Management Interviews – IEX, Sobha Developers, Bata India, Sandhar Technologies, V-Mart

IEX

  • Q2 volume growth driven by increased demand in Gujarat, Maharashtra, Bihar, WB, Telangana, J&K
  • Reason in increase of pricing was due to hydro and wind generation going down in September and shortage of coal
  • Our transaction fees is not dependant on price of power but on volumes transacted
  • Load shedding is the last thing that distributors engage in, hence demand for power will continue
  • Any variation of fees in future shall be first approved by a regulatory approval, earlier exchanges were free to vary.

Link : https://youtu.be/q7RLg1wgg2g

Sobha Developers

  • Revenue can be recognized only on completion basis as per New AS
  • There are few private sector NBFC where we have seen they have not disbursed loans and they have assured that max delay is for 2-3 weeks
  • Aiming topline of 1200 crs in this FY. Order book of 2300 cr on hand for contract manufacturing, will grow this business at double digit
  • 1st time buyers have been buying early in their age
  • 2018 will be better than 2017
  • Kerela is a great market for us, sentiment will revive when NRI returns in december season
  • Gurgaon and NCR is genuinely growth oriented market in North
  • Bangalore we have good land bank

Link : https://youtu.be/wmnWoRioGyg

Bata India

  • SSGR is 9%+ and premium segment is 30%+
  • Turnover growth was 15% where 16% growth in retail and 4% in non retail
  • Portion of premium products will go to 35% from 30% at present
  • Passing entire benefit of GST to customers
  • Margins have improved by 1%
  • All new launches will be mix of premium and retail

Link : https://youtu.be/JqT3gLPC4gM

Sandhar Technologies

  • Margins pressure is due to commodity prices and increase in power and fuel cost
  • Our new units are operating at negative operating leverage and as time passes will see much better margins from new units
  • Industry segment grew at 13%, we grew at 20%
  • PV segment grew at 5.1%, we grew at 7.9%
  • CV segment grew at 37%, we grew at 35%
  • Off highway grew ta 22%, we grew at 75%
  • Diversification program has paid off well for us
  • Just 3% of overall revenue is exports
  • 50% of our foreign currency exposure is always hedged

Link : https://youtu.be/Q57YeC6j64g

V-Mart

  • Festival demand has shifted from Q2 to Q3 which is the reason of SSGR coming down
  • Expenses are growing and SSGR is flattish resulting in Ebitda loss in quarter
  • Witnessing good festival season – will meet our expected nos. by year end
  • Our stores are in Tier2 Tier3 cities and people buy only when they need and when there is festival. So during festival they come out and buy large quantities. Seeing demand rise in winter wear products from North India. Kids wear is growing more than other items
  • 19 new store opening in H1, focussing on north and east states
  • We approach clustered approach by opening new store which is 100-150 kms from our other stores

 

 

 

 

Management Interviews – Welspun India, Welspun Corp, Bajaj Electricals, Castrol India, Escorts, BEL

Welspun India

  • After a long time entered in to double digit growth trajectory
  • SPACES grown 20% in Q2
  • Launched W brand towels in domestic market
  • Christy sales via e commerce platform have gone up by 140%
  • Expecting 1800 crs revenue from Welspun flooring in 2-3 years time (2x of capex)
  • Double digit growth guidance for revenue and ebitda margin next year will improve substantially as current year hedges expire
  • Capex will be 900 crs – 700 crs for flooring. No new spending on spinning and weaving.

Link : https://youtu.be/mSHvcIzKTDk

 

Welspun Corp

  • 7% growth on YoY basis and 9% growth on QoQ basis
  • Ebitda is 239 crs at sales of 269 MT
  • Order book of 1.7 mn tonnes valued at 2 bn $ (highest ever in history of co.)
  • 850k tonnes from Saudi, 500k tonnes from US and 300k tonnes from India
  • Growth mostly coming from US mkt
  • Made a provision of 28 crs rs for ILFS and other bonds.

Link : https://youtu.be/zoF1df0buTE

 

Bajaj Electricals

  • Sales at 1598 crs vs 935 crs YoY , 71% growth
  • PAT gone up to 34 crs from 18 crs, 79.6% growth
  • Consumer product business growing by 25%
  • EPC is growing by 127% because of orders from UP projects
  • Consumer products margins are less as RM prices have gone up and Co. has not taken increase in prices, it will be taken in 3rd qtr
  • EPC margins – UP order margins are on lower side than other EPC projects
  • Total order book for EPC is 7300 crs
  • EPC topline by year end will be 4000 crs, 60% growth
  • Consumer products topline will be around 3000 crs
  • CP margins we expect to improve by 100 bps, EPC margins will be in same range

Link : https://youtu.be/G4yE78X8p_4

 

Castrol India

  • Current quarter volumes increased 4%
  • T/O increased 8% after putting in 3 prices increases in market
  • Profitability was maintained despite 115crs increase in cost of goods
  • ReLaunched some products with differentiated technology
  • We have recovered 80% of cost of goods increase in 9 months
  • No price hikes in this quarter unless huge change
  • Reached 150k retail outlets and signed alliance with M&M
  • Saw uptick in industrial volumes in Q3, 4% growth
  • Synthetic products is a small part of turnover % in India as market is still evolving
  • Lubricant demand depends on how much the vehicle moves and how many vehices are there in system and not so much on vehicles sales. Other thing that impacts is technology change. Replacement of lubricants are getting longer which means vehicles require lesser lubricants but they’ll require other synthetic products in which castrol is well positioned
  • Long term volume growth of 5-6%

Link : https://youtu.be/tuW3Dq-Nabw

 

Escorts

  • Diwali and Navratri are generally strong periods
  • Already taken price increase two times, will be looking again for 1% increase after festive season is over
  • In construction business, H1 is lower and H2 is better, guidance of 13% growth on full year basis
  • Railways – Order book – 400 crs+ which will be executed within next 12-13 months – Guidance of 25-30% growth on full year basis
  • Lowered margins in railways compared to previous quarters as we are entering new product segment. On a full year basis margins will be better by 200-300 bps
  • In tractors we are able to pass the cost increases to customers but in construction we are facing difficulties
  • Price realisations were better due to price hike taken
  • Overall macro for rural is looking positive for next 2-3 quarters

Link : https://youtu.be/eOr_jKPHk3I

 

BEL

  • Revenue growth of 20% for half year
  • PAT depends on mix of services provided during particular period
  • Ebitda guidance for full year around 17-18%
  • Order book of company at all time high touching 50,000 crs
  • Executable order per year will allow us to grow at 12% CAGR
  • Will complete deliveries at 11200 crs in this year
  • Expect order flow of 10000-13000 crs in FY 20

Link : https://youtu.be/xufvb85MJys

Interesting Reads – 05-11-2018

Stocks that investment gurus would buy for Diwali 2018 (ET)

In this article, ET has explained and filtered stocks based on methods used by 4 investment gurus – James O’ Shaughnessy, Warren Buffett, Joel Greenblatt, Joseph Piotroski

https://bit.ly/2DncDS6

 

Can Ethanol Change Business Dynamics For Sugar Industry? (BQ)

A good read on changing dynamics for sugar industry.

https://bit.ly/2OpEoKH

 

The Low Stress Way to Research Stocks (Safal Niveshak)

Jatin Khemani talks about his equity research process and how he tries to balance the stress part of the equation that it involves

https://bit.ly/2zoZNhq

 

A Brief Overview Of Global & Indian Coffee Sector (Alpha Invesco)

https://bit.ly/2Dkccbb

 

Understanding The Indian Tyre Industry, Key Players & The Road Ahead (Alpha Invesco)

https://bit.ly/2RCMgKU

 

Reminiscences Of A Stock Operator: The Volkswagen Chronicles (Albert Bridge Capital)

Mother of all short squeezes, Volkswagen briefly became the world’s biggest company by market value, as short sellers caught betting on a price drop with borrowed stock scrambled to find shares after a buying spree by Porsche

https://bit.ly/2SNlmRJ

Management Interviews – Globus Spirits, Prataap Snacks, Berger Paints, Ceat

Globus Spirits

  • Investing 25-30 crs into premium IMFL business every year. Sales is small now but it’s a high growth business
  • Economy brand business growing at about 8-10% every year
  • Rajasthan is a biggest state, followed by Haryana and then West Bengal
  • Bihar Distillary – Is for ethanol policy – Large part of capacity will go to OMCs – Will start in next 2 months – Will add about 100 crs of revenue to our business on annual basis – Margins will be north of 20%
  • Have taken price increase and that lead to increase in margins
  • Margin increase due to ethanol is not yet played out
  • 12% margins can be safely assumed this year and will increase once ethanol is played out
  • Rajasthan is over 30% of our revenues and most profitable state, don’t see much change in buiness due to elections
  • There will be some capex in Bihar and Haryana for ethanol

 

Link :

https://twitter.com/CNBCTV18News/status/1032528096128262144

 

Prataap Snacks

  • Will not take debt for acquisition of Avadh snacks, already have cash on books of about 140 crs and cash reqd is 145 crs
  • Avadh snacks revenue is 140 crs; Ebitda margins are 7.5-8.5%; No.4 in Gujarat Category
  • They have small debt of 2-3 crs Rs
  • Gujarat is 4-5% of India’s population – they consume around 12-14% of Indian snacks
  • Revenues of Prataap snacks from Gujarat is just 12-25 crs in a year
  • Will take our holding from 80% to 100% in next 4-5 years; until then Avadh promoters will run the business for us
  • We have a growth target of 18-20% and margins of 7.5%
  • Will target revenues of 1250 crs this year

 

Link :

https://twitter.com/CNBCTV18News/status/1032522272576159745

 

Berger Paints

  • RM Prices – Moderation in some and some gone up
  • Re devaluation will impact us as 25-30% of RM is imported
  • We will take a price increase of 1-1.5% in September
  • Ebitda margins will be static or some drop if we are unable to take price increase
  • Saboo coating acquisition – Speciality products – Glass coating, Plastic coating – Earlier it was a Noth Indian company – We are planning it to take to different geographies
  • Volume growth was at 17% in Q1 due to base effect; In Q2 it might not be 17% but can expect a good volume growth
  • Market share – 19% in decorative business
  • Capacity utilization – 70-72% in normal months and 90-92% in seasonal months
  • Going to set up a plant near Lucknow in UP which will come up in 2020

 

Link :

https://twitter.com/CNBCTV18News/status/1032517987985580032

 

Ceat

  • Our physical rubber inventory will be around 3-4 weeks
  • We have a mix of rubber sourcing i.e. imports and local
  • We are facing some supply issues from Kerela in last 2-3 weeks leading to production stoppage
  • Local rubber prices have moved up from 125/kg to 133/kg (Kerela). As far as international prices are concerned – they are rangebound around 1450 $
  • Availability of carbon black have improved in last 2 months.
  • Re depreciation has also impacted delivery costs in terms of imports
  • 2 Wheller demand is good in last 2-3 months; also seen growth in both OEM and Replacement market
  • We are working for additional capacity addition based on our long term capex plan
  • Likely to incur 1000 cr capex in Halol for TBR – Will be commissione din Q3 of this FY
  • Setting up greenfield plant in Southern india for Passenger Vehicles – Est capex is 2000 crs
  • Capex spend will be in phases ; funded through internal accruals (1/3rd) and debt (2/3rd) – Debt to Equity at end of FY19 could be 0.7-0.8

 

Link :

https://youtu.be/E60gjyHdW58

 

 

 

 

SEBI Annual Report 2018–Quick Notes

Link to the SEBI annual report – https://www.sebi.gov.in/reports/annual-reports/aug-2018/annual-report-2017-18_39868.html 

  • FPI portfolio: Top 40 stocks Forty stocks account for 74% of FPIs’ equity portfolios in India
  • Mutual fund portfolio: Top 40 stocks Forty stocks account for 63% of MFs’ equity portfolios in India
  • LIC portfolio: Top 40 stocks Forty stocks account for 83% of LIC’s equity portfolio in India
  • Of the 223 issues, 216 were from the private sector which raised ` 68,870 crore compared to 118 issues that raised ` 31,683 crore in 2016-17.
  • In the cash segment, the turnover at NSE increasedby 43.1 per cent during 2017-18 compared to 19.3 per cent growth in the previous year. The turnover of BSE too increased by 8.5 per cent during 2017-18 compared to 34.9 per cent growth in the previous year.
  • The turnover of all stock exchanges in the cash segment increased by 37.4 per cent to ` 83.2 lakh crore in 2017-18 from ` 60.5 lakh crore in the previous year.
  • Of the aggregate turnover, NSE accounted for 87 per cent of the total turnover and BSE accounted for 13 per cent of the total turnover.
  • Over the years, index options have emerged as the most traded instrument in the Indian derivatives market. During 2017-18, the share of index options in total turnover at NSE increased further to 81.8 per cent from 77.1 per cent in the previous year.
  • So far, under mass media campaign, more than 67,980 TVCs, around 2, 25,040 radio spots, over 5,200 insertions in various print editions, around 962 screens in cinema halls were covered under the campaign. Further, around 53 crore bulk SMSes in various languages were sent cautioning investors against Ponzi schemes/unregistered CIS
  • During 2017-18, the total amount of fees and other charges received was ` 624.44 crore (audited) as against ` 518.75 crore in 2016-17 (audited). The recurring fee was 48.90 percent in 2017-18 as compared to 60.70 percent in 2016-17 of the total fee collected. During the year 2017-18, the largest recurring fee of ` 78.00 crore was collected from Derivatives Members registration followed by ` 40.82 crore collected from Stock Brokers and Sub- Brokers. In non-recurring fee category, the highest fee was collected from Offer Documents and prospectuses filed (` 112.24 crore) followed by Buy Back of Share (` 106.12 crore) and Takeover Fees (` 29.70 crore).
  • As on March 31, 2018 the total number of employees in various grades is 794 (including employees on deputation/ contract), out of which 698 employees are officers and 96 employees comprise secretaries and other staff. The male and female composition is 527 and 267, respectively.

There is a very long section on SEBI orders which is very interesting to see actions taken and how much time it takes.

Some more snapshots from the report

  • Mumbai continues to be the leader in turnover.

Mumbai Rocks

  • Free Float Market Cap at 45% of total market cap.

Free Float Market Cap

  • Only 3121 stocks trade for more than 100 days.. No of listed maybe 5200.
  • Only 1730 stocks have traded from more than 100 days regularly on NSE.

Trading Frequency

  • CDSL catching up in terms of investor accounts but value-wise NSDL is way above.

NSDL CDSL

  • CDSL leads in geographical spread of DP locations.

Geographical Spread

  • Options share increasing. But its due to calculation on notional value of the contract.

Index Futures to Derivatives

  • Good increase in AUM and no of clients in PMS.

Portfolio Managers

  • AIFs picking up big time.

AIF

  • Not a major jump in FPIs

Intermediaries

  • USA followed by Mauritius on in Assets Under Custody

AUC FPIS

  • No of SME listings are ramping up in a very big way.

SME listings

  • Market cap is still small.

SME capital raising

  • Pending actionable grievances being reduced at a great rate.

SEBI grievancesSEBI pending grievances

  • Sub Brokers reducing !!

Sub BrokersPortfolio Managers RIA RA

  • Given the high networth requirements doubt no of MFs are going to grow anytime soon.

No of Mutual Funds

  • Way too much surveillance ?

Surveillance Measures

Individual Shareholding Increases in Downtrends–PC Jewellers , Vakrangee and Manpasand Beverages top the charts

We had written a note on how Retail Investors keep averaging stocks in this article on NooreshTech Blog

http://www.nooreshtech.co.in/2018/04/why-do-traders-go-bust-and-investors-get-lost.html

Look at this snippet from Kotak Institutional Research Report.

Almost all the stocks are in downtrends and have corrected more than 20% from their highs.

 

Page Industries – 90 PE is not expensive – Cartica Capital (Part 2)

In our last post we mentioned how Cartica Capital finds Page Ind. is reasonably valued at 90 PE

The interview was aired on 28th June 2018

Looking at the Shareholding pattern of Page Industries we came across that holding of Cartica Capital has come down from 8,62,721 shares to 6,84,058 shares  between March to June 2018. Price range of Page Ind. during same time was 21800 to 27800

Shareholding of Cartica in Page Ind. over last 3 years

Quarter No. of shares
June 2018 6,84,058
March 2018 8,62,721
September 2016 8,64,565
June 2016 8,69,465
September 2015 8,63,650

Price Chart of Page Ind

Page Industries–90 PE is not expensive–Cartica Capital

An interesting take from Cartica Capital which is the 2nd largest public shareholder in the stock after Nalanda.

Video Link – https://www.youtube.com/watch?v=BnoCjHHyjJU

Check 2.40 to 4.10 . The overall interview is also interesting.

You might want to read up on Modigliani Miller Model for valuation

Indag Rubber–Buys a Group Company – Electric Vehicles Ancillary–Sun Mobility–Diversification or Diworsification?

Intimation under Regulation 30 about investment upto Rs.14.50 crores (USD 2.1 million) by way of acquisition of 21,00,000 equity shares of USD 1 each of SUN Mobility Investor Ltd.(Jersey)

https://www.bseindia.com/xml-data/corpfiling/AttachHis/9942e6e3-ef09-4c96-ac6c-3ac533796c69.pdf

http://www.sunmobility.co.in/ 

Khemka group has indirect control and ownership.

Investment is being done at book value of USD 1 per share.

Although the total investment is only 14.5 cr as of now. Will this be a good diversification or diworsification ?

Disclosure – No Holdings. Not a recommendation.