Equity Watch, Uncategorized

Pochiraju takes a U turn after bottoming out last year- higher bottoms and tops in 2014

Pochiraju Industries Ltd (PIL) , established in 1995, was initially incorporated as Pochiraju Flori Tech Ltd with the main business of cultivation and marketing of cut flowers. During the last 18 years ,the Corporate strategy of the company has changed  to create multiple drivers of growth anchored on its core competencies .The company is currently focusing on three business segments – Agri Business, Pharmaceuticals and Bio-Technology & Life Sciences. The organizational structure of the company is designed for effective management of multiple business.Presently the Agri Businesses  of cut flowers ,fruits and vegetables and Pharma  is contributing Rs. 120  crores to the top line and Rs. 11 crores as PAT thus giving an eps of Rs. 5.5 and P/E of less than 3.5@ CMP of Rs.18. With the commissioning of Pharma and Bio-Tech businesses when in full swing the profitability is expected to take a  quantum jump.On the Financial front, the Market cap. of the company is just about Rs.36 crores ( CMP =Rs.18.5 and 1.9 crore shares ) while the BV is close to Rs.60.

Financial Results
View in (Million) Prior Period
(in Cr.) Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-14
Income Statement
Revenue 36.16 47.38 25.80 24.37 22.20 119.74
Other Income
Total Income 36.16 47.38 25.80 24.37 22.20 119.74
Expenditure -28.40 -39.64 -22.12 -18.86 -16.95 -97.57
Interest -1.56 -1.48 -1.51 -1.16 -1.19 -5.35
PBDT 6.20 6.25 2.17 4.34 4.06 16.81
Depreciation -1.72 -1.72 -1.33 -1.33 -1.33 -5.71
PBT 4.48 4.54 0.83 3.01 2.73 11.11
Tax -0.10 -0.43 -0.05 0.05 -0.31 -0.74
Net Profit 4.38 4.10 0.78 3.06 2.42 10.37
Equity 18.91 18.91 18.91 18.91 18.91 18.91
EPS 2.32 2.17 0.41 1.62 1.28 5.48
CEPS 3.22 3.08 1.12 2.32
OPM % 21.45 16.33 14.25 22.59 23.67 18.51
NPM % 12.11 8.66 3.04 12.54 10.91 8.66
Detailed Detailed Detailed Detailed Detailed Detailed
Segment Segment Segment Segment Segment Segment

Investment is recommended on declines @ Rs. 15-16 as the share price has jumped by 25% during the last one week after declaration of June quarterly results..

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information

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Lanco Industries to take a U turn after bottoming out last year

Lanco Industries producer of Ductile Iron ( DI ),the preferred pipes for drinking water infrastructure is the only fully backward integrated producer of DI Pipes. It has capacity of 90,000 tonnes of spun DI Pipes, 150,000 tonnes of Pig Iron , 90,000 tonnes of Slag Cement,and 51,000 tonnes of Castings.Besides these it also owns captive Iron Ore Mines and that way its a fully backward integrated DI Pipes producer in India.

Lanco Industries Ltd has informed BSE that the Board of Directors of the Company at its meeting held on July 28, 2014, inter alia, has approved capex plan of Rs.325 crores to set up a Small Dia Pipe (SDP) Plant of 1,00,000 TPA for sizes ranging 100mm to 300mm dia with increased capacity of Blast Furnace and other facilities.

The Board has also approved the change of name of the Company from LANCO INDUSTRIES LIMITED to SRIKALAHASTI PIPES LIMITED which is subject to shareholder’s approval in general meeting and other statutory approval.

Financial Results
View in (Million) Prior Period
(in Cr.) 2014 2013 2012 2011 2010
Income Statement
Revenue 989.40 863.89 787.00 728.10 691.30
Other Income 7.24 10.02 8.42
Total Income 996.64 873.91 795.42 728.10 691.30
Expenditure -872.38 -812.64 -721.74 -638.87 -564.76
Interest -54.90 -60.42 -57.86 -14.67 -20.62
PBDT 69.36 0.86 15.83 74.56 105.92
Depreciation -27.94 -22.18 -19.99 -18.72 -17.95
PBT 41.42 -21.33 -4.17 55.85 87.98
Tax -2.72 8.23 0.22 -13.82 -30.04
Net Profit 38.70 -13.10 -3.95 42.03 57.94
Equity 39.76 39.76 39.76 39.76 39.76
EPS 9.73 -3.29 -0.99 10.57 14.57
CEPS 16.76 2.29 4.03 15.28 19.08
OPM % 12.56 7.09 9.36 12.26 18.30
NPM % 3.91 -1.52 -0.50 5.77 8.38
Detailed Detailed Detailed Detailed Detailed

Company is likely to make Net profit of Rs. 60 crores for FY15 , a 50 % jump over FY14 ..This will give an EPS of Rs. 15 for the year ending 31st March 2015..

At Rs. 50 share seems to be undervalued  and is available at P/E of  just 3.5 based on its future FY 15 PAT of Rs. 60  crores or an EPS of RS.15 .All other producers of DI Pipes are quoting at P/E of 10+  including its parent Electro Steel Castings. Demand for DI Pipes is expected to grow at more than 30 % as Govt. has set aside Rs. 75,000 crores for Drinking Water Infrastructure because of growing urbanisation and inadequate existing  infrastructure. Besides domestic demand there is growing overseas demand too for DI ppes. Most important  for Lanco is its parentage in Electrosteel Castings and there is a distinct possibility of Lanco merging with its parent. In that scenario the share will be re-rated and will quote at P/E of about 10.

Buy is recommended on declines near to Rs. 45-50, as the share has appreciated by 25% during the last 2 months

Note : Lanco Industries was recommended by us in April 2007 and again in 2010 at Rs. 35

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision

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Uncategorized

Arrow Textiles may turn out to be a multibagger like Arrow coated products

Arrow Textiles a  company that resulted from demerger of Arrow Webtex in November 2008 is about to take off into a new trajectory more or less like Arrow Coated Products which was recommended in this column some 3 years back .

Arrow Textiles customers  are well known names in undergarments sections of textile industry namely :

Customers
(in alphabetical order)
Woven Labels Fabric Printed Labels Woven Elastic Tapes Woven Rigid Tapes
AMUL Brand Hosiery
Colorplus
Hennes & Mauritz
Indian Terrain
Jockey
LUX Brand Hosiery
Fila
Cubus
Rupa Brand Hosiery
Several Exporters & Domestic Brands
VIP brand Hosiery
Turtle

And over the last five years  the company’s Financial performance has improved considerably and presently EPS is close  2 and P/E of less than 5.

(in Cr.) 2014 2013 2012 2011 2010
Annual Trends
Revenue 41.90 36.87 31.94 29.31 23.43
Other Income 0.84 0.48 1.40 0.04 0.01
Total Income 42.74 37.35 33.33 29.36 23.44
Expenditure -32.70 -29.99 -25.84 -23.22 -20.60
Interest -1.60 -2.85 -4.31 -1.45 -1.30
PBDT 8.45 4.50 3.18 4.68 1.54
Depreciation -3.17 -3.03 -2.89 -1.88 -1.42
PBT 5.27 1.47 0.29 2.80 0.12
Tax -1.69 1.52 -0.56 -1.43 -0.56
Net Profit 3.57 2.98 -0.27 1.38 -0.44
Equity 19.04 19.04 19.04 13.60 13.60
EPS 1.88 1.56 -0.14 1.01 -0.32
CEPS 3.54 3.15 1.38 2.39 0.72
OPM % 23.96 19.94 23.46 20.91 12.11
NPM % 8.53 8.07 -0.85 4.69 -1.88
Detailed Detailed Detailed Detailed Detailed
View in (Million) Prior Period
Quarterly Trends

  • (in Cr.) Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-14
    Income Statement
    Revenue 10.92 11.83 11.44 9.42 9.21 41.90
    Other Income 0.01 0.17 0.02 0.21 0.45 0.84
    Total Income 10.93 12.00 11.46 9.63 9.66 42.74
    Expenditure -8.57 -8.51 -9.47 -7.51 -7.21 -32.70
    Interest -0.27 -0.32 -0.35 -0.41 -0.52 -1.60
    PBDT 2.09 3.17 1.65 1.71 1.93 8.45
    Depreciation -0.80 -0.80 -0.80 -0.79 -0.78 -3.17
    PBT 1.29 2.36 0.85 0.91 1.15 5.27
    Tax -0.53 -0.75 -0.34 -0.27 -0.34 -1.69
    Net Profit 0.76 1.62 0.50 0.64 0.81 3.57
    Equity 19.04 19.04 19.04 19.04 19.04 19.04
    EPS 0.40 0.85 0.26 0.34 0.43 1.88
    CEPS 0.82 1.27 0.68 0.75 0.84 3.54
    OPM % 21.57 29.46 17.42 22.47 26.57 23.96
    NPM % 6.96 13.66 4.41 6.84 8.79 8.53
  • Given the growth in  user Industry like Page , Rupa, TT, Maxwell etc, its just a matter of time that Arrow Textile might follow the same trajectory like that of Page .

Buy is recommended at CMP ..

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information

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Lanco Industries going great guns

Lanco Industries producer of Ductile Iron ( DI ),the preferred pipes for drinking water infrastructure is the only fully backward integrated producer of DI Pipes. It has capacity of 90,000 tonnes of spun DI Pipes, 150,000 tonnes of Pig Iron , 90,000 tonnes of Slag Cement,and 51,000 tonnes of Castings.Besides these it also owns captive Iron Ore Mines and that way its a fully backward integrated DI Pipes producer in India.

Electrosteel castings another major DI Pipe producer owns 57 % of Lanco’s Rs. 39.7 crore equity. Market cap. of Lanco is just about Rs. 270 crores @CMP of Rs. 66. Over the last 3 years Lanco has installed 150,000 tonnes capacity Coke Oven Plant  and 12 MW Power Plant based on Waste Heat Recovery from Coke Oven Plant. Replacement costs of all its plants excluding Captive Iron Ore mines will be above Rs. 500 Crores. Co’s top line for FY 10 is expected to be more than Rs. 700 crores ,growth of about 10 % YOY. Hoewever its bottom line is expected to be Rs. 60 crores a growth of 233 % over FY 09 PAT of Rs. 18 crores.Check out the Q3 results below:

http://www.lancoindustries.com/Lanco%20Q3%20Results.pdf

At Rs. 60 share seems to be undervalued  and is available at P/E of  just 4.5 based on its future FY 10 PAT of Rs. 60  crores or an EPS of RS.15 .All other producers of DI Pipes are quoting at P/E of 10+  includig its parent Electro Steel Castings. Demand for DI Pipes is expected to grow at more than 30 % as Govt. has set aside Rs. 25,000 crores for Drinking Water Infrastructure because of growing urbanisation and inadequate existing  infrastructure. Besides domestic demand there is growing overseas demand too for DI ppes. Most important  for Lanco is its parentage in Electrosteel Castings and there is a distinct possibility of Lanco mergig with its parent. In that scenario the share will be re-rated and will quote at P/E of about 10. 

Buy is recommended on declines near to Rs. 60, as the share has appreciated by 25% during the last 2 weeks.

Note : Lanco Industries was recommended by us in April 2007 at Rs. 35

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision

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Ram Setu and Gammon Bridge

The Lord surveyed the Ram Setu and said “Hanuman, how diligently and strenuously you and your vanara sena had built this bridge several centuries back. It is remarkable that it has withstood the ravages of the climatic and geographical changes over centuries. It is indeed an amazing feat especially considering the fact that a bridge at Hyderabad built by Gammon using latest technology collapsed the other day even before they could stick the posters on its pillars.” Hanuman with all humility spoke “Jai Sri Ram, it is all because of your grace. We just scribbled your name on the bricks and threw them in the sea and they held. No steel from TISCO or cement from Ambuja or ACC was ever used. But Lord, why rake up the old issue now.” Ram spoke “Well, Hanuman some people down there want to demolish the bridge and construct a canal. The contract involves lot of money and lot of money will be made. They will make money on demolition and make more money on construction. ” Hanuman humbly bowed down and said “Why not we go down and present our case” Ram said “Times have changed since we were down there. They will ask us to submit age proof and we don’t have either a birth certificate or school leaving certificate. We traveled mainly on foot and some times in bullock carts and so we don’t have a driving license either. As far as the address proof is concerned the fact that I was born at Ayodhya is itself under litigation for over half a century, If I go in a traditional attire with bow and arrow, the ordinary folks may recognize me but Arjun Singh may take me to be some tribal and, at the most, offer a seat at IIT under the reserved category. Also, a God cannot walk in dressed in a three-piece suit and announce his arrival. It would make even the devotees suspicious. So it is dilemma so to say.” “I can vouch for you by saying that I personally built the bridge.” “My dear, Anjani putra, it will not work. They will ask you to produce the lay-out plan, the project details, including financial outlay and how the project cost was met and the completion certificate. Nothing is accepted without documentary evidence in India. You may cough but unless a doctor certifies it, you have no cough. A pensioner may present himself personally but the authorities do not take it as proof. He has to produce a life-certificate to prove that he is alive. It is that complicated.” “Lord can’t understand these historians. Over the years you have given darshan once every hundred years to saints like Surdas, Tulsidas, Saint Thyagaraja, Jayadeva, Bhadrachala Ramdas and even Sant Tukaram and still they disbelieve your existence and say Ramayana is a myth. The only option, I see, is to re-enact Ramayana on earth and set the government records straight once for all.” Lord smiled “It isn’t that easy today. Ravan is apprehensive that he may look like a saint in front of Karunanidhi. I also spoke to his mama Mareecha, who appeared as a golden deer to tempt Sita maiyya when I was in the forest and he said that he won’t take a chance of stepping on earth as long as Salman Khan is around

 

Author unknown.  Sent by Dr Ranjit Shahani  Thanks Ranjit

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Equity Watch, Uncategorized

Spice Communication IPO WATCH Expect to list at Rs. 52-57

Spice Communications

­­­­­­­­­­­­­­­­­­­­­­­­­­­Neutral                                                                                Price Band – Rs.41-46

Issue Details

Objects to the issue

The current initial public offering (IPO) is to raise Rs 464 crore at the lower band (Rs 41) and Rs 520 crore at the upper band (Rs 46). The net proceeds from the issue are to be used for part repayment of long-term debt, for payment of NLD and ILD licence fee, for meeting related capital expenditures to set up base infrastructure for NLD/ILD amounting to Rs 63.60 crore, for paying vendor(s) for network equipment and other capital expenditure amounting to Rs 177.63 crore, and for general corporate purpose and public issue expenses. Spice Communications has issued 2.49 crore of equity shares at a price of Rs 45 to certain investors pre-IPO and raised Rs 111.93 crore.

Background

Promoted by Dilip Modi of the B K Modi group, Spice Communications provides cellular services in Punjab and Karnataka. Telekom Malaysia will hold a 39.2% equity stake post-issue compared with 40.8% of the Modi group. The company was the second largest cellular services provider in Punjab and the fifth largest cellular services provider in Karnataka, measured by the total number of subscribers with a combined market share of 14.49% in these two states (Punjab: 23.9% and Karnataka: 7.5%) end March 2007. The subscriber base was 3 million (2.05 million in Punjab and 0.95 million in Karnataka) with network coverage of 537 towns in Punjab, covering approximately 55% of the state population, and 229 towns in Karnataka, covering 33% of the state population end May 2007.

Spice Communications has pending applications for licences to provide cellular services in additional 21 circles throughout India . The company was recently awarded a national long distance (NLD) licence and international long distance (ILD) licence by the Department of Telecommunications and it intends to initially set up base infrastructure for a capacity of 30 million minutes per month across 15 locations in India .

Investment Rationale

Brand equity to support growth

Ø       Has received NLD and ILD licences and proposes to offer data transmission services and voice transmission for calls originating and terminating on most of India’s and global telecom networks. It will be basically taking capacity on lease rather than setting up its own network. This will improve the operating profit margin.

Ø       One of the objects of the issue is to repay part of debt, which is likely to reduce the interest burden.

Ø       The Indian telecom industry is one of the fastest growing in the world adding nearly six million subscribers a month. The mobile subscribers base is estimated to increase to approx. 210 million by the year ending March 2008 (FY 2008), from the current level of 167.44 million subscribers end April 2007. Factors like falling handset costs, attractive tariffs and extensive reach have reduced the entry barriers for new subscribers and, thus, expanded the markets available to telecommunication service providers. The presence in the country’s richest state, Punjab , is likely to translate into volume growth.

Risks and Concerns

Ø       In the absence of pan-India presence like other integrated operators, unable to provide seamless roaming services and is forced to share its revenue with other operators with whom it has roaming arrangement for its subscribers. Though licences in other circles have been sought, the current state of financials will hamper expansion in other circles in a major way in foreseeable future.

Ø       Of the last five completed financial years, there were net losses in three years on account of low operating profit margin compared with the industry, high interest and depreciation. Losses have been incurred even in FY 2007. On account of continuous losses, the net worth has eroded. Accumulated losses stand at Rs 684 core (higher than the current issue size of around Rs 500 crore).

Financial Performance

In Rs. Cr.

Particulars 0206 (12) 0306 (12) 0406 (12) 0506 (12) 0606 (12) 0612 (6)
Revenue 501.70 494.26 536.34 606.57 661.49 385.11
OPM (%) 31.9 33.6 28.0 27.4 22.2 22.0
OP 160.04 166.02 150.41 166.48 146.56 84.61
Other Income 31.16 85.39 18.64 36.91 18.79 8.84
PBDIT 191.20 251.41 169.05 203.39 165.35 93.44
Interest 106.11 76.64 68.05 71.90 86.97 63.80
PBDT 85.09 174.77 101.00 131.49 78.38 29.64
Depreciation & Amortization 100.45 117.16 123.51 123.93 145.82 70.96
PBT -15.35 57.61 -22.51 7.56 -67.44 -41.31
Tax 0.00 0.00 0.00 0.18 1.30 0.49
PAT -15.35 57.61 -22.51 7.39 -68.74 -41.80


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Uncategorized

Investmet in Nahar Spinning can spin profits

After remaining suspended on BSE and NSE for about 2 months because of demerger and financial re-engineering, Nahar Spinning Mills started trading on Friday the 23rd March, 2007.The share saw huge selling on first day and was frozen at the lower circuit @ Rs. 149.

Looking at the fundamentals of the company with Equity capital of Rs. 18 crores ,3.6 crore shares of FV Rs. 5 ,expected turnover of Rs. 1000 crore + for FY07 and Rs. 1250 crores for FY08 and PAT of Rs. 100 crores and Rs. 125 crores for FY 07 and FY 08 respectively, the share is available at P/E of less than 5.Its very much underpriced and one can take a position in this stock for short and long term .In the long term company is expected to come out with a scheme of demerging the huge land bank that the company is having and giving the shares of this co tentatively named as Nahar Realty to its shareholders.This will unlock the shareholders value and take the company’s share to dizzy heights just like Bombay Dyeing.

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.

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