14.56% (17.47% in fy17 9m)
expense growth- 8.82%
increase in cost of raw materials-28.18%
Finance cost decrease-12.05%
EPS growth-16.32%

here is the latest financials-

fin.jpg720x752 168 KB

QoQ comparison of total expense-
q1 to q2- up 4.4%
q2 to q3-up 22.9%
q1 to q3- up 28.4%

QoQ comparison of cost of raw material-
q1 to q2 to q3- 302.33cr to 194.46cr to 258.22cr

Notable is subcontracting expenses going up drastically
q1 to q3-up 194.8%
But the employee benefit expense is up by 4% (q1oq3)
This is reasonable considering the complex nature of the projects handling by the company and seasonal variation of the business, as mentioned by management on being called.

Now directly coming to the value in the balance sheet…
…
Total Borrowings - 3865.5cr as of q3 end

Total arbitration award receivable as on q3…3025.94cr
Total receivables as on q3 inclusive of awards…3580cr
Unbilled work in progress q3 end=949cr
Sum of the previous two=4529cr, which is the cash to be received in total…
Total debt 3865.5cr vs total cash to be received 4529cr…
You get a debt free company!

total 9m PAT=61cr (up 57% yoy)
expected fy 18 PAT=95cr

So Company’s debt will be wiped off and
Maintaining the current margin and profit growth which will increase more on account of finance cost reduction) we can expect fy19 PaT of 115cr…

Now coming to the short term receivable situations…
Pure trade receivables to be received within a couple of quarter…554cr
Award to be received within q4fy18 or stretched a bit to q1fy19…414cr
The company is pursuing certained customers to release 704cr of awards and will be received soon…
That totals to 1672cr…
Remember long term debt is just 2268cr and only 596cr will be left after q2fy19 (expected)…

the Q3 finance cost of the company was 150cr at the current debt levels, which if negated in debt free status and considering other parameters constant to focus on this effect, we will have a total 600cr added to the bottom line…

So we will be having an increase of Rs.6 eps over time with debt reduction, which is significant… Because at present the ttm eps is 0.77
A total of 800percent increase in earnings over time just due to rwduction of finance coat which is visible…!
Also note, the arbitral tribunal is a total of 5333cr
Of which 3026cr is current award receivable rest is yet to be received and pending court process, which if won, will lead to a total cash flow in future of 2307cr…

This was a standalone basis estimate…

Other than this fin cost reduction magic,
Topline is foing at 10percent yoy
BUT EBITF ( revenue-(expense-finance cost)) is down 3% yoy mainly because of increase in subcontracting expense…So organic growth is not magnificent!

With Infra structure expected to be a very big theme in coming times, HCC might be a life time asset to possess…

Disclaimer… Took position today…
This was my first presentation in Valuepicker and to all members it is a humble request to share you opinions and criticize for benefits…
for everyone’s quick referral, i attach here all the financials referred to…
thank you…
HCC-Analyst-Presentation-Q1-FY-2017-18.pdf (650.6 KB)
HCC-Analyst-Presentation-Q3-FY-2017-18.pdf (562.2 KB)
HCC-Q3-FY2017-18-Results.pdf (240.4 KB)
HCC-Analyst-Presentation-Q2-FY-2017-18.pdf (862.0 KB)
HCC-Analyst-Presentation-Q4-FY2016-17.pdf (1001.2 KB)

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@Gaurav_Agarwal wrote:

Product

Sponge Iron
Steel melting Shop
Rolling Mill
Captive Power
Wheat products - Atta, Suji, bran sold in UP, Bihar & West Bengal

---

Capacity

Sponge Iron - 2.97 Lac Ton per annum
Steel Melting Shop - 3.3L Ton per annum
Rolling Mill - 3.3L Ton per annum
Captive power - 53 MW
Floor Mill - 1 Lac Ton per annum

The above capacities are recently expanded at the cost of 235 crores. Commercial production of expanded capacities started on 01-Dec-17.

Please find companies letter dated 15-Jan-18 in this regard here. (256.8 KB)

Expansion

As per the company disclosure dated 24-Jan-18 company wants to expand capacities further as follows

Sponge Iron - 4.45 Lac ton per annum
Steel Melting Shop - 4.95 Lac ton per annum
Rolling Mill - 4.95 Lac ton per annum
Captive power - 73.5 MW
Pellets - 6 Lac ton per annum

The cost of this expansion is pegged at 510 crore.

Other details like

When will the expansion start? When it will be completed etc. are not know at this point?

---

Location

Company’s registered office is in Kolkatta and plant is located in Gorakpur Industrial Development Authority (GIDC), Gorakpur U.P

---

Raw Material

Iron Ore
Coal

---

Process

Company uses Direct Reduced Iron method for steel production. It is similar to how Tata Sponge produced Steel.

---

Holding Company

Gallantt Metal is holding company with plants located in Gujarat in similar line of business.

---

Financials

As always Screener.in is our destination for financial of the company.

1. Consolidated Cash flow from operation is more than Consolidated Net Profit.
2. Debt to equity is less than one.

---

Controvery

1. Land takeover for Gorakhpur Metro - There was some news that company land will be takeover by Government for Gorakpur Metro. Management clarified that they have some land bank in Gorkhpur city a portion of which will be taken over for Metro Rail

2. Company designated as Shell Company by SEBI - According to this disclosure, shell company status has been removed.

---

Risks

1. Excessive leverage - Having completed a recent expansion, company has planned for another expansion at the cost of 510 crore. Such rapid expansions are marred with multiple risks.

2. Increase in price and non-availability of raw material - Company does not have captive mine of iron ore or coal. Rapid increase in price of any raw material can derail the company.

---

Triggers

Iron & steel companies are coming out with wonderful results. Tata Sponge has done very well. Multiple source say India is having very good demand for Steel. Expansion of capacity will lead to increase in topline & bottomline of company.

Invested. Views may be biased.

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@MSSMurthy wrote:

Continuing the discussion from Meera Industries : Worth a look:
00a5298c-8564-4223-ba4d-b4c5470e568e.pdf (287.6 KB)
Out

Developments as per the board meeting dated 8th Feb 2018 of the company
Special focus on new developments and top line growth for financial year 2019 - 2020

1. Keeping phase with the double digit top-line growth the board has decided to expand the scope of machines to rope industry in addition to the existing machinery designed for textile industry
2. The board felt that this will pave the way in growing sales in coming years
3. The board has decided to take initiatives to participate in several domestic and international exhibitions to tap a larger base of mid and medium customers worldwide

I feel the above steps will greatly help in expanding the markets in scope and size over the present small base of Rs 13.71 Cr in sales - FY 2017, and present market cap of Rs 149 Crs.

Here what is of significance is the existing being small any meaningful improvement in sales and profits will possibly take the company into a higher orbit in performance which is likely to be appropriately discounted into the sale price

I am holding on to my shares in Meera for a long long time to come

http://www.bseindia.com/xml-data/corpfiling/AttachLive/00a5298c-8564-4223-ba4d-b4c5470e568e.PDF

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@max_payne wrote:

SML Isuzu Limited (SMLI) is a trusted and reliable commercial vehicle manufacturer since 1985. It has over 25 Years of experience in producing Light & Medium commercial vehicles to meet the Indian customer needs. SMLI is a first company to manufacture and supply state of the art fully built Buses, Ambulances and customized vehicles.
Sumitomo Corporation, Japan and Isuzu Motors, Japan respectively holds 44% and 15% shareholding in the Company.
This is very good CV cycle story with added benefit newer Vehicle launch.

Recent Observation:

 Company is highly ignored as we have better results coming from other players.
 They have faced recent profit growth issue's due to Bharat Stage norms & supply issue.
 Newer model & marketing related expense.

Pros for Trigger:

Good vehicle inventory
Expanse of delivery network is going on nicely
Good price points entries & they can complete properly in SUV & HV segment.
Industrial activity demand improvement will be visible.
Good ROE 
Good Capital allocation
Good Dividend History
Share holder friendly Management 
Vehicle scraping policy will be big boost.

Cons to Consider

Competition from large player
Raw material Spike 
Demand for Vehicle can dampen, but highly unlikely 
Pick up in CV cycle is not happening at desired pace, keep watch on it.
profit was depressed as sales was depressed due to GST, Demoney & Bharat Stage norms, So once we start seeing  good result it will be in Investment radar

Financials:

As on 19-Dec-2019 :
Return on capital employed: 21.92%
Return on equity: 16.95%
ROCE3yr avg: 18.71%
Reserves: ₹ 388.04 Cr.
Debt: ₹ 38.64 Cr.
Book value: ₹ 280.52
Net worth: ₹ 402.52 Cr.
Operating cash flow 3years: ₹ 175.02 Cr.
Cash Conversion Cycle: 44.18
Average return on equity 3Years: 15.65%
Market Cap to Sales: 1.1

Wide Range of Products Both in Cargo (5 – 12 ton) and Passenger Categories (13 - 52 seats)

Installed Capacity
18000 Vehicles
4000 Bus Bodies

Disc : Little bit of investment done .
I would be monitoring vehicle sales & if we see it moving north side then keep adding.

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@nikhilv wrote:

I would like to bring your attention to this company called Sona Koyo steering.This company claims to be the largest manufacturer of steering systems in India, catering to passenger cars, utility vehicles and light commercial vehicles.Customer includes Maruti Suzuki, Toyota, Hyundai, Tata Motors, Mahindra & Mahindra, General Motors and Ford. Independently, as well as through its network of overseas joint-venture partners, it exports high quality precision products to USA, Europe and Japan.
List of exact products -
High performance tilt steering column
High performance intermediate shaft for CEPS
High performance telescopic shaft for steering column
Advanced telescopic I-shaft for CEPS
Improved hydraulic power steering gear
High performance steering gear for CEPS system
Electronically controlled power steering system (ECPS)
Advanced column technology for HCV
Advanced telescopic I-shaft technology for HCV
Advanced steering column with value added features
Intermediate shaft with vibration dampener for UV
Improved steering column
Steer-by-Wire
Steering Electronic Control Unit
Electric Power Assist Module (EPAM)

Details can be found on their website i.e. http://sonakoyosteering.com/index.php?option=com_content&view=article&id=135&Itemid=218&lang=en

Basic financials are as follows - (source - screener)

Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017
Sales 683.68 692.00 852.80 1,206.78 1,421.25 1,460.02 1,492.31 1,552.97 1,518.30 1,583.19
Expenses 622.55 685.54 770.15 1,060.86 1,246.59 1,295.48 1,313.80 1,337.30 1,324.34 1,379.88
Operating Profit 61.13 6.46 82.65 145.92 174.66 164.54 178.51 215.67 193.96 203.31
OPM 8.94 0.93 9.69 12.09 12.29 11.27 11.96 13.89 12.77 12.84
Other Income 7.38 4.94 7.54 9.14 3.09 9.35 39.70 4.88 15.97 9.08
Interest 12.69 32.41 36.33 43.67 45.93 41.09 39.23 31.14 31.73 28.54
Depreciation 16.78 25.08 28.45 37.74 45.75 58.50 67.95 103.68 98.75 103.00
Profit before tax 39.04 -46.09 25.41 73.65 86.07 74.30 111.04 85.71 79.46 80.84
Tax 14.14 -14.49 9.64 24.55 25.85 26.34 24.73 26.72 25.30 27.42
Net Profit 24.91 -31.74 16.95 44.64 48.71 38.09 67.76 37.90 37.05 36.49

The financials seems ordinary.However, there are few things which should be paid attention to -

1. JTEKT Japan has taken over the company from current promoters.This started when JTEKT bought 25% stake from the current promoters.Point to be noted is this takeover was done at a 50 % premium price as per this news -

2. As per the press release yesterday, now amalgamation has been completed and the share holding is as follows -

JTEKT - 75% (promoter)
Maruti Suzuki - 5% (co-promoter)
public - 18%

3. According to bloomberg -

“India’s largest carmaker Maruti Suzuki India Ltd., one of the promoters of Sona Koyo who could not participate in the open offer, was also separately given the option to sell its shares to JTEKT, but it declined. JTEKT, the world’s largest maker of steering systems, is 33.51 percent owned by Toyota Group.”

4. JTEKT is diversified group of Japan and have products ranging from steering systems, bearing ,machine tools , sensors etc.The latest annual report of JTEKT can be found here -

Positives -

1. The opportunity in auto business to grow is still huge in India considering the under penetration.
2. The steering business is less prone to getting affected due to disruption of EV , autonomous cars etc.
   3.Taking over of the company by mgmt such as of JTEKT proves to be betterment as it can be inline with the Japanese company spreading their footprints out of Japan for growth especially in auto sector.
   4.JTEKT is worlds largest producer of steering systems.

.I believe the first look at valuation does not attract me and growth is more or less flat if not degrowth.I am keeping it on my watch list and any interesting development should not be ignored.

I am starting this thread for health discussion over how to mainly read the management takeover by JTEKT Japan over a sector that is already growing but still have headroom to grow a lot.

1. I fail to understand so far that while the auto sales growth has been good at least since last few quarters, why the top and bottom line is flattish for this company.
2. Who is then eating away the steering business share in India.zf sterring to some extent (robert bosch JV) and bharat gears too have flattish top and bottom lines.
3. Why did the promoters exited if a clear growth path was visible.
4. There has been exits of key top level person - It could be that the new promoters wants to rejig things but clarity is not there.

Views are invited to delve deep in.

Disc - Not holding.

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@reach.sriharsha wrote:

Viaan Industries
In Sep 2014 Mr. Ripu Sudan Kundra(AKA Raj Kundra) & Mrs. Shilpa Shetty Kundra acquired
defunct Kolkata based Hindusthan Safety Glass company from shareholders and promoters
with intention to improve their Jems and Jewellery business. Following is the news link
https://economictimes.indiatimes.com/markets/stocks/news/shilpa-shetty-raj-kundra-snap-up
-defunct-hindusthan-safety-glass-industries/articleshow/42311328.cms
Currently company business as per its website looks like below( http://www.v-ind.com )

1. https://www.viaanstudios.com/
   Viaan Studios is a leading developer and publisher of high quality games and
   animation.
2. https://www.chasebid.com/
   Bid and Buy website
3. http://bestnaturalsindia.com/
   Best Naturals is one of the first Ayurvedic brands in the world to combine the
   power of astrology with Ayurveda. Direct selling and invite only by current
   distributor.
4. https://www.matchipl.com/
   Poker app. Looks like they are trying to do their own ‘cricket -IPL’ ‘Kabbaddi’ in poker
   arena. Jointly owned by Viaan & International Federation of Match Poker
   Do not get confused with IPL terms, this has nothing to do with Cricket IPL
   and Rajastan Royals.
5. http://www.v-ind.com/yo-yo-yogurt/ & http://yoyoooo.in/
   Our Pre-mix Major ingredient’s are from USA especially for Yo-Yo and we assure you
   only the finest ingredients are used.

Viaan Industries also entered into mobile phone business in 2015. Company claims it
imports the phones from China and major revenue comes from selling phones in CIS region.
Related news link.
http://www.thehindubusinessline.com/info-tech/shilpa-shettybacked-viaan-enters-mobile-pho
ne-segment/article7916330.ece ).
About 5 lakh Viaan handsets are currently manufactured in China, which Kundra estimated
will be absorbed by the market within three-four months. “We might assemble the handsets
in India,” Kundra said.
APO Mobiles, a Ukraine registered company, has taken the rights of selling Viaan phones in
7 CIS countries, including Ukraine, Belarus and Kazakhstan, and is also planning to do the
same Europe. “We intend to generate revenues of $ 80 million in one year,” Kuldeep Kumar,
Managing Director of APO, said. . In all these products/Services brand Ambassadors are
Shilpa Shetty and Raj Kundra themselves. In house ambassadors no additional expense.

                                       **Financials**

Please note since pre 2015 does not qualify I have studied last 2 year available data for
below analysis.
Some interesting snippets from AR 2015-1016

01.jpg1040x357 107 KB

Stock manipulation story. This was during very early days of taking over company. Unless
something serious I am missing, I will take this story with a pinch of salt.

                                                                                **Analysis**

• In year 2015 company was taken over from defunct state by new management and
  new management spent money to get into track. So first year earning should not be
  considered for all fairness.
• In second year company posted 11cr profit but they have not paid any tax. This is not
  good. Since the company has many import based products I expected taxes to be
  paid in due time.
• The current AR financial result do not talk about viaan mobile phone related
  business at all. So I hope its gone bad.
• Their Poker league can bring some cash. Playing teams have to pay certain amount
  and they have also back integrated with Mobile app so that general public can also
  pay. Its paid app. So some revenue can flow from it, but very little. Not sure how
  much profit/revenue split between viaan and International Federation of Match
  Poker.
• They seem to have app for each of their business line. For example poker league
  is major business and they have paid app through which people can participate
  Similarly they have a TV show in colors “Aunty Boli Lagao Boli” which is
  integrated with “chasebid” app/website through with people can bid live. The
  show might have finished its 1st season. Since I did not see this Sunday(as per
  their website). So if some one know about TRP or popularity of this show it would
  be great to know how Viaan is doing with respect to its products(TV show &
  gaming app).
• The company is booking sales, but its trade receivables stands at 60cr. That means
  company booked sales but money not received. Please note their sales figure is 135
  Cr. so trade receivable is roughly 44% of their sales. Last year Trade receivables
  were at 8cr(march 2016) this year March 2017 it is 60Cr. !!!. Close watch on Trade
  receivables needed in future also.
  
  02.jpg1037x123 16.9 KB
• In addition to above details, the Receivable days is increased from 89 days in 2016
  95 days in 2017. Which means avg sold item gets its money after more than 3
  months.
• Short term borrowing (the money needed to run company) increased from 80 lakh to
  1.32 cr. This may be valid because as mentioned in AR, they have set up new office
  and considerably invested in employees.
  
  03.jpg984x98 13.2 KB
• All in all promoters are trying to make good business case by foraying into many
  businesses and hope things to work in one or another. One good thing is they are
  trying to monetise from various aspect via technology and app.
• Following are few questions which I have
  ○ Can Raj & Shilpa would have done such diversified business with private
  company?
  ○ If it can be done via private company why they chose public company path?
  ○ Why they did this by acquiring defunct listed company? (This partially
  because lots of regulations and also to get their IPO flowing they need good
  business to be established)
• Shilpa Shetty is associated(director) with another company “Best Deals TV Pvt Ltd”,
  which is from Akshay Kumar. Looks like they may be sharing facility etc. In AR some
  entries for advances as well. They have agreement to sell their products via
  teleshopping looks like. Since Akshay is a Canadian citizen, does it have any other
  effect? (Need to check more on this aspect).
• In 2017 AR company is claiming their UAE business is doing very good. But its not
  mentioned details of its operations. Company has also an office in LONDON.

NOTE: Some of the points above might be normal for any company, please provide your comments.

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@sammy11 wrote:

Current price 72, Mcap 169cr (as on 09.02.18)
Listed on BSE

Background

Inditrade Capital Ltd. (Inditrade) was set up in 1992 in Kochi as JRG Securities Ltd., and was engaged in broking and distribution of financial products.

Barings Pvt. Equity Partners India were the promoters of the company since 2009, and as of December 2015, held 49.4% of the shares through its affiliates/funds [Duckworth Ltd (subsidiary of Baring India Private Equity Fund II Ltd; 45.6% share) and Baring India Pvt. Equity Fund III Listed Investments Ltd. (3.8%)]. In February 2016, a group of investors that included Sudip Bandyopadhyay (SB) and 2 corporate entities Juno Moneta Technologies and AT Invofin India purchased the stake from Barings and made an open offer to the public to acquire additional 26% of shares. The price paid by the new investors was Rs. 42.5 per share as compared to book value per share of Rs 39.6 as at March 2016.

As at December 2016 (after completing the formalities for takeover of shares and open offer) the new promoters owned 71.77% of the company. SB directly owns only 0.21% of the company, and it is likely that he has indirect stake through the 2 corporate entities, as well as future stake through ESOPs. These entities also have a certain Alok Tandon as a key person.

Current Business

Inditrade in its current avatar is engaged in equity/commodity/insurance broking (constituting 40% of total revenue), client financing (21%) and distribution of financial products (23%). It has 29 branches and 350 franchisees with over 1.5 lakh registered customers across Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana and Maharashtra.

Future Businesses – focus areas

Agri Commodity Funding

The company has also been involved in agri-commodity trading and financing, and this received further impetus by acquisition of the agri-commodity business of Edelweiss group in November 2016.

This is a highly unorganized market (about 75-80%) and presents a focused player like Inditrade ample opportunity to grow. Warehouse receipt management and certification is increasingly becoming more regulated, standardized and professionally managed, minimizing frauds that used to plague the sector in earlier times.

Inditrade offers funding against exchange traded non-essential commodities stored in exchange recognized warehouse, for short duration of 1-3 months, to commodity traders and processors. Commodity price risk (and to a large extent, default risk) is mitigated by simultaneously selling futures contracts of the commodity of similar duration on the exchange through their broking division. This enables them to offer high loan amounts of as much as 95% of the value of the commodity in a relatively quicker time at fairly attractive rates of 14-15% (much of the competition is from banks which charge lesser rate of 12-14% but take time and offer only 70-80% of the value).

Microfinance

Inditrade secured its microfinance lending license in March 2017 and commenced microfinance business in April 2017 by initially targeting the semi-urban industrial belt of South Maharashtra and Tamil Nadu. It has 9 branches in both states and plans to have 15 more branches by end of FY2018 with a loan book of Rs 100cr (half each in Maharashtra and TN).

They claim to be the first in the industry to have a completely digitized prospecting-approval-disbursement-collection process which involves eKYC and GPS tracking, online credit checks (through rating agencies Equifax and High Mark Ratings), and money transfer to bank accounts. Use of digital systems are likely to enable better risk management. The maximum credit provided to a single borrower is Rs 30,000 over a period of one year, with weekly collections. The microfinance business has currently 50 employees who have been incentivized by making them part owners, infusing 1/3rd of the equity capital.

As per recent press report of November 2017, Inditrade’s microfinance business had 17 branches and a loan book of Rs 40cr. It is in the process of acquiring 80% stake in another microfinance entity Varam Capital (25 branches spread over TN and Chhattisgarh, with loan outstanding Rs 100cr) at a cost of Rs 40cr. Whether this is paid in cash or shares is not known as of now.

Quick comment on Financial performance

The financials are audited by Haribhakti (including 4 out of 6 subsidiaries, the remaining 2 having insignificant contribution as on 31.03.17) which provides some comfort.

FY17 was the first full year of operations under the new management. Till recently the company has generated revenues only from its traditional business of broking, private funding and distribution. This is expected to continue to grow at a healthy pace in future given the sector tailwinds. The new businesses of agri-commodity funding and MFI are likely to start having an impact from early FY19.

The company has grown its revenues year on year by 39% in Q1-18 and 33% in Q2-18. However expenses, particularly employee, finance and administration costs, have grown at a faster pace over these periods as the company is focusing on growing its commodity financing and microfinance businesses. The company started borrowing funds in Q4-17 and would have deployed them during FY18. These expenses are in the nature of upfront investments, and should start generating returns in future periods.

Q3 income is up from 10.8cr to 17.8cr, up by 65% (but we have to remember we are comparing with a demon quarter). PAT is up from 0.13cr to 1.5cr. Momentum of Q2 also appears to be sustaining (revenues of 16.4cr and PAT of 1.6cr). Finance cost has doubled in Q3 over Q2 indicating that company has resorted for borrowings to fund its lending businesses (there is a big difference between the interest cost figures in P&L and Segment reporting, which needs clarification). Debt/equity ratio as of Sep 17 was less than 0.4.

Broking is a volatile business and is highly correlated to the vagaries of market activity. It can be seen from table below that broking is around 40% over last 3 quarters. And client financing is 21%. Financial distribution is decreasing is and others is increasing (what does others constitute is not known at present).

Summary

• Although in a crowded space (NBFC), the company appears to have a differentiated business model – particularly (1) agri commodity funding with commodity price/credit risk hedging and (2) sector-focused semi-urban MFI lending to banked and/or tax paying customers (as against the uneducated poor that MFIs are known to target) and leveraging digital information and platforms for more efficient delivery and risk management.

• Existing businesses like broking, client funding and distribution of financial products will continue as bread and butter business with sector tailwinds emanating from digitization and a structural shift towards financialisation of savings.

• The company is contemplating a digital enabled foray into affordable housing finance, which would be a new area for growth.

• The Jockey has relevant experience, financial backing and probably, skin in the game in terms of ESOPs (2 sets of ESOPS have been announced by the company for its employees with exercise price of Rs 37.75 earlier and Rs 83 more recently)

• Current price is around 1.7x of what the new promoters paid to takeover the company

Risks/Concerns

• This is an evolving story and needs close tracking on how the new businesses pan out. The last 3 quarter results have been directionally right. However, it is now 2 years post management takeover in November 2015, and the company needs to start delivering at the bottomline level soon. Broking is a volatile business and it can drag performance in bear markets.

• There is key-man risk as a lot is riding on SB. While he has a slightly chequered past, he seems to have the necessary experience having been involved/started financial service businesses. One wonders why he is still actively appearing on TV (as a financial analyst) recommending other company stocks and why he is mainly based in Mumbai instead of the headquarters in Kochi. Of course, as they say- once an analyst, always an analyst; and maybe SB will continue to be one. Also the MFI business is based in Mumbai.

• As is typical with small/start-up companies, there is the generic risk of over promising and under delivering. In their FY2017 Annual Report the company made a tall claim to achieve a loan book of Rs 5000cr in 3 years (which was later scaled down to 3000cr in a subsequent interview). Even then, this is extremely aggressive/ambitious and while the company may certainly have these as internal targets, it should refrain from public announcements of this nature, so as to manage investor expectations. Such steep targets may also force the company to take undue risks while chasing growth (for instance the price they intend to pay for their proposed acquisition of Varam Capital could be questionable).

• Lending is easy, but key is credit risk management and recovery. The company is still to be tested on this. Their delinquencies/NPAs should be closely tracked, as ideally none (or very little) of it should appear within the 1st year atleast.

Some pointers on valuation

The share was available for below 42.5 for many months post announcement of takeover by the new promoters (till as late as May/June 2017), and would have been the ideal time to buy as we would be getting in at the same price as the new owners. The share witnessed a spurt sometime around Jul-Aug 17 when the target of Rs 5000cr in 3 years became public.

The book value per share as of Sep 2017 was 44 per share, and annualized 9-month EPS is 2.35. The current price of 72 translates into price-to-book of around 1.6x and price-to-earnings of 30x. While the price looks ok on PB basis, the PE looks optically high for an emerging company, and may correct, if the company delays on delivery. However, if the company is able to sustain 30-40% growth at PAT level, this would look attractive.

The company has several subsidiaries, which are not wholly owned, through which it carries on its activities. When applying valuation metrics, some element of holding company discount may come into play.

Disclosure

I hold shares in the company from earlier and also added recently after Q3 results. I am not a registered financial analyst and this is not a recommendation. Views welcome.

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@kunal_patel wrote:

Sintercom India Ltd

Market Cap @ 65/- ~156crs
Revenue 1H18: 36.3crs / FY17 – 66crs
Margins: ~24%

Why to read more about Sintercom

1. One of the three company in India making Sintered products (Auto component) alongside GKN (a MNC), Sundram Fastener.
2. An associate of global market leader ‘Miba’ in Sintered products
3. Strong board/management composition
4. Strong margin profile for a 66crs revenue company.
5. Growing and untapped market

Company Background:
Sintercom India Ltd. is one of the leading automotive sintered components manufacturer located in Pune, India. It specialises in manufacturing medium to high density sintered components for automotive engine, powertrain and exhaust systems as well as sensor components for global customers. Company was started by Mr. Jignesh Raval in 2007 as Maxtech India Pvt. Ltd. Mr. Raval is a technocrat with over 20years of experience in Automotive industry. Prior to starting Sintercom, he was working with Tenneco Inc as ED, Global Supply Chain Management division.

Timeline:
2007 – Started as Maxtech India Pvt. Ltd
2010 – Started manufacturing Stainless Steel Hego Boss (converted forged parts to Sintered products)
2011 – Entered into a JV with MIBA Sinter Austria (converted Forged Gears to Sintered Gears)
2012 – Changed company name to Sintercom India Pvt. Ltd (kept introducing new products)
2013 – Started supplying to Maruti Suzuki
2015 – Developed 6-speed transmissions Syncro Hubs
2016 – Developed a product for Bajaj Auto (Forged shift tower component to sintered)

Board of Directors
Mr. Hari Nair – Chairman, ex-COO, Tenneco, 20yrs experience
Mr. Jignesh Raval – MD, CEO
Mr. Markus Hofer – CFO, Miba AG
Mr. Harald Nuubert – CEO, Miba Sinter Group

Management Team
Mr. Jignesh Raval – MD, CEO
Mr. Pankaj Bhatawadekar – CFO
Mr. Nikhil Chavan – Head, Engineering and Marketing
Mr. Sachin Gunjal – Head, Manufacturing

What is Sintering Technology
Sintering is a process that uses metal powder to make components. Sintered products are highly tensile and density higher than normal casting and foundary products. Please go through the video here to understand more about the process. (Sintering process)

Sintering is a green technology as it uses metals scrap and uses less water and energy compared to Casting and foundaries.

Usage

Market Sizing
Currently market size of Sintered products in automotive segment is pegged at ~950crs. Share of sintered products in PV is ~4kg/Passenger vehicle, however in the US this comes to 17kgs and in EU and Japan, this is around 12kgs. If management is to be believed, this could go up to 7kgs over next 5 years.
Since sintered products are lighter than casting/forging products, hence they are more and more preferred by the OEMs to reduce the weight of the vehicle which helps in increasing efficiency of the vehicle.

If Auto analysts are to be believed then 2W market is expected to increase by 12% per annum to reach 23-24m while PV is expected to go up to 5m over next 2-3 years. Also as BS VI will roll out in 2020-21, usage of sintered products is expected to go up by another 1-1.5kg/PV.

With rough calculation, we can arrive at the market size of ~1500-2000crs over next few years. That roughly doubles the market in next few years.

Sintercom currently has market share of ~6.5% which it expects to increase it to ~10% by 2020-21

Key Customers
Sintercom has long standing relationship with major players in India like Mahindra’s, Bajaj, Maruti, Honda and others. It is also exporting a small portion to Suzuki for products in Japan. Pic below shows how many models of which OEM uses Sintercom products.

image.jpg1990x1201 545 KB

Financials & Other operating metrics

4-yr Revenue CAGR – 10.7%
4-yr Sintered Products revenue CAGR – 18.5%

4-yr EBITDA CAGR – 15.2%
4-yr PAT CAGR – 104% (On a low base)

EBITDA margin has improved from 17-18% to 24% in 1H18. This is largely because of discontinuation of sale of Hego Boss (non-sintered product) which was a low margin business. Management had consciously taken this decision to reduce sale of hego boss and as of 1H18 it has been discontinued. Sintered products have higher margins and every new product introduced will improve the margins further.

RoCE has increased from 11% in 2013 to 14% in 2017 & 18% in 1H18.

Cash Flows: Company is generating ~10-11crs of operating cash flow and uses it to reduce debt.

Asset turnover is ~ 1.5x and operates at 70-75% capacity. They use rest of the capacity for R&D purposes to bring new prototypes.

Object of the IPO:
Company would be raising ~INR 56.5crs (incl anchor/Preferential allotment).

Total amount Raised – 56.5
Exiting Shareholder – (23.0)
Capex - (16.56)
Debt Repayment - (11.5)
W/C requirement - (3.0)

Remaining for general corporate purposes

Sintercom would be spending ~16.5crs on capacity expansion which would increase its capacity from 1800 tons to ~3800tons (need to confirm this number). Also at the present facility they can increase the capacity to 8000tons by just installing machineries.

Current debt is 35crs out of which they would retire 5crs from operating cash flow and reduce it further by 11.5crs from IPO proceeds. Portion of debt that they are retiring is a high interest debt from Mahindra financials that charges ~14% interest. After the IPO, effective interest rate is expected to be ~11-12% which is likely to reduce further to 9-10%. Interaction with the management indicates they already have an offer from HDFC with effective interest rate of ~9.5%

Valuation
At IPO price, company will have a market cap of ~156crs. In 1H18, company has generated PAT of ~3crs and is likely to cross ~6crs for FY18. It would command a multiple of ~26x at IPO price which is not expensive but not cheap either. Other auto ancilliary companies with similar margin profile trades at higher multiples.

Other Details:
MIBA AG would hold ~20% after the IPO. Company pays 3% royalty to MIBA for the technology/Know-how that they use from MIBA.
Company has an order book of 50crs for New products that it has developed.

To sum up
Sintercom is an interesting company to study. Sintered products demand is increasing globally. It has a strong technology partner in MIBA which is a leading player in the industry. Company is run by a passionate CEO and has strong BoD in place. Further company is only focussing on Auto industry while sintered products finds place in other industries as well. However, management feels they have long road ahead in this industry and hence any diversification will come only when they penetrate this market well.

Key Risks

1. Slowdown in Auto markets
2. Change in technology
3. Increase in royalty to MIBA
4. Increase in raw material prices could affect margins

Investment in SME stocks has its own risk. It is always about growth while investing in SME/micro cap stocks. Please do your due diligence before investing.

Discl: Applied in IPO. This should not be construed as an invest advice. Please take your own decision before investing.

Source: Company presentation, Youtube and RHP

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@KUNJ wrote:

Reproducing key extracts from the presentation made by me in VP Kolkata meet last Sunday:

• Construction is the 6th -largest economic segment in India, accounting around 8 % of the country’s GDP in FY2016-17, the second-biggest employer (after agriculture), with about 35mn people engaged, and the second-largest recipient of FDI after the services sector.

• FM in Budget 2018 continued to put a strong thrust on infrastructure development by increasing Government’s estimated budgetary and extra budgetary expenditure on infrastructure to Rs. 5.97 lakh crore against estimated expenditure of Rs. 4.94 lakh crore in 2017-18

Segments of Construction Industry and Key Drivers

segments.png1349x884 60.8 KB

Types of Construction Contracts:

types.png1343x744 26.2 KB

Understanding HAM:

HAM.png1110x818 44.8 KB

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@Capsule91 wrote:

Hi everyone, it is increasingly becoming difficult to find good companies at reasonable valuations and those that are reasonably valued or undervalued both in numbers and compared to intrinsic values or in relative individual perception have some sentiment dampness in the form of high leveraged balance sheet, pledged holdings , low promoter holdings, high rm costs severely compressing margins and innumerable other factors …

So one of the Forward looking parameters i want to research on is Capacity expansion in the background of high demand growth in the market sector where the companies work…

I request all the members of Valuepicker family to enrich each other with ideas in companies who have a significant capex planned in near future or already under process…

Please follow the format of presentation as the following…

1.Company name…
2.Amount or %addition to present capacity…
3.Nature of capex- brown/green field &industry segment…
4.Source of fund(debt, internal accruals, qip)…
5.Incase of funding from debt, present debt to equity ratio…
6.incase of qip, promoter holding before or after qip with %dilution…
7.Timline for capex to come online where ever possible as per management guidance…
8.Outlook on demand growth in the industry segment in which capex is being done
**

Please provide with the latest updated information where ever possible, when in doubt or needs further verification , please mention citation needed…
Please do not discuss about any individual stock in details expect the introductory questions, which otherwise can be discussed in respective company threads in valuepicker…

Hoping the thread to be very useful for mutual discovery…
Thanking you, i will start the thread with my contribution…

DISCLAIMER
Market capitalization and valuation metrics should not be considered while selecting companies for this thread…
This thread does not and should not be intended for any stock recommendation and followers of this thread are requested to follow individual research method for evaluating investment choices if inspired from this thread…

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@Capsule91 wrote:

One of the most decorated patterns in the chart is Cup and handle pattern, we all know that…

This thread serves as a discovery tool for such scrips exhibiting a cup and handle pattern at present…

Also patterns in the charts do not follow a textbook always, so there might be patterns which may be likely to be so, but time will tell…
All such cases can be posted, and all can evaluate later …

I request all members of valuepicker family to contribute in mutual discovery as and when one comes across such a pattern…

For knowledge about this pattern the following link can be accessed as i personally found it very useful…

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:cup_with_handle_continuation

All the best for mutual discovery…

I will start with my personal contribution…

disclaimer… the thread does not have any intention to give recommendation for a buy , sell or hold on any scrips and users are instructed to follow own analysis for any decision making for any scrips which one might be interested in post inspiration from this thread…
Any posts which carry even a hint of such a recommendation will be flagged immediately…

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@vinayohara wrote:

HI All,

Currently Steel is in a strong bull cycle. which we can see in the quarterly results of big companies for last few qtrs. This steel bull cycle can be attributed to china steel production cuts for improving pollution situation. Apart from that cyclical recovery and steel demand in end usage sectors is also going up due to Govt push in infra and housing segment.

I came across this stock, which is a micro cap (50cr mcap aprrox). Rathi bars mainly makes bars and billets. They have significant presence in north india with brand name “Rathi and rathi thermax” amd manufacturing plant in alwar.
There are few good things I noticed, which i will be sharing.
First of all the company has shown tremendous improvement in recent quarters.
below tables are taken from screener.

image.png1229x650 29 KB

TTM Pat growth is 141%. in Dec 2017 qtr Pat has gone up from 7 lacs to 79 lacs.
As on March 2017, they don’t have any term loan only working capital requirements they have.
They have 3.47cr cash and cash equivalents.
I also noticed in annual report 2017, that they also use scrap or sponge iron as raw material.

Recently promoter started buying from open market and they have picked up 1.56%. Current holding is around 60%. which is decent to me.
here is the snapshot from BSE.

image.png982x683 44.4 KB

From Crisil report on Rathi bars :

Strengths

• Promoter’s extensive industry experience and established relationships with suppliers and customers: Benefits from the key promoter, Mr KK Rathi’s extensive experience of more than 40 years in the steel products business’he manages operations with sons, Mr Anupam Rathi and Mr Anurag Rathi’and his keen insights into industry dynamics, and healthy relationships with customers and suppliers and around 800 dealers, distributors and stockists should continue to support business risk profile.

• Above-average financial risk profile: Financial risk profile is expected to remain comfortable, backed primarily by healthy networth (Rs 75.12 crore as on March 31, 2016) and steady accretion to reserve. Total outside liabilities to tangible networth ratio was below 1 time in the 6 years through March 2016. Also, moderate dependence on bank lines has led to improvement in interest coverage to 3.49 times in fiscal 2016 from 2.88 times the previous fiscal.

Weaknesses

• Stagnant revenue and susceptibility to volatile steel prices: Revenue should remain stagnant due to decline in prices of steel products. Also, low product differentiation and limited value addition in the steel products industry, and inability to pass on increases in price, will continue to expose profitability to volatility in raw material prices.

• Vulnerability to cyclicality in the highly fragmented steel industry, and slowdown in offtake by the end-user industry: The demand for RBL’s products, such as thermo-mechanically treated (TMT) bars, is linked to the capex programmes of end-users, such as real estate, civil construction and engineering industries, which are cyclical. Slowdown in capex programmes in these industries, driven by the economic downturn and the expected gradual recovery, should continue to constrain revenue for RBL

Outlook: Stable
CRISIL believes RBL will continue to benefit over the medium term from the promoter’s extensive experience and healthy relations with customers and suppliers. The outlook may be revised to 'Positive’ if substantial growth in revenue and profitability and efficient management of working capital cycle strengthens key credit metrics. Conversely, the outlook may be revised to ‘Negative’ if decline in revenue and profitability or any sizeable, debt-funded capex constrains financial risk profile, especially capital structure.

I tried contacting promoter. Here are the few points from that conversation.

1. As per them they are leaders in top and mid market TMT bars in northern India. They mainly sell in retail through strong dealer network and dealer margins. They keep their ad spends low and spend that money on dealers and masons.
2. They produce themselves and are currently running at a utilization level of 50%. Expects it to go up to 60-65 % by this FY end and 70-75% by FY19.
3. They source scrap iron mainly from adjacent maruti plant as the scrap is of less value for Maruti dont see any margin pressure coming from increased iron ore price. Also sounded confident about passing the cost increase to end users.
4. TMT bar prices have gone up from 23k to 40k per ton this year and hence see dramatic improvement in margins. Guiding for 200-300 bps improvement in margins with topline growth to the tune of 20% in FY 18 and 19 consecutively.
5. On steel cycle he said, he is there in business for last 30 years and have seen a few cycles. Generally cycles tend to last for 4-5 years.

To me he sounded very very bullish and I don’t agree with the first point above that they are leaders.
Being conservative I am not considering 2-3% margin expansion, but we can expect around 1% which itself will give a nice boost to the bottomline.

Valuation : I believe it’s cheap as its available below book value which is 47 and cmp is 31. In fact to other steel players market is giving valuation of 1.5 times of sales. It has got cash in book and strong balance sheet.
When all other players were struggling with debt and spoiling their balance sheet in down cycle, they sustained. I believe their is enough room for upside. But volatility can be expected.

Its a microcap and we should take a special care while investing. low Liquidity is a big problem in such stocks.

Being from non-finance background, I not that good in checking balance sheets. If anyone see any red-flags in past few years, Please share.

discl - Invested.

Regards
Vinay

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@pankha wrote:

I found Kanchi Karpooram as a good dark horse candidate more than an year ago. Since then it is growing steadily and I feel now, it can pick up pace in quality of earnings from hereon.

The company South India’s first and largest producer of a variety of Terpene and Paper chemicals. The Products range from Turpentine-based chemicals like Camphor, Dipentine, Iso Bornyl Acetate,Soudium Acetate Trihydrate etc. To Gum rosin and its derivates such as Fortified Rosin, Ester Gum, Phenolic / Maleic Resins and many others.

The company is working to develop and expand the customer base to provide industries with a stable, continuous supply of raw materials from a totally new source.

http://www.kanchikarpooram.com/
https://www.bseindia.com/stock-share-price/kanchi-karpooram-ltd/kanchi/538896/

The company has clocked latest nine month EPS of 25+ and may end FY18 with an EPS of 35+

would suggest to keep this stock in the research watchlist.

Pankaj (Twitter: @AnyBodyCanFly)

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@sgjaclyn wrote:

Does anyone see an opportunity to buy BFIL shares from and get IIB shares based on 1000:639 ratio of exchange announced during the merger? I do not have an idea on how to calculate taking into consideration the current price of both the companies.

Hence not sure if there exists an opportunity to be tapped into.

Welcome comments from those who have explored similar situations.

Disc: Hold IIB shares.

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@Chirag2015 wrote:

This is my first thread on the Forum. I would appreciate the feedback of senior people and would also invite fellow members to research more on this company.
I am grateful to @Vivek_6954 as I came to know about this company through the thread Vivek Gautam Portfolio. Also, the scuttlebutt done by @DrArvind gave me the conviction to read more more about the company and it’s history.

About the Company and Business

The Promoter, Sanjaybhai D. Bhuva commenced the business of production of different types of Ice-cream, Mango Shake, Lassi & milk product etc. under a sole proprietorship M/s. Shree Shital Industries in the year 2000. Subsequently, sole proprietorship was converted into a partnership firm under the name M/s. Shree Shital Industries, pursuant to partnership deed dated June 17, 2013. Further, the name of the partnership firm was changed to Shital Cool Products on
September 11, 2013. Shital Cool Products was thereafter converted from a partnership firm to a Private Limited Company under Part IX of the Companies Act, 1956 with the name of Sheetal Cool Products Private Limited and received a certificate of incorporation from the Registrar of Companies, Gujarat, Dadra and Nagar Havelli on October 14, 2013. The Company was subsequently converted into a public limited Company pursuant to special resolution passed at the Extra-ordinary General Meeting of The Company held on July 24, 2017 and the name of The Company was changed to Sheetal Cool Products Limited. A fresh certificate of incorporation consequent upon conversion to public limited Company was issued by the Assistant Registrar of Companies, Ahmedabad dated August 10, 2017.

The Company is currently involved in producing and processing of milk and milk products, snacks and bakery items. The diversified product portfolio enables them to cater to a wide range of taste preferences and consumer segments, including adults and children. They sell the products under the brand “Sheetal” to a number of distributors and super stockists. It also has a franchise model to increase the visibility of our Company. Company has seen strong growth under the vision, leadership and guidance of our promoters, Bhupatbhai D. Bhuva, Dinesh Kumar D. Bhuva, Sanjay D. Bhuva. They have good industrial knowledge and experience, which enable us to carry the processing in an efficient manner.

Currently, the company has a manufacturing unit spread over an area admeasuring around 5314.66 square meters (approximately) at Amreli, Gujarat and the registered office is also situated at the same location. The unit is well equipped with wide range of machineries and other handling equipment to facilitate smooth manufacturing process. As on date of this Draft Prospectus, the Company has employed 22 employees (including skilled, semi-skilled) and 275 personnel on contract basis. It imparts continuous training to the employees, which helps the organization stay abreast of the rapidly changing preferences and taste of consumers. The company is ISO 22000:2005 & ISO 9001:2015 certified in respect of manufacture of Ice-cream, milk & milk products, mango ras, lassi, curd, flavoured milk, masko, wafers, namkeen, fryums and bakery products. The products undergo a quality check, to maintain precision in the results.

The restated total income for the Fiscal ended March 31, 2015, 2016 and 2017 was Rs. 4,490.40 Lakhs, Rs. 12,527.96 Lakhs and Rs. 15,462.88 Lakhs. The restated profit after tax for the Fiscal ended March 31, 2015, 2016 and 2017 was Rs.12.85 Lakhs, Rs. 196.16 Lakhs and Rs.205.85 Lakhs.

Location
Purpose Location
Registered office GIDC Plot No.78,79 &80, Amreli, Gujarat-365601
Manufacturing Unit GIDC Plot No. 75, 76, 77, 78, 79 & 80, Amreli, Gujarat-365601

Products:
Wide range of products as mentioned below:
• Milk and Milk product: Products comprises of ice cream, pasteurized milk, flavTheed milk, yoghurt, lassi, chaas, sweets and many more.
• Snacks: Snacks portfolio of products comprises of potato chips, banana chips, extruded snacks (fryums), other namkeen including bhujia, salted peanuts, salted pulses and many more.
• Bakery: Bakery portfolio of products comprises of variety of breads, pav, khari, cake and many more.

(Major revenue coming from Milk and Milk products. Current margins are low, EBIT Margins for Namkeen and Fryms ~5%, for Milk and Milk products ~2.5%)

Sheetal_Segment breakup.jpg1148x919 238 KB

Financials
P&L statement

Sheetal Cool_P&L.jpg1088x1153 338 KB

Cash Flows

Sheetal_Cash Flows.jpg1087x1333 507 KB

!

Balance Sheet

Sheetal_Balance sheet.jpg1084x1312 376 KB

Net block is increasing pretty fast, which suggests that company is continuously increasing its capacity.

Objects of the Issue – Purchase of additional plant and machinery is the key object

Sheetal_Object of Issue.jpg1087x1007 466 KB

Assuming all these plants and machinery goes to net block, the net block is going to increase by 40%

Company is expecting ~3X jump in receivables (2018 compared to 2017). This directionally suggests that company is planning siginicant jump in turnover.

Capacity Expansion and Utilisation plans

Sheetal_Capacity Utilisation.jpg1087x1072 442 KB

Shareholding pattern after IPO – Promoter holding just marginally above 50% post IPO

Sheetal_Promoter holding.png1145x712 411 KB

Scuttlebutt
The company seems to be providing quality and packaging at par with companies like Vadilal, but at a cheaper price.

Good feedback on promoters- going by some scuttlebutt done by @DrArvind

Not much reviews about ice-cream available online. But one-of the parlors on Zomato had pretty happy customers
https://www.zomato.com/ahmedabad/sheetal-dairy-ice-cream-vasna/reviews

Valuation compared to peers

Sheetal_Peers.png861x189 25.5 KB

With net profit of 2.06 crores, and current EPS of 2.06 as well, company is trading at a PE of about 60. If you look at P/S, it is available at a P/S ratio of .86

The company has witnessed good capacity utilization in the past and should do good with positive rural consumption story. Company is also looking to launch premium products and expand beyond to more markets.
It is looking to double it’s ice-cream capacity by 2020 and triple the namkeen+fryms capacity to 3 times.
The increase in capacity should aid in margin expansion.

My understanding of positives/negatives
Positives
• Hardworking 1st gen promoters
• Cheaper compared to peer looking at P/S (0.86)
• Focusing on rural markets – Rural consumption tailwinds
• Summer season to kick-off
• Expanding product portfolio – getting into snacks, premium ice creams
• Good customer reviews – (though limited scuttlebutt info)
• Low margins, (new plant) capacity increase should aid margin expansion

Negatives
• Pricing of products is lower compared to established players – lack of pricing power, one of the reason of low margins
• Debt on higher side (13.7 crore debt – 9.7 cr long term, 3.9 cr short term). D/E of 1.67
• High competition in ice cream business
• SME liquidity issues

Discolsure: Invested and looking to add more

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@dsaraf wrote:

Telecom is probably one of the industries which any potential investor seeking to compound returns over long periods of time will want to stay away from - significant capex intensity, heavy under-trading of ARPU’s and the periodic interference by Governments.

pat margin.PNG1204x87 9.54 KB

From clocking net margins of 24% in 2008, Bharti’s net margins have fallen to a meagre 2% as of FY’17 ( and are likely to be heading further south this year) . However, what is even more painful is that IF you remove Other Income from profitability, the company has actually reported a loss at Net level in 2017 and is barely managing to stay in black this fiscal - all thanks to Mr Jio’s nonchalant grip on the Pricing metrics of the industry.

'If you can’t beat’em , join ‘em’ has been the catch phrase for the industry as marginal players have finally given up the ghost and joined hands with the bigwigs. Competition has fallen from 15 players in 2012 to just 3 currently

As Bruce Berkowitz says, focus on where the puck is going and not where it is at currently.

The current scenario -
The telecom industry is currently a battleground for just three players who are in charge of serving 125cr mobile connections in the country - with little by way of ensuing profitability - which raises the question? has this business become an eventual charity?

Charlie Munger, when asked about his wife’s ex-husband famously said ‘you’ve got to ensure your competition is weak.’

For Bharti, competition stems mainly from Jio who has been on a nonchalant capex drive to garner market share. The company is now targeting the existing 2g subscriber base of Idea Cellular and has again resorted to a tariff war in order to get incremental market share.

The below pyramid shows the magnitude of users that Jio can still lure away -

capex scope.PNG708x472 203 KB

On the demand side, data has become the be all and end all source of entertainment and work for a majority of the Indian population. From being a luxury, data is now a necessity and most of this boils down to Jio’s agressive stance on pricing. It would be safe to say that data penetration is only expected to rise with time ( current data users in India stands at approx 45 crore vis a vis total mobile subscription base of 120cr)

The positives -

1. Concentrated supply
   2)Ever increasing demand
   3)Turn around of Bharti Africa

The key risks -
When does all of this demand growth actually translate into numbers for incumbents. Bharti guides for an annual capex figure of 25,000cr and mentions that the high capex intensity is stated to continue( remember, this is after incurring a massive 60,000cr over the last three years). Idea and Vodafone are now gearing themselves up for a 60,000cr round of capex in the next three years. With industry profitability already nearing the zone of danger, one wonders as to how long are earnings going to remain suppressed.

I am attaching my notes from Bharti’s conference call and a few other links to help boarders get a better understanding of the industry in general and the current scenario.
Airtel and Telecom.docx (19.5 KB)

Conclusion - For any upside risks to RoE’s , both Net profit Margins and Asset turns have to increase . Net profit margins are a function of the ARPU recovery going ahead AND asset turns are a function of internet penetration( which in my mind will only go up with time) and ARPU’s . Timing the ARPU recovery is something potential investors need to watch for as that is the single biggest driving factor behind this case

Disc - token quantity; still building up on the thesis

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@ashish_agarwal wrote:

Hello Friends,
I have come across a company called CONFIDENCE Petroleum. The company has significant presence in the LPG/CNG Energy. The company has primarily dealing in four sectors:

1: CYLINDER MANUFACTURING (core business):
Function: From more than last two decades with cylinder manufacturing as its core activity. Launched a new type of product in the name of go gas elite.

Features of go gas elite: BLAST PROOF, LIGHT WEIGHT (about half of weight than metal cylinders) , Translucent Visibility, Elegant Design,EASY handling etc.

Major clients: PSU like Indian Oil, Hindustan petroleum, Bharat petroleum and Private players.
Capacity of manufacturing: Company has 15 manufacturing facility at various locations in India like Nagpur(4 units in this region),Mumbai, Gujrat, Hyderabad, Jalpaigudi, Baazpur, Jharkhand . Cylinder manufacturing capacity of the group is 5 million cylinders per annum
2: Auto LPG Dispensing Station (ALDS):In the name of GO Gas Auto LPG Stations
Function: Auto LPG Dispensing Station. Today GO Gas Auto LPG Stations are available in Maharashtra, Karnataka, Tamil Nadu, Telangana, Andhra Pradesh, Gujrat, Rajasthan, West Bengal, Madhya Pradesh, Uttar Pradesh
CAPACITY:CURRENTLY COMPANY HAS 112 LPG DISPENCING STATIONS AS PER Q22018 PRESENTATIONS.

3: BOTTLING: India’s largest Private Sector LPG bottler in India.
Major clients: Actively providing Bottling assistance to Oil major PSUs Indian Oil, Bharat Petroleum, Indian oil etc.
Capacity/PLANTS: 58 POTILLING PLANTS in 19 states .

4: Packed Cylinder Division:

Franchise model: Also they are inviting people to open their own gas agency under the name of Go Gas (350 dealers available in India)

Various links(please check this):
http://www.confidencegroup.co/home.html
http://www.confidencegroup.co/CPIL%20WEBSITE/CPIL%20Q2FY18%20Result%20Presentation/CPIL%20Q2FY18%20Result%20Presentation.pdf

Note: Not posted anything on financials of the company as I m new in investing and researching on that front . Not invested.
Please share ur views.
If anything I have written wrong please correct me.

Thanks and regards
Ashish Agarwal

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@sukhlani1 wrote:

Graphite Electrode in a Special Situation

The Entire Graphite Electrode Industry is in a special situation like never seen before…

My Reasons for the same :

1. Strong Moat - Technology is not available publicly and new entry not easy. Last tech shift happened 25 years back.

2. Expansion by Exiting Players - Wont be easy as the supply of Needle coke (one of the key raw materials for Electrode is severely constrained). Needle coke is now getting used in Batteries which has caused a huge spurt in price almost up by 6 times. Current expansion plans : Graftech 35000 tonne increase and HEG going up from 85,000 to 100,000. Around 50K tonne increase over the next few years may not be enough

3. Total Current World Capacity is roughly 700,000 excluding China ( source : http://events.steelmintgroup.com/tag/graphite-electrode-price-chart)

4. Raw Material Supply Constraint to continue : As per Industry, it takes 2 to 3 years to respond to the demand on needle coke demand expansion.

5. China’s curb on Pollution causing a dramatic shift - China almost becoming a Net Importer from Exporter of GE. Export reduction of 120,000 tonne from China will lead to 10% reduction in overall supply (http://events.steelmintgroup.com/chinese-graphite-electrode-export-dry-2018/) . The Real impact of this will be felt in 2018

6. Pollution Impact - Steel can be produced through Electric Arc Furnace (EAF) or Blast Furnace(BF) where EAF is getting preference due to high pollution in BF . China has close 300,000 tonne of BF Steel Manufacturing plants already and is planning to open up 57 new EAF plants to add 120Mn Steel in 2017 and 137 Mn Steel in 2018 resulting in higher Steel prices of Steel across the world and also forcing others to produce more steel till China’s new EAF Steel capacity comes up. Also explaining drop of 200,000 Tonne of Graphite Export in 2018.

7. Graphite Use in Steel - 2-3 kg of Graphite per tonne of Steel so not a significant input cost for Steel

8. Any Alternatives of Graphite for EAF Manufactures - We need energy to make steel. You can take either for Chemical energy through exothermic reactions Or electric energy which needs GE. However it is not an easy task. However in the past GE was not a cost factor so no research has been done in this. But at this point in time there can be a lot of attention drawn towards these estimates and cost analysis. . In some plants in China and Russia plants are running without GE only on chemical energy by altering factors such as charge etc. Most EAF have gone towards hot metal to avoid GE and power consumption. This reduces GE consumption significantly. These are very early days still

Source : http://events.steelmintgroup.com/category/global-graphite-electrode-conference-2018/

10. Net Impact on GE prices : Prices have gone up by almost 6x and is currently at 15000 USD per tonne of Grpahite up from 2500 USD per tonne

11. What is factored in GE price already : GE are sold through annual contracts and the new contracts that reflects the price generally starts from January. Having said that some GE are sold through Spot prices so we expect the real impact should reflect from Q1-2018-19 Results

12. Is it a temporary or permananet Shift - Grafftech one of the key producers have contracted upto 60% of their capacity at 9500 USD for the next 5 years. They are able to do so since they are vertically integrated and produce Needle Code internally . GI and Heg may not be able to do such long comtracts so since they cannot favtor in Needle Coke Price commitment for so long. But still the story will be intact for several years and may not be a few quarter story

13. Are the profits real - Both GI and Heg have given strong dividends to reflect that profits are real and may not be only in paper. GI has spent almost 100 Crs in Dividends , still leaving 240 Cr of Net profit retained in the last quarter along

14. Targets for GI - Difficult to predict as it depends on two key factors : Price for Needle Coke and Price for GE. Both have gone up 5 to 6 times over last one year so any estimates will be futile . But we can predict looking at the price factors that GE should clock EPS of 45 - 50 by Q4 of current year and anywhere between 100 - 120 by the coming fiscal year on a conservative basis.

All Contradictory views welcome

Disclaimer : Invested since lower levels and these are personal views derived from various reports available publicly. Pls do your own research before investing

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@SOHAN wrote:

1.singer india 2.acrysil 3.international travel house 4.nicco parks 5.cupid

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@Anil.Bajpai8819 wrote:

Sreesakthi Paper Mills (BSE: 532701) was originally started as a paper company in early 90s in Kerala. The company was profitable and was performing well till the year 2014 which is evident from the fact that they were dividend paying till 2014. After 2014 the paper business went into losses due to cycle reversal. Also Kerala government imposed strict regulations on pollution control and asked them install effluent treatment facility at their paper plant. Management by their own admission (as per AR 2016) felt it will not be profitable business to continue and decided to close down the paper business.

About the Management:
The company is owned by S. Rajkumar who has vast experience in logistics business. The management currently owns an operational logistics park in Oragadam, Chennai. Everstone which is the largest Indian Private Equity investor, took a majority stake in this part for about 200cr.

The below website has more details about their logistics business:
http://sreekailas.com/Logistics.php

Sree Kailas Logistics:
Based on AR published for the year 2017, the company plans to set-up a logistics facility in place of the current facility in kerala. The company also intends to change the name of the company to Sree Kailash Logistics.
Latest AR: https://www.bseindia.com/bseplus/AnnualReport/532701/5327010317.pdf

The company currently has some debt in the books from the erstwhile paper business which will be retired from the following- So after this company will become debt-free.

• Proceeds from sale of Palakkad Land – Sale completed, company has disclosed to exchange
• Proceeds from sale of current plant and machinery – Sale completed. company has disclosed to exchange
• Convert remaining loan to warrants/equity – Currently voting resolution going on based on announcements.
  For the new business, the company plans to use the land in Edayar to set-up warehouse and cold-storage facility.
  “Your company has undertaken the implementation of Dry Chill Cold Storage (Logistics Business) and planning to establish 2 lakhs sq. ft Warehousing space during the current financial Year. Your company has also initiated discussions with select MNCs for renting the warehousing space.” – From AR Page 19
  Hydropower: Also based on AR the company has 47% stake in 3 hydro power plants (11 mw) which are yet to commence operation.

Risks

• The new business is not operational as of now. Execution risk must be factored in for a start-up company.
• Will they be able to get new clients and make it operational.
  Compared to peers like Snowman logistics in logistics business which trade at about few hundred crore market cap, this company at a market cap of 17cr looks interesting if the promoter is able to repeat execution of what he had done in Chennai.

Comments invited. I don’t own any shares of this company as I am still studying it. It looks very risky as it is a smallcap company.

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