Stock Ideas – Long term

Mysore Cements – what I think about..

Posted on June 17, 2008. Filed under: Stock Ideas - Long term |

Recently read through the Annual Report of Mysore Cements. These are my initial impressions from report.
Mysore Cements is a SK Birla promoted company with a cement production capacity of 2.1 million tonnes across 3 production facilities in Karnataka, UP and MP. The SK Birla group has recently off-loaded its entire stake of 54.38% to Hiedelberg Cement Group of Germany. Now, Mysore Cements is a subsidary of Hiedelberg Group. The company is expanding its capacity to 5.9 million tonnes per annum subject to approvals from regulatory authorities. The Board of the company has been re-cast with the nominees from Hiedelberg group taking over the Birla held board positions. The company is merging Indorama cement and Hiedelberg Cement India P Ltd with itself w.e.f 01 April 2008.
The company follows Jan-Dec accounting year and for the y.e 31 Dec 2007, the total production of Cement and Clinker stood at 2.201 Million tonnes companred to 1.610 million tonnes for the y.e. 31 Dec 2006, implying a production increase of 36%. The net realisation per tonne of cement during 2007 stood at Rs3271 compared to Rs2954, again showing an upward bias in price realisation.

Positives:
1. The company revenue and profits have been raising continuously over the last 4 quarters. Of course, the cement cycle is doing good being the primary reason, the company’s association with Hiedelberg may be a positive in the long run. The net profit of the company has increased to Rs97.65 crores for the y.e 31-12-07 compared to the loss of 2.19 Rs34.31 crores in y.e. 31-12-06. For the quarter ended 31-03-08, the company has reported an EPS of Rs 2.59.
2. The company holds cash to the extent of Rs180.73 crores in the Balance sheet as at 31-12-07. This works to per share value of Rs11.43. The total market capitalisation of Mysore Cements at the current rate of Rs32 works out to Rs506 crores.
3. The company has generated cash of more than Rs.80 crores for the year ended 31.12.07.
4. The company holds 12 lakh shares of Cimmco Birla Ltd., in its books valued at Rs12 lakhs. The market price of Cimmco Birla is Rs25 per share and there is already a proposal of takeover by Titagarh Wagons. Since Cimmco Birla is under BIFR purview, the promoter company can not sell the stake now.
5. In addition to this, the company holds investments in listed entities which are valued clost to Rs2.50 crores. (As per the last balance sheet it was valued at Rs5.45 crores. Considering the erosion in value of securities over the last few months, I have reduced the market value of investments by more than 50% to Rs2.50 crores)
6. The company has accumulated losses of Rs269.83 crores in the books which will help the company to reduce the tax burden over the next couple of years.
7. The company is quoting at an attractive valuation of less than USD65 Economic Value per tonne compared to the industry average of USD105 per tonne.

8. The company has an expanding operating margin over the last 3-4 quarters.

Negatives:
1. Cement being a highly cyclical industry, the fortunes may swing wildly. The per tonne realisation may not be sustained, there can also be a drop in the demand for cement due to economy slowdown. The company may also face difficulty in managing rising input costs, in-adequate limestone mining facilities, coal availability and increasing railway freight charges.
2. The company being located in the hinterland, the exports may not be an viable option at all.
3. The accumulated losses to the extent of Rs269 crores will stop any dividend pay-out for the next couple of years atleast.
4. Increasing cement capacity across the industry leading to fall in price.

My take on this company:
The company looks interesting to me at this price of Rs32 considering its parentage. I am being very conservative in estimating the full year EPS to be around Rs7.50 (instead of Rs10 thats what you will get if you just annualise the first quarter ending 31 March’08). It is quoting at 4 PE but since it is a turn-around story and zero-debt company (very important in a rising interest rate scenario) it is destined to do better.

I would ideally look at a price of Rs45 over the next one year at the minimum for this scrip, which presents a possible upside of around 50% from the current price levels.

Advertisements
Read Full Post | Make a Comment ( None so far )

Orchid Chemicals & Pharmaceuticals – what is happening in the scrip?

Posted on March 18, 2008. Filed under: Stock Ideas - Long term |

Orchid Chemicals & Pharmaceuticals scrip has fallen more than 50% in the last two days. On Friday, 14 March, it closed at Rs206 and today on 18 March it has closed at Rs113.60. At today’s closing price, the scrip is quoting at a PE of 4.16. Incidentally, the Business Line carried a detailed buy recommendation of Orchid Chemicals at Rs206 only last Sunday. Click here to view the report.

What would have triggered the steep fall in the scrip in the last couple of days?

1. Bear Stearns sold a huge chunk of Orchid Chemicals stock on Monday due to its liquidity related problems. Bear Sterns has sold the scrip at 195 range on Monday.

2. Macquaire Bank which holds a sizeable chunk of Orchid Chemicals is rumoured to have sold their stake in the market.

3. There is a sale of more than 20 lakh shares by the promoters family members on Monday at Rs135 range.

4. Orchid Chemicals is supposed to carry forex derivative contracts in their books which due to the recent currency movements in Yen and CHF may have a negative impact on the profit and loss for this quarter.

Answers to the questions above:

1. The entire lot sold by Bear Stearns has been picked up by another FII. Also we should note that the sale by Bear Stearns is nothing related to the fundamentals of Orchid Chemicals but due to its own liquidity position.

2. Macquaire Bank sale is still a rumour and no bulk deals reported.

3. The promoters have clarified that the sale of more than 20 lakh shares has been triggered due to margin call on their individual share trading accounts and it was not an intentional sale.

4. The company has clarified that their exposure in forex derivatives is negligible to their balance sheet size.

Technical view:

Don’t think I am a qualified technical expert but when I had one look at the graph it has broken all supports and quoting below 100 DMA and 200 DMA. On pure technicals, it is not a buying signal!!

I think there is no justification for the steep correction of over 50% in the last two days in the scrip. The fundamentals merit a closer look at the scrip with large scale expansion planned by Orchid Chemicals, launch of new products in the coming year in US market etc., If at all somebody is going to buy Orchid, it is better to stagger your purchase. Remember the famous quotation, when the whole world is fearful, you can be greedy.

Disclaimer:
I don’t currently own Orchid Chemicals but may own it in the future. Please check the fundamentals and take your own personal decision.

Read Full Post | Make a Comment ( None so far )

Gujarat NRE – 3rd Quarter Results update

Posted on January 31, 2008. Filed under: Stock Ideas - Long term |

Gujarat NRE Coke has come out with sterling results for the third quarter. The topline has grown to Rs248 crores in Q3 2007 from Rs102 crores in Q2 2007. The net profit for the quarter is Rs49.90 crores which translates to an EPS of Rs1.45 (diluted) on a quarterly basis. The net profit margin has improved to 20.58% compared to 12.30% during the previous quarter.

There are very many fundamental changes happening in the company which I have earlier mentioned here. I am quoting below a snippet posted in Deepak Singh’s blog “State of the market” on Gujarat NRE:
“Gujarat NRE Coke – A batch of foreign investors led by an Australian fund were seen buying shares of Gujarat NRE Coke in good numbers. According to these investors, floods in Australia, freezing weather in China and transport bottlenecks in Indonesia will stoke a sharp rise in the price of coal in other parts of Asia. JP Morgan recently raised its forecast for 2008 coking coal prices to $140 a tonne, a 42% jump from last year’s agreed price of $98.38. Its previous estimate was $120 a tonne. It is in this light that foreign investors are accumulating shares of mining major Gujarat NRE Coke in good numbers…Economic Times”

With the projected rise in the coal prices and Gujarat NRE owning huge coal mines would stand to benefit. I continue to remain bullish on the stock.

Disclaimer: This is not an invitation to buy or sell shares. The views expressed are my personal opinion and please consult your financial planner before taking your decision. I own the shares of Gujarat NRE Coke.

Read Full Post | Make a Comment ( None so far )

Third quarter results update on my portfolio of stocks

Posted on January 30, 2008. Filed under: Stock Ideas - Long term |

I have written about Surya Pharmaceuticals before. You can read that here and here. The third quarter results for Surya Pharma has been declared and it is on track.

The topline is flat and the quarterly EPS is maintained around Rs8.27. There is an improvement on the operating margins by more than 120 basis points and by 50 basis points on the net profit level. The net profit is not reflected the higher operating margins because of higher depreciation and interest cost. The company has gone for expansion and I think it has not started generating revenues. We also need to look if there has been pricing pressures as well.

The trailing twelve months EPS is Rs29.10 and today it has closed at Rs115. The stock is currently quoting at PE of 3.95 and looks very attractive. I continue to hold the stock and I am planning to buy more around Rs100.

Disclaimer: Pls check independently before you buy or sell stocks. This is not an invitation to buy or sell stocks.

Read Full Post | Make a Comment ( None so far )

Indraprastha Medical and Surya Pharma – making smart moves!

Posted on December 14, 2007. Filed under: Stock Ideas - Long term |

Two scrips I wrote about in this blog over the last 3 months have started moving. I am very happy about it.

Indraprastha Medical:

I have earlier written about Indraprastha Medical here when it was quoting around Rs40. The stock has started moving after a very long consolidation and today it has closed at Rs57 with volumes in excess of 1.5 million shares on both the exchanges. I believe that the stock is getting re-rated and it is possible there is further appreciation. A neat 40% return in 3 months time.

Surya Pharma:

Surya Pharma initially discussed here around Rs90 has also started moving and it has closed today at Rs139.80.

On both the cases thee are positive fundamental reasons which have been listed in the original posts. Added on to the fundamental reasons, there is also a positive feeling about the pharma companies on the bourses now. The market has started responding to the fundamental changes happening and it now all depends on this quarter results.

I continue to remain bullish on both the counters.

Read Full Post | Make a Comment ( None so far )

Indrapratha Medical Corporation – watchout!

Posted on December 4, 2007. Filed under: Stock Ideas - Long term |

I have earlier written about Indraprastha Medical Corporation (BSE 532150) here.

Today Indraprastha Medical Corporation has made a big jump of around 9% with high volumes. This is an interesting development “technically” as it has broken out of consolidation zone. There may be fundamental reasons behind this which would unfold in the coming days. I am not saying I know of some thing which brewing in this company!! I am investor with no insider knowledge.

Keep a close watch on this stock and any close above Rs50 would take the stock to a higher level.

Read Full Post | Make a Comment ( None so far )

KR Choksey’s Diwali Picks

Posted on December 2, 2007. Filed under: Stock Ideas - Long term |

When I was talking to my friend on Saturday, he mentioned that I didnt give the complete list of shares recommended by KR Choksey as part of their Diwali picks on the blog. I had earlier mentioned about the KR Choksey’s recommendations here.

So to satisfy my friend who asked for the complete listing, here I go:

1. Great Offshore
2. Hanung Toys
3. Micro Tech
4. Unitech
5. Mundra Port and SEZ

Read Full Post | Make a Comment ( None so far )

KR Choksey’s Diwali Picks

Posted on December 2, 2007. Filed under: Stock Ideas - Long term |

When I was talking to my friend on Saturday, he mentioned that I didnt give the complete list of shares recommended by KR Choksey as part of their Diwali picks on the blog. I had earlier mentioned about the KR Choksey’s recommendations here.

So to satisfy my friend who asked for the complete listing, here I go:

1. Great Offshore
2. Hanung Toys
3. Micro Tech
4. Unitech
5. Mundra Port and SEZ

Read Full Post | Make a Comment ( None so far )

Surya Pharma – Further details

Posted on November 2, 2007. Filed under: Stock Ideas - Long term |

I am able to collate the details of the developments with Surya Pharma.

1. The company has undertaken a de-bottlenecking exercise in its existing plant which will help it to increase productivity and revenue in second half of FY 2008.

2. The company has started exporting Menthol and menthol derivatives from August 2007. Hence, the full impact of revenues from Menthol exports would start reflecting in the coming quarters.

3. The company has embarked on construction of a new plant in the tax haven state of Jammu in accordance with US Food and Drug Administration to manufacture Active Pharmaceutical Ingredients (API) in the areas of therapeutic oncology and sterile cephalosporins.

4. The company is entering into high margin injectible business and also anti-cancer drugs.

The above factors would help the company to achieve higher revenues and profits in the second half year. The first 6 months EPS works out to Rs15 and I believe the second half year can contribute atleast the same amount if not more. Assuming the full year EPS works out to Rs3o, at current market price of Rs110 it is quoting at a forward FY 2008 PE of less than 4. It makes a strong case for buying at current levels and I am planning to buy it.

Read Full Post | Make a Comment ( None so far )

Surya Pharma – Interesting stock to look at!!

Posted on October 24, 2007. Filed under: Stock Ideas - Long term |

Surya Pharma is a stock to watch. The half yearly results are good with a 6 months EPS of Rs15. The stock is currently quoting at Rs116. If the current quarter EPS is maintained for the next two quarters, the company would end up with an yearly EPS of around Rs31. The stock is quoting a FY08 PE of less than 4.

There are many positive developments happening in the company which I will share in the days to come once I am able to collate.

On the technical side, the stock has broken out of the trading range and the first support for the stock is around 96 and below that at 90 levels.

Disclaimer: This is not an invitation to buy or sell shares. Pls take your own decision. I dont own these shares at this moment.

Read Full Post | Make a Comment ( None so far )

« Previous Entries

Liked it here?
Why not try sites on the blogroll...