L&T to buy 10% in City Union Bank
December 01, 2006 02:53 IST
Engineering major Larsen & Toubro will pick up nearly a 10 per cent stake in the Kumbakonam-based City Union Bank for Rs 45 crore.
The company will subscribe to the preferential allotment of 2.66 million equity shares, representing a 9.99 per cent stake in the post-issue equity of the bank, at Rs 169 apiece. The allotment is subject to the approval of the Reserve Bank of India.
The City Union Bank board on Thursday approved the issue of preferential shares to L&T. The City Union Bank stock closed at Rs 170.70 on the BSE, 4.88 per cent higher than Wednesday's close of Rs 162.75.
The proposed move of L&T is aimed at leveraging the strength of the bank and L&T's financial services firm L&T Finance. "Also, it provides an investment opportunity in the banking sector, which has been doing well for quite some time," said an L&T executive.
It is not clear whether L&T's financial services arm will be the investment vehicle for the acquisition of the bank's stake.
It is learnt that L&T will seek permission from the apex bank for acquiring the stake.
RBI norms allow a corporate entity to pick up up to 5 per cent stake automatically and up to 10 per cent with the apex bank's permission.
However, scaling up of stake beyond 10 per cent in a bank by a corporate entity is not allowed.
The 102-year-old bank, formerly known as Kumbakonam Bank, manages over Rs 3,500 crore in deposits and its advances portfolio increased by Rs 537 crore in the 2006 financial year.
In FY 2006, CUB's total income stood at Rs 184.14 crore with a net profit of Rs 56.37 crore. It's operating profit increased to Rs 109.15 crore from Rs 81.67 crore in 2005.
The bank slashed its NPA liabilities on net advances down to a mere 1.95% in fiscal 2006 from 3.37% in fiscal 2005.
Thursday, November 30, 2006
Cheviot Co. Ltd.
Report Dated: 30 th January 2005
HISTORICAL BACKGROUND
:
•
This Kolkata-based jute major was promoted by the Kanoria group more than
100 years ago has been operating as a 100% EOU (Export Oriented Unit) and
is today, by far the
most profitable jute manufacturer in the country.
•
Its second plant at Falta (FSEZ) (a 100% EOU) in West Bengal commenced
commercial production on March 27 th 2003. Both its units (the other being
at Budge Budge) are engaged in manufacture of high-grade industrial
fabrics.
•
Over the past few years, the company has embarked upon a modernization and
diversification exercise and has this endeavour has largely been met with
success.
•
Occasional labour unrest is somewhat inherent to the jute industry and
Cheviot too has had its share of the same in 1998, 2000 & 2004. Its
operations though have remained largely unaffected.
•
Its captive power plant became operational in January 2003, thereby
enabling the company to secure itself in the wake of frequent power
failures prevalent in West Bengal.
BSE Code
526817
Promoter Holding 73.13%
CMP Rs.
512
Market Capitalisation (Rs. In crores)
154
2
•
In keeping with Company's strategy to focus on its core business of
manufacturing value added items of jute goods, the Company is taking
effective steps to expand operations at its 100% Export Oriented Unit at
Falta Special Economic Zone, by setting up a backward integration project
to create facilities to manufacture jute yarn as per permissions granted by
the Government of India.
The proposed expansion of the aforesaid Falta Unit would be advantageous
and can be conveniently carried on along with its existing operations and
would ultimately make it an integrated unit manufacturing and exporting
value added jute fabrics and yarn. The work on the said project is expected
to commence soon.
OVERVIEW OF THE JUTE INDUSTRY:
•
India is the world’s largest jute producer followed by Bangladesh, China,
Myanmar, Thailand & Nepal. India and Bangladesh together account for more
than 90% of total world jute production as also the total world area under
jute cultivation. India was 2.6 times the size of Bangladesh in terms of
both area under jute cultivation and jute production.
•
In terms of yield per hectare though, China leads the race with 52% higher
yield than India but since China’s total jute production is just 7% that of
India, this is not very significant.
•
Within India, around 70% of the jute production comes from West Bengal and
productivity in terms of quintals/hectare is also highest in W.B. The rest
of the production comes from Bihar, Assam, Andhra Pradesh, Orissa,
Meghalaya, Tripura & others. This production pattern is in line with
cultivation patterns.
•
The Indian jute industry has been facing very difficult times over the last
few years. Losses have been mounting. In the 3-year period from FY00 to
FY02, aggregate losses for the industry went up from Rs.344.31 crores to
Rs.418.67 crores. This number though has since been falling and stood at
Rs.387.27 crores in FY04.
•
Out of 74 companies in the jute industry, only 33 were profit making during
2003-04.
•
Operations at as many as 13 jute mills stood suspended as at October 2003
and as many as 30 jute mills were BIFR cases.
3
•
Due to mounting losses in the industry, the total capital employed has
eroded fast and stood at negative Rs.1939.7 crores as at the close of FY04.
Cheviot’s capital employed stood at positive Rs.110.82 crores as on the
same date.
•
To put things in perspective, most of the losses were resulting from the 6
jute mills controlled by the Government owned NJMC (National Jute
Manufacturers Corporation) and if one excludes these, the picture is
materially different. To illustrate this, between 2001-02 and 2003-04, the
losses from NJMC & 2 other Govt. owned mills increased from Rs.376.9 crores
to Rs.447.16 crores, the rest of the industry recorded a sharp turnaround,
reporting a net profit of Rs.59.89 crores in 2003-04 as against a loss of
Rs.41.76 crores in 2001-02. (Source: Office of the Jute Commissioner,
Kolkata). A similar trend was also seen in the capital employed figures.
•
The jute industry got a breather by way of the TUFS (Technology Upgradation
Fund Scheme) w.e.f 01/04/99, which enabled textile and jute manufacturers
to avail of loans for modernization at lower costs. As per the scheme
which remains valid upto 31/03/04, the fund would be used to re-imburse 5%
of the interest cost paid by the company to the approved lender.
•
Until 15/10/05, Rs.80.36 crores of assistance under TUFS had been
sanctioned, out of which Rs.69.47 crores had already been disbursed.
•
A number of jute manufacturing facilities have closed down over since May
2005, in view of the non-availability of raw jute and rising prices
thereof. However, the Government’s recent moves to control prices have
brought some stability. In fact, the JCI termed the high prices as
extremely speculative, given the better crop output and 21 lakh bales of
surplus carryover.
All this means better margins for jute manufacturers.
•
Presently, the jute industry’s major products include hessian, yarn,
sacking, CBCs & JDPs. There is however, great potential for the use of
Jute Geo-textile (JGT) in roads, particularly in rural areas. JMDC has
entered into a MoU with the National Rural Roads Development Agency
(NRRDA), to undertake a Pilot Project in rural roads under PMGSY with Jute
Geotextiles. The Pilot Project will cover at lease two stretches each in 6
states totaling to around 50 km. Successful completion of the project is
expected to bring a new future to the Jute Industry.
•
The National Jute Policy 2005 of the UPA Government is targeting a 15% CAGR
in quantity terms for jute and jute products. In value terms, the targets
are even more optimistic and are expected at Rs.5000 crores by 2010 as
against Rs.1000 crores in 2005.
4 .BUSINESS PROFILE
:
•
Let us now evaluate Cheviot’s performance in light of the grim industry
outlook painted above.
Cheviot has thrived in spite of the poor business environment.
•
Exports as a percentage of total sales have been rising and stood at 72.25%
in FY05. Margins in the export market are much higher than those in the
domestic markets. Cheviot exports fine yarns to Belgium, U.K., Germany,
U.S.A., Holland and other countries.
•
The company has increased its focus on value added items of jute and jute
blends thereby improving its product mix.
•
Cheviot is a niche player and one of the lowest cost producers of jute in
the country. Cheviot enjoyed the highest pre-tax profitability margin in
the industry at 12.27% in 2003-04 as against the industry average of 1.73%.
To put things in perspective, Birla Jute (division of Birla Corporation
Ltd.), which is the largest listed player, had a profitability of just
3.35%.
Profitability for Cheviot has improved to 14.89% in 2004-05 and
15.38% for the 9 months ended December 31, 2005 (after excluding Rs.6.27
crores of one-time income that was included in the net sales for the
period)
It would only be fair to say that Cheviot is an exception to the otherwise
ailing jute industry.
FINANCIALS
:
•
Summarised below are the financials for the last 5 years:
(Rs. in million)
FY05
FY04
FY03
FY02
FY01
Income :
Operating Income
1,492.93 1,416.13 1,317.03 1,215.49 1,041.40
Expenses
Material Consumed
672.08
553.28
585.30
617.89
477.66
Manufacturing Expenses
94.60
235.55
115.57
101.51
90.22
Personnel Expenses
257.60
232.82
237.00
215.08
210.62
Selling Expenses
108.99
89.04
76.65
71.43
103.05
Administrative Expenses
74.52
67.35
55.00
65.16
48.32
Cost Of Sales
1,207.78 1,178.04 1,069.50 1,071.06
929.86
Operating Profit
285.15
238.08
247.53
144.43
111.55
5
FY05
FY04
FY03
FY02
FY01
Other Recurring Income
1.86
2.68
3.35
14.11
3.22
Adjusted PBDIT
287.02
240.76
250.87
158.53
114.76
Financial Expenses
1.61
7.56
3.63
1.65
4.68
Depreciation
70.14
72.77
40.97
36.26
38.85
Other Write offs
0.00
0.54
0.54
0.54
0.54
Adjusted PBT
215.27
159.90
205.74
120.09
70.70
Tax Charges
31.29
7.66
27.72
13.70
11.00
Adjusted PAT
183.98
152.24
178.02
106.39
59.70
Non Recurring Items
6.91
13.83
-0.34
3.29
1.67
Other Non Cash adjustments
0.01
1.46
48.34
-1.19
6.43
Reported Net Profit
190.90
166.07
177.68
109.68
61.37
Earnings Before Appropriation
206.08
182.33
236.80
115.39
75.21
Equity Dividend
30.08
24.06
15.07
9.04
7.54
Retained Earnings
171.73
155.19
219.80
106.34
66.90
Operating income and material consumed for FY01, FY02 and FY03 are
inclusive of inter-unit sales.
•
It is clear from the above statistics that
Cheviot’s operating profits
have grown at a CAGR of 20.6% over the last 5 years, which by any
standards is commendable.
•
The topline has grown at a CAGR of 10% during the same period (on a
normalized basis), which shows that the growth has been led by cost
cutting and improvement in sales realisations brought about as a result
of moving up the value chain.
•
The performance for the 9 months period ended December 31, 2005 along
with comparatives is shown below:
Description
YTD FY06
YTD FY05
Net Sales
1,184.5 1,074.9
Other Income
19.7 8.1
Total Income
1,204.1 1,083.0
Expenditure
(918.3) (851.7)
Operating Profit
285.9 231.3
Interest
(0.6) (1.4)
Gross Profit
285.3 229.9
Depreciation
(50.1) (51.3)
Profit before Tax
235.2 178.7
Tax
(36.9) (26.8)
Profit after Tax
198.3 151.9
EPS
65.91
50.48
Value (Rs. in million)
6. The bottom line growth of 30.6% on a topline growth of 10.2% is
commendable. EBITDA margins rose by 170 bps to 22.5% from 20.8% in the
year ago period. This is despite substantial reduction in export market
assistance (EMA) w.e.f. April 05 and higher raw material and fuel
prices.
•
As on March 31, 2005, Cheviot had cash and liquid investments of
Rs.361.4 million (Rs.120 per share), thereby providing a margin of
safety to investors.
•
The table below shows the key financial ratios of the company for the
last 5 years, which makes it evident that
Cheviot is in the pink of
financial health.
Key Performance Indicators
FY05
FY04
FY03
FY02
FY01
PER SHARE RATIOS
Adjusted E P S (Rs.)
61.17
50.62
59.05
35.29
19.80
Adjusted Cash EPS (Rs.)
84.49
74.99
72.82
47.50
32.87
Reported EPS (Rs.)
63.47
55.22
58.94
36.38
20.36
Reported Cash EPS (Rs.)
86.79
79.59
72.71
48.59
33.42
Dividend Per Share
10.00
8.00
5.00
3.00
2.50
Operating Profit Per Share (Rs.)
94.81
79.16
82.11
47.91
37.00
Book Value Per Share (Rs.)
480.43 431.75 591.33 382.89 341.29
Free Reserves Per Share (Rs.)
333.09 281.04 233.22 163.71 119.12
PROFITABILITY RATIOS
OPM (%)
19.10
16.81
18.79
11.88
10.71
GPM (%)
14.40
11.67
15.68
8.89
6.98
NPM (%)
12.77
11.70
13.45
8.92
5.87
Adjusted Cash Margin (%)
17.00
15.89
16.62
11.64
9.48
Adjusted RONW (%)
17.81
17.37
24.24
20.28
15.30
•
Other listed companies engaged in jute manufacture are Birla Corporation
Ltd., Champdany Inds. Ltd. & Willard India Ltd. While Birla Corp. &
Willard are diversified companies, Champdany is a dedicated jute
manufacturer. All 3 companies have suspended operations at most or all
of their jute mills since the last few years due to illegal strikes
and/or unviability of operations. Cheviot is the only company to
increase capacity in recent times.
7. INVESTMENT RATIONALE
:
•
The Cheviot stock has nearly quadrupled since I initiated coverage of
the stock at Rs.140 per share in November 03. In spite of this, the
stock remains grossly undervalued.
I believe that the re-rating on the stock is far from over.
Its valuation parameters are discussed below:
Cheviot trades at a price to book of just 1.07 times based on its FY05 book
value of Rs.480 per share and below its expected book value of Rs.550 per
share for FY06.
Cheviot’s PE Ratio based on projected FY06 EPS of Rs.80 stands at 6.4
times. Champdany Industries trades at a PE ratio of 29.7 times its
annualized EPS for H1FY06.
Cheviot’s dividend payout has been increasing steadily and the company is
expected to pay Rs.12 per share for FY06.
The company’s margins, on the operating, gross & net levels have been
increasing steadily.
Cheviot’s reserves have been swelling at a rapid pace and it is a likely
bonus candidate.
Cheviot’s cash position has been improving for the last 5 consecutive
years.
Cheviot is sitting on sizeable real estate assets (Rs.85 crores as at FY05,
as revalued as on FY03). The market value of these assets would have
appreciated significantly and given that the company has already amended
its objects clause to include real estate development, any concrete moves
in this direction could provide additional triggers.
•
The jute industry is perceived as substitute to cotton in certain areas
and with rising cotton prices, jute manufacturers will also see their
margins increasing.
•
The industry’s future hinges on introduction of new innovative
applications for jute products and Cheviot with its strong cash flows is
well placed to invest in R&D.
8. In September 2004, Indian jute exporters in general and
Cheviot in
particular got a shot in the arm, with the lifting of anti-dumping
duties in Brazil.
After a protracted legal battle by the Jute Manufacturers Development
Council (JMDC) which lasted for 7 years, the Brazilian Government has
lifted the Anti-Dumping Duty on import of jute bags into Brazil for 5
Indian jute companies, including Cheviot. (USD 0.77 per kg)
This augured well for penetrating into the vast Brazilian market for
food-grade jute bags for packaging coffee and cocoa beans.
•
The continuation of the compulsory jute packaging for food grains &
sugar to the extent of 100% & 90% respectively has been a big positive
as far as demand for jute packaging material is concerned. In fact, Mr.
Budhadev Bhattacharyya, CM,
West Bengal, has been pushing for 100% jute
packaging for both. The JMDC has been lobbying for compulsory jute
packaging on similar lines for all industrial products too. Jute is an
eco-friendly substitute for plastic.
Even in an eventuality where compulsory packaging is phased out, Cheviot
will be least affected, given that its sales predominantly come from
exports and it manufactures high value non-traditional diversified jute
yarns and fabrics.
•
The world’s no.1 retailer Walmart’s recent decision to source $5 billion
from India by 2010 could benefit the jute industry in the longer term.
•
In the post-2005 free trade environment, with removal of QRs on all
products, efficient exporters such as Cheviot could benefit.
•
Given these positives, the stock is likely to outperform in the medium
term. Accordingly,
a conservative 12-month price target of Rs.800/- is
set on the counter. At this price, the stock would trade at just
10xFY06-projected earnings, which is very reasonable, given its
prospects.
The company distributed dividend of 13 rs for the year 2011-12.
Notes:
Essay on development of jute textile industry In India
Swot Analysis of Indian Jute Industry at www.indiantextilejournal.com
Jutecomm.gov.in/indostry_intro.htm
HISTORICAL BACKGROUND
:
•
This Kolkata-based jute major was promoted by the Kanoria group more than
100 years ago has been operating as a 100% EOU (Export Oriented Unit) and
is today, by far the
most profitable jute manufacturer in the country.
•
Its second plant at Falta (FSEZ) (a 100% EOU) in West Bengal commenced
commercial production on March 27 th 2003. Both its units (the other being
at Budge Budge) are engaged in manufacture of high-grade industrial
fabrics.
•
Over the past few years, the company has embarked upon a modernization and
diversification exercise and has this endeavour has largely been met with
success.
•
Occasional labour unrest is somewhat inherent to the jute industry and
Cheviot too has had its share of the same in 1998, 2000 & 2004. Its
operations though have remained largely unaffected.
•
Its captive power plant became operational in January 2003, thereby
enabling the company to secure itself in the wake of frequent power
failures prevalent in West Bengal.
BSE Code
526817
Promoter Holding 73.13%
CMP Rs.
512
Market Capitalisation (Rs. In crores)
154
2
•
In keeping with Company's strategy to focus on its core business of
manufacturing value added items of jute goods, the Company is taking
effective steps to expand operations at its 100% Export Oriented Unit at
Falta Special Economic Zone, by setting up a backward integration project
to create facilities to manufacture jute yarn as per permissions granted by
the Government of India.
The proposed expansion of the aforesaid Falta Unit would be advantageous
and can be conveniently carried on along with its existing operations and
would ultimately make it an integrated unit manufacturing and exporting
value added jute fabrics and yarn. The work on the said project is expected
to commence soon.
OVERVIEW OF THE JUTE INDUSTRY:
•
India is the world’s largest jute producer followed by Bangladesh, China,
Myanmar, Thailand & Nepal. India and Bangladesh together account for more
than 90% of total world jute production as also the total world area under
jute cultivation. India was 2.6 times the size of Bangladesh in terms of
both area under jute cultivation and jute production.
•
In terms of yield per hectare though, China leads the race with 52% higher
yield than India but since China’s total jute production is just 7% that of
India, this is not very significant.
•
Within India, around 70% of the jute production comes from West Bengal and
productivity in terms of quintals/hectare is also highest in W.B. The rest
of the production comes from Bihar, Assam, Andhra Pradesh, Orissa,
Meghalaya, Tripura & others. This production pattern is in line with
cultivation patterns.
•
The Indian jute industry has been facing very difficult times over the last
few years. Losses have been mounting. In the 3-year period from FY00 to
FY02, aggregate losses for the industry went up from Rs.344.31 crores to
Rs.418.67 crores. This number though has since been falling and stood at
Rs.387.27 crores in FY04.
•
Out of 74 companies in the jute industry, only 33 were profit making during
2003-04.
•
Operations at as many as 13 jute mills stood suspended as at October 2003
and as many as 30 jute mills were BIFR cases.
3
•
Due to mounting losses in the industry, the total capital employed has
eroded fast and stood at negative Rs.1939.7 crores as at the close of FY04.
Cheviot’s capital employed stood at positive Rs.110.82 crores as on the
same date.
•
To put things in perspective, most of the losses were resulting from the 6
jute mills controlled by the Government owned NJMC (National Jute
Manufacturers Corporation) and if one excludes these, the picture is
materially different. To illustrate this, between 2001-02 and 2003-04, the
losses from NJMC & 2 other Govt. owned mills increased from Rs.376.9 crores
to Rs.447.16 crores, the rest of the industry recorded a sharp turnaround,
reporting a net profit of Rs.59.89 crores in 2003-04 as against a loss of
Rs.41.76 crores in 2001-02. (Source: Office of the Jute Commissioner,
Kolkata). A similar trend was also seen in the capital employed figures.
•
The jute industry got a breather by way of the TUFS (Technology Upgradation
Fund Scheme) w.e.f 01/04/99, which enabled textile and jute manufacturers
to avail of loans for modernization at lower costs. As per the scheme
which remains valid upto 31/03/04, the fund would be used to re-imburse 5%
of the interest cost paid by the company to the approved lender.
•
Until 15/10/05, Rs.80.36 crores of assistance under TUFS had been
sanctioned, out of which Rs.69.47 crores had already been disbursed.
•
A number of jute manufacturing facilities have closed down over since May
2005, in view of the non-availability of raw jute and rising prices
thereof. However, the Government’s recent moves to control prices have
brought some stability. In fact, the JCI termed the high prices as
extremely speculative, given the better crop output and 21 lakh bales of
surplus carryover.
All this means better margins for jute manufacturers.
•
Presently, the jute industry’s major products include hessian, yarn,
sacking, CBCs & JDPs. There is however, great potential for the use of
Jute Geo-textile (JGT) in roads, particularly in rural areas. JMDC has
entered into a MoU with the National Rural Roads Development Agency
(NRRDA), to undertake a Pilot Project in rural roads under PMGSY with Jute
Geotextiles. The Pilot Project will cover at lease two stretches each in 6
states totaling to around 50 km. Successful completion of the project is
expected to bring a new future to the Jute Industry.
•
The National Jute Policy 2005 of the UPA Government is targeting a 15% CAGR
in quantity terms for jute and jute products. In value terms, the targets
are even more optimistic and are expected at Rs.5000 crores by 2010 as
against Rs.1000 crores in 2005.
4 .BUSINESS PROFILE
:
•
Let us now evaluate Cheviot’s performance in light of the grim industry
outlook painted above.
Cheviot has thrived in spite of the poor business environment.
•
Exports as a percentage of total sales have been rising and stood at 72.25%
in FY05. Margins in the export market are much higher than those in the
domestic markets. Cheviot exports fine yarns to Belgium, U.K., Germany,
U.S.A., Holland and other countries.
•
The company has increased its focus on value added items of jute and jute
blends thereby improving its product mix.
•
Cheviot is a niche player and one of the lowest cost producers of jute in
the country. Cheviot enjoyed the highest pre-tax profitability margin in
the industry at 12.27% in 2003-04 as against the industry average of 1.73%.
To put things in perspective, Birla Jute (division of Birla Corporation
Ltd.), which is the largest listed player, had a profitability of just
3.35%.
Profitability for Cheviot has improved to 14.89% in 2004-05 and
15.38% for the 9 months ended December 31, 2005 (after excluding Rs.6.27
crores of one-time income that was included in the net sales for the
period)
It would only be fair to say that Cheviot is an exception to the otherwise
ailing jute industry.
FINANCIALS
:
•
Summarised below are the financials for the last 5 years:
(Rs. in million)
FY05
FY04
FY03
FY02
FY01
Income :
Operating Income
1,492.93 1,416.13 1,317.03 1,215.49 1,041.40
Expenses
Material Consumed
672.08
553.28
585.30
617.89
477.66
Manufacturing Expenses
94.60
235.55
115.57
101.51
90.22
Personnel Expenses
257.60
232.82
237.00
215.08
210.62
Selling Expenses
108.99
89.04
76.65
71.43
103.05
Administrative Expenses
74.52
67.35
55.00
65.16
48.32
Cost Of Sales
1,207.78 1,178.04 1,069.50 1,071.06
929.86
Operating Profit
285.15
238.08
247.53
144.43
111.55
5
FY05
FY04
FY03
FY02
FY01
Other Recurring Income
1.86
2.68
3.35
14.11
3.22
Adjusted PBDIT
287.02
240.76
250.87
158.53
114.76
Financial Expenses
1.61
7.56
3.63
1.65
4.68
Depreciation
70.14
72.77
40.97
36.26
38.85
Other Write offs
0.00
0.54
0.54
0.54
0.54
Adjusted PBT
215.27
159.90
205.74
120.09
70.70
Tax Charges
31.29
7.66
27.72
13.70
11.00
Adjusted PAT
183.98
152.24
178.02
106.39
59.70
Non Recurring Items
6.91
13.83
-0.34
3.29
1.67
Other Non Cash adjustments
0.01
1.46
48.34
-1.19
6.43
Reported Net Profit
190.90
166.07
177.68
109.68
61.37
Earnings Before Appropriation
206.08
182.33
236.80
115.39
75.21
Equity Dividend
30.08
24.06
15.07
9.04
7.54
Retained Earnings
171.73
155.19
219.80
106.34
66.90
Operating income and material consumed for FY01, FY02 and FY03 are
inclusive of inter-unit sales.
•
It is clear from the above statistics that
Cheviot’s operating profits
have grown at a CAGR of 20.6% over the last 5 years, which by any
standards is commendable.
•
The topline has grown at a CAGR of 10% during the same period (on a
normalized basis), which shows that the growth has been led by cost
cutting and improvement in sales realisations brought about as a result
of moving up the value chain.
•
The performance for the 9 months period ended December 31, 2005 along
with comparatives is shown below:
Description
YTD FY06
YTD FY05
Net Sales
1,184.5 1,074.9
Other Income
19.7 8.1
Total Income
1,204.1 1,083.0
Expenditure
(918.3) (851.7)
Operating Profit
285.9 231.3
Interest
(0.6) (1.4)
Gross Profit
285.3 229.9
Depreciation
(50.1) (51.3)
Profit before Tax
235.2 178.7
Tax
(36.9) (26.8)
Profit after Tax
198.3 151.9
EPS
65.91
50.48
Value (Rs. in million)
6. The bottom line growth of 30.6% on a topline growth of 10.2% is
commendable. EBITDA margins rose by 170 bps to 22.5% from 20.8% in the
year ago period. This is despite substantial reduction in export market
assistance (EMA) w.e.f. April 05 and higher raw material and fuel
prices.
•
As on March 31, 2005, Cheviot had cash and liquid investments of
Rs.361.4 million (Rs.120 per share), thereby providing a margin of
safety to investors.
•
The table below shows the key financial ratios of the company for the
last 5 years, which makes it evident that
Cheviot is in the pink of
financial health.
Key Performance Indicators
FY05
FY04
FY03
FY02
FY01
PER SHARE RATIOS
Adjusted E P S (Rs.)
61.17
50.62
59.05
35.29
19.80
Adjusted Cash EPS (Rs.)
84.49
74.99
72.82
47.50
32.87
Reported EPS (Rs.)
63.47
55.22
58.94
36.38
20.36
Reported Cash EPS (Rs.)
86.79
79.59
72.71
48.59
33.42
Dividend Per Share
10.00
8.00
5.00
3.00
2.50
Operating Profit Per Share (Rs.)
94.81
79.16
82.11
47.91
37.00
Book Value Per Share (Rs.)
480.43 431.75 591.33 382.89 341.29
Free Reserves Per Share (Rs.)
333.09 281.04 233.22 163.71 119.12
PROFITABILITY RATIOS
OPM (%)
19.10
16.81
18.79
11.88
10.71
GPM (%)
14.40
11.67
15.68
8.89
6.98
NPM (%)
12.77
11.70
13.45
8.92
5.87
Adjusted Cash Margin (%)
17.00
15.89
16.62
11.64
9.48
Adjusted RONW (%)
17.81
17.37
24.24
20.28
15.30
•
Other listed companies engaged in jute manufacture are Birla Corporation
Ltd., Champdany Inds. Ltd. & Willard India Ltd. While Birla Corp. &
Willard are diversified companies, Champdany is a dedicated jute
manufacturer. All 3 companies have suspended operations at most or all
of their jute mills since the last few years due to illegal strikes
and/or unviability of operations. Cheviot is the only company to
increase capacity in recent times.
7. INVESTMENT RATIONALE
:
•
The Cheviot stock has nearly quadrupled since I initiated coverage of
the stock at Rs.140 per share in November 03. In spite of this, the
stock remains grossly undervalued.
I believe that the re-rating on the stock is far from over.
Its valuation parameters are discussed below:
Cheviot trades at a price to book of just 1.07 times based on its FY05 book
value of Rs.480 per share and below its expected book value of Rs.550 per
share for FY06.
Cheviot’s PE Ratio based on projected FY06 EPS of Rs.80 stands at 6.4
times. Champdany Industries trades at a PE ratio of 29.7 times its
annualized EPS for H1FY06.
Cheviot’s dividend payout has been increasing steadily and the company is
expected to pay Rs.12 per share for FY06.
The company’s margins, on the operating, gross & net levels have been
increasing steadily.
Cheviot’s reserves have been swelling at a rapid pace and it is a likely
bonus candidate.
Cheviot’s cash position has been improving for the last 5 consecutive
years.
Cheviot is sitting on sizeable real estate assets (Rs.85 crores as at FY05,
as revalued as on FY03). The market value of these assets would have
appreciated significantly and given that the company has already amended
its objects clause to include real estate development, any concrete moves
in this direction could provide additional triggers.
•
The jute industry is perceived as substitute to cotton in certain areas
and with rising cotton prices, jute manufacturers will also see their
margins increasing.
•
The industry’s future hinges on introduction of new innovative
applications for jute products and Cheviot with its strong cash flows is
well placed to invest in R&D.
8. In September 2004, Indian jute exporters in general and
Cheviot in
particular got a shot in the arm, with the lifting of anti-dumping
duties in Brazil.
After a protracted legal battle by the Jute Manufacturers Development
Council (JMDC) which lasted for 7 years, the Brazilian Government has
lifted the Anti-Dumping Duty on import of jute bags into Brazil for 5
Indian jute companies, including Cheviot. (USD 0.77 per kg)
This augured well for penetrating into the vast Brazilian market for
food-grade jute bags for packaging coffee and cocoa beans.
•
The continuation of the compulsory jute packaging for food grains &
sugar to the extent of 100% & 90% respectively has been a big positive
as far as demand for jute packaging material is concerned. In fact, Mr.
Budhadev Bhattacharyya, CM,
West Bengal, has been pushing for 100% jute
packaging for both. The JMDC has been lobbying for compulsory jute
packaging on similar lines for all industrial products too. Jute is an
eco-friendly substitute for plastic.
Even in an eventuality where compulsory packaging is phased out, Cheviot
will be least affected, given that its sales predominantly come from
exports and it manufactures high value non-traditional diversified jute
yarns and fabrics.
•
The world’s no.1 retailer Walmart’s recent decision to source $5 billion
from India by 2010 could benefit the jute industry in the longer term.
•
In the post-2005 free trade environment, with removal of QRs on all
products, efficient exporters such as Cheviot could benefit.
•
Given these positives, the stock is likely to outperform in the medium
term. Accordingly,
a conservative 12-month price target of Rs.800/- is
set on the counter. At this price, the stock would trade at just
10xFY06-projected earnings, which is very reasonable, given its
prospects.
The company distributed dividend of 13 rs for the year 2011-12.
Notes:
Essay on development of jute textile industry In India
Swot Analysis of Indian Jute Industry at www.indiantextilejournal.com
Jutecomm.gov.in/indostry_intro.htm
Wednesday, November 29, 2006
TATA SPONGE
Tata Sponge to invest Rs 800 cr in Orissa Business Standard— July 20, 2005
Tata Sponge Iron has lined up an investment of Rs 800 crore for capacity expansion at the existing premises at Bilaipada near Joda, in the Keonjhar district of Orissa. Ashok Pandit, managing director of Tata Sponge, said the board has given an in-principle approval for setting up three kilns and three additional power plants and this would be done in phases. This would take the capacity of the plant to 8.4 lakh tonne per annum, an increase of 115 per cent. The total investment would be to the tune of Rs 800 crore, out of which, 25 per cent would funded through internal accruals and the balance would be debt funded. "We are not looking at equity funding" said Pandit. The kilns would be put up at a gap of one year but everything would depend on the market situation. He said the gap could be brought down to six months also. At present, the board has approved an investment of Rs 300 crore for installation of the fourth kiln of 1.5 lakh tonne per annum capacity and a captive power generational facility of 18.5 megawatt (Mw) capacity along with other related facilities. After the first phase of expansion, the installed sponge iron manufacturing capacity of the company would increase from 3.9 lakh tonne per annum to 5.4 lakh tonne per annum. Out of this, 1.5 lakh tonne per annum was currently under implementation. The capacity expansion was part of a growth plan to enhance the sponge iron manufacturing capacity to 8.4 lakh tonne in a phased manner. Further, the captive power generation facility would increase to 44.5 Mw, including the captive power plant of 18.5 Mw currently under implementation. The plant was initially designed for a production capacity of 90,000 tonne per annum which was enhanced to 1,20,000 tonne per annum through various modifications during 1990-91. Later, to cater to the growing demand of quality sponge iron, Tata Sponge doubled its capacity by adding another kiln of equivalent capacity in 1998-99. In December, 2001 Tata Sponge commissioned a 7.5 MW captive power plant to produce electricity from the waste heat of exit gases of its second kiln. Tata Sponge was incorporated in 1982 as a joint venture of Tata Steel and the Industrial Promotion & Investment Corporation of Orissa Limited (IPICOL). It was set up for the production of sponge iron based on the Tisco direct reduction (TDR) technology. Later during 1991, Tata Steel acquired IPICOL's stake and at present Tata Sponge is a sister company of Tata Steel.
Tata Sponge Iron has lined up an investment of Rs 800 crore for capacity expansion at the existing premises at Bilaipada near Joda, in the Keonjhar district of Orissa. Ashok Pandit, managing director of Tata Sponge, said the board has given an in-principle approval for setting up three kilns and three additional power plants and this would be done in phases. This would take the capacity of the plant to 8.4 lakh tonne per annum, an increase of 115 per cent. The total investment would be to the tune of Rs 800 crore, out of which, 25 per cent would funded through internal accruals and the balance would be debt funded. "We are not looking at equity funding" said Pandit. The kilns would be put up at a gap of one year but everything would depend on the market situation. He said the gap could be brought down to six months also. At present, the board has approved an investment of Rs 300 crore for installation of the fourth kiln of 1.5 lakh tonne per annum capacity and a captive power generational facility of 18.5 megawatt (Mw) capacity along with other related facilities. After the first phase of expansion, the installed sponge iron manufacturing capacity of the company would increase from 3.9 lakh tonne per annum to 5.4 lakh tonne per annum. Out of this, 1.5 lakh tonne per annum was currently under implementation. The capacity expansion was part of a growth plan to enhance the sponge iron manufacturing capacity to 8.4 lakh tonne in a phased manner. Further, the captive power generation facility would increase to 44.5 Mw, including the captive power plant of 18.5 Mw currently under implementation. The plant was initially designed for a production capacity of 90,000 tonne per annum which was enhanced to 1,20,000 tonne per annum through various modifications during 1990-91. Later, to cater to the growing demand of quality sponge iron, Tata Sponge doubled its capacity by adding another kiln of equivalent capacity in 1998-99. In December, 2001 Tata Sponge commissioned a 7.5 MW captive power plant to produce electricity from the waste heat of exit gases of its second kiln. Tata Sponge was incorporated in 1982 as a joint venture of Tata Steel and the Industrial Promotion & Investment Corporation of Orissa Limited (IPICOL). It was set up for the production of sponge iron based on the Tisco direct reduction (TDR) technology. Later during 1991, Tata Steel acquired IPICOL's stake and at present Tata Sponge is a sister company of Tata Steel.
Tuesday, November 28, 2006
Entertainment Network India Ltd
Radio Mirchi
From Wikipedia, the free encyclopedia
Jump to: navigation, search
Radio Mirchi Logo
Radio Mirchi is a nationwide network of private FM radio stations in India. It is owned by the Entertainment Network India Ltd (ENIL), which is one of the subsidiaries of The Times Group.
"Mirchi" is Hindi for chilli. The tagline of Radio Mirchi is "It's hot!".
The original avatar of Radio Mirchi was Times FM, which began operation in 1993. Until 1993, All India Radio or AIR, a government undertaking, was the only radio broadcaster in India. The government then took the initiative to privatize the radio broadcasting sector. It sold airtime blocks on its FM channels in Hyderabad, Mumbai, Delhi, Kolkata and Goa to private operators, who developed their own program content. The Times Group operated its brand, Times FM, till June 1998. After that, the government decided not to renew contracts given to private operators.
In 2000, the government announced the auction of 108 FM frequencies across India. ENIL won the largest number of frequencies, and thus started its operations under the brand name Radio Mirchi.
In January 2006, Radio Mirchi bagged 25 frequencies in the second wave of licences that were issued by the Government of India. This pushes the Radio Mirchi presence in 33 centers. In the first wave of launches, It launched recently in April in Bangalore ,which has been a spectacular hit among the folks.It is giving a healthy competition to Radio City in the city.
[edit] Areas of operation
Currently, Radio Mirchi has a presence in 10 cities, including the 4 metros of India:
98.3 FM - Ahmedabad '"Mirchi Sunanevale ALWAYS Khush. Its HOT! !! " in Ahmedabad.'
98.3 FM - Bangalore It uses the tagline "Sakat hot maga!" in Bangalore.
98.3 FM - Chennai It uses the tagline "Idhu sema hot machi!" in Chennai.
98.3 FM - Delhi
98.3 FM - Hyderabad It uses the tagline "idi chaala hot guru!" in Hyderabad.
98.4 FM - Indore
98.3 FM - Jaipur
98.3 FM - Kolkata
98.3 FM - Mumbai It uses the tagline "Its HOT!" in Mumbai.
98.3 FM - Pune
It claims to reach almost 70% of FM radio listeners in Mumbai and Delhi. In Ahmedabad, Pune and Indore, it is the only private radio broadcaster. Radio Mirchi has started providing Visual Radio to its subscribers in Delhi from 25 july, 2006 onwards and would be started soon in Mumbai.
Notes
Pros:
1. Zero debt as on 25.11.06
2. The share capital has reduced from 1169.9 to 339.18 for the year 05 to 06. I need to check for insider trading. Actually it could be because of "Adjustment on account of reduction of Share Capital/Securities Premium Account (Refer Note 2 (f)(iii) on Annexure V)"
3. Promoters holding is more than 71 percent.
4. Strong brand power.
5. Around 3 percent held by Institutions.
From Wikipedia, the free encyclopedia
Jump to: navigation, search
Radio Mirchi Logo
Radio Mirchi is a nationwide network of private FM radio stations in India. It is owned by the Entertainment Network India Ltd (ENIL), which is one of the subsidiaries of The Times Group.
"Mirchi" is Hindi for chilli. The tagline of Radio Mirchi is "It's hot!".
The original avatar of Radio Mirchi was Times FM, which began operation in 1993. Until 1993, All India Radio or AIR, a government undertaking, was the only radio broadcaster in India. The government then took the initiative to privatize the radio broadcasting sector. It sold airtime blocks on its FM channels in Hyderabad, Mumbai, Delhi, Kolkata and Goa to private operators, who developed their own program content. The Times Group operated its brand, Times FM, till June 1998. After that, the government decided not to renew contracts given to private operators.
In 2000, the government announced the auction of 108 FM frequencies across India. ENIL won the largest number of frequencies, and thus started its operations under the brand name Radio Mirchi.
In January 2006, Radio Mirchi bagged 25 frequencies in the second wave of licences that were issued by the Government of India. This pushes the Radio Mirchi presence in 33 centers. In the first wave of launches, It launched recently in April in Bangalore ,which has been a spectacular hit among the folks.It is giving a healthy competition to Radio City in the city.
[edit] Areas of operation
Currently, Radio Mirchi has a presence in 10 cities, including the 4 metros of India:
98.3 FM - Ahmedabad '"Mirchi Sunanevale ALWAYS Khush. Its HOT! !! " in Ahmedabad.'
98.3 FM - Bangalore It uses the tagline "Sakat hot maga!" in Bangalore.
98.3 FM - Chennai It uses the tagline "Idhu sema hot machi!" in Chennai.
98.3 FM - Delhi
98.3 FM - Hyderabad It uses the tagline "idi chaala hot guru!" in Hyderabad.
98.4 FM - Indore
98.3 FM - Jaipur
98.3 FM - Kolkata
98.3 FM - Mumbai It uses the tagline "Its HOT!" in Mumbai.
98.3 FM - Pune
It claims to reach almost 70% of FM radio listeners in Mumbai and Delhi. In Ahmedabad, Pune and Indore, it is the only private radio broadcaster. Radio Mirchi has started providing Visual Radio to its subscribers in Delhi from 25 july, 2006 onwards and would be started soon in Mumbai.
Notes
Pros:
1. Zero debt as on 25.11.06
2. The share capital has reduced from 1169.9 to 339.18 for the year 05 to 06. I need to check for insider trading. Actually it could be because of "Adjustment on account of reduction of Share Capital/Securities Premium Account (Refer Note 2 (f)(iii) on Annexure V)"
3. Promoters holding is more than 71 percent.
4. Strong brand power.
5. Around 3 percent held by Institutions.
Monday, November 27, 2006
Tata POWER
Pros
1. Dividend Growth:
06 85.00
05 75.00
04 70.00
03 65.00
02 50.00
2. Earnings Growth:
06 29.66
05 26.80
04 25.72
03 26.27
02 25.68
3. Consistent Reduction is administration and other expenses
4. Cash and other cash items
06 990.55+18.06 secured loans 946
05 979.60 +12.87 secured loans 1059.07
04 51.90
03 126.41
02 307.01
5. Rise in Book Value
06 990.55
05 979.60
04 51.90
03 126.41
02 307.01
6. Dividend History
1994
25%
1995
28%
1996
30%
1997
35%
1998
35%
1999
37%
2000
37%
2001
42%
2002
50%
2003
65%
2004
70%
2005
75%
2006
85%
Cons
1. The cash position is only just sufficient to meet the secured loans. The cash position will have to improve further.
Nov 27, 2006
Tata Power Company advances following Q2 results
As many as 1.51 lakh shares were traded in the counter on BSE.
The stock witnessed a steady rally since late-October. From Rs 528.15 on 26 October, it rose steadily to Rs 576.50 by 24 November 2006, as buying continued.
Tata Power Company posted 60.99% rise in net profit to Rs 202.32 crore for the Q2 September 2006 as compared to Rs 125.67 crore for Q2 September 2005. Total income increased to Rs 1279.17 crore (Rs 1097.21 crore).
On 23 November, Tata Power signed a joint venture agreement with Tata Steel for captive power plants in Chattisgarh, Orissa & Jharkhand. This joint venture aims to meet the power and steam requirements, to facilitate expansion of Tata Steel in the three states. Tata Power will hold 74% equity in the venture, with Tata Steel holding 26%. Under this agreement, Tata Steel will consume power generated from these power plants, meeting the requirements of captive plant norms stipulated by the Government of India’s captive power plant policy.
Tata Power had recently formed an EPC (engineer-procure-construct) consortium with Siemens Power Generation, Germany and Doosan Heavy Industries & Construction, South Korea, for the design and construction of power plants based on super critical technology.
Source: Capital Market
1. Dividend Growth:
06 85.00
05 75.00
04 70.00
03 65.00
02 50.00
2. Earnings Growth:
06 29.66
05 26.80
04 25.72
03 26.27
02 25.68
3. Consistent Reduction is administration and other expenses
4. Cash and other cash items
06 990.55+18.06 secured loans 946
05 979.60 +12.87 secured loans 1059.07
04 51.90
03 126.41
02 307.01
5. Rise in Book Value
06 990.55
05 979.60
04 51.90
03 126.41
02 307.01
6. Dividend History
1994
25%
1995
28%
1996
30%
1997
35%
1998
35%
1999
37%
2000
37%
2001
42%
2002
50%
2003
65%
2004
70%
2005
75%
2006
85%
Cons
1. The cash position is only just sufficient to meet the secured loans. The cash position will have to improve further.
Nov 27, 2006
Tata Power Company advances following Q2 results
As many as 1.51 lakh shares were traded in the counter on BSE.
The stock witnessed a steady rally since late-October. From Rs 528.15 on 26 October, it rose steadily to Rs 576.50 by 24 November 2006, as buying continued.
Tata Power Company posted 60.99% rise in net profit to Rs 202.32 crore for the Q2 September 2006 as compared to Rs 125.67 crore for Q2 September 2005. Total income increased to Rs 1279.17 crore (Rs 1097.21 crore).
On 23 November, Tata Power signed a joint venture agreement with Tata Steel for captive power plants in Chattisgarh, Orissa & Jharkhand. This joint venture aims to meet the power and steam requirements, to facilitate expansion of Tata Steel in the three states. Tata Power will hold 74% equity in the venture, with Tata Steel holding 26%. Under this agreement, Tata Steel will consume power generated from these power plants, meeting the requirements of captive plant norms stipulated by the Government of India’s captive power plant policy.
Tata Power had recently formed an EPC (engineer-procure-construct) consortium with Siemens Power Generation, Germany and Doosan Heavy Industries & Construction, South Korea, for the design and construction of power plants based on super critical technology.
Source: Capital Market
Friday, November 24, 2006
List of Companies under focus
Portfolio
AARTI DRUGS
AEONIAN INVSTS.
BPCL
CCAP LIMITED
CHEVIOT COMPANY
CITY UNION BANK
GNFC
HINDALCO
ITC
Lanxess Abs Ltd
MTNL
NAVA BHARAT VENTURES
PATEL ON BOARD
Patel Roadways allots shares to Patel On-Board Couriers members
Patel Roadways' board of directors at a meeting held on 31 October 2006, has allotted 53,86,612 equity shares of Rs 10 each, aggregating to Rs 5,38,66,120 out of the share capital of the company to the shareholders of Patel On-Board Couriers (POBCL).
The aforesaid equity shares were allotted in the ratio of 23 equity shares of the company for 20 equity shares held in POBCL. These equity shares have been allotted pursuant to the scheme of amalgamation (the Scheme) of POBCL with the company, which was approved by shareholders of both and by the High Court of Bombay on August 11, 2006.
RASHTRIYA CHEM
RELIANCE NATURAL RESOURCES LIMITED
TATA POWER
Tata Sponge Ltd
Prospects
Amar remedies
Companies with Brand Identity and Sustainable competitve advantage
KMCH Ltd:
25th november 06:
cons
For the last four years, the debt equity ratio is more than one and the current ratio is around 0.5.
pros
The earmings 06 have outgrown 340 percent of earnings 05.
SP Apparels : not yet listed
AARTI DRUGS
AEONIAN INVSTS.
BPCL
CCAP LIMITED
CHEVIOT COMPANY
CITY UNION BANK
GNFC
HINDALCO
ITC
Lanxess Abs Ltd
MTNL
NAVA BHARAT VENTURES
PATEL ON BOARD
Patel Roadways allots shares to Patel On-Board Couriers members
Patel Roadways' board of directors at a meeting held on 31 October 2006, has allotted 53,86,612 equity shares of Rs 10 each, aggregating to Rs 5,38,66,120 out of the share capital of the company to the shareholders of Patel On-Board Couriers (POBCL).
The aforesaid equity shares were allotted in the ratio of 23 equity shares of the company for 20 equity shares held in POBCL. These equity shares have been allotted pursuant to the scheme of amalgamation (the Scheme) of POBCL with the company, which was approved by shareholders of both and by the High Court of Bombay on August 11, 2006.
RASHTRIYA CHEM
RELIANCE NATURAL RESOURCES LIMITED
TATA POWER
Tata Sponge Ltd
Prospects
Amar remedies
Companies with Brand Identity and Sustainable competitve advantage
Bata Limited
- Strengths would be its strong retail presence
- Cost advantages due it is strong expertise in manufacturing and distribution.
- It caters to different segments through it retail formats.
- Revenues of the next competitor is 41%.
- It has 35% market share in the organised footware market.
- Most recognised brand name in India.
- Pidilite Idustries limited
Lookup
KMCH Ltd:
25th november 06:
cons
For the last four years, the debt equity ratio is more than one and the current ratio is around 0.5.
pros
The earmings 06 have outgrown 340 percent of earnings 05.
SP Apparels : not yet listed
Thursday, November 23, 2006
LANXESS ABS LTD - A VALUE STOCK
Financials
http://geojit.com/profiles/Geojitfin.asp?index=1&a=13&pageOpt=4&Opt=B&Code=866
This is a zero debt company
Dirwectors report 05
http://geojit.com/profiles/pdirep.asp?index=1&pageOpt=12&code=866&a=10
LANXESS ABS LTD - A VALUE STOCK
October 20, 2005
Rakesh Sharma
Formed in the 1970s as ABS Plastics Ltd, the company later changed its name to ABS Industries Ltd. The company is a pioneer in the field of engineering thermoplastics and has played a significant role in the development of this industry in India.
Years later, in 1997, Bayer Industries, subsidiary of Bayer AG took a 50.97% stake in the company and it was subsequently named Bayer ABS Ltd. More recently, in April 2005, the interest held by Bayer was transferred to a new entity called Lanxess and the name of the company was changed, yet again, to Lanxess ABS Ltd (LANABS). This was as part of the global realignment of Bayer AG whereby it transferred its chemicals and parts of polymers businesses to the newly formed group, Lanxess.
Lanxess ABS is a leading producer of highly specialised engineering thermoplastics in India. These are a substitute for traditional material like sheet metals and find application in many industries. The company manufactures styrenic resins, mainly ABS (acrylonitrile-butadiene-styrene) and SAN (styrene-acrylonitrile). Its product range includes Absolac & Lustran ABS resins and Absolan SAN resins, which are supplied to industries such as information technology, automotive, consumer durables, extrusions and so on. The company currently has a market share of more than 60%.
The company has performed reasonably well in the past. In the six-year period (FY98 to FY03), sales increased from Rs147 crores to Rs344 crores, which is a CAGR of 15%. During the same period, profit after tax increased from Rs4 crores to Rs25.3 crores, a CAGR of 36%. The company paid dividends in each of these six years, the rate having gone up from 10% in FY98 to 25% in FY03. However, during FY04, while sales climbed 18% to touch Rs408 crores, profit after tax (excluding extraordinary items) was lacklustre. The (ordinary) dividend was maintained at 25%.
The company has the calendar year as its reporting period.
The following table carries its broad financials for the 9-month period, ended September 2005.
Particulars
Amount (in Rs crores)
Sales
296.94
Profit After Tax
10.16
Equity Capital
17.58
EPS (annualised)
7.5
CMP
102
PE (times)
14
MCap
180
MCap/Sales (annualised)
0.45
During the period, sales were flat and the trend (in the recent past) of a somewhat declining profitability continued. It can be hoped that the currently disappointing results will not affect the big picture.
The rationale for investment in the company is as follows.
Lanxess AG will be able to focus on the business of thermoplastics after its separation from Bayer. This would generally augur well for its group companies such as LANABS.
LANABS is an important part of Lanxess AG contributing about 12% to its global business in terms of volume. Going forward, Lanxess plans to increase its commitment in India, which is one of the fastest growing markets in the world.
The Indian styrenic resins market is expected to grow at double-digits in the next decade mainly due to a steady growth of user industries. The outlook for the industry looks fairly positive.
The company has recorded a consistent growth in earnings over the years while its share price has lagged. The share might catch up with the company's underlying performance. Moreover, the company is likely to get along nicely in the future.
The LANABS share currently trades at Rs102 on the NSE with a yearly high/low of Rs157 and Rs90 respectively. The current price translates into a MCap of Rs180 crores and a MCap/Sales ratio of 0.45.
Lanxess ABS deserves to be probed further. It appears that the stock offers both value and growth. It is a buy.
http://geojit.com/profiles/Geojitfin.asp?index=1&a=13&pageOpt=4&Opt=B&Code=866
This is a zero debt company
Dirwectors report 05
http://geojit.com/profiles/pdirep.asp?index=1&pageOpt=12&code=866&a=10
LANXESS ABS LTD - A VALUE STOCK
October 20, 2005
Rakesh Sharma
Formed in the 1970s as ABS Plastics Ltd, the company later changed its name to ABS Industries Ltd. The company is a pioneer in the field of engineering thermoplastics and has played a significant role in the development of this industry in India.
Years later, in 1997, Bayer Industries, subsidiary of Bayer AG took a 50.97% stake in the company and it was subsequently named Bayer ABS Ltd. More recently, in April 2005, the interest held by Bayer was transferred to a new entity called Lanxess and the name of the company was changed, yet again, to Lanxess ABS Ltd (LANABS). This was as part of the global realignment of Bayer AG whereby it transferred its chemicals and parts of polymers businesses to the newly formed group, Lanxess.
Lanxess ABS is a leading producer of highly specialised engineering thermoplastics in India. These are a substitute for traditional material like sheet metals and find application in many industries. The company manufactures styrenic resins, mainly ABS (acrylonitrile-butadiene-styrene) and SAN (styrene-acrylonitrile). Its product range includes Absolac & Lustran ABS resins and Absolan SAN resins, which are supplied to industries such as information technology, automotive, consumer durables, extrusions and so on. The company currently has a market share of more than 60%.
The company has performed reasonably well in the past. In the six-year period (FY98 to FY03), sales increased from Rs147 crores to Rs344 crores, which is a CAGR of 15%. During the same period, profit after tax increased from Rs4 crores to Rs25.3 crores, a CAGR of 36%. The company paid dividends in each of these six years, the rate having gone up from 10% in FY98 to 25% in FY03. However, during FY04, while sales climbed 18% to touch Rs408 crores, profit after tax (excluding extraordinary items) was lacklustre. The (ordinary) dividend was maintained at 25%.
The company has the calendar year as its reporting period.
The following table carries its broad financials for the 9-month period, ended September 2005.
Particulars
Amount (in Rs crores)
Sales
296.94
Profit After Tax
10.16
Equity Capital
17.58
EPS (annualised)
7.5
CMP
102
PE (times)
14
MCap
180
MCap/Sales (annualised)
0.45
During the period, sales were flat and the trend (in the recent past) of a somewhat declining profitability continued. It can be hoped that the currently disappointing results will not affect the big picture.
The rationale for investment in the company is as follows.
Lanxess AG will be able to focus on the business of thermoplastics after its separation from Bayer. This would generally augur well for its group companies such as LANABS.
LANABS is an important part of Lanxess AG contributing about 12% to its global business in terms of volume. Going forward, Lanxess plans to increase its commitment in India, which is one of the fastest growing markets in the world.
The Indian styrenic resins market is expected to grow at double-digits in the next decade mainly due to a steady growth of user industries. The outlook for the industry looks fairly positive.
The company has recorded a consistent growth in earnings over the years while its share price has lagged. The share might catch up with the company's underlying performance. Moreover, the company is likely to get along nicely in the future.
The LANABS share currently trades at Rs102 on the NSE with a yearly high/low of Rs157 and Rs90 respectively. The current price translates into a MCap of Rs180 crores and a MCap/Sales ratio of 0.45.
Lanxess ABS deserves to be probed further. It appears that the stock offers both value and growth. It is a buy.
Tuesday, November 21, 2006
Research On Gujarat NRE Coke
25 November 2006
Someone said to me Gujarat nre coke is a shareholder friendly company. I need to check on that. Probably I would add it to my watch list and filter it down if it passes the value investing crietria.
Well this is what the directors report says on diviend and bonus issue
"Bonus Issue In attempt to continuously align its paid-up capital with its growing scale and also distribute profits judiciously, your Company is prompting the issue of bonus shares at periodic intervals. The company had issued bonus shares for the 3rd year in succession during the month of February 2005. Further, your directors are pleased to recommend the fourth successive issue of bonus shares in the ratio of one share for every one share held. "
"Dividend Your Directors are pleased to recommend a final dividend of 5% in addition to the three interim dividends aggregating 45% during the period under review. This has aggregated to 50% dividend for the period under review as against a dividend of 40% paid in 2003-04. With this final dividend, the amount of total dividend paid by the company during the period under review increased to Rs. 44.96 crores as compared to Rs. 16.89 crores paid in the previous year. The bonus shares allotted during the period under review are entitled to a full dividend, irrespective of their date of allotment, declared thereafter. "
It has got some short term credit with its d/e @ 1.1. This is wat the report says about it.
"The Company is enjoying short-term credit rating of 'PR1+' (PR One plus, the highest rating) indicating strong capacity for timely payment and carry lowest credit risk and long-term rating of 'AA-' (double A minus) indicating high safety for timely servicing and carry very low risk, both from Credit Analysis and Research Limited (CARE). The same are due for review after publication of annual results. "
Observation: This stock would have been a good buy if the debt equity ratio was less or equal to 0.5. Still other parameters also contribute to picking this company for a potential buy.
Pros
The revenus have doubled every year from 01, except for 03.
The net profit is 7500 percent of that of 01.
The ROE is consistently above 25 and the average ROE works around 44.
The Promters hold 46% , Public hold 32.5% and Fincacial institutions hold only 6%.
The company has successfully gone for vertical intergration by acquiring coal mines in australia through its subsidairies. The coal mines are sufficient to meet the raw material demands for the future.
The company has setup wind power turbines to meet its power requirements.
The debt can repaid with its internal accruals.
The company has a diversified range of customers but steel industries being its major customer.
Not more than 20% of revenue is generated from a single customer. So it does not rely on few customers.
Note:
The book value is 49.65 but the CMP is 28. So the company is available at a sufficient discount.
The eps growth has been increasing steadily at around 45 every years for 5 years. That shows the intrinsic value growth.
Someone said to me Gujarat nre coke is a shareholder friendly company. I need to check on that. Probably I would add it to my watch list and filter it down if it passes the value investing crietria.
Well this is what the directors report says on diviend and bonus issue
"Bonus Issue In attempt to continuously align its paid-up capital with its growing scale and also distribute profits judiciously, your Company is prompting the issue of bonus shares at periodic intervals. The company had issued bonus shares for the 3rd year in succession during the month of February 2005. Further, your directors are pleased to recommend the fourth successive issue of bonus shares in the ratio of one share for every one share held. "
"Dividend Your Directors are pleased to recommend a final dividend of 5% in addition to the three interim dividends aggregating 45% during the period under review. This has aggregated to 50% dividend for the period under review as against a dividend of 40% paid in 2003-04. With this final dividend, the amount of total dividend paid by the company during the period under review increased to Rs. 44.96 crores as compared to Rs. 16.89 crores paid in the previous year. The bonus shares allotted during the period under review are entitled to a full dividend, irrespective of their date of allotment, declared thereafter. "
It has got some short term credit with its d/e @ 1.1. This is wat the report says about it.
"The Company is enjoying short-term credit rating of 'PR1+' (PR One plus, the highest rating) indicating strong capacity for timely payment and carry lowest credit risk and long-term rating of 'AA-' (double A minus) indicating high safety for timely servicing and carry very low risk, both from Credit Analysis and Research Limited (CARE). The same are due for review after publication of annual results. "
Observation: This stock would have been a good buy if the debt equity ratio was less or equal to 0.5. Still other parameters also contribute to picking this company for a potential buy.
Pros
The revenus have doubled every year from 01, except for 03.
The net profit is 7500 percent of that of 01.
The ROE is consistently above 25 and the average ROE works around 44.
The Promters hold 46% , Public hold 32.5% and Fincacial institutions hold only 6%.
The company has successfully gone for vertical intergration by acquiring coal mines in australia through its subsidairies. The coal mines are sufficient to meet the raw material demands for the future.
The company has setup wind power turbines to meet its power requirements.
The debt can repaid with its internal accruals.
The company has a diversified range of customers but steel industries being its major customer.
Not more than 20% of revenue is generated from a single customer. So it does not rely on few customers.
Note:
The book value is 49.65 but the CMP is 28. So the company is available at a sufficient discount.
The eps growth has been increasing steadily at around 45 every years for 5 years. That shows the intrinsic value growth.
I have been thinking!!
8th december 2006
When should you sell you company?
You should sell when you find that the company loses on its fundamentals, when the company is overpriced or when the management becomes poor or selfish. You can also sell when you need urgent cash. You can sell when you find companies which you feel have more value than the companies in you portfolio.
1st december 2006
Correction, Crash and Worse
How long shold one wait to buy?
Well stepping into the value investor's shoe, if you find a good company with solid fundamentls and shareholder friendly management, you can buy it. The question when arises. If you feel if the price of the stock is overvalued, then probably wait for a correction. A correction can be loosely defined a fall of 10% or more of market index. A 20% fall or more can be termed as bearish . Similarly a 30% or more fall or more would be extremely bearish. Then the next question can be "how long will it take for a correction?". Well it might take 2 or 3 years for a correction, and more for a crash. But you cant be sure.
Market ignorance is Good!!!
A long term investor need not keep track of the market price, economies and peer tips. In the short run all these factors play a crucial role. Prices of good companies fluctuate, economies rise and fall, and tips work or misfire. He need to look for strong companies which head north in the long term. He should study and understand the characteristics of those companies. Company research is a continuous process. Good charatcteristics include selfless management, strong financial strength, owner friendliness and competiveness. Tendency to buy and sell relates more to market movements than the performance of the company. The greater the frequency of watching the market fluctuation, more the tendency to do [buy/sell] something with the stocks. A good investor would spend more time in understanding the company character, instead of worrying about the market fluctuation. Iam not saying the you shuld completely ignore the market. You need to look into it only to find out whether the company you are tracking is available at a bargain price [margin of safety].
Believe in what you see (just for picking prospective companies)
Time and again people invest in companies that they dont understand. You might have put your hard earned money in biotechnology, power and lot of other companies which have an attractive name. I have come across few name like crazy infotech, alchemist and aeonian investments(in fact i bought some). Well those names are catchy! I have been watching crazy's stock price go crazy from Rs 30 and am still watching it. Within a matter of few months it touches Rs 110. When this is now a three bagger as peter lynch would have called it. But Dont invest in something you dont know. Research then invest. Or else you might not know when this company goes crazy again and fall to Re 1. I am not telling this company is good or bad. I am not asking you to understand a comapny before investing.
Bigbaggers are found in your backyard!
You dont need a professional stock picker to advise on what to buy. You can find one in your backyard. It might be the one whose product or service you would have enjoyed. Buying top companies is like buying jeans at lewis. You can get the good jeans from downtown at a price much below.
When should you sell you company?
You should sell when you find that the company loses on its fundamentals, when the company is overpriced or when the management becomes poor or selfish. You can also sell when you need urgent cash. You can sell when you find companies which you feel have more value than the companies in you portfolio.
1st december 2006
Correction, Crash and Worse
How long shold one wait to buy?
Well stepping into the value investor's shoe, if you find a good company with solid fundamentls and shareholder friendly management, you can buy it. The question when arises. If you feel if the price of the stock is overvalued, then probably wait for a correction. A correction can be loosely defined a fall of 10% or more of market index. A 20% fall or more can be termed as bearish . Similarly a 30% or more fall or more would be extremely bearish. Then the next question can be "how long will it take for a correction?". Well it might take 2 or 3 years for a correction, and more for a crash. But you cant be sure.
Market ignorance is Good!!!
A long term investor need not keep track of the market price, economies and peer tips. In the short run all these factors play a crucial role. Prices of good companies fluctuate, economies rise and fall, and tips work or misfire. He need to look for strong companies which head north in the long term. He should study and understand the characteristics of those companies. Company research is a continuous process. Good charatcteristics include selfless management, strong financial strength, owner friendliness and competiveness. Tendency to buy and sell relates more to market movements than the performance of the company. The greater the frequency of watching the market fluctuation, more the tendency to do [buy/sell] something with the stocks. A good investor would spend more time in understanding the company character, instead of worrying about the market fluctuation. Iam not saying the you shuld completely ignore the market. You need to look into it only to find out whether the company you are tracking is available at a bargain price [margin of safety].
Believe in what you see (just for picking prospective companies)
Time and again people invest in companies that they dont understand. You might have put your hard earned money in biotechnology, power and lot of other companies which have an attractive name. I have come across few name like crazy infotech, alchemist and aeonian investments(in fact i bought some). Well those names are catchy! I have been watching crazy's stock price go crazy from Rs 30 and am still watching it. Within a matter of few months it touches Rs 110. When this is now a three bagger as peter lynch would have called it. But Dont invest in something you dont know. Research then invest. Or else you might not know when this company goes crazy again and fall to Re 1. I am not telling this company is good or bad. I am not asking you to understand a comapny before investing.
Bigbaggers are found in your backyard!
You dont need a professional stock picker to advise on what to buy. You can find one in your backyard. It might be the one whose product or service you would have enjoyed. Buying top companies is like buying jeans at lewis. You can get the good jeans from downtown at a price much below.
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