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Wednesday, September 21, 2016

Multibagger Stocks - Hidden Gems Vs Small Cap Index

Dear Reader,

Benchmark indices made new milestones last year in the month of March with the Nifty hitting the 9,100-mark and the Sensex moving past 30,000 levels for the first time, followed by a healthy correction of almost 25% from March 2015 till February this year. Later, with sentiments turning positive locally as well as globally, we have seen strong bounced back with sharp rally of more than 27% during last 7 months.

At current situation, how does one know the right stock to invest in and that too at the right price which will ensure strong returns in the long term? This will be a question that will be the uppermost in the minds of most investors wanting to allocate part of their funds towards stocks. Especially in light of the heightened volatility in the markets in the past.

For instance, take a look at the period between 2005 and early 2008. During that time, there was a general sense of euphoria prevailing in India what with the country consistently logging in growth rates of 9% plus and the stock markets zooming to 21,000 levels. And then this optimism snapped.

The global financial crisis reared its ugly head and sent global economic growth and world stock markets including India into a tailspin. Suddenly there was nervousness all around. Forget bad stocks with bad fundamentals, retail investors in India were loathe to put in their money even in good companies available at attractive prices fearing that prices will fall down further. Then 2013 dawned, signs of recovery began to be noticeable and stock markets surged once again. And with stable government in place, major indices Sensex and Nifty continued to move northward making all time highs in March 2015.

Corrections in bull market are healthy and give opportunity to invest. Bull markets do test your patience and conviction. If you expect a straight-line  appreciation in stock markets, that is not going to happen. Profit bookings at regular intervals bound to bring the indices lower. A lot of people who were left on the sidelines when the move was too fast got an opportunity to invest in equities at discounted prices during Jan and Feb this year.

The idea really is not to time the markets. That is a feat best left to speculators. For long term investors, there will still be plenty of stocks that they can look to add on to their portfolios. These stocks if picked at the right price by proven approaches can turn into multi-bagger opportunities.

We are pleased to share that Hidden Gems (Unexplored Multibagger Small Cap Stocks) recommended by us since inception  have outperformed small cap index by wide percentage points ensuring much better returns for our members.

Below is the performance update of small cap stocks recommended by us in 2014, 2015 and 2016 under our Hidden Gems subscription service:

Hidden Gems Stocks 2014 Vs Small Cap Index:
As illustrated in the table above, average returns of Hidden Gems stocks released in 2014 is 167% compared to small cap index average returns of 41.2%. As on date, Hidden Gems stocks of 2014 are outperforming small cap index by whopping 125.8%.

Total 8 Hidden Gems stocks out of 11 released in 2014 have already achieved their target price giving more than 100% returns to our members in period of 1 to 2 years.

Hidden Gems Stocks 2015 Vs Small Cap Index:
Total 5 stocks of 2015 have already achieved their target price. As illustrated in the table above, average returns (as on date) of our Hidden Gems stocks released in 2015 is 69.3% compared to average returns of 13.9% of small cap index, out performance of 55.4%.

Hidden Gems Stocks 2016 Vs Small Cap Index:
Our Hidden Gems stocks of 2016 released so far have also outperformed small cap index. As on date average returns of our Hidden Gems 2016 stocks is 45.4% compared to small cap index average returns of 16.3%, out performance of 29.2%.

And that's not all! We have a strong history of exploring multibagger micro and small cap stocks. It gives us immense pleasure to share that 37 out of 52 Hidden Gems stocks released in last 6 years (till Dec'15) have given returns above 100%. Moreover, 26 out of these 37 Hidden Gems stocks have given returns in the range of 200% to 1900%.

As many of these reports were made public, you can access read / download our research reports by clicking on the links below:

1. SAB TV NETWORK >>> Rec. Date: 05 Sep'10 >>> ROI: 882% >>> Read / Download

2. DE NORA >>> Rec. Date: 07 Nov'10 >>> ROI: 378% >>> Read / Download


3. CAMLIN FINE >>> Rec. Date: 27 Mar'11 >>> ROI: 1331% >>> Read / Download


4. WIM PLAST >>> Rec. Date: 30 Aug'11 >>> ROI: 1527% >>> Read / Download

5. KOVAI MEDICAL >>> Rec. Date: 27 Oct'11 >>> ROI: 646% >>> Read / Download


6. CERA SANITARY >>> Rec. Date: 24 Dec'11 >>> ROI: 1422% >>> Read / Download

7. SUPERHOUSE >>> Rec. Date: 29 Feb'12 >>> ROI: 242% >>> Read / Download

8. MAYUR UNIQ. >>> R. Date: 31 Mar'12 >>> ROI: 662% >>> Read / Download

9. PREMIER EXPLO. >>> R. Date: 22 Jul'12 >>> ROI: 392% >>> Read / Download

10. ROTO PUMPS >>> Rec. Date: 05 Aug'12 >>> ROI: 162% >>> Read / Download

11. TIDE WATER OIL >>> Rec. Date: 30 Oct'12 >>> ROI: 194% >>> Read / Download

12. ACRYSIL >>> Rec. Date: 25 Nov'12 >>> ROI: 448% >>> Read / Download

13. TCPL PACKAG. >>> Rec. Date: 31 Jan'13 >>> ROI: 810% >>> Read / Download


14. ATUL AUTO >>> Rec. Date: 28 Feb'14 >>> ROI: 202% >>> Read / Download


15. RANE BRAKE >>> Rec. Date: 31 May'14 >>> ROI: 540% >>> Read / Download

16. ASIAN GRANITO >>> Rec. Date: 29 Sep'14 >>> ROI: 180% >>> Read / Download

17. CONTROL PRINT >>> Rec. Date: 30 Nov'14 >>> ROI: 64% >>> Read / Download

18. PLASTIBLENDS >>> Rec. Date: 31 Jan'15 >>> ROI: 78% >>> Read / Download

19. SMS PHARMA >>> Rec. Date: 09 May'15 >>> ROI: 97% >>> Read / Download

20. CHEMFAB ALKAL. >>> Rec. Date: 06 Sep'15 >>> ROI: 211% >>> Read / Download

We are confident that we will continue to hunt best Hidden Gems from universe of small caps by doing authentic, in-depth and unbiased research work and support our members to make educated investment decision.

At Saral Gyan, team of equity analysts keep on evaluating small and mid cap stocks to explore the best Hidden Gems and Value Picks of stock market. Saral Gyan - Hidden Gems and Value Picks are the small and mid cap stocks with high probability to become multi-bagger stocks in future and a path for our investors to create wealth through equity investments in a long run.

Its our mission to ensure that you reap the best returns on your investment, our objective is not only to grow your investments at a healthy rate but also to protect your capital during market downturns.

An opportunity missed is an opportunity lost, create a Wealth-Builder portfolio by investing in Hidden Gems and Value Picks of stock market. Subscribe to Hidden Gems & Value Picks and start investing systematically in fundamentally strong small and mid cap companies.

To subscribe to Hidden Gems online, click hereAvail attractive discounts by subscribing to our combo packsclick here for details.

Do contact us in case of any queries, we will be delighted to assist you. 

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan

Tuesday, September 20, 2016

Chemfab Alkalies Turns 3-Bagger Today! ROI @ 230% in 1 Year

Dear Reader,

We are pleased to inform you that our Hidden Gem stock of August 2015 - Chemfab Alkalies Ltd (BSE Code: 506894, NSE Code: CHEMFALKAL) which was released on 6th Sept'15 has become 3-Bagger today giving absolute returns of 230% to our Hidden Gems members in period of 1 year. Our team suggested Buy on Chemfab Alkalies Ltd at average price of Rs. 90.80 on 06 Sept'15 with a target price of Rs. 170, stock has already achieved its target price in matter of 10 months and we suggested our members to continue to hold the stock. Chemfab Alkalies stock made its 52 week high of Rs. 303.95 today and currently trading at Rs. 300 giving absolute returns of 230% to our Hidden Gems members in period of 12 months.

Company has posted strong set of numbers in June 2016 quarter, net profit of Chemfab Alkalies rose 294.27% to Rs 6.19 crore in Jun'16 as against Rs 1.57 crore during the previous quarter ended June 2015. Total income from operations rose 32.87% to Rs 30.48 crore in the quarter ended June 2016 as against Rs 22.94 crore during the previous quarter ended June 2015. 

We suggested our members to continue to hold the stock in our Hidden Gems Flash Back report released on 1st August 2016.

Below is the summary of Chemfab Alkalies Ltd shared by our team under Hidden Gem stock of August'15 released on 06th September 2015.

Note: This report is shared only for the purpose of information and not an investment advice. Kindly carry out your own due diligence in case of investment in Chemfab Alkalies. 

Company Background:


A Chennai based company Chemfab Alkalis Ltd (CAL) was incorporated in 1983. The company was promoted by M/s Titanium Equipment and Anode Manufacturing Company Limited. CAL manufactures chemicals for industrial applications. In June 2009, chlorates division has been closed permanently due to frequent power problems and labor unrest. Company established India’s first Membrane Cell Caustic Soda Plant and commenced production from July, 1985.

CAL is the first Indian company to use the power saving ion exchange membrane cell technology to manufacture caustic soda. Chemfab Alkalis (CAL) also produces Sodium Hypochlorite and sodium Chlorate and the bye products of caustic soda like chlorine and hydrozen. Chemfab Chlorates, a group company was amalgamated with Chemfab Alkalies Ltd during the year 2001-02 on the approval from High court of Madras.

The company has also takenover the management of Salt fields by the way of backward integration. The salt fields are situated at marakanam 25 kms from the factory of the company. Chemfab Alkalis was selected for the 1988 award of excellence in Environment Preservation and Pollution Control by the Federation of Indian Chambers of Commerce and Industry for its membrane cell technology which totally eliminated the use and disposal of mercury.

Products
  • Caustic Soda Lye in two grades (33% & 48%)
  • Liquid Chlorine
  • Hydrogen Gas
  • Hydrochloric Acid 
  • Sodium Hypochlorite / Bleach Liquor 
  • Barium Sulphate

The above products are completely free from mercury and are used in food processing industries as well.

The first ever pollutant free caustic soda in the country was from CAL. The quality of the products matches the requirements of BIS and meets international specifications.

CAL commenced the operation with the production capacity of 25 TPD and now operates at 100 TPD. The features of the plant recently revamped it’s with the latest-state-of-the-art BiTAC technology, and looking forward to double its production capacity to 200 TPD.

Chlor alkali market in India has witnessed healthy growth in recent years, largely driven by increasing demand from end user industries due to higher output from the chemicals sector. Chlor alkali market is broadly categorized into three segments, namely Caustic Soda, Chlorine and Soda Ash. Caustic Soda finds major application in diverse industries, such as soap & detergents, pulp & paper and textile processing among others. Chlorine is produced as a by-product during caustic soda production and is widely used during PVC manufacturing, drinking water disinfection and pharmaceutical production. Soda Ash is used mainly during glass, soap & detergent and silicate production.

With strong growth anticipated in all these end use industries, the market for chlor alkali in India is forecast to grow considerably in the next five years.

According to India Chlor Alkali Market Forecast & Opportunities, 2019, the market for chlor alkali in India is projected to exhibit a CAGR of around 7% during 2014-19. The market is expected to witness high penetration rate in the Western and Northern regions of the country. The market, though highly fragmented at present, is gradually moving towards consolidation, particularly with the entry of foreign players and expansion in distribution network of existing players. Among the three market segments, caustic soda held the highest revenue share, followed by chlorine and soda ash segments.

Soap & detergent is the main end user industry in the chlor alkali market, followed by glass, pulp &paper, alumina and other industries.

Research & Development

The Company has an in-house Research Development Department, where the main areas of focus are Energy Conservation, Process Upgradation and Environmental Preservation. The Ministry of Science and Technology, Department of Scientific and Industrial Research, Government of India, has recognized the Company’s inhouse R & D facilities, which is valid upto 31st March, 2017. The Company has a sophisticated Quality Assurance (QA) Laboratory recognized by DuPont, USA for the analysis of Chlor- Alkali brine.

The Brine from various Chlor- Alkali Industries in India is being analyzed at CAL-QA Laboratory. The Company continues to take all possible steps to conserve energy in every area of its operations recognized by DuPont, USA for the analysis of Chlor- Alkali brine. The Brine from various Chlor- Alkali Industries in India is being analyzed at CAL-QA Laboratory. The Company continues to take all possible steps to conserve energy in every area of its operations.

The company continues to use hydrogen gas instead of conventional fuel reducing the carbon footprint. The company has also installed solar street lightings and also the Bio Gas plant for replacing conventional energy sources by making investment of Rs. 10 lakhs.

2. Recent Developments: (as on 6th Sept'15)

i) Replacement of old plant with Bipolar BiTAC Electrolysers Plant from CEC, Japan.

In 2014, company introduced a new BiTAC® Electrolysers from CEC, Japan for the first time in the Country. The new Plant was commissioned during August 2014, and is operating well within the agreed operational parameters and will result in savings in energy consumption to the tune of 30% to 40%.

Company has also replaced the old Caustic Concentration plant with a new Plant and this was commissioned in the month of March 2015. This will also result in improved operational efficiencies.

ii) Ongoing Expansion Plans to drive Revenue Growth & Profitability

Company awaits the statutory clearances for its expansion plans and a favourable decision on its appeal before the National Green Tribunal. Company has also made plans for venturing into newer areas for Chlorine utilisation.

The Company is in the process of developing 632 acres of salt fields and the production of salt is expected to commence post completion of the development activities.

The new Salt fields which were acquired are slated to commence production shortly. With all these measures, management is confident that company is poised for a great leap ahead and achieving good results in the forthcoming years.

3. Financial Performance:

Chemfab Alkalis standalone net profit declines 51.69% in the June 2015 quarter

Net profit of Chemfab Alkalis declined 51.69% to Rs 1.57 crore in the quarter ended June 2015 as against Rs 3.25 crore during the previous quarter ended June 2014. Sales declined 25.78% to Rs 22.92 crore in the quarter ended June 2015 as against Rs 30.88 crore during the previous quarter ended June 2014.

Chemfab Alkalis standalone net profit declines 6.08% in the March 2015 quarter

Net profit of Chemfab Alkalis declined 6.08% to Rs 1.39 crore in the quarter ended March 2015 as against Rs 1.48 crore during the previous quarter ended March 2014. Sales rose 4.83% to Rs 25.60 crore in the quarter ended March 2015 as against Rs 24.42 crore during the previous quarter ended March 2014.

For the full year, net profit declined 37.81% to Rs 10.23 crore in the year ended March 2015 as against Rs 16.45 crore during the previous year ended March 2014. Sales declined 1.97% to Rs 109.85 crore in the year ended March 2015 as against Rs 112.06 crore during the previous year ended March 2014.

Company performance was impacted in FY 2014-15 mainly due to the fall in international caustic prices which averaged during the year between USD 320 – 340 per MT CIF. However, we believe that international caustic prices will remain in the range of USD 350-380 per MT CIF in the short term which will have a positive impact on company’s realizations.

Moreover, we believe company to post significant improvement in operating margins considering replacement of old caustic concentration plant with a new plant which was commissioned in the month of March 2015.

4. Peer Group Comparison:


5. Key Concerns & Risks:

i) The Rupee depreciation during the year will make imports cheaper, resulting in increased flow of caustic soda imports into the country thereby impacting company’s product realizations.

ii) International caustic prices were at USD 330-380 per MT CIF levels during the year and are expected to remain in this band in the short to medium term, any drop in prices below USD 330 will have a negative impact on company’s realizations. On the chlorine utilization front, slow demand growth continued to have an adverse impact on the Industry.

iii) Dependence on the grid power continues to be a risk though the Puducherry power scenario remains reasonably stable but with the cost of power continuing to be a concern. The Company is working with the Puducherry Government for the implementation of open access which would help de-risk our power sourcing.

6. Saral Gyan Recommendation: (as on 06 Sept'15)

i) Chlor-Alkali is the basic Heavy Chemical Industry, manufacturing Caustic Soda, with Chlorine, Hydrogen, Sodium Hypo Chlorate and Hydro Chloric Acid as by-products. Overall, the Financial Year 2014-15 was an average year for the Industry, primarily due to the fall in international caustic prices which averaged during the year between USD 320 – 340 per MT CIF. International caustic prices have now moved to USD 360-380 per MT CIF levels and are expected to remain in this band in the medium term which will have a positive impact on company’s realizations.

ii) Caustic Soda finds major application in diverse industries, such as soap & detergents, pulp & paper and textile processing among others. Chlorine is produced as a by-product during caustic soda production and is widely used during PVC manufacturing, drinking water disinfection and pharmaceutical production. With the rebound in the country’s GDP, the demand for caustic is likely to grow strong which will help company to boost its revenue growth with higher capacity utilization. However, slower chlorine demand is expected to continue to impact the capacity utilisation of the company.

iii) In 2014, company introduced new BiTAC® Electrolysers from CEC, Japan for the first time in the country. The new Plant was commissioned during August 2014, and is expected to result in savings in energy consumption to the tune of 30% to 40%. Company has also replaced its old caustic concentration plant with a new plant which was commissioned in Mar’15. These initiatives will help company to improve its profit margins significantly with increase in revenues going forward.

iv) With the rebound in the country’s GDP, the demand for caustic is likely to grow strong. However, slower chlorine demand is expected to continue to impact the capacity utilisation of the industry. The investments and efforts taken by the Company during last financial year are expected to result in significant savings in its manufacturing costs, especially power cost.

v) Company’s EBITDA and PAT margins are expected to improve significantly considering investments and efforts taken by the Company during last financial year which will result in significant savings in its manufacturing costs, especially power cost.
vi) Chemfab Alkalis is virtually debt free with reserves of Rs. 125 crores in its books which is much more than the company’s current market capital of Rs. 87 crores. Promoter’s shareholding is at 75% without pledging any shares and rest is held by non-institutional investors. FII and DII shareholding is nil in the company.

vii) Company awaits the statutory clearances for its expansion plans and a favourable decision on its appeal before the National Green Tribunal. Company has also made plans for venturing into newer areas for Chlorine utilisation. The new Salt fields which were acquired are slated to commence production shortly. With all these measures, management is confident that company is poised for a great leap ahead and achieving good results in the forthcoming years.

viii) Management has rewarded shareholders by paying regular dividend in the past. For FY 14-15, company has declared dividend of Rs. 1.25 per share.

ix) As per our estimates, Chemfab Alkalis Ltd can deliver bottom line of 13.5 crores for full financial year 2016, annualized EPS of Rs. 14.7 with forward P/E ratio of 6.4X for FY16. Valuation looks attractive for a debt free company with expected expansion in its profit margins.

x) On equity of Rs. 4.59 crore, the estimated annualized EPS for FY 15-16 works out to Rs. 14.7 and the Book Value per share is Rs. 142.86. At current market price of Rs. 94.40, stock price to book value is 0.66.

Considering recent initiatives taken by the management in terms of improving operational efficiencies and company’s expansion plans to drive business growth, Saral Gyan team recommends “Buy” on Chemfab Alkalis Ltd at current market price of Rs. 94.40 for target of Rs. 170 over a period of 12 to 24 months.

Buying Strategy:
  • 70% at current market price of 94.40
  • 30% at price range of 82-85 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio

To Read / Download Saral Gyan Hidden Gem - Aug'15 Research Report - Click Here


Add power to your equity portfolio by investing in best of small & mid cap stocks - Hidden Gems & Value PicksIts our mission to ensure that you reap the best returns on your investment, our objective is not only to grow your investments at a healthy rate but also to protect your capital during market downturns.

An opportunity missed is an opportunity lost, subscribe to Hidden Gems & Value Picks and start investing systematically in fundamentally strong small and mid cap companies.

To subscribe to Hidden Gems online, click hereAvail attractive discounts by subscribing to our combo packsclick here for details.

Do contact us in case of any queries, we will be delighted to assist you. 

Wish you happy & safe Investing. 

Regards, 

Team - Saral Gyan

Friday, September 16, 2016

Ultramarine & Pigments Ltd - ROI of 90% within 1 Year

Dear Reader,

We are pleased to inform you that our Hidden Gem stock of September 2015 - Ultramarine & Pigments Ltd (BSE Code: 506685) which was released on 11th Oct'15 is giving as on date returns of 90% to our Hidden Gems members within 1 year. Our team suggested Buy on Ultramarine & Pigments Ltd at price of Rs. 83.35 on 11 Oct'15 with a target price of Rs. 150. We are glad to inform our readers that stock has already achieved our target price within one year, Ultramarine & Pigments stock made its 52 week high of Rs. 160.85 today and currently trading at Rs.158.50 giving absolute returns of 90% to our Hidden Gems members in period of 11 months. 

Below is the summary of Ultramarine & Pigments Ltd shared by our team under Hidden Gem stock of September'15 released on 11th October 2015.

Note: This report is shared only for the purpose of information and not an investment advice. Kindly carry out your own due diligence in case of investment in Ultramarine & Pigments. 

Company Background:


Established in 1960, Ultramarine & Pigments has its manufacturing facilities at Ambattur, Madras and Ranipet in North Arcot, Tamilnadu. It is the largest manufacturer of ultramarine blue and synthetic detergents. The company also manufactures ultramarine colours, organic and inorganic pigments, metal powders, chemicals, raw materials for the paint industry, varnishes, enamels, oils and plastics. Company’s sales footprint has expanded from 2 countries to 50 countries and is still growing widely in emerging markets in Latin America and Africa.

This is the only company in India to receive the ISO 9002 certification for both laundry and industrial grades of ultramarine blue.

In 1987, the company diversified by setting up a unit to manufacture HDPE woven sacks. In 1995, the company purchased about 150 acres of land in Coimbatore, Tamilnadu, and set up four windmills which can generate one MW of electricity pa. The company also set up a new plant in Sep.'95, to manufacture synthetic detergent bars/cakes with an installed capacity of 15,000 mtpa.

In 1995-96, the company issued bonus shares in the ratio 1:1. Its new plant to manufacture alkyl benzene sulphonic acid with a capacity of 16,000 mtpa, commenced production in Apr.'96. During 1996-97, the company has set up a Linear Alkyl Benzene Sulphonic Acid plant with an installed capacity of 16,000 mtpa was commissioned.

In 1997-98, the company expanded the installed capacity of its Ultramarine Blue by 1,500 MT. The company has amalgamated with Sri Narasimha Plastic Industries Pvt. Ltd. in 1999-2000 which enabled the company to carry out the combined HDPE business more economically and advantageously. Also during the year, the ultramarine blue unit and detergent unit at Ranipet has been awarded ISO 9002 Certificate.

Company also launched its IT Enabled Services Division at Chennai. The company diversified into the ITES segment and started Lapiz Digital Services in early 1993, which has been performing well in its sector. 

During 2000-2001, the company received ISO 14001 Certificate for Blue and Detergent Divisions at Ranipet during 2000-2001. The company has expanded the installed capacity of HDPE/PP Woven Fabric during the year 2003-04 by 180 MT and with this expansion, the total capacity has risen to 900 MT.

Ultramarine & Pigments Ltd is equipped with an excellent infrastructural setup which includes most modern production equipments, process and Quality control instruments, continuously updated technical know-how, Quality management and assurance systems. The Quality assurance system ensures that every batch of products conforms to the grade specification in all aspects.

Technically superior approach to analysis and measurements are constantly identified and implemented. Besides, the organization has implemented ISO 9001 Quality system management standard and ISO 14001 Environment system management standard.

Company operates in 3 segments, Pigment division, Surfactants division and IT division.

Pigment Division

This division caters to the domestic & export markets. Unseasonal rain in South India affected the demand from the domestic market, causing a dip in sales. The European market remained flat this year, and did not show any revival. This division achieved a net revenue of Rs. 60.17 crores (4152 MT) as compared to Rs. 54.58 crores (4542 MT) in financial year 2013 -14. Due to a better product mix, realization per MT was improved by 21% resulting in a better profitability.

Surfactants Division

The Company has achieved a net revenue (including processing) of Rs. 79.10 crores during the financial year ended March 31, 2015 as against Rs. 65.41 crores in the previous year, showing an increase of 21%. This improvement in revenue and the margins is due to a sustained focus on broadening the customer base, with an emphasis on the organized sector and corporate customers. The increase in margins is also attributable to the improved supply of imported Alpha Olefin (a key raw material) in the first two quarters of the year. However in the latter part of the year, due to the volatility of crude prices, we faced erratic and inconsistent supply of raw material.

IT Division

IT division reported an income of Rs. 28.88 crores, an increase of 5% over last year. The profitability has improved considerably (15%) due to better margins and controls on overhead costs.

Products & Services

Pigment Division:
  • Ultramarine Blue
  • Ultramarine Violet
  • Bismuth Vanadate Yellow
  • Mixed Metal Oxides
Surfactants:
  • Linear Alkyl Benzene Sulphonic Acid
  • Alpha Olefin Sulphonate
  • Sodium Lauryl Sulphate
  • Sodium Lauryl Ether Sulphate
Others:
  • Dry Mixed Detergents
  • IT Enabled Services
  • Wind Mill Generation
Wind Mill Generation
  
In FY 2014-15, the total revenue of the windmills was Rs. 216 lacs, an increase of 24% over the previous year. Company repaid the entire term loan availed from EXIM Bank, and as a result, faced lesser interest charges. This helped company to improve the profit from the Windmills significantly. In the coming years, company hope that the constraints and bottlenecks faced by Windmill operators will be reduced, as the Tamil Nadu State Grid capacity is augmented. This will help the company to avoid production loss during peak season. 

2. Recent Developments: (as on 11th Oct'15)

i) Plan to expand Surfactant business with initiation of Gujrat-Dahej Project

Gujrat Industrial Development Corporation (GIDC) is in the process of establishing infrastructural facilities at the industrial site at Dahej, Gujarat. The Company has paid water contribution charges for the year, and is waiting for further progress, based on which the Company will initiate the necessary steps for setting up the project to expand its Surfactant Chemical business.

ii) Increasing Focus on IT Enabled Services

In ITES division, company has a renewed focus on improving the operational efficiency, broadening of customer base and enhancing the revenues of the domestic division.

IT division reported an income of Rs. 28.88 crores, an increase of 5% over last year. The profitability has improved considerably (15%) due to better margins and controls on overhead costs. In FY2013-14 EBITDA margin of this segment was 20.4%, in FY2014-15 it was at 22.4%, increased by 200 basis points.

With recent initiatives and developments, company is expected to deliver better top line and bottom line growth with increase in operating margins. 

iii) Promoters consistently increasing their stake in the Company  

As per shareholding pattern submitted by the company for Sept’15, promoter’s shareholding in the company is 51.99%. Promoters have increased their holding by 1.38% in last one year and by 4.83% in last 3 years. 

Promoters buying own company's share from the open market is a signal of highest commitment and confidence in the company's business. From above, it is evident that management of Ultramarine & Pigments Ltd has steadily made purchases via open market to increase their stake in the company. 
  
Promoters buying shares from open market adds comfort in terms of associated downside risk in stock price in case of market correction

3. Financial Performance:

Ultramarine & Pigments standalone net profit rises 25.17% in the June 2015 quarter

Net profit of Ultramarine & Pigments rose % to Rs 5.22 crore in the quarter ended March 2015 as against Rs 5.04 crore during the previous quarter ended March 2014. Sales rose % to Rs 50.92 crore in the quarter ended March 2015 as against Rs 42.08 crore during the previous quarter ended March 2014.

Ultramarine & Pigments standalone net profit rises 25.17% in the March 2015 quarter

Net profit of Ultramarine & Pigments rose 25.17% to Rs 3.68 crore in the quarter ended March 2015 as against Rs 2.94 crore during the previous quarter ended March 2014. Sales rose 4.06% to Rs 41.55 crore in the quarter ended March 2015 as against Rs 39.93 crore during the previous quarter ended March 2014.

For the full year, net profit rose 30.23% to Rs 18.74 crore in the year ended March 2015 as against Rs 14.39 crore during the previous year ended March 2014. Sales rose 14.46% to Rs 171.66 crore in the year ended March 2015 as against Rs 149.98 crore during the previous year ended March 2014.

In FY 14-15, the overall performance of the Company both in terms of revenue & profit before tax increased by 14% & 27% respectively. The total revenue was Rs. 172.21 crores & profit before tax was Rs. 27.51 crores. The profitability of all the major segments improved due to several steps initiated by the management. 

We believe company will continue to show improvement in operating margins from ITES division and its exports sales with increase in product offerings.   

4. Peer Group Comparison:
5. Key Concerns & Risks:

i) The domestic market for pigments continued to pose challenges. There is shrinking demand for laundry and white washing applications, and there is a slowdown in the manufacturing sector.

ii) As there was an erratic supply of Alpha Olefin due to fluctuations in crude pricing. This has had an adverse impact on the Surfactants division, and has limited company plans to expand its customer base.

iii) Revenues in the detergents division are limited by the need for huge outlays on sales promotions and distribution for retail sale. While company has consolidated its retail operations for detergents and its retail pigments, overheads remain prohibitive and a limiting factor

6. Saral Gyan Recommendation: (as on 11 Oct'15)

i) Ultramarine & Pigments has made a continuous effort to bring in more value added products in pigments division, and has developed products like violet, cobalt blue & yellow. This will help company in improving overall realization of Pigments division. The utilization of the sulphonation plant capacity will also improve due to committed off take of sulphonated products by leading corporates.

ii) In ITES division, company has a renewed focus on improving the operational efficiency, broadening of customer base and enhancing the revenues of the domestic division. We expect company will continue to achieve good revenue growth and profitability from its ITES division going forward. 

iii) In FY 2014-15, exports earnings of the company have increased by 17% (Rs. 55.56 crores as against Rs. 47.29 crores) on account of better performance of both manufacturing & ITES divisions. The Company continues to focus on the export market. Management has been consistently successful in broadening the customer base and at offering custom grade material at faster pace. In order to improve realization, company has focused on offering finer grades of material. The emphasis on in-house R&D augurs well for export market. 

iv) Company’s EBITDA and PAT margins are expected to improve considering better margins from IT segment and focus on exports with increase in product offerings.

v) Ultramarine & Pigments is a debt free company with reserves of Rs. 99 crores. Promoter’s shareholding is at 51.99% (as on Sept’15) without pledging any shares. FII shareholding in the company is nil and DII shareholding is negligible at 0.14%. 

vi) Management has rewarded shareholders by paying regular dividend in the past. For FY 14-15, the company has paid dividend of 150% i.e Rs. 3 per share. At current share price of Rs. 83.35, this results in a dividend yield of 3.6%. 

vii) Gujrat Industrial Development Corporation (GIDC) is in the process of establishing infrastructural facilities at the industrial site at Dahej, Gujarat. The Company has paid water contribution charges for the year, and is waiting for further progress, based on which the Company will initiate the necessary steps for setting up the project to expand its Surfactant Chemical business. viii) Management has rewarded shareholders by paying regular dividend in the past. For FY 14-15, company has declared dividend of Rs. 1.25 per share.


viii)  During last 3 years, promoters have increased stake by 4.83% in the company. Considering reasonable valuations and good future prospects, we expect promoters will continue to buy the shares from open market to further increase their stake in the company. Moreover, management has been maintaining a healthy dividend payout of 56.3% and rewarded shareholders by issuing bonus shares in the ratio 3:5 in 2005 which is impressive. 

ix)  As per our estimates, Ultramarine & Pigments Ltd can deliver PAT of 26 crores for full financial year 2016, annualized EPS of Rs. 8.9 with forward P/E ratio of 9.4X for FY16. Valuation looks attractive for a debt free company with expected expansion in its profit margins.


x) On equity of Rs. 5.84 crore, the estimated annualized EPS for FY 15-16 works out to Rs. 8.9 and the Book Value per share is Rs. 34.07. At current market price of Rs. 83.35, stock price to book value is 2.45. 

Considering company’s initiatives to increase its product offering with focus on higher revenues from exports, improvement in operating efficiency from IT division and company’s expansion plans to drive business growth, Saral Gyan team recommends “Buy” on Ultramarine & Pigments Ltd at current market price of Rs. 83.35 for target of Rs. 150 over a period of 12 to 24 months.  


Buying Strategy:
  • 80% at current market price of 83.35
  • 20% at price range of 70-75 (in case of correction in stock price in near term)
Portfolio Allocation: 2-3% of your equity portfolio

To Read / Download Saral Gyan Hidden Gem - Sept'15 Research Report - Click Here

An opportunity missed an opportunity lost. If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small and mid cap companies - Hidden Gems & Value Picks.

The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

Also Read: Rane Brake Fires on All Cylinders - Turns 6-Bagger in 2 Years!

Subscribe to Hidden Gems & Value Picks and start investing systematically. Avail attractive discounts by subscribing to our combo packsclick here for details.

Do contact us in case of any queries, we will be delighted to assist you. 

Wish you happy & safe Investing.

Regards, 
Team - Saral Gyan

Thursday, September 15, 2016

Power your Portfolio by Investing in High Quality Small Caps

Investing in High Quality Small Caps with Strong Fundamentals

On 3rd January, 2005, Hawkins Cooker had a market cap of Rs. 18 crore and its stock was at Rs. 33.25. Today, on 15th Sept'16 the stock price closed at Rs. 2926 and the company's market cap is Rs. 1547 crore. Hawkins has given returns of 8700% since Jan 2015, Rs 1 lakh invested in Hawkins Cookers in Jan 2005 is valued at Rs. 88 lakhs today.

Lets take another example of little know company Camlin Fine Sciences which is our 15-Bagger stock. We recommended this stock 5 years back at price of Rs. 6.05 (adjusted price after 2 stock splits in last 5 years, actual recommended price was Rs. 60.50) and today its closed at Rs. 88.45 giving absolute returns of 1362%, that's too excluding dividend payouts. Mind boggling, isn't it? It's a a fact! The company has posted strong growth YoY and rewarded share holders in big way in last 5 years. 

Do you own such stocks which can give you similar returns in future?

The number of small-cap stocks is large and finding a quality stock that can give high returns over a long period is tough even for equity analysts. One reason is that such stocks usually have a short history and are not tracked by many analysts and brokerage houses. Then there are risks such as low liquidity, governance concerns and competition from larger players.

Scores of once small companies have over the years grown big, giving investors a 30-50 per cent annual return over 10-15 years and creating fortunes for investors. However, more often than not, we find ourselves at the wrong side of the fence and regret our inability to spot such stocks on time.

If these factors scare you but you still want to gain from the upside potential of such stocks, Saral Gyan Hidden Gems and Value Picks is an ideal choice for you.

It’s a fact that 35 Hidden Gems out of 52 released by our equity analysts in last 6 years (till Dec'15) have given more than 100% returns.

Buying Strategy for Small Caps

1. Go for companies with low debt ratio (preferably less than one)

2. A high interest coverage ratio (above 3x) and a high return on equity are big advantages

3. Avoid companies with huge liabilities in the form of foreign currency convertible bonds / external commercial borrowings

4. Look at the quality of the management, its governance standards and how investor-friendly the company is.

5. Mid-cap and small-cap companies can be future market leaders, so be patient with your investments

Those who wish to invest in small-cap stocks should do so only if they have a long investment horizon and tolerance for volatility. Small-cap stocks suffer the steepest falls in a bear market and rise the most in a bull market. An investor should stay invested for at least three-five years to allow their portfolio to gain from at least one bull run.

Benefits of Investing in Small Caps

1. Huge growth potential: The first and the most important advantage that a small cap stock gives you is their high growth potential. Since these are small companies they have great scope to rise as opposed to already large companies.

2. Low Valuations: Usually small cap stocks are available at lower valuations compared to mid & large caps. Hence, if you invest in good small cap companies at initial stage and wait for couple of years,  you will see price appreciation not only because of growth in top line and bottom line but also due to rerating which happens with increase in market capital of the company.

3. Early Entrance Advantage: Most of the fund house and institutions do not own small caps with low market cap due to less liquidity which make it difficult for them to own sufficient no. of shares. This gives retail investors an opportunity to be an early entrant to accumulate such companies shares. When company grows in market cap by delivering consistent growth and becomes more liquid, entry of fund houses and institutions push the share prices up giving maximum gains to early entrants.  

4. Under–Researched: Small cap stocks are often given the least attention by the analysts who are more interested in the large companies. Hence, they are often under - recognized and could be under-priced thus giving the investor the opportunity to benefit from these low prices.

5. Emerging Sectors: In a developing economy where there are several new business models and sectors emerging, the opportunity to pick new leaders can be hugely beneficial. Also the disruptive models in the new age is leading to more churn and faster growth amongst the nimble footed smaller companies.

Concerns while Investing in Small Caps

1. Risk: The first and the most important disadvantage a small cap stock is the high level of risk it exposes an investor to. If a small cap company has the potential to rise quickly, it even has the potential to fall. Owing to its small size, it may not be able to sustain itself thereby leading the investor into great loses. After all, the bigger the company, the harder it is for it to fall.

2. Volatility: Small cap stocks are also more volatile as compared to large cap stocks. This is mainly because they have limited reserves against hard times. Also, it in the event of an economic crisis or any change in the company administration could lead to investors dis-investing thereby leading to a fall in prices.

3. Liquidity: Since investing in small cap stocks is mainly a decision depending upon one’s ability to undertake risk, a small cap stock can often become illiquid. Hence, one should not depend upon them for an important life goal.

4. Lack of information: As opposed to a large cap company, the analysts do not spend enough time studying the small cap companies. Hence, there isn’t enough information available to the investor so that he can study the company and decide about it future prospects.

Saral Gyan team do take care of above concerns by doing in-depth research and analysis of small cap companies before releasing Hidden Gems (Unexplored Multibagger Small Cap Stocks) research reports with buy recommendation. Its sincere efforts, dedication and passion of our equity analysts that 35 out of 52 Hidden Gems released by us during last 6 years have given more than 100% returns to our members. In fact 26 out of these 35 stocks are giving returns in the range of 200% to 1700%.

Let us look into the overall returns given by Hidden Gems stocks of 2014, 2015 and 2016 have so far vis a vis BSE small cap index. 

Below is the performance update of Hidden Gems released in 2014 compared to returns given by small cap index:
We are pleased to share with our readers that Hidden Gems stocks - 2014 average return as on date is 159% compared to small cap index average return of 40.3%, hence outperforming small cap index by whopping 118.7%.

Total 8 Hidden Gems stocks out of 11 released in 2014 have already achieved their target price giving more than 100% returns to our members in period of 1 to 2 years.

Below is the performance update of Hidden Gems released in 2015 compared to returns given by small cap index:
Total 5 stocks of 2015 have already achieved their target price. As illustrated in the table above, average returns (as on date) of our Hidden Gems stocks released in 2015 is 61.4% compared to average returns of 13.3% of small cap index, out performance of 48.1%.

Similarly, our Hidden Gems stocks released in 2016 also outperformed small cap index by wide margin. Below is the performance update of Hidden Gems - 2016 released during this year:
Our Hidden Gems stocks of 2016 have also outperformed small cap index.As on date average returns of our Hidden Gems 2016 stocks is 46.7% compared to small cap index average returns of 15.6%, out performance of 31.1%.

If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small and mid cap companies - Hidden Gems & Value Picks. Its important for us to ensure that we suggest you to pick the right stock ensuring that you get handsome returns on your investments in medium to long term.

The stocks we reveal through Hidden Gems & Value Picks are companies that either under-researched or not covered by other stock brokers and research firms. We keep on updating our members on our past recommendation suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future outlook.

Subscribe to Hidden Gems & Value Picks and start investing systematically. Avail attractive discounts by subscribing to our combo packsclick here to know about discounts applicable on combo packs. You can subscribe online, simply click on SUBSCRIBE! link of the subscription service / combo pack you wish to subscribe.

In case if you are not comfortable in subscribing online, click here to know about our other payment options and bank details.

Note: Hidden Gem stock research report is scheduled to released on Sunday, 18th Sept'16 (end of the day). 

Do contact us in case of any queries, we will be delighted to assist you. 

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan