Right Time to Take a Home Loan

       Some of my fiends recently told me that because of the high Interest Rate during the past three years they have postponed to buy a  Residential Home. Now it seems that  Interest rate becoming down and they are waiting for next one or two years for the Interest to hit rock bottom. But I have a different view, which like to share with you. In my opinion this is the best time to buy a home with a loan. 

The first thing is once you adjusted with high Interest rate and then it coming down (talking about Floating Rate Loans) it would be great benefit to you. Other wise, if interest rate continuously rising, you may be in trouble. 

The second thing is a typical home loan period in India is estimated for 12 years. Within a period of 12 years most probably we should pass through an Economic cycle, means that we can see a bottom and peak of the economy. In the worst period normally the interest rates will be in the high and in the best time for economy the rates would be low. It clearly shows that within a typical home loan period we can see a bottom of the interest rate and also a peak. So it assumes that we would get the average Interest rates within the entire loan period. 

The third concept is when the interest rate at high, normally all construction activity would be dull. It seems that there should be ample labour supply (at least in the theory), which is one of the critical factor of constructing a Home.

If you intend to take home loan with tenure of 10 years, it is better to go for a 15 year loan, especially if you eligible to get Tax benefit.  But you need to do one thing, the difference in the EMI should be deposited in a Bank RD(Recurring Deposit). This is much better than a 10 year loan. Let me explain it with an eg.

Suppose we taking an Rs. 20 Lk home loan with an Interest rate of 10.5% with a tenure of 10 years, EMI would be Rs. 26987/-. Within a period of Ten years you need to pay Rs. 3238440/- (26987*120 months). In this case Interest component will be Rs. 1238440/- (3238440-2000000).

In the second  case if the same amount of loan has taken with tenure is 15 years EMI would be Rs.22108/- Within a period of 15 years we need to pay Rs. 3979440/- (22108*180). In this case Interest portion will be Rs. 1979440 and additional payment will be Rs. 741000/-(3979440-3238440)

Suppose you taking a loan with 15 years and the difference in EMI (26987-22108= 4879 ) is depositing in a Bank RD with an interest rate of 9%, after 15 years it would go up to Rs. 1848905/-.  With an additional payment of Rs. 741000/-, you can earn Rs. 18.48 Lk!. In addition you will get Income tax benefit for 15 years for the extra Interest payment too.

In the above example there is problem. in India maximum RD period is 10 years. Here you can do one thing the amount (Rs. 4879/-)  deposit for a period of Ten years in RD, it would grow to Rs. 947643/-. After ten year this amount deposit for 5 years with a normal Interest rate of 8% for a period of next Five years ( assumes that an interest of 8% will get at that time, but there is no guarantee) the amount would be at Rs. 13.9 Lk !!. Anyway it seems much better.If you smart you can invest the amount after 10 years another RD for the next five years, will get some extra benefits.  So think about it seriously. 

Don't worry to take a debt to make a Home, because you are taking a liability to create an Assets, which only appreciate in the future.

Nb: Here there are some assumptions which are given below:

1. After ten years interest rate for a Five year FD will get an interest rate of 8%.

2. RD will get in to your hand without any taxation. (But remember that I didn't consider the  additional Income Tax benefit on the higher Interest outgo of a 15 year loan).

Requesting your comments regarding this view. It would be great help for others too. If you like this post please share it to your friends. If you like it and don't like to share it through this blog, no problem just copy and sent it via your email.

I can be reached at:

valueinvestmentviews@gmail.com

Important Notice

     This is to inform you all  that I am temporarily discontinuing Stocks recommendations in this blog till getting further clarity on the "SEBI's  Research Analysts Regulation" which has come into effect from December 1st, 2014.

IFB INDUSTRIES - Target Crossed

          I have recommended IFB INDUSTRIES LTD on 16 October, 2014 in my "Diwali Recommendation" list at Rs. 320/- with a target of Rs.500/- . After it touched a new high of Rs. 533/- it is hovering at around Rs. 480/-. Despite this stock seems good to stay  invested even in the current levels, all  are requested to Book partial Profit as it crossed the first target levels. 

(To read the report please see October 16th post -"Diwali Picks- Samvat 2071-72".

To - All Readers of this blog

Dear Friends,

        I got few mails from the readers of this blog, mostly with suggestions even some sarcasms. Let me extend to all of them a warm welcome. But, once again I would like to share my intention of this work.  

Kindly note that this blog is not a research analysts creation. It is not intent for making money.  Here I am just sharing my views to all readers about few stocks. All information are collected from publicly available sources.  I feel that Nifty @ 8600, almost all stocks are overvalued, still  cheap stocks are perhaps cheap in quality too. So there is a high risk of selection.

I can only write down my views, ( means) unable to jack up the stock price. That is why I am not giving a specific target to most of the stocks which I suggested. All  readers are requested to self study before investing any of the stocks I recommended here.

Please feel free to share your views regarding this blog, because it surely help a lot to improve the quality of my effort.

I can be reached at:

valueinvestmentviews@gmail.com

SANGHI INDUSTRIES LTD - Invest

Market Price : Rs. 48.5

BSE Code: 526521

NSE Code: SANHIIND

Equity Capital: Rs. 220 crore

FV: Rs. 10/-

Market Cap: Rs. 1070 crore

Book Value/sahres: Rs. 40.5

Web: www.sanghicement.com

Even though Cement is the largest consuming product in the world on per capita basis, Cement Industry's fortune is largely depends on GDP growth. On an average rule, Cement Industry is growing 1.2 to 1.5 times of the GDP growth of the country.

Mostly, India is a country with over supply of cement production. In the Indian scenario, a typical cement company needs 65% capacity utilization to be break even, 75% capacity utilization is comfort and of or above 85% capacity utilization is excellent. 

In India, about 65% of the cement had is consumed by Housing Sector, 15% in Infrastructure sector and the rest is consumed my Commercial & Industrial construction and a small portion goes to exports.

Fuel is accounts a major portion of the cement production cost whether it is Coal, Furnace oil, electricity and transportation cost of raw materials or end product. If a company can save in this area, its bottom line will be appealing. 

According to analysts estimate, Indian GDP is expected to grow over 6.5% in the next year and after that it will grow by 7.5%. Unexpected fall in the crude Oil prices is fortunates the Govt as it need not to spend large sum of Fuel Subsidy. In the November, 27th meeting of OPEC decided to not to cut Oil production is favour for India as the crude oil price expected to be at low level at least for the next few months. We feels that the savings from the subsidy, Govt will utilize in to their ambitious infrastructure projects. Interest rate in India seems to going to fall as the inflation reduced. It will also boost the Housing projects and other investments across the Economy, also boost the cement demand.

In such a scenario, Sanghi Industries Ltd, a well managed mid sized cement company with attractive valuation feels a good investment opportunity for medium term perspective. I am not going for a one-to one financial analysis, just giving a view about this company. 

Sanghi Industries Ltd (Sanghi), better known as "Sanghi Cement" is Gujarat based mid-sized cement company promoted by Sanghi brothers.  Having an installed capacity of over 3 MTPA capacity, Sanghi is the only Five star rating cement company in India. Now the company is utilizing almost 85% of its capacity.  The ongoing brown field expansion which is expected to complete by next year, the company's capacity will be at 4.1MTPA. For the better and cost effective transportation, the company have Jetty in Gujarat and Mumbai also it propose to sets up new jetties on long distance places at Kochi and Goa, where higher demand and margins. It also propose to add Six vessels to support the cost effective transportation by the Sea. 

Earlier, the promoters of the Sanghi brothers had some dispute over the company management, now it seems almost settled. Any way the promoters of the company acquiring shares through open market purchases. During the last two years they have acquired 10% stake through creeping acquisition route, which shows the confidence of the management in their company.

The company's September quarter financials was poor, thanks to a 38 days shut-down on its clinker plant. Sanghi has reported a turn over of Rs. 181 crore in the second quarter ended September 14 as against 210 crore reported in the same quarter of the previous year. However, Net profit reported at Rs. 1.8 crore from a loss of Rs. 18.5 crore reported in the previous year. The notable point is , as a result of the restructure and pay-off of some of its debts, company's  interest out go declined sharply by 40% to Rs. 3.6 crore in the September quarter. We feels Sanghi's margins will improve in the future on every aspects. At the current market price of Rs. 48.5, it seems a good medium term bet.

Please note that I have no vested interest in this company.

Gulf Oil Lubricant - Target achieved

     On 16 October 2014, we have recommended Gulf Oil Lubricant Ltd at Rs. 308/- ( as "Diwali recommendation") with a one year target of Rs. 450/-. After one and a half month it crossed the target. We suggesting to sell 50% of your holdings and keep the balance to avoid risk, cash on some profit and to get better return in the future. ( To read the report please see October 16th "Diwali recommendation")

Pioneer Embroideries Ltd - Repeat

    

   On November 16, we have recommended to invest in Pioneer Embroideries Ltd when it was Rs. 22/-. Presently the stock is trading at Rs. 19/-. We feel the stock will be a potential Multi -bagger in the medium term because the promoters of the company infused about Rs. 10 crore in to the company by way of preferential shares issue, it settled/restructured  most of  its dues with banks and Financial Institutions. The company is in final stage of settlement with other Banks to settle the balance dues. Once again we like to suggest to invest in this stock those who having some patience.

SIMMONDS MARSHALL LTD : Book Partial Profit

    

     On October 30, We have recommended to consider an Investment in Simmonds Marshall Ltd when it was trading at Rs. 39.5. Yesterday it closed at  Rs.72/- We advice those who all are having exposure in this counter to consider to reduce at least 50% of your holding as it surged over 80% within a very short span of time.  

SWISS GLASCOAT EQUIPMENTS LTD - Enjoying Double Benefits

Market Price: Rs.100/-
Listing : BSE
BSE Code: 522215
Market Cap: Rs. 50 crore
Equity Capital : Rs. 5 crore
FV: Rs. 10/-
Book Value: Rs. 45.3

        

         Swiss Glascoat Equipments Ltd (SGEL), a Gujarat based company is engaged in the manufacture and sales of Glass lined equipments and spares. SGEL is the third largest glass lined equipment manufacturer in India after US based - GMM pfaudler Ltd and French firm DeDeitrich. (Out of this two companies, GMM pfaudler is the only listed  company on the stock exchanges.) Earlier the second largest company in Glass lined equipment Industry in India was Hyderabad based NILE Ltd. In 2011, NILE sold its unit to De Deitrich. Swiss Glascoat Equipments Ltd enjoying a double benefit as competition reduced on account of one of the major competitor exited from the business and at the same time user industries including Pharma, Agrochemicals and Food processing industries are registering a hopeful double digit growth. 

         SGEL having over two decade experience in the industry. Its Glascoat product range comprises of both Ready made and custom built equipments.   The company's ability to deliver products in a timely manner to its customers as well as design and development of innovative products are excellent. Major pharmaseuticals and pesticides companies from domestic and international front including Bayer cropscience, Syngenta, Teva, Mylan, Glenmark, Divis lab, Aurobindo Pharma and Shasun are few of the customers of the company.  SGEL having regular dividend paying track record, which is slightly increasing YoY basis in line with the company's growth. Last financial year the company paid a dividend of 25% against 22% paid in the previous FY. 

         The company's major products, Glass lined reactors, lined  storage tanks and columns and blenders are widely using in pharma and pesticides  industries. Generic pharma sector, were as leading Indian Pharma companies have strong presence accounts about 25% share in globally with an expected 12-14% CAGR for the next couple of years. As per the reports, Indian Pesticides and Food processing Industry too  going to register an amazing 14 to 16% growth in the next five years, these all are expected to rise sales of the SGEL. 

          Due to the Global economic slowdown started in early 2007, almost all companies were deferred their Capex which adversely affected the capital goods industry. Even in this period SGEL reported a slow but steady growth in the domestic and export markets. Its sales increased from Rs. 35 crore in 2007 to Rs. 76 crore in 2014. At the same time NP increased from Rs. 1.5 crore to Rs. 3.8 crore. With a small equity capital base of Rs. 5 crore, TTM EPS stood at Rs. 8.65. At the prevailing market price ( which recently surged in a big way) of Rs. 100, TTM PE is 11.5Xs. The company reduced its debt to Rs. 13.5 crore in the FY ended March, 2014  from Rs. 19.9 crore in the previous year. 
                
           At a first look it seems that the company's promoter holding declined to 35.7% from 43.5% during the last year. But its is because of one of the promoter with 7.06% stake re-categorised as non- promoter. We expects the company going to register above its earlier growth rate in line with the user industry's growth. Reduction in interest rate on cut down debt, more over softening commodity prices would boost the bottom-line.  Despite a recent sharp rally in its stock price, we feel SGEL gives a good medium term investment opportunity.

RPG LIFE SCIENCE LTD :- Keep an eye on it.

Market Price:  Rs. 91/-

BSE Code: 532983

FV/ Shares: Rs.8/-

Market Cap: Rs. 152 crore

Promoter Holdings: 61.83%

      Perhaps it may not be prudent if giving positive views on a Pharmaceuticals Company, particularly a part of infamous for wealth creation to their Share holders,  which reporting stagnant financials since the past several years and suffering from a warning letter found from the USFDA (US Foods and Drugs Administration). I am talking about the RPG group's pharmaceuticals and Biotechnology company, RPG Life science Ltd. Subsequently the partition of the RPG group businesses to RP Goenka's two sons in 2010, almost all companies from the two groups have re-rated (company financials and Stock performance) in a big-way, especially Harsha Vardhan (HV) Goenka's group companies including CEAT Ltd, Summit Securities, Zensar technologies and KEC International Ltd. But still, RPG Life science, the pharmaceutical arm of the HV Goenka's group stands a paradox to it. 

       RPG Life Science Ltd, formerly known as Searl India Lts is engaged in the business of Formulation, APIs and Bio technology segments. It has three manufacturing units; one in Navi Mumbai, Maharashtra and Two in Ankaleswar, Gujarat. As per the FY 2014 balace sheet 62% of the company’s revenue come from Formulation, 22% from APIs and about 9% from Bio technology. The company also undertakes contract product development on the back of strong R&D. Gastrointestinal, Respiratory, Pain Management and Nutritional are the acute therapies and Cardiology, Anti-Diabetic, Oncology and Nephrology therapies are the Chronic speciality therapies' focuses area of the company.

          In May 2013, RPG life Science got a warning letter from the USFDA for violation of current good manufacturing practices at its two plants each at Ankaleswar  and Mumbai. After it got the warning letter from the USFDA, the company have aggressively started corrective actions to meet the regulators requirements. However, normally the estimated time for corrective steps and complete adherence  with the stipulation indicated by the USFDA is two years. Now it is almost over one and half years, we hope that the company will get the approval from the regulator sooner than later. Anyway, the management of the company is full confident about the future functioning of the company. It may be the reason they are sharply increasing their holdings through open market purchase. During the past four quarters, the promoters of the company have increased more than 5% stake from the open market. We have already seen the same type of accumulation in the CEAT Ltd's and Summit securities' counters ahead of its sharp rally on the market.

          Even though the company holdings EU GMP, WHO GMP and TGA, Australia certification for the API facility at Navi Mumbai and UK MHRA certification for Ankaleswar palnt, the warning letter from the USFDA adversely affected the business of the company in the last FY.  For the HY ended September 2014. the company reported a sales turn over of Rs.119 crore and Net loss of Rs. 6.4 crore on an equity capital base 0f Rs. 13.3 crore. 

      To build a strong and sustainable product portfolio, the Company has undertaking a backward integration for Di-phenoxylate and Azathioprine. It has plans to introduce new APIs every year in various key therapist segments. With successful achievement of USFDA certification, the Company plans to penetrate developed  markets with new APIs. However, in the short term there may be some uncertainties about the company's performance, but in the medium to long term growth story is intact. Investors with some patience can consider to accumulate this stock on declines only for medium to long term objective. 

  

PIONEER EMBROIDERIES LTD - Turnaround Story

Pioneer Embroideries  Ltd:


Market Price: Rs. 22/-
BSE Code: 514300
FV: Rs. 10/-
Equity Capital : Rs. 17.7 cr
Mrket Cap : Rs. 39 cr
FY- 2014 Sales: Rs.280 cr.

               If a company coming back into the black from the verge of closure should be highly appreciated, Pioneer Embroideries Ltd (PEL) deserves all its glory. As agreed in the CDR package, now the company is settling its defaulted dues to various Banks and Institutions as OTS (one tine settlement) by one-by-one. Its financial performance , particularly in the net level improving considerably. The industry growth, which engaged the company also looking well, we foresees a bright future of PEL in the medium  term.

       

                 Pioneer Embroideries Ltd is India's largest manufacturer - exporter of Embroideries, Bobbin laces, Raschel laces and other garment accessories. PEL owns the No. 1  retail brand Embroidered clothings named "Hakoba".  The company have seven manufacturing units spans 5 states from Tamil Nadu to Haryana. Apart from the domestic sales PEL exports its products to Latin America, North America, Europe, Africa and the Middle East. 

     The company's top-line growth is satisfactory since the past decade and unfortunately its bottom-line is not so. In 2008 (up to 2008, PEL having a regular dividend paying track record), to meet the financial requirement for setting up a Dope Dyed Polyester Yarn (DDPY) division, the company had issued FCCBs for $30mn, which were proposed to convert into shares but not happened that because of the sharp fall in its share prices on account of the Global financial crisis. (In fact just $2 mn converted in 2008, $16 mn restructured in FY 2014 and $11 mn was pending). Recently, the company had bought back the remaining FCCBs. It has settled the defaulted dues with ICICI bank by one time settlement. As per the CDR package instruction, in March, 2013 the promoters of the company  had subscribed 1651978 shares at Rs. 21.22 per shares and another 3125948 shares at Rs. 19.77 per shares to aggregate  Rs. 9.7 crore. Last week PEL has completed the OTS with State Bank of Patiala. So it is clear that the company management is confident with the company's overall growth in the coming years.

      The company's Dope Dyed Polyester Yarn (DDPY) division's performance is continuously improving. Last financial year ended march 2014, the compny's DDPY division surpassed its sales target with a 21% YoY growth. But the bottom line was pitiful due to a large out go of interest. In FY 2014, PEL has reported a sales income of Rs. 280 crore and net loss of Rs. 7 crore after considering an Interest out go of Rs. 16 crore and depreciation of Rs. 11 crore. For the HY ended September the company's sales improved to Rs.  136 crore against it reported Rs. 132 crore in the previous year. At the same time its NP, with the help of Rs. 5.5 crore other Income, reported at Rs. 1.73 crore. The same period of the last financial year NP was reported at Rs. 3.77 crore, including an other income of Rs.11 crore. Finance cost reduced considerably in the first HY of the current FY. We believe the trend will continue in the coming quarters, once it fully settled the dues as per the schedule and arranged the low cost fund. We hope that the company's financial performance, especially in the bottom-line will considerably improve in the future and it would reflect in its stock price too.

Cybertech Syetems & Software - Results Update

Cybertech Systems & Software Ltd: Q2 Results - Update

         On October 29, we have given a positive view on Cybertech Systems, when it was at Rs. 42/-. After two weeks the  stock touched a high of Rs.74/- and closed by 10% lower at Rs. 63/-, thanks to a not so good  second quarter  financials. On a consolidated basis its top-line fell 10% and bottom line slipped into red. What we understand is increased expenses on employee addition and other expenses too caused to report a ( profit after Interest but before exceptional items ) loss of of Rs. 33 lakh against a profit of Rs. 1.84 crore on sequential basis.  Despite a dismal financial results, we hopes that all positive circumstances are there to improve its performance in the future. Also we can keenly track the movement of the management, especially if they increasing their stake. 

DONEAR INDUSTRIES LTD : Truly undervalued stock

Donear Industries Ltd:

Industry: Textile - Fabric/Ready made Garments

BSE CODE: 512519

Market Price : Rs. 20/-

FV / shares: Rs.2/-

Market cap: Rs. Rs. 102 Crore

Sales (FY - 2014) : Rs. 480 crore

         Even though numerous Textile companies in the lower end of the Industry trading inexpensive valuations,  the story is entirely different about the companies those who all are having strong brands and nation wide presence. We know the  market valuation of companies like Page Industries ( in fact  user of an international brand - Jockey), Kewal Kiran, Lovable Lingeries, Rupa & Company Ltd and Maxwell apparels...the list longs. At this situation we need to a close looking at a Micro cap company - Donear Industries Ltd. The company having over  three and half decades experience in the Textile Industry with fabulous track record of Product innovation, Capacity addition, Dealer & distribution network widening and Brand building.

          Donear Industries Ltd is engaged in manufacturing of medium and premium category fabrics like suiting, Trousers for Menswear and Women wear. Its manufacturing facilities are located at Silvasa, Surat and Dadra nagarhaveli. The company  offers garments under the brands Donear Suiting, Donear Royal Classico, Donear Gift4U, Donear Soft&Smooth..etc. Its brands includes top six brands in India. Donear having a presence of 29 states and 7 Union Territories in India with around 300 wholesale and 12000 retail distributors. It exports to 28 countries. 

         Promoters of the company holdings 75% of the equity capital and 15% held by  four  reputed FIIs - Merrill Lynch, City group, Mavi Investment Fund ( part of UBS) and Lotus global Investment. 

         As per the last full-financial year statement, out of the Rs. 480 crore revenue reported by the company, 89% comes from fabric, 8% from garments and rest from yarns. While the domestic sales grew by 18% (YoY) its export increased by 45%. Last financial year the company reported a NP of Rs. 3.73 crore after considering depreciation of Rs. 22 crore and Interest of Rs. 29.5 crore. With a  Rs. 10.4 crore equity capital base it reported an EPS of Rs. 0.72. The first quarter of the current financial year ended June 2014, its  sales reported at Rs. 130 crore with an increase of 30%. At the same time NP increased from Rs. 1.44 crore to Rs. 3.96 crore. First quarter EPS stood at Rs. 0.78, ie, more than last full year. 

        Huge interest payment, because of it needs lot of working capital is the major reason of the poor bottom line performance of the company. The promoters were off to timely increase the equity capital base is a draw back. Textile Industry is a highly labour intensive and various schemes like TUFS, from central and some state Govt incentives for the sector will intensifies the competition in the Industry. However, Donear can overcome the competition through its top quality, strong brand and dealer and distribution network.

       With consumerism, rising disposable income and organized retail sector growth are major growth drivers for the company. The proposed hike in FDI in the Multi brand retail will bring greater investment in the entire value chain. 

      We believe that the stock deserves much higher valuation from the existing levels considering the fundamentals of the company and market fancy of the Industry moreover four reputed FIIs having considerable stake among the floating stock. 

Discalimer: I/My dependants have no vested interest in the above mentioned stock.

SRIKALAHASTHI PIPES LTD

Srikalahasthi Pipes Ltd:

Market Price: Rs.78

BSE Code: 513605

Equity Capital: Rs.39.76 cr

       Srikalahasthi Pipes Ltd (formerly known as Lanco Industries  Ltd) is now a part of  kolkota based Electro Steel  Castings Ltd. The company is located at kalahasthi at Thirupathi. The company is the largest D I pipe manufacturer in the South India. Srikalahasti's main product, i.e. D I pipes are  widely used in Water and sewage sectors. Public Water Boards and several water infrastructure projects are the major customers of the company.

        The company having mainly three units as Molten metal/pig Iron, D I pipes and a mini cement unit. It is also having a  12 MW waste heat recovery based captive power plant too. In 2003 the company's DI pipe capacity was 9000 TPA, which has been gradually increased.  After the ongoing Rs.100 crore capital expansion, the company's D I pipe manufacturing capacity would be increased to 50000 TPA,  along with this certain balancing facilities which includes enhancement of blowing capacity in MBF and additional furnace. In addition to this the company is going for an expansion for Rs.325 crore for smaller Dia Ductile Iron Pipes segment which is expected to completed by FY- 2016.

          Company's operational efficiency is astonishing. Energy conservation is a continuous activity of the company. Its captive power plant running over 100 % capacity. Its Sinter plant has been operational in the last fiscal replaced lump ore with Iron Ore, which reduced the manufacturing cost significantly.

The Union Minister for Water resource Sri. Uma Bharti last Friday said that  that irrigation facility in all agriculture land in India would be available within 10 years. The commitment of the New central Govt  in the area of water infrastructure project giving immense growth opportunity for the company.

            The company's financial performance is very impressive. Despite a capex of Rs. 100 crore under going, the company reduced its long term and short term borrowings by almost 5% in the first half year ended September 2014. Capacity expansion would help to improve the top line and bottom line of the company in the coming years. For the first HY ended September 2014, the company's turnover slightly slipped to Rs. 475 crore from Rs.485 crore. At the same time NP jumped to Rs.31.2 crore from Rs.13.2 crore. Half year EPS is Rs. 7.84. After the completion of the expansion we expect the company's turnover and net profit would increase significantly, especially the company having sufficient order backlog. We feel this stock carry low risk with decent capital appreciation chance in the medium term.

Disclaimer: I /my dependents have no investments in the above mentioned company.

RESULTS UPDATE - Nilkamal Ltd

               I have recommended Nilkamal  Ltd at Rs. 330/- on my "Diwali Recommendation" list.  Unfortunately this stock (perhaps the only stock from my investment list)  not performed well ( forgot about it touched over Rs.380/- after my recommendation). Due to a fall in crude oil prices and  a reduction in the company's debt, I expected it would register a better result for the  September quarter. Nilkamal has reported a sales income of Rs. 460 crore in September quarter against Rs. 423 crore registered in the same quarter of the previous year. Against my view, its raw material cost increased to Rs. 186 crore from Rs. 147 crore.  Mainly, high raw material cost  caused  a fall in its NP to Rs.6.9 crore from Rs.12.5 crore. However the result shows a marginal improvement from the June 2014 quarter. Still I suggest the investors to HOLD the stock for better return as the raw material cost benefit may get in the coming quarters and still Nilkamal capable to deliver an EPS over Rs. 20/- in the FY 2014-15. When we considering the valuation of plastic moulded products industry in the market it is better to stay invested in the stock at least  for the time-being.

SIMMONDS MARSHALL LTD : A safe bet

Simmonds Marshall Ltd: 

BSE CODE: 507998
Market Rpice: Rs.39.5
Market Cap: Rs. 44 Crore

       

     Globally, the Auto mobile industry and Capital goods sector showed sluggish growth since the past couple of years due to economic slow-down. In India, high interest rate too adversely affected these Industries. Now it seems that the interest rate peaked-out and economic activity showing early signs of recovery. So this is the right time to invest in the auto ancillary sector for a medium term perspective. Simmonds Marshall Ltd (SML) seems one of the best bet from this sector for a medium term investment perspective.

       Simmonds Marshall Ltd Started in 1960 with the technical and financial collaboration with Firth Cleveland Fastenings Ltd, UK to manufacture high-end fasteners in  India. In 1987 the company became a pure Indian company as the the Indian promoters bought back the entire holdings from the foreign partner.

     Simmonds Marshall manufacturers wide range of top quality specialized Nylon insert self locking nuts, special fasteners, U-nuts, Wheel nuts, Bolts & Studs, Weld Nuts and cooled forged sleevers etc for the  Auto Mobile and Industrial segment. SML is well known in the industry on its product quality.  95% of the company's revenue comes from the OEM (Original equipment manufacturers) segment. The company supplies its products to major  global and almost all Indian Auto mobile companies including GM, Caterpillar, Dana, Suzuki, Honda, Fiat, Ashokleyland, Tata Motors, Hero,Bajaj and New Holland etc.

     The company has been increasing its cold forming capacity and can produce over 50 crore nuts per annum in wide range from M4 to M48 diameter and equivalent imperil sizes. Growth in the Auto mobile sector directly helps the financials of the company as it is largely depends on the OEm segment. Though a tepid growth registered in the past few years, the expected growth in the Auto industry may boost the company's financial performance in the years to come.

         

         The company having a very small equity capital base of Rs. 2.24 crore and  a healthy reserve of around Rs. 35 crore as on March, 2014. Even though the FV of the stock is Rs.2/-, a small improvement in the margins would reflects a jump in the EPS as its low equity base. For the trailing twelve months period ended June 2014, the company reported a turnover of Rs. 110 crore and NP of rs. 4.4 crore. At the same time EPS reported at Rs.4/-. At the current market price of Rs. 39.5, the stock is trading with a TTM P/E of around 10xs. Considering the Industry's growth, we feel the company's performance should improve in the future and SML is a best medium term bet which carries very low downward risk.

Disclaimer: I/My dependants have no holdings in the above mentioned Stock.

   

CyberTech Systems and Software Limited : Ray of Hope

CyberTech Systems and Software Limited: 

BSE CODE: 532173
Market Price: Rs. 42
Market Cap Rs.108 Crore
FY 2014 Sales: 73 Crore

        It was in the early 2000s so  called IT bubble time, Cyber Tech Systems was one of the hot picks from the mid-cap IT space and touched a life time high of Rs. 1500.  Then, the IT spirits vapour, this stock too fell into the bear grip like other so many small IT companies. But, almost after one and a half decade, now the company introducing new product, entering new tie-ups for technology partners and sets up new facilities, We feel this company is going to write another success story. 

      CyberTech is a global information technology company specialises in next generation Geospatial, networking and enterprise solutions. Company's services span across all major industries including Govt, education,utilities, defence, telecom,retail and healthcare. 

    CyberTech having strong technology and business partnership with global IT leaders including Microsoft, ESRI, SAP and CISCO.  ESRI is the world leader in the Geospatial information and software segment. SAP is the third largest software development company in the world. Cybertech has now a major player in the area of mapping solutions and geospatial application were as the company is going to focus in the future. 

     On March 2014, CyberTech inaugurated new four-storied 25000 Sq.feet Geospatial center of excellence named "CyberTech House". This new facility is India's first private Geospatial technology centre  having a  seating capacity of 250 engineers.

     After a tough competition from  over 1000  national and international IT companies CyberTech receives the "Skotch Order of Merit" in the 37th skoch summit on "Minimum Government, Maximum Governance" held at the India habitat centre, New Delhi on 19-20th September 2014. CyberTech’s selection for this ‘Order of Merit’ speaks volumes for the customer acceptance and quality of its GeoCivic® solution. It is a reflection of the success that CyberTech has had at building market-driven solutions on leading Esri technologies.

       The company's financial performance also showing  steady improvement. For the trailing twelve month period ended June 2014, the company reported a sales income of Rs. 68 crore and EPS of Rs. 4.1. Going forward, financial performance  are expected to jump as the company introduce new products and services, technology tie-up and new recruitment. We feel the stock will have the potential to be a Multi-bagger in the medium term.

Disclaimer:  I/My dependants have no investment in the above mentioned stock.

Talbros Automotive Components Ltd - Go with this successful journey

Talbros Automotive Components Ltd : 


BSE  CODE: 505160
Market Price: Rs. 103
Market cap: Rs. 127 Crore
FY - 2014  Sales:  Rs. 365 Crore
NP: Rs. 19. 3 Crore
EPS: Rs. 15.3

           Talbros Automotive Components Ltd, an integrated player in the Auto Component manufacturer   is established in 1956 by Talwar family at Faridabad. The company manufactures Gaskets, steering & suspension components and stamping, rubber products and forgings. It has five solid tie-ups and three joint ventures with notable global players like Federal mogul - USA, Nippon leakless - Japan and Presswerk krefeld - Germany. 

      As the largest gasket manufacturer in India, the company's products are widely used in Two wheelers, Passenger vehicles, Farm equipments and commercial vehicles. All most all of the  auto companies and engine manufacturers including Ashok leyland, Bajaj Auto, Cummins, Eicher, Escorts, Hero Honda, Honda, John deere, Force motors, Maruti, Tata companies, Suzuki and Affinia Automotives are major clients of Talbros. The company now design develop and manufacture products as per clients requirements. Talbros got numerous awards from its vendors like M&M Tractors, Cummins, Honda and Eicher Motors. Some of these company's single source supplier too Talbros.

       With the growth of the domestic Auto mobile industry, the company also growing so quickly. While the company's overall growth in the last year almost muted, its forging division shows over 50% growth since the past four years. In the export front too the company is doing very well. Widely expected interest rate reduction in the coming quarter will boost the auto sales and helps further improvements in sales of the company.

               The company's R&D facility is very strong. Last year Talbros has developed and started commercial production of asbestos free gaskets.

      The company has a dividend paying track record of last 50 years, which tells the commitments to its equity share holders. 

      Since the past couple of months the promoters of the company is acquiring its shares from the open market which shows the confidence of the management about the future growth of the company.

             

    On the valuation front the company's stocks seems tinny and it is one of the major attraction for investment. Talbros sales to market cap stood at 0.33X only. For the trailing 12 months period the company reported a sales income of Rs. 366 crore and  net profit of Rs. 18.3 crore. On an equity capital of Rs. 12.4 crore, its TTM EPS stood at Rs. 14.75. We are giving a BUY call on this stock with a price target of Rs. 200 within a period of one year as we consider the company's solid track record, new products development, expected higher export contribution to revenue and moreover the hopped for Auto sales in the years to come.

Disclaimer: I/ My dependants have no investment in the above mentioned stock.

Rexnord Electronics & Controls Ltd - A Microcap Multi Bagger Stock

Rexnord Electronics & Controls Ltd: 

BSE Code: 531888
Market Price : Rs. 21
Market Cap: Rs. 13 crore
FY 2014 Sales : Rs. 40 cr
NP: Rs. 1.95 cr

       Rexnord Electronics and Controls Ltd is Mumbai based, BSE listed company since the past two decades. The company is engaged in the business of manufacturing and sales of Cooling Fans, DC brushless Fans, Cooling condensers, gear motors  and shaded pol motors all are for industrial use. These motors are widely used in computers, servers, refrigerators, freezers, inverters, injection moulding machines and photo copying machines etc. The company has a humble beginning and still it is a small company. But the interesting thing is since the past three years the company is growing more than 25% annually. In the export front too the company is doing very well. Last year export revenue increased by 18.5%.

      Rexnord holds ISO 9001:2008 quality certificate from TUV NORD CERT GmBH. Because of the outstanding quality of the company's products it got numerous quality awards from it vendors like Voltas, Carrier Aircon, Bluestar etc.The quality of the product protect the company from stiff competition from the local players. The company introduces more product in its portfolio to increase it revenue and for better margins. To meet the fund requirement for expansion, the company has allotted 3478800 convertible preference shares to its promoters in September 2014 at Rs. 13.4  per shares for Rs. 4.7 crore. With the conversion of the said warrents promoters holdings increase fro current 46.5% to 56.6%.

     Yet the company's sales income for the FY 2014 stood at Rs. 40 crore, its market capitalization stood at just 13 crore which seems the stock is highly undervalued. Considering the company's expansion, growth potential in the user industry and attractive valuation we feel the stock would be a multi-bagger in the medium term.

Disclaimer: I/My dependants have no investment in the above mentioned stock

Galaxy Entertainment Corporation - A Micro-Cap Multi Bagger

Galaxy Entertainment Corporation Ltd

Bse Code: 506186

Market Price: Rs. 32.85

    Galaxy Entertainment Corporation Ltd (Galaxy) is a part of Kishore Biyani's Future Group. Unlike other Future group companies, Galaxy has a negligible debt ( As on march 31, 2014, its Long-term borrowings stood at Rs. 4.75 crore) and not single  share pledged by its promoters.

      Incorporated in 1981 at Mumbai, Galaxy provides Leisure and Entertainment services such as Bowling, Sports Bar, Pool and Video games, Restaurant&bakery and Food courts etc. As on March 2014, the company operates 28 centres.

Food Stop is the company's new thrust are which are the food courts attached to the shopping malls.

     SBX, the sports bar is on of the major revenue source of the company. The company is continues to focus on this segment by increasing its outlet numbers in new regions with high potential.

     Shanghai Street is serves Chinese and Punjabi Adda provides North Indian dishes, which all are accepted by customers.

      Young population with rising disposable income and increasing number of nuclear families with high urbanization gives immense growth opportunities for the company.  Enhancing domestic tourism and expectation of high level living standards like Malls, Multiplexes too rise the leisure , entertainment and eating - out culture.

   But, Still the company's financial performance is not so encouraging. For the FY-2013-14 Galaxy reported a revenue of Rs.46 crore and net profit of Rs. 3 crore including an other income of Rs. 12 crore. The first quarter of the current FY sales  reported at Rs. 9.8 crore and posts net loss of 1 crore. The company's total market capitalization stood at around Rs. 50 crore only. Despite a dismal   financials, this stock gives huge hope when we considering the company's growth potential and promoters background. So I am unable to give a price  target for this stock but strongly feels that investors with patience can consider to BUY this stock for long - term view.

Disclaimer: I/My dependants have no investment in the above mentioned stock