Poly Medicure is one of our favourite small cap stock which has carved out a niche for itself and has grown well over the last few years.

The company is the one of the biggest exporter of IV Safety Cannulae and other healthcare disposable products. This business segment is always growing and with development of better medical facilities, this segment should grow faster.

Few worthy points:

• The company has grown at a CAGR (Compounded annual growth rate) of 30.75% over last 10 years. (From turnover of 10 Cr in FY 2000 to 112.22 Cr turnover in FY 2009)
• The company is expected to grow at 20% YOY (Year on year) for next 2-3 years. This year the company is expected to do a turnover of 135 Cr with a net profit of 15 Cr, thus implying an EPS of 27.
• The CMP of 200 discounts the immediate EPS of 27 by just 7.5 times.

The last two quarters have been very good due to the backward integration efforts of the company done in the last few years and hence the company may be able to sustain operating margins around 20%.

Recent Developments

• The company has won series of patent infringement cases against major B Braun, after which the company is free to sell the advanced IV Safety Cannulae with the inbuild safety feature (http://www.expresshealthcare.in/201002/market26.shtml). This product has potential to sell at a very remunerative price in the developed nations.
• The company has been strengthening its sales network on the domestic front and tying up with major hospitals.
• The company is looking to expand its capacities and targets to double turnover in next 3 years. For they same they are also looking to put up a new factory.

Challenges:

Being a high volume low price product, the scaling up of the business is not easy. The company has been trying to develop new products to overcome the same.

Here is a company with strong financials, good business model, high margins, good return on equity, good cash flow yet available at less than 8 PE.Similar Posts:

• Shilpa Medicare – A strong bet on Oncology
• Balkrishna Industries – Not just any regular tyre company
• Jaihind Projects
• Shilpa Medicare – Update
• Suprajit Engineering

BNK Capital is a small finance company with experience of over several decades. The company provides brokering services across the various products such as equities, commodities etc and serves several HNIs and corporates.

The interesting part is the market value of the investment the company holds. Some of the major investments are:

At CMP of about 42, the co’s own Mcap is close to 25 Cr while the value of marketable investments on Balance sheet is 143 Cr!! Hence the company is available at a discount of 82.65% to the value of investments. Similar valuations were once found in CHI Investments too, which was then our favorite and yielded very good returns.

Yes, many of the similar finance companies trade at discounts to their market value of investments, but such discounts are usually not more than 30-35%. Here we are getting a company at 83% discount.Similar Posts:

• CHI Investments – Interestingly mis-priced
• CHI Investments – proposed merger impact
• The ride of CHI Investments
• Shilpa Medicare – A strong bet on Oncology
• CHI Investments – Update

Its logical not to go for tyre companies as long term investment as the business model is not very attractive cause:

1. No competitive edge hence no pricing power and high competition

2. ROCE are low

This is where Balkrishna Industry (BKT) stands out. This company has had a spectacular track record of:

1. Growing at 30.47% CAGR for last 11 years!!! Yes, the company had a turnover of just 98 Cr in 1999 and last year, the company was able to post a turnover of 1407 Cr.

2. Net profits have also grown at the same pace.

3. ROCE has on average remained in the range of 20-25% for last 5 years.

4. Consistent healthy margins

5. Good dividend pay-out.

WHY is the the difference between Balkrishna Ind and other tyre cos so huge?? Reasons:

BKT operates in the OHT (Off Highway tyres) segment i.e.. the tyres find application in the agricultural and construction equipment segments. BKT exports 90% of its production to developed countries and 75% of the sales are to the replacement market.

Globally this industry is leaded by Bridgestone, Good year and Michelin…and as this business involves high customisation and labour, these global companies are unable to maintain their competitiveness. BKT has been able to provide the quality at 30% cheaper prices and hence is gradually gaining market share. As of now, BKT has a market share of 2-3% and the company aims to increase the market share to double digits in next 5 years.

The company has 1900 SKUs – one of the highest in the industry and the company claims to have an expertise in developing the new SKUs in-house in the least time.

Other positives:

During the crisis last year, BKT prudently held back the planned expansions to better the balance sheet. Result – the interest cost has reduced majorly and so has the debt equity ratio. The cash flows are coming in.

Going ahead, I feel the company will be back on growth to gain market share.

At CMP of 590 and declines, the company is available at attractive valuations for a long term investment perspective.Similar Posts:

• Shilpa Medicare – A strong bet on Oncology
• Poly Medicure
• Suprajit Engineering
• Shilpa Medicare – Update
• Albert David

There’s a whole ocean of oil under our feet! – Plainview in “There Will Be Blood” (Oscar Winner)

We had recommended the stock earlier on our blog here. Though the stock is up more than 65% now, it still has a lot of potential.

The company had held an analyst meet yesterday and the updates are very encouraging. Few highlights:

• Jaihind Projects is into Pipeline EPC business and has vast experience in pipeline construction segment having laid down more than 10000 km of pipeline. The company has 2^nd largest equipment base for execution of pipeline EPC contracts.
• There is a total proposed investments of more than Rs 200 billion in developing and expanding the existing pipeline network in India over next 3 to 4 years, adding up to more than 10000 km of additional cross-country natural gas pipeline across the country. Further more than 60 cities are earmarked to get CGD (city gas distribution) networks by FY’12, along with proposed implementation of National Gas Grid by GAIL and capacity expansion of the LNG terminals, the demand for natural gas pipelines is slated to grow.
• Total order book position of the company as on Dec’09 stands at Rs 943 crore.
• In addition to the above, the company has bid nearly Rs 1000 crore of domestic orders on its own and more than Rs 1000 crore of international orders along with the alliances.
• The company intends to invest in windmills and generate about 12-15 MW using wind power.
• The company has target of net sales of more than Rs 475 crore for FY’10 with better margins.

Similar Posts:

• Jaihind Projects
• “5 Trading Mantras” from Dad
• Albert David
• Manjushree Technopack – In depth snapshot
• CHI Investments – Interestingly mis-priced

Asian Hotels (which we recommended recently for its demerger news) has filed a document with BSE detailing the post-demerger financial aspects including the post-demerger balance sheet of the three new companies. We were flirting with the data to guess the post demerger scenario and here are the possibilities (provided in the excel sheet below).

As per the announcement, a shareholder holding 100 shares of Asian Hotels will get:
– 50 shares of AHL residual company
– 50 shares of Chillwinds
– 50 shares of Vardhman Hotels
The new figures show a significant rise in the book values, as during the demerger, the assets are transfered at their fair values.

Do give it a look at the above numbers and share your comments.Similar Posts:

• Asian Hotels
• CHI Investments – proposed merger impact
• Few Updates
• Update on Q3 nos
• CHI Investments – Interestingly mis-priced

“Its’ the work on your desk…It’s the work on your desk. Do well with what you already have and more will come in.” – Charlie Munger

Dear Friends,

This post is to bring an update and review of all the stocks discussed till now.

Performance till now:

Individual Updates:

1. Shilpa Medicare: This stock has been a wealth-creater. The company has yet again posted excellent Q3 nos. Based on the same, the future looks bright and the stock is getting the attention of bigger investors (Read: ICICI Prudential mutual fund ). On repeat or better financial performance, the stock has potential to reach 350 levels.

2. Jaihind Projects: The company has been doing well. As per a recent ET article, the co has to complete major projects by mid this year. One should continue to hold.

3. Albert David: This stock was picked as more of a value pick to park idle funds. One can consider booking partial profits.

4. Suprajit Engineering: The company has come out with excellent Q3 nos. The stock has also done well. To reward the shareholders, the management has proposed 45% interim dividend, 1:1 bonus and stock split. Though a bit aggressive than required, all these developments can take the stock to higher levels.

5. IST Ltd: As per the recent updates, the construction activities are going at good pace and co has built almost 10 lac sq ft of space. Leasing out of the same in due time will be a very positive development. If things keep going as per the plans, the stock has all the potentials of becoming a multi-bagger.

6. Manjushree Technopack: We have been providing updates in other threads.

7. Asian Hotels: Usually demergers create lot of shareholder wealth. So one should remain invested and look forward to buying on declines.

We are trying to bring some new picks from the Q3 nos. In the meanwhile some of my other favourite cos have come out with very good numbers and investors can consider them for investing: Balkrishna Industries & Poly Medicure.Similar Posts:

• Few Updates
• Happy New Year!!!
• Manjushree Technopack – In depth snapshot
• Asian Hotels
• Post Demerger impact of Asian Hotels – Unlocking the hidden value

“Mittal & Co.” – members of UPSE (Uttar Pradesh Stock Exchange) and business associates of “Asit C. Mehta”, has been encouraging value investing since seventies and entered the brokerage business in 1982 (yeah, this is our 28th year). With the support of our esteemed clients, teamwork of most enthusiastic employees and hard work done by everyone, the good has just got better.

You are invited to join us at this wonderful moment.

Investing in the heart of the city has become easier now.

We will soon be posting the pictures of the new office for our readers who might not be able to join us on the opening ceremony.

Keep your wishes coming,

Happy Investing,

from whole team of “Mittal & Co.”Similar Posts:

• Welcome to Dalaal-Street.com
• Manjushree Technopack – In depth snapshot
• Excellent Q2 nos from Shilpa Medicare
• 5 Great People – 50 Spectacular “Quotes”
• Albert David

[...] You see negative Free Cash Flows, but that’s not a bad thing for a company in its early growth stages. It is investing all the profits it generates and more back into business expansion. As you can see even the much bigger global majors report marginal or negative free cash flows in this industry.

Best Margins & Returns in the business

And when we look at its track record, it makes us feel even better. Although achieved on a small base, it has more than tripled its sales in last 5 years while earnings per share (EPS) has gone up 8x (on an adjusted basis) in the same period. Just look at the long term track record, it tells us this Management is managing growth nicely.

Exciting Growth on a low base

Makes me wonder about the quality of this growth. How has it managed profitability and returns in the pursuit of this growth?
Its heartening to see that margins have consistently been trending up. Returns shot up tremendously in FY07 on the back of high capacity utilisations. Since FY07 Manjushree has been investing in this growth aggressively by doubling capex every year. This has led to lower capacity utilisations and Asset turns, in turn lowering RoA and RoE. But on the whole returns have also been trending up.

Tells me Management is savvy and doing the right things while pursuing growth aggressively. [...]

You can read the complete in depth analysis done by us jointly at Stock Pick Focus.

In -depth Snapshot of Manjushree Technopack [at Stock Pick Focus]

You might also like 10 Questions to Manjushree Technopack Management.Similar Posts:

• Balkrishna Industries – Not just any regular tyre company
• Update on Q3 nos
• Delivering on Q2 expectations
• Manjushree Technopack (MT)
• Warm up to Q2 results

Yeah, I’m a bit late in conveying my new year wishes as last few days have been highly hectic.

Markets have been roaring and stocks are flying. I think we should be careful going ahead and should start building cash levels. Q3 nos will be very important to judge the price vs value for many stocks.

Among the stocks we have discussed at our blog earlier, almost all have done extremely well. Few updates:

Manjushree: After very good returns in short term, I think we should do partial profit booking here.

Fresenius Kabi: Stock has done quite well and looks a bit expensive now. One may book profits on rise here.

Suprajit Eng: One can continue to hold.

Jaihind Projects: I feel the best is yet to come. One may look to add more on declines.

Siemens Healthcare: One should exit due to the merger announcement.

Asian Hotels: Stock has moved up smartly as expected but more room is left.

Few new stock ideas which can be considered at current levels and declines: Vipul Ltd, Himatsingka Seide & Tata Sponge. (I’ll post detailed logic later)Similar Posts:

• Update on Q3 nos
• Few Updates
• Excellent Q2 nos from Shilpa Medicare
• Siemens Healthcare
• Jaihind Projects

Albert David: Has risen from 70 levels to 130.

Fresenius Kabi: Has risen from 70 levels to 113.

Shilpa Medicare: Mentioned at our blog @ 90, is trading at 190 now.

I hope our readers had acted on the calls and made good profits. We would advice booking partial profits at current and higher levels.

Some updates:

Shilpa Medicare has got listed on NSE also.

Jaihind Projects is convening a board meeting to appoint Delloite as their statutory auditor. This should be a very positive move for long term and provide comfort to investors.

Asian Hotels has uploaded few statutory details relating to the demerger. I would advice investors to go through the documents. The documents are available on BSE Website (announcements section)Similar Posts:

• Update on Q3 nos
• Happy New Year!!!
• Excellent Q2 nos from Shilpa Medicare
• Jaihind Projects
• The results season has arrived – start the scan