2014 has been an eventful year. At the macro level, we had a new government, an enthusiastic new leader, a great bull run… and at the personal level, we attended many more AGMs, read more books and met many great intellectual minds in the investing world. We had the highest ever visitors on both Dalal-Street and Screener, together exceeding an average traffic of 1 million page views every month, with a total reading time of over 750 hours each day.

Top performers and learnings:

Last couple of years have been great for a stock picker as the market has well rewarded the companies with niche business models, consistent growth and good corporate governance. Companies with healthy cash flows and a passionate management have been re-rated at an unprecedented pace.

Growth stocks such as Astral Poly, Avanti, Ashiana, Kitex, Shilpa, Atul Auto, Ajanta Pharma, Poly Medicure and Mayur Uniquoters performed exceptionally well. ValuePickr community proved to be an invaluable platform to collaborate with dedicated fellow investors and bring out the best of discussions. It feels great to see Shilpa Medicare and Atul Auto getting mentioned even now as the high potential ideas in the Motilal Wealth creation study.

Value stocks such as Oriental Carbon, MPS, Canfin and Lumax Autotech too performed equally well. These were trading at a sheer undervaluation despite having a good business model with a healthy growth. Reaction to the SEBI’s call auction rule also provided us an opportunity to invest in few micro caps such as Premco Global, Dynemic Product, Freshtrop and Kovai Medical. They were available at throwaway valuations, consequently providing some fantastic returns. Key is to follow value, which is always there, whenever the general mood is dull .

Worst performers and learnings:

GRP – A big learning has been that one should learn to detach oneself from their favorite idea. Though the stock hasn’t fallen since quite sometime, one has had to incur a lot of opportunity cost. The company continues to struggle and given the low natural rubber prices and demand, there hasn’t been any material improvement in operations of the company.

Cairn India – We got attracted by the statistical cheapness of the stock and the huge cash pile the company had been sitting on. It seemed a very safe idea with hardly any downside. But the stock subsequently fell almost 30-35% given the big fall in prices of crude oil. While it could not have been predicted, management’s action on cash also contributed to the fall.

Interesting articles:

Professor Bakshi’s lecture on Relaxo (along with the lecture on paying up) was a superb article which helped us in adding another tool as to how one should try and evaluate a company for a long term perspective. We never used to think like this before these articles.

Ian Cassel’s posts on Conviction to Hold and Averaging Up are also very good reads.

Do go through Charlie Munger’s AGM Notes, where Munger is (as usual) at his best.

We also recommend our readers to watch these movies:

Other People’s Money
Jiro Dreams of Shushi

We wish everyone a Very Happy New Year :).

DISCLAIMER: We are not expressing any opinion on on any of the stocks mentioned in the post. We are only sharing about what we think went right or went wrong in our analyses - it does not translate into a buy or sell call. The only opionion expressed in the above post is for the movies and articles.

The post Reviewing 2014 appeared first on Dalal-Street.

We wish you and your family a very Happy and Prosperous Deepawali. Samvat 2070 has been a great year for investors and the future looks equally promising.

Lately, we haven’t been posting much because of the guidelines of SEBI on research analysts. The guidelines come at a needed stage as there is a lot of volatility and mis-selling by vested interests which cause harm to retail investors.

We are not sure about the impact of the guidelines on the blogs and forums and await for more clarity on rules and compliances.

Herewith, we are NOT expressing any opinion on any of the stocks. We are just providing an update on the quarterly numbers of stocks discussed earlier:

Shilpa Medicare: We attended the company’s AGM last month. The management is focused on Oncology space -a sector which requires a very long term vision. It takes a planning of at-least 6-8 years to be able to deliver the right product at the right time. Shilpa has been building a pipeline which is expected to bear fruits in over the next 2-3 years. (Detailed of the company have been discussed in earlier posts).

Kitex Garments: The company has declared an excellent Q2FY15 result. It is hard to find companies with such a good profitability, growth and leadership in niche segment. We would recommend our readers to listen to the company’ conference call.

Avanti Feeds: It is interesting to see Malabar India Fund take 1%+ stake in Avanti Feeds as per the latest shareholding pattern filed by the company. As per the industry articles, the segment continues to perform well. The recent cyclone in the state of AP and Orissa has not caused much damage to the shrimp industry.

Once again, we wish all our friends and their families a very Happy & Prosperous Deepawali.

Happy Investing!!!

The post Wish you a very Happy and Prosperous Diwali appeared first on Dalal-Street.

The fabulous March 14 quarter, coupled with the increase in the gross block of the company got us more excited about the company. When we watched a few videos about of the company’s facilities ( https://www.youtube.com/watch?v=GEFzq8CIhm0 ), we ensured that we attend the company’s AGM. At the AGM, we were fascinated by the passion and track record of the company’s management . We were able to understand company’s focus on quality and timely delivery. The value proposition for the company is huge volumes and the inherent employee efficiencies, both of which take years if not a decade to replicate (more discussed here). Our seniors also highlighted about the huge positive impact the company is making in the lives of thousands of women by providing them a good work environment (including fooding and stay).

Donald Francis, of ValuePickr, pursued the story after the AGM to cover the company in even more detail. Using his scuttlebutt approach, he interviewed various vendors, suppliers and customers across the textile and infant garment industry to understand the nuts and bolts of the infant garment industry. Donald then followed up all the doubts and missing pieces in his Q&A. The Q&A is available on the ValuePickr website and we recommend you to go through the same. We have shared a few extracts from it:

You have set up a high-quality infrastructure on par with the best in the world with state-of-the-art advanced machinery. Who were the early influencers?

Well I guess the credit for it goes to my dad and the early training he put me through. He was a strict disciplinarian and he ensured I learnt to respect every aspect of the work ongoing in our factory. As a 13 year old, I was started out from cleaning the lavatories, to the shop-floor, to becoming a machinist, technician, bleaching and processing to garmenting operator.

I grew up with the ethos and the confidence of trying to do something different from the run-of-the-mill. We were not afraid to take risks.

We make it a point to publish results immediately after the year-end – even that is a creative first!

How do you see KCL and KGL growing individually in the next 2-3 years?

Both will double the capacities. Both should keep growing at 20-25% annually.

What about the Employee Base? ~4000 are direct employees at KGL. What is the total KGL+KCL direct employee strength? How many are contracted?

Total employee strength is ~8000. There are no contract labourers.

While capacities are being enhanced what about the Labour situation? will that also need to be doubled ~16000 employees in 2-3 years? And, if you continue to double volume capacities every 2-3 years – realistically, where do we see Labour counts growing to in the next 3-6-9 years?

Actually we will need only incremental 10% more additional Labour to reach 1.1Mn/pieces per day.

That’s something difficult to grasp and will take some doing. Kindly share how will this be achieved?

Firstly productivity improvements through use of advanced technology, backed up by productivity improvements through increasing efficiencies. Thirdly automation is being brought in new areas. For example we are installing a shaving machine that will bring in 4:1 savings in manpower. That itself will free up 300 people. We are bringing in lot of automation in Kitchen that will free up another 100 people. Automatic Roti-Maker (just need to put the Maida) producing 60 Chapaties every minute. Automatic Idly-Maker producing 2000 idlies per hour. 30 kg onions will get peeled in 1 hour. 2000 plates will be cleaned every hour. All imported fully automatic machines being introduced. Imported German machines for Vaccuum Cleaning that will bring in 75% labour saving.

It’s not one single thing that will do the trick, but a whole host of new initiatives in every area that we can identify where we can improve productivity and/or increase efficiency. Together we are confident these will deliver double the capacity at low incremental labour addition.

Read the complete Management Q&A on ValuePickr

Recent conference call of investors with MD

Annual Reports of the company since 1996

The post Kitex Garmets: Management Q&A appeared first on Dalal-Street.

First of all a heartiest congratulations to everyone for giving such a clear mandate. It was the need of the hour for our country and society to have a better and stable government. It is heartening to see that this time the election has been won on the agenda of development. From inaction and scams, lets hope the economy gets back on track.

The markets have witnessed a major change and upliftment in its mood over last few weeks. Those who were invested from before must be enjoying the gains. One should be careful, however, to not get carried away. These broad rallies are very useful for portfolio reconstruction – i.e. getting out of ideas or mistakes where the conviction levels were not high and moving into companies with a better clarity and visibility.

Lately, we have not been posting much because the companies we have discussed earlier are performing quite well fundamentally and continuing to grow consistently. We feel they still have a good long term potential.

Brief updates on our existing ideas:

Astral Poly – While the company continues to deliver an expected growth of about 30%, the stock keeps surprising everyone through a regular re-rating. Though the stock does trade at high valuations now, we recommend reading this article for some insights about the company’s high quality of business, management and growth prospects going forward.

Ajanta Pharma – Ajanta has once again come up with an excellent quarter – it continues to surprise everyone with the quality of its numbers. Do see their latest presentation, which gives a lot of insight on the brands they own and other qualitative aspects of their business. The slide number 14 is very interesting and is one of the key reasons behind their good growth and superior margins.

Shilpa Medicare – Shilpa Medicare too has reported a good quarter:

Its good to see a consistent increase in the gross block of the company. Recently the company has raised 75 Cr by way of preferential allotment to an FII. The company has been developing a product pipeline over the last 3-4 years; we expect the new facilities and products to give a revenue growth of 25-30%+ CAGR over the coming years.

Avanti Feeds – The company continues to maintain high growth rates with a revenue growth of 75% in 2014. Its amazing to see that the company has grown from just 72 Cr turnover in 2009 to 1135 Cr in 2014. The balance sheet is quite healthy with a debt of just 50 Crores.

As per a recent article on the company, the company has recently set up a 85,000 tonne plant in addition to its capacity of 1,40,000 tonnes. With the industry continuing to do very well, it is expected that Avanti may again deliver high growth of 30-50% for the coming year FY15.

Its also good to see promoters buying over 1.7 lac shares since 1st April, 2014.

*Caution: Shrimp industry is a high risk industry, often affected by shrimp diseases and natural calamities.

Kitex Garments – We visited the AGM of the company and it was a superb experience. Its one of the those extra-ordinary entrepreneurship stories where a person has created a great company from scratch, all in 15-20 years.

Today, KGL is the third largest infant garments manufacturer in the world and supplying to some of the best names in the world including Gerber, ToysRus and Carter. They are known for manufacturing the best quality garments. Compared to a normal textile industry, the infant’s garment industry does not have a high competition. Infants can be allergic to dyes and chemicals, or chew the buttons – thus Kitex uses the best of the dyes and yarns. They also invest heavily into social compliances and provide an air-conditioned factory, free food and free stay to almost 9000 workers, of which 90% are females. The company had done a recent capex – it aims to be the biggest in the world in this year and eventually double the current size in 3-4 years.

Though the stock has had a sharp run up in recent times, we feel that it is one high quality business and should do well over a long term.

GRP – The company continues to face tough times. We were expecting the things to get better with the improving turnover, but this quarter has been a disappointment. Till the previous quarter, the issue was underutilization of capacity and problems at the new plant set up; hence we had a hope of better times as and when the economy improves. During the last quarter, however, the raw material cost as a percentage of total cost has increased substantially and is now a new cause of worry. We have reduced some exposure (by about 15-20%) and look forward for an update at the company’s upcoming AGM.

Oriental Carbon – After a long wait, the company has posted a good set of numbers. One of the big positives is the increase in dividend from Rs 5 last year to Rs 7 this year. The stock is trading at 5 times earnings with a price to book value of 1.

Amongst the new ideas, we are working on Anuh Pharma these days. The latest quarterly numbers hint an improvement in the company’s operations. From being a general bulk drug company, the company seems to be making efforts on R&D and entering regulated markets. The negatives are – 1. the group has several other unlisted companies which are also into pharmaceutical business and 2. the listed company has had a dull past.

We look forward to a strong budget over the next month. Happy investing!

The post Updates on the Quarterly Results – Q4FY14 appeared first on Dalal-Street.

The magazine’s cover story is on “Equity Investing: Myths vs Reality.” Its an interesting issue and you might like to get a copy of the magazine :).

The markets have done quite well in the recent months. Many of our stocks such as Astral, Ajanta, Mayur Uniquoters, Atul Auto, Avanti, MPS, Poly Medicure have created new highs.

We haven’t been writing about new ideas over the last two months because most of the companies we have held are quite good and it is better to just sit on them and watch. With the markets getting into action, it is not easy to find many new ideas. Owing to the good returns, it might be a good option to build some liquidity/cash in portfolios (around 15-20%).

Stock Updates

Kitex Garments: The company is one of the first ones to declare the Q4FY14 results. The numbers are fantastic: sales have increased by 56 %, operating profit margins have increased to 24% and the profits have increased by 170 %. Looking at the increase in the gross block in the balance sheet, it seems the expansion has completed and the current performance may sustain. In the whole textile sector, it is one of the rare companies with a differentiated business model and good quality earnings.

Shilpa Medicare: The company posted very good performance in Q3FY14. The stock price has done well too. The interesting thing is that the growth has started coming even when the USFDA approval hasn’t come for the new formulation plant. We continue to be optimistic about the company’s long term prospects. IndiaNivesh has recently published a detailed coverage on the company; we recommend our readers to go through the same.

Ashiana Housing: Prof. Sanjay Bakshi has written some excellent blog posts related to Ashiana Housing. The posts help us understand the reasons for the superior business model of the company. The management interview discusses the company’s vision and highlights the clarity in the management’s processes. We recommend the readers to go through the posts.

New ideas under study

PTC India Financial Services: The company is promoted by PTC India. It provides financing to energy projects. Earlier the company also had investments in several projects, but divested from them at good profits. Although the company suffers from risks related to power and PSU sectors, it has been increasing its loan book at a brisk pace of 30 to 40%. The growth is expected to accelerate if the sector sees some improvement. At CMP of 14, the stock is trading at about 6 times its normal earnings, half the book value and with an expected dividend yield of over 4%.

Technocraft Industries: Its an interesting company to delve deeper. The company has 3 main segments of which the drum closure division is the primary one. Drum Closure is the lid used to seal the oil and chemical containers. Technocraft is the world’s second largest player in the drum closure business with a market share of 35% . The patented technology and the monopolistic business provide the high margins. The company gets a turnover of around 225 crores and operating profits of around 65 crores from this segment. The market capitalization of the company is 274 crores.

Although the drum closure division is the cash cow, the other two divisions – Scaffolding and Textiles – are low return commodity businesses. These two divisions bring down the overall profitability and return on equity of the company. The company has not been able to utilize the spare funds efficiently and also lost some money in NSEL (booked 50% loss in the December quarter).

If few things can be corrected, the stock has lot of value at CMP of 90.

Freshtrop Fruits: This company is one of the leading exporters of high quality grapes and other fruits from India. In past, the company was one of the earliest and most advanced players with best of the technology to export high quality grapes. Currently the company is supplying to one of the best retailers including ASDA, Tesco, Marks & Spencer, DelHaize and others. Over the last 3 to 5 years, the company has been experiencing a few problems:

1. Europe stopped import of grapes from India due to high pesticide.
2. They had done a major capex for fruit processing plant which has been a drag on the financials.
3. In the current year, there has been a major hailstorm and the results might be poor (we would request our readers to provide the inputs if possible).

We came across a recent article on the bright prospects of the industry. It might be a turning point for the company over the coming years.

Few other ideas which are cheap on valuations and may fit well into Graham kind of plays are: Damodar Industries and KCP Sugar. Another stock which looks opportunistic is Waterbase Ltd based on the superb run-up in Avanti Feeds.

For the upcoming elections, we would request all our readers to caste your vote – your investment returns might depend on it.

Link to manifestos
AAP: http://www.aamaadmiparty.org/aap-manifesto-2014
BJP: http://www.bjp.org/manifesto2014
Cong: http://inc.in/manifesto/

The post Money Today Q&A and Updates on Stocks appeared first on Dalal-Street.

We have an US CEO who has been with us for last 5 years and assembled together a top Team in International Generics business. Success has come because of Product Identification ability. Year-wise market-wise plans are drawn up till 2024

We have built a strong IP Culture/Team over last 5 years or so.

We have been following Alembic Pharma for last few quarters. We mentioned about the company in our Diwali post.

Alembic Pharma is among the oldest companies in the Indian pharma industry. But no major developments took place over the last decade as the company was more into the domestic markets, and limited to the anti-infectives, cough and cold segment which are highly competitive and matured. Over last 2-3 years there has been a contrasting change in the company. The revenues are growing (earlier the growth was 10% now it is 20-25%), the margins are expanding (earlier margins were 13-15% now it is 18-20%) and the balance sheet is getting stronger and efficient.

Reason for the change is the shift towards the international generics. This segment is expanding quite quickly for the company – from about 100 odd Cr in 2010 to 235 Cr in 2013 to 450 Cr in 2014 (expected). This segment has a potential to scale up to 1000 Cr turnover over the next 2-3 years given a strong product pipeline prepared by the company. Alembic Pharma has filed 60 ANDAs (just 18 five years back and 31 are approved till date). On the domestic side, the company has been entering the specialty segments such as Ophthalmology, Cardio, Anti-Diabetic etc, which have a higher growth and a better margin.

Another key thing to observe is the high spend on R&D and yet improving margins and profitability:

ValuePickr team has conducted an in-depth management interview and we would recommend our readers to go through it for more insights. (Might require a free login.)

Quarterly result updates:

1. Ajanta Pharma: The company has once again posted a superb set of numbers beating the best of the expectations. The investor presentation provided by the company is highly informative about the business model and one should have a look at. Going by the numbers, the company may end the year with an EPS of about 55-60+ and stock becomes attractive at about 900 levels. One risk to watch out for is the sustainability of margins going forward.

2. Avanti Feeds: The company has posted a stellar set of numbers. Due to the several risks which popped up during the last couple of quarters, we were expecting earnings to get temporarily hit but the company has posted an all time best quarterly result! The company has been able to maintain the 90% CAGR growth rate of over last 3-4 years. We feel the company has good potential even from current prices.

3. Atul Auto: The company has been able to maintain the growth rate at about 18-20%. It is remarkable to see the company growing and gaining market share in such a challenging environment wherein most of the other players are experiencing pressure on margins and reporting a negative growth. Atul Auto has robust cash flows and is focusing on expanding its dealer network and penetration in new states. Given the current capacity, the company has potential to increase its turnover by another 25-30% without incurring any substantial capital expenditure.

4. Astral Poly: Astral has been one of our best performers and a multi-bagger stock. The company has again delivered a 30% growth. Due to the reduced forex volatility, the forex losses too have come down a bit. The stock has undergone a lot of PE re-rating and the stock is trading at about 27-28 times FY14E earnings now. Though there is still a visibility for growth in coming years, we start getting cautious at high PE multiples. One may do small profit bookings on rises.

5. Canfin Homes: The company has once again posted a superb growth of 50%+. The current management has been doing excellent work but the stock is not getting its due recognition due to the fear of a PSU tag. If we look at the financial ratios, the Gross NPA are very low at under 1% and falling continuously. We feel the valuations are attractive and the stock may do well.

6. GRP : GRP had been going through a very rough patch over the last 1 year due to the demand slowdown and the capex done last year at Tamil Nadu. On the positive side, the things seem to have stabilized and the company is recovering quickly. GRP has delivered almost 30% topline growth in this quarter though the margins are still under pressure. Its tough to take a call as to how soon the margins will come back but we continue to be optimistic about the long term horizon.

7. Oriental Carbon: The company has after a long time come out with a very good set of results. We feel the right way to look at the numbers is to look at the earnings for the 9 months of FY14 till now. The earlier quarterly results were subdued due to forex provisions and this quarter results are better due to some forex reversals. Company has been a beneficiary of rupee depreciation and should see better margins going forward. One key risk is the pending court case on the Mundra plant.

8. Selan Exploration: In the last post we mentioned about Selan. In the Q3FY14 results, though the numbers are flat but by way of notes to accounts, the company has confirmed that it has drilled 6 new wells and further activities are happening. Its a big positive as the company used to do a production of around 2.50 Lac barrels per annum till 2010, but due to lack of regulatory approvals for new drilling over last 2-3 years and oil wells being “declining in nature” the overall production fell each year for last 3 years.

Since the approvals have started coming in now, Selan might be able to scale up production to 5 lac+ barrels per annum over the coming years. One should keep a watch of this company.

The post Alembic Pharma Q&A and other updates appeared first on Dalal-Street.

Dear Friends,

Dalal-street team wishes you & your family a very Happy & Prosperous New Year!

2013 has been a great year for markets, especially the mid cap area we focus on. The best thing about markets has been that it has focused on quality and rewarded companies with good balance sheet, business model and corporate governance. Several stocks which we discussed earlier like Astral Poly, Ajanta Pharma, Atul Auto, Mayur Uniquoters, Poly Medicure etc underwent multiple re-ratings and delivered multi-bagger returns. While at the same time cos with poor track records and corporate governance standards are just languishing and long term returns have been very poor. This will go a long way in encouraging investors, companies etc to seek something unique and establish high governance standards.

“In the short run, the market is a voting machine but in the long run it is a weighing machine.” – Benjamin Graham

We have great hopes for 2014. Being the big election year, it is heartening to see a big political change happening. People are demanding better governance here too and these things will hopefully make India a better country and speed up the development and prosperity in years to come.

Another positive thing happening in our market is the dilution of Periodic Call Auction System(PCAS) introduced earlier which had affected more than 2200 companies and trading in them had become very tough which had impacted the small investors and sentiment in a big way. As per the new rules, most of the stocks will come out of this rule. Over last few months we had been working on a basket of companies trading at very attractive valuations but affected due to this rule, we expect them to do well.

Stock Talk:

In our last blogpost we had mentioned some ideas we were working on. Here are more details:

1. APM Industry: Though the co is present in the un-exciting textile industry however the nos of last 4-5 years are worth taking a look. The sales have almost doubled from 160 Cr in 2008 to 290 Cr in 2013 while the margins have improved every year from just 5.5% then to 13.50% in 2013 and hence the net profits have increased from less than 1 Cr to 22 Cr in 2013.

The most interesting part is the balance sheet – unlike other textile companies, the co has used the earnings to repay debt and has become debt free. Plus the dividends have been increased every year and the stock offers an attractive dividend yield of 6% at CMP of 27. PE ratio is just 2.5 and stock is trading below BV.

Risk – as its a very small company, its tough to access the reason behind the change. If the same is due to cyclicality in end product rather than actual management efforts then it may be a value trap.

2. Muthoot Capital: Muthoot Capital is a part of the famous Muthoot group but they are not into gold loan financing as generally perceived. They are a NBFC with focus on lending to two wheelers, three wheelers and light commercial vehicles sector. The company has been growing aggressively at a CAGR of 55% over last 5 years. They do target to maintain high growth rates going forward.

The valuations seem attractive as the stock is trading at 4.5 PE, less than 1 times BV and providing a dividend yield of 5%.

3. Kitex Garments: This company is part of the reputed Anna group of Kerala. Kitex manufactures infant garments and supplies to one of the biggest global retailers like Toys R Us, Gerber, Wal-Mart, Jockey etc. The company is known for its superior quality, facilities and efficient production management.

Here is a very insightful corporate video

The company has very good financial ratios but the company didn’t grow much over last couple of years due to political problems and lack of approvals for expansion. It seems the problems are over now. If the company is going ahead with the expansions planned earlier, the company should do well.

Apart from these, we are studying Selan Exploration. The company has rich oil fields with high proven reserves. The company has a very strong balance sheet with clean cash flows and surplus cash on balance sheet. The stock trades at about 9-10 times the annual free cash flows. The concern has been that due to lack of regulatory approvals there hasn’t been any growth over last few years. As the sector has started getting approvals, finally the ramp up may happen and the company may do well in coming years.

Wish all our readers a Very Happy New Year!

The post Happy New Year 2014 appeared first on Dalal-Street.

It has been one of the dream performance over the last 2-3 years – the company’s revenue have grown at a CAGR of 88% over last 3 years, and the stock returns have also been fabulous.

Over last few days, there have been reports of reporting of EMS disease in the Indian Shrimp industry. The EMS has been confirmed and as a preventive measure, MPEDA has decided to halt fresh production for next 2-3 months. Though it is a short term negative development for the industry, few positives to note are: 1. The EMS reported is in very small portion of the sample (just 1%) 2. As December to February is a lean period for the industry hence the damage will be limited and if the preventive steps are properly undertaken then the industry can quickly come out of the problem. MPEDA has provided a detailed clarification.

As a caution, we have chosen to book profits and reduce the exposure, and monitor how things develop going forward.

Among the new ideas, we are currently studying: APM Industries, KCP Sugar, Kitex Garments and Muthoot Capital. We hope to discuss the latest quarterly results and a detailed analysis in the next article.

The post Avanti Feeds: MPEDA announcements appeared first on Dalal-Street.

We wish all our readers a very Happy & Prosperous Deepawali. May Goddess Laxmi shower her blessings, and Lord Ganesha shower happiness on all of us.

Samvat 2069 ended on a wonderful note as the Sensex hit an all time high.

We recommend our readers to take part in the Muhurat Trading session on this auspicious day. Few ideas for long term perspective are:

1. Alembic Pharma

2. GRP

3. Oriental Carbon

4. P I Ind

5. Shilpa Medicare

Over last couple of years, we have got some superb companies to participate in, such as Astral Poly Technik, Ajanta Pharma, Atul Auto, Avanti Feeds, Poly Medicure, Mayur Uniquoters etc and all of these have given some superb returns. The Q2FY14 results have been very good for most of the companies we have been tracking and hence existing ideas give more comfort and promise rather than something new and unknown.

The best stock to buy could be the one you already own – Peter Lynch

We would like to thank our readers for your support and collaboration in doing the in-depth research and groundwork. We are pretty optimistic about the year ahead and wish you Happy Investing!!!

The post Happy Deepawali: Samvat 2070 appeared first on Dalal-Street.

We personally love to keep a track of small, interesting and growing companies with a market capitalization of under 100 crores. But we are rarely able to talk much about these small companies as they come with their own set of troubles including low liquidity, low visibility, lesser information, chances of corporate in-governance etc.

It is interesting to go through their annual reports and valuations even if one does not invest in them.

[Companies with ** mark are classified under PCAS (call-auction mechanism)]

Acrysil** (M.Cap 53 Cr): Acrysil is the “only company in all of Asia – and one of just a few companies worldwide ” manufacturing quartz kitchen sinks.” The company posted a good June quarter. The management talks about big ambitions in the annual report. If they actually end up delivering what they are aiming for, this stock can give fantastic returns.

Alicon Castalloy** (M.Cap 55 Cr): This company is “one of the largest integrated aluminium casting manufacturing units in India.” Interestingly, the company has posted a growth of 25% in the revenues over last 3 years, when the whole auto ancillary industry has been witnessing a slowdown. The margins have fallen significantly though (from 18% to 11%). CRISIL report provides a good history of the company. The book value is Rs.96 and the stock is at 3.5 times earnings at Rs.50.

Bharat Agri Fert & Realty (M. Cap 40 Cr): Over the last couple of years the company entered into the real estate business. The company is getting majority of the profits from real estate projects of the company in Thane, Mumbai. The company is almost debt free and has got good success in the Phase 1 of the project. Phase 2 is scheduled over next 3-4 years. The stock is trading at 2 times earnings, 0.75 times the book value and provides a dividend yield of 3.25%

Dynemic Products** (M.Cap 15 Cr): The company is “into manufacturing of Food Colors, Lake Colors, and Blended Colors & US-FDA certified FD&C Dyes. These are essential ingredient of food, drug, cosmetic, personal care and FMCG industry.” This is a highly competitive market. The company has grown at about 20% over the last 5 years and about 70% of the revenues are from exports. Last year the margins were impacted due to MEE plant regulations. At current price of Rs.14, the market capitalization is just about 15 Cr, while the net profits over last 4 years have been more than 4 Cr each year. The stock provides a dividend yield of 9% (company has consistently maintained dividend payout of 30% each year).

Gulshan Polyols** (M.Cap: 53 Cr): The company is amongst the largest producers of sorbitol and calcium carbonate in India. It is the market leader with a substantial market share in the respective segments.The company is almost debt free, has 6 plants in five states, and cash from operations during each of the last 5 years have been in excess of 20 crores. The company has been consistent with dividends though the payout ratio is low (current yield is of 5%), 1/3rd of book value and a PE of 2.25 times.

KG Denim (M.Cap 37 Cr): If one looks at the past numbers, the company was quite stagnant till 2009 with the sales in 200 crores range and had been posting losses. Since then, the revenue has grown to over 500 crores and the profits are back (along with a significant improvement in the ROE numbers). The stock is available at just 2 times earnings, half the book value and provides 5.3% dividend yield.

Piccadily Agro** (M.Cap 58 Cr): We mentioned about this company earlier too. The company has grown at a CAGR of 25% over last 5 years. The interesting part is the country liquor business started in 2007-08 period, the company has been able to grow it rapidly from 36 Cr turnover in 2008 to 205 Cr in 2013. They now have some leadership brands in the Haryana market. The margins were severely affected for more than a year due to control on selling price but the same have been increased recently and the company should benefit. The stock is trading at 2 times earning, half the book value and provides a dividend yield of 4%.

Premco Global** (M.Cap 10 Cr): The company is a manufacturer “of Woven and Knitted Elastic and non-Elastic Narrow Fabric and Webbing.” This is a competitive market and with low margins. But the company has been posting some fabulous numbers lately. The company also has a good clientele. The stock is available at a PE of just 1.4, half the book value with dividend yield of 5.5%.

Shree Ajit Pulp & Paper**(M.Cap: 20.5 Cr): This is another very interesting company. The company manufactures “reels of kraft paper used for making corrugated boxes in packaging industry.” The revenues have grown at a rate 25% annually over the last 5 years. The company also has an ROE of 25%+ yet available at just 1.3 times earnings and almost at a third of its book value. Despite being in the paper sector, the company has had low debt and good working capital management.

** The companies are classified under PCAS (call-auction mechanism).

It is always better and very much rewarding to go into superior businesses. Prof. Sanjay Bakshi has posted a wonderful post on the same. Yet we fail to understand the extreme negative sentiments and valuations of 2-4 PE in few companies which have been consistent on dividends, growing at a decent pace and have good tangible assets backing them. We feel some of these small caps are trading at quite a discount to intrinsic value and perhaps compelling Graham kind of ideas.

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