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.