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

Diwali Picks - Samvat 2071-72

Happy Diwali and Welcome to My Blog

This blog is my humble effort to just share my views of the stocks, not making research reports. Over a two decade experience as an investor in the Indian Stock markets I strongly feels that it is better to ' invest in individual stocks on their merits' to get good return. 

This Diwali I am suggesting three quality stocks to invest for a medium to long-term perspective. My detailed views of these stocks are given below:

1. Nilkamal Ltd - BUY

   Plastic products business is expected to remain high as it is comparatively cheap and its user friendly nature. Declining crude oil prices expected to boost the profit margins of the company, while softening inflation increases revenue.

       Nilkamal Limited is Asia's largest moulded plastic products manufacturer, located at Mumbai, Maharashtra. The company’s product portfolio includes Plastic Furniture, Material Handling Crates and Bins, Tables, Rack, Chairs, Industrial Pallets, Waste Bins, Insulated Crates and mattress etc.

     Mattress Division of the Company grew by 36% in FY 2013-14, while the industry grew by 10%. Nilkamal propose to invest up to Rs. 60 crore in three years to setting up additional factories in the West, North and Central India to expand manufacturing capacity of the mattress segment. 

  In the last financial year the Company has added 7 one stop furniture showrooms named “Nilkamal Home Ideas” to taking the total of “Nilkamal Home Ideas” stores to 26. The company proposes to further increase its sales channels of both Nilkamal Home Ideas and @home.  

   Nilkamal protected itself from stiff competition as the company’s very strong brand image, product quality and nationwide dealer and distribution network. Plastic furniture business of the company enjoys a leadership position with a market share of around 32% and a lead of over two times its closest competitor. 

   Going forward, Plastic products business is expected to remain high as it is comparatively cheap and its user friendly nature.  With the economic activity picking up, we expect to increase the plastic furniture use as increasing urbanization, coming up new malls, food courts and offices etc. 

 Last financial year the company registered a modest growth in its financials due to a 15% increase in the raw material prices and a sudden fall in the currency value. Plastic resins, the main raw material of the plastic products is a by product of crude oil. The company’s margins are expected to boost in line with the fall in the crude oil prices. Lower inflation would help to increase the sales of the company. Thus the short to medium term outlook of the company seems bright.  

      For the trailing twelve months ended June 2014, Nilkamal has reported a sales income of Rs. 1682 crore and Net profit of Rs. 39.3 crore. With an equity capital of Rs. 14.9 crore, EPS stood at Rs. 26.3. Prevailing market price of Rs. 330, the stock is trading TTM PE of 12.5Xs and P/BV of 1X. Last financial year the company reduced its debt by Rs. 103 crore to Rs. 270 crore. This would further strengthen the financial position.  We feel the stock to touch Rs. 480 within a one year time frame.

2. Gulf Oil Lubricants India Ltd - BUY

      Part of the Ashok Leyland group, Gulf Oil Lubricants is the second largest Lube manufacturer in the private sector in India. Having a vast marketing network, capacity additions and ever growing demand for lubes make it the company an unshakable long-term bet.

    Gulf Oil Lubricants India Ltd, part of the Hinduja (Ashok Leyland) group is the second largest private sector lubricant manufacturer in India. The company is the de-merged division from Gulf Oil Corporation Ltd in July, 2014.  The company's products- Long drain engine oil is used in all type of engines and industries under the brand 'Gulf'. This brand has a presence in over 100 countries world wide excluding USA, Spain & Portugal.

    Gulf Oil enjoys nearly 5% market share in the domestic lubricant market and nearly 7% market shares in the secondary market. In the domestic front, major strength of the company is its strong marketing network of over 300 distributors and 5000 plus retail dealers across the country.

     The company and the M&M Group on October 7th, 2014 entered a tie-up for the latter's tractor segment, which will be a significant turning point for the company. With an impressive growth in tractor sales M&M dominates a market share of 42% in India, the worlds largest tractor market. This OEM supply contract will contribute more oil to Gulf Oil's existing success.

     Gulf Oil is going for a huge capacity addition. Its Silvasa plant's capacity is propose to increase from 75000 KL to 9000 KL. Apart from this, it is sets up a new 75000 KL capacity plant in Chennai with an investment of Rs.120 crore. The company management is confident to achieve 10-11% revenue growth in this Fiscal and after completion of the expansion, expecting a 15-16% growth.

    For the FY ended march, 2014, the company posted sales of Rs.1060 crore and Net profit of Rs.61 crore. For the quarter ended June,2014, the first quarterly result published after the de-merger and listing, it has reported a net profit of Rs.18 crore and revenue of Rs. 265 crore. At the current market price of Rs. 308, the stock is trading with a P/E of nearly 20Xs on an annualized EPS of Rs.19. Considering the parent company's ample experience in the automotive industry, company's capacity addition, strong dealer and distribution network and ever growing demand from the primary and secondary market we feel the stock having a potential to touch Rs. 450/- within one year.

3. IFB Industries Ltd - BUY

     “IFB” is the most trusted brand and undisputed market leader in the fully automatic washing machines industry in India. Despite a high valuation and recent sharp rally in the stock price, IFB seems a good Investment opportunity at current levels when considering the company’s strong brand image solid financials, growth opportunities in the industry and aggressive expansion of its product portfolio. 

     IFB Industries Limited originally known as Indian Fine Blanks Limited started operations in India during 1974 in collaboration with Hienrich Schmid AG of Switzerland. The company has a Home Appliances division which contributing roughly 80% of revenue and an Auto-ancillary division, contributes roughly 20% revenue. Home appliance division is manufacturing and marketing of fully automatic washing machines, dryers,  dishwashers, microwave ovens, split air conditioners, refrigerators, cooker hoods, built in hobs and modular kitchens. The auto component division of the company is engaged in manufacturing and sale of fine blanked auto components especially for two wheelers. 

   Earlier the company concentrated in single product- front load washing machines. Now the company has shifted to more products to its arena with refrigerators and air conditioners are the latest additions. With the top rated quality and pan India marketing and service network, IFB is able to easily capture its position in a very high competitive market. 

  Low household penetration and well below world average of appliances in India will provide tremendous growth opportunities for domestic home appliances companies.  Rise in double income nuclear families, easy availability of credit, changing life style, introduction of new models and increasing consumer awareness too help to post strong growth even in non-metro cities.  

    As per the company data response to newly launched products like air conditioners and refrigerators has been quite encouraging. The sale of company’s products through IFB Points stood at 16 per cent in last quarter compared to 9 per cent in the previous year. New products will boost the top line of the company in the years to come. 

   Auto mobile Industry is the major customer segment for IFB’s engineering division. Since the last couple of years auto mobile sales was impacted by slowing economy, high interest rates and fuel cost. Now the situation has been changed as Fuel price declined and interest rate seems peaked out. Thus the engineering division of the company too expected to do well in the future. Moreover this division concentrating non-auto sectors for steady growth in the future. 

    With a negligible debt in its book, IFB’s balance sheet is strong and it will remain strong in the coming years as major expenses regarding the manufacturing and distribution front almost seems over.  Last financial year the company reported a sales income of Rs. 1020 crore and Net profit of Rs. 27 crore after consideration of Rs. 14.3 crore forex loss. For the first quarter ended June 2014 it reported a sales income of Rs 290 crore and Net profit of Rs. 17.5 crore. At the current market price of Rs. 320, IFB is trading with a TTM PE of 35 which seems very high. But still we feel the stock is a good investment opportunity with an upside target of over Rs. 500/- within a period of one year if we considering the company’s strong brand, financials, revenue contribution from new products and growth potentials of the industry.

Disclaimer: Please be noted that I have no investments in the above mentioned three stocks.