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Wednesday, March 22, 2017

Ultramarine & Pigments - ROI @ 104% in 1.5 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 104% to our Hidden Gems members in 1 year and 5 months. 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. Stock has already achieved its target price and we informed our members to continue to hold the stock. We are glad to inform you, Ultramarine & Pigments stock made its 52 week high of Rs. 212 last year and today closed at Rs. 170 giving absolute as on date returns of 104% to our Hidden Gems members in period of 1 year and 5 months. 

In Dec'16 quarter, net profit of Ultramarine & Pigments rose 10.01% to Rs 8.57 crore against Rs 7.79 crore during the previous quarter ended Dec 2015. Sales rose 15.45% to Rs 67.78 crore in the quarter ended Dec 2016 as against Rs 58.71 crore during the previous quarter ended Dec 2015.

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

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.

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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, March 21, 2017

Act Before 11.59 PM Today to Grab Best Discounted Price!

Dear Reader,

Finally, time has come to say Goodbye to this festive season with end of Saral Gyan Holi Dhamaka Offer 2017, our offer will close today at 11.59 PM. We are thankful to our readers for giving overwhelming response to our offer by joining our services at best discounted prices and also grabbing valuable freebies. We will close our offer mid night today, if you are still thinking to join, Act Now! Our ongoing offer will disappear from our website on 22nd Mar'17.

Since 2010, Saral Gyan team has successfully published hundred of articles providing insight to equity market and today cherish association of more than 35,000 members. Articles published on our website received lot as it helped our readers to make educated and smart investment decisions based on facts.

During past 6 years, we launched suitable services to help Investors to create wealth by investing in Indian stock market. Its appreciation and support of our readers that one of our most admired service - Hidden Gems ranks on top not only in performance but also on Google search engine. Try it out yourself by searching "Hidden Gem Stocks" or "Multibagger Small Cap Stocks" on Google, you will find our website www.saralgyan.in featuring on top in search results. Its your appreciation and word of mouth publicity which make our website featuring on 1st position in Google.

During this festive season, we decided to pass on the maximum benefits to our readers by offering great savings and valuable freebies under Saral Gyan Holi Dhamaka Offer 2017. Attractive discounts & valuable freebies which make our offer special for our readers are as under:

1. Discount up to 30% on combo pack subscription (closes today at 11.59 pm)
2. Hidden Gems Flash Back Report - To be released in March 2017
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4. Existing Equity Portfolio Health Check Up (under Wealth-Builder subscription)
5. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.

Below table indicates subscription services and discounted prices valid up to 20th March'17.
Saral Gyan Holi Dhamaka Offer 2017
SARAL GYAN
SUBSCRIPTION SERVICE
HOLI DHAMAKA OFFER 2017
DISCOUNTED PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden GemsRs. 10,000 9,000
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Combo 1: HG + VP + WB + 15%Rs. 40,000 28,000
Combo 2: HG + VP + 15%Rs. 20,000 15,000
Combo 3: HG + VPRs. 16,000 13,000
Combo 4: HG + 15%Rs. 14,000 11,500
Combo 5: VP + 15%Rs. 10,000 8,500

Simply choose the subscription service / combo pack you would like to opt and click on SUBSCRIBE! link in above table to make online payment using your debit / credit card or net banking facility. In case if you are not comfortable in making online payment, click here to know about our other payment options and bank details.


Time has shown that smart investors have made their fortune by investing in equities in long term. None other asset class can match giving you such extra ordinary returns. Yes, its important for you to invest in right set of companies at right price.

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. Remember, "If you want your Money to Grow, Equities is the only Way to Go" in long term. If you think to invest in stocks for period of 3 months or 6 months, we suggest you to stay out of stock market because you are not investing, you are betting on volatility of stock market which could be risky.

We also take this as an opportunity to share the returns on investment given by one of our most admired service Hidden Gems during last 6 years.

Hidden Gems (Unexplored Multibagger Small Cap Stocks) continue to shine giving average returns of whopping 244% to our Hidden Gems subscribers compared to 54% returns of small cap index during last 6 years.

It gives us immense pleasure to inform you that 39 Hidden Gems out of 64 have given more than 100% returns to our members during last 6 years. Moreover, 30 stocks out of these 39 have given returns in the range of 200% to 1900% during the same period.

As we made most of these reports public, you can access read / download our research reports by clicking on the Read / Download link:

1. SAB TV NETWORK >>> Rec. Date: 05 Sep'10 >>> ROI: 890% >>> Read / Download

2. DE NORA >>> Rec. Date: 07 Nov'10 >>> ROI: 209% >>> Read / Download


3. CAMLIN FINE >>> Rec. Date: 27 Mar'11 >>> ROI: 1343% >>> Read / Download


4. WIM PLAST >>> Rec. Date: 30 Aug'11 >>> ROI: 1442% >>> Read / Download

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15. ATUL AUTO >>> Rec. Date: 28 Feb'14 >>> ROI: 189% >>> Read / Download


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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.

Through Hidden Gems and Value Picks, we're providing you opportunities to invest in such small / mid caps stocks today. Infosys, Pantaloon, Unitech, Glenmark were the small cap stocks in past and today are the well known companies falling under mid and large cap space.

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

Moreover, under our Wealth-Builder service, we encourage our members to replicate our Wealth-Builder portfolio by investing in selective high quality small and mid cap companies. These companies are reporting 20-30% + annualized growth and got their due share of re-rating and delivered exceptional returns to our members so far. Since 1st Jan 2013, Nifty has given returns of 50.1%, Sensex returns is 47.8% where as Wealth-Builder portfolio has given returns of 290.1% returns to our members. In case you have not yet started building a portfolio of high quality and fundamentally strong growth stocks for long term wealth creation, please find below the Wealth-Builder portfolio allocation & performance update for your reference.

We believe, investing in Wealth-Builder portfolio with regular portfolio review from our end can help you achieve market beating, very good returns over a longer team and help you take care of yourself and your family needs, which ultimately lead to a healthy and wealthy life after retirement.

Below are the details of our all 4 services:

1. Hidden Gems (Unexplored Multibagger Small Cap Stocks): Based on fundamental analysis, our equity analysts release one Hidden Gem research report every month with buy recommendation and share it with all Hidden Gems members. Stock finalized as Hidden Gem belongs to small / micro caps space with market cap of less than 500 Crores, expected returns from Hidden Gems is above 100% in period of 12 - 24 months. Annual subscription charge of Hidden Gems is INR 10,000 under which you will receive total 12 Hidden Gems research reports (one on monthly basis). Click here to read more about Hidden Gems.

2. Value Picks (Mid Caps with Plenty of Upside Potential): Our equity analysts team consider Warren Buffet approach to short list stocks from mid cap segment as Value Picks. Market cap of Value Pick will range from 1000 crores to 10,000 crores. Holding period of Value Picks is 12 - 24 months and one can expect returns of 40-50%. Annual subscription charge of Value Picks is INR 6,000 under which you will receive total 12 Value Picks research reports (one on monthly basis). Click here to read more about Value Picks.

3. 15% @ 90 Days (Buy to Sell Stocks for Short Term Gain): Based on technical analysis, our team recommends one stock every month to our members. It’s a short term call under which you can expect returns of 15% within period of 90 Days. Annual subscription charge of 15% @ 90 Days is INR 4,000 under which you will receive 12 stock recommendations. We suggest lower allocation in 15% @ 90 Days stocks and higher allocation in Hidden Gems and Value Picks which are our portfolio stocks based on fundamental analysis.​ 15% @ 90 Days stocks recommendations are based on buy to sell and gain strategy, hence we suggest our members to book complete profits once target is achieved and exit in case target is not achieved or stock has broken its 2nd support level as per report. Click here to read more about 15% @ 90 Days.

4. Wealth-Builder (An Offline Portfolio Management Service): Wealth-Builder is our model portfolio of Rs. 10 lakhs and currently we are holding 16 stocks in our portfolio. We suggest higher allocation in our Wealth-Builder stocks which includes best of our Hidden Gems and Value Picks released during last couple of years. Our team suggest all our Wealth-Builder members to invest in the stocks which are part of our Wealth-Builder portfolio. Every month our team updates our Wealth-Builder members which stocks they need to buy / sell / hold with % allocation of these stocks in their portfolio, the suggested changes need to be replicated in the same proportion. Annual subscription charge of Wealth-Builder is INR 20,000 under which you will receive total 12-18 portfolio updates. We also review existing equity portfolio of our members and advise them which stocks to hold and which to exit based of fundamental analysis under Wealth-Builder service. Our Wealth-Builder service is suitable for those investors who have an existing portfolio of at least 2 to 3 lakhs or planning to invest similar amount or more in equity market. Click here to read more about Wealth-Builder.

We do update our members in terms of profit booking / exits depending upon various factors like overall Industry / Sector outlook, fundamentals of the company, management action plan and annual performance in terms of top line, bottom line, operating margins and other important parameters.

Now you can add power to your equity portfolio by investing in best of small & mid cap stocks - Hidden Gems & Value Picks. Enjoy great savings and receive valuable freebies during Saral Gyan Holi Dhamaka Offer 2017 by availing subscription of our Hidden GemsValue Picks & Wealth-Builder services.

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

Wish you happy & safe Investing.

Regards,
Team - Saral Gyan.

Wim Plast - Our 15-Bagger Stock - ROI @ 1395% in 5.5 Years

Dear Reader,

If you invest in fundamentally strong small and mid cap companies with a medium to long term horizon, you will get rewarded for sure that too in a big way. Wim Plast Ltd (BSE Code: 526586) is classic example of "Buy Right and Sit Tight" strategy.

Our equity analysts published Hidden Gem - Aug 2011 research report and shared it with all Hidden Gems members 5.5 years back on 30th Aug 2011. Hidden Gem stock - Aug'11 - Wim Plast Ltd was recommended at price of Rs. 92.50 (bonus issue adjusted price, actual average recommended price was 185) with target price of Rs. 215 over period of 1 to 2 years which was achieved sooner than later, however we suggested our members to continue to hold it and add more on dips considering strong fundamentals and reasonable valuations.

In 5 years and 6 months, stock has multiplied investment of our Hidden Gems members by 15 times. Wim Plast share price is closed at Rs. 1383 today giving absolute returns of 1395% since our initial recommendation. We kept on advising our members to add this stock in their portfolio at higher levels during last 4 years for long term wealth creation post our initial recommendation in 2011.


We believe Wim Plast is well positioned to deliver robust top line and bottom line growth in coming quarters. Stock at current price looks fairly valued, however any significant correction in stock price must be considered as buying opportunity by long term investors.

Wim Plast is a zero debt company promoters holding of 74.96%. Company is maintaining operating margins above 17% since last 5 years and is taking all right steps to deliver consistent growth. In last five years, Wim plast have shown healthy CAGR growth of 14.8% and 20% in Revenue and PAT, respectively. ROE is 23.7% in last 5  years, which is impressive for such a small cap company.

Wim Plast continuously introduced new range of products to drive revenue growth and profitability in past. Company has strengthened its brand equity of ‘cello’ branded products throughout country and has been continuously increasing the ad spend. Company has launched new models for its product range including various new designs. Another prominent brand of the company ‘Cello Bubble Guard Sheets’ has gained rich response from the users for applications like Tile Protector, False Ceiling, Wall Panel and Packaging materials in past.

In plastic furniture segment, Wim Plast is the third largest manufacturer after Nilkamal and Supreme. Among listed players, Wim Plast has an edge over its peers by reporting better margins. Balance sheet has remained strong for the company as it has zero debt in its balance sheet. Strong operating cash flows enable the company to remain debt free and fund the expansions through internal accruals.

Wim Plast Forays into Air Cooler Segment with Cello Coolers

India air cooler market is growing with a CAGR of 11.26% from last four years and market is projected to grow further due to rising mercury, increasing disposable income, growing demand in middle class people and low price of air coolers as compared to air conditioners. India air cooler market is divided into two parts viz. residential and industrial. Residential and Industrial air cooler market is growing with a CAGR of 15.68% and 9.04% respectively from past four years. Keeping in point, low capital expenditure and electricity benefits of air coolers, the middle income group majorly fuelled the sales in residential market. Whereas, industrial cooling is slowly gaining increasing importance as corporate are now looking to create an amiable working environment for their employees.

The Indian air cooler market size is estimated to be around Rs 3,000 crore in value term and around 30% of this is in the organised sector and rest is catered to by the unorganised segment players. According to “India Air Cooler Market Outlook, 2021”, India’s Air Cooler market is anticipated to reach INR 8,000 Crore by 2021 from current estimated size of 3000 crores. There are an estimated 247 million households in India and about 65% own fans, while only 4% of these households own air conditioners and 8% own air coolers. High and rising temperature levels are leading to greater demand for cooling solutions. With rising incomes, cooling solutions are increasingly viewed as necessities. Considering lower cost of ownership vis a vis ACs (70% lower capital costs and 90% lower running costs) and the constrained power supply situation in India, air coolers are the mass market option for Indian consumers. So, the potential customer base for cooling solutions in India is huge.

Symphony, Kenstar and Bajaj are the dominant players in the organized air cooler market. Voltas has also forayed into the industry and is expected to give fierce competition to the market leader Symphony. Room coolers account for almost two-third of the total market and is expected to dominate going forward, followed by desert coolers. North India caters to the largest revenue sales as the region is growing at a fast pace and the growth is fuelled by a shift from unorganized to the organized market.

Symphony is the market leader. Symphony domestic sales in FY 15-16 was ~ Rs. 450 crores with nearly 50% market share in organized market, other players too grown from zero to over 15% share of the organised market in value terms in last 3 to 5 years.  

Wim Plast is the new entrant in air cooler market and already started selling its coolers under brand “Cello” with all major online retailers – Amazon, Flipkart, Snapdeal, Paytm and Pepperfry. Various models of Cello coolers are launched in price range of Rs. 7,000 to Rs. 15,000 under Dessert, Mini Dessert, Personal and Window category with water capacity of 22 Litres to 60 Litres. Cello coolers are available in wide range with latest features to compete well with other major players to grab market share in organized air cooler industry. Cello Coolers TV commercial is already started by the company to position and market its products in this summer season.

With beginning of summer season, we have seen Cello coolers at supermarket stores like Hyper City and Big Bazaar in places like Mumbai and Delhi along other other brands like Symphony, Bajaj, Crompton Greaves, Kenstar and Orient coolers. We believe the same will be available soon across country to capture market share by the company.

Wim Plast has history of strong brand positioning under brand Cello to market and sell its products in moulded furniture (plastic furniture and material handling products) and boards (false ceiling, wall panel, bubble guard sheet etc) category.

We believe entry into air cooler business will augur well for the company as it will give a major boost in terms of revenue growth going forward. 

Below is the summary of Wim Plast Ltd - Hidden Gem - Aug'11 Research Report released on 30th August 2011.

Company Background

Wim Plast Limited incorporated on 7th October, 1988, and listed in the year 1994 at the Bombay Stock Exchange Ltd. (BSE) and the Ahemedabad Stock Exchange Ltd. (ASE).

In the year 1994 company setup manufacturing unit of plastic moulded furniture at Daman in which company got grand success in the business. In the process of diversification in 2005 company has setup plants at Baddi, Himachal Pradesh for processing of bubbleguard extrusion sheets and also moulded furniture which a new innovation in India in the field of extrusion technology.

Presently the company has manufacturing units at Daman, Baddi and Chennai also have Depots in Gujrat, Rajasthan, Andhra Pradesh, Haryana and Punjab and have strong consumer base through out the country.

Cello is the undisputed leader in plastic finished goods. Since 1975, the group has been shaping plastics into high quality convenience products for homes and industries making life better & easier. Ceaselessly endeavoring to set new bench marks in quality and constantly innovating to blaze new trails in the marketplace. Today Cello offers larger range of products than any other manufacturer in India.

All surpassing the highest international standards in quality Cell's R&D, manufacturing technology, production processes, materials, quality standards and the high skilled workforce of 5000 people are among the best in the world making Cello the no. 1 brand of plastic products in India.

Product Range:

1.Plastic Moulded Furniture 2. Material Handling 3. Cello Bubble Guard Board  

False Ceiling

Stronger and Lifelong Revolutionary False Ceiling Panels (first time in Asia), a perfect product to fulfill all your needs of false ceiling.

Ideal for Offices, Warehouses, Stores, Industrial sheds, Textile Industries, Chemical Industries, Pharma Companies, Hospitals, Hotels, Docks, Ports & Commercial Complexes.

Inherent Advantage
  • Light Weight Strong & Durable
  • Moisture & Water Proof
  • Termite, Insect & Bacteria Proof
Wall Panels

Cello Bubble Guard Wall Panel has various advantages over other material namely, moisture & termite proof, Fire retardant, Economical, Maintenance free. Available in various designs.

Wall Panels can be directly pasted on the solid surface with the adhesive recommended (SG 1000 of 3 M / SP5 of Pidilite) and joints can be finished with sealants, tapes or decorative beadings.

The panels offers high tensile strength, resists stress cracking, retains stiffness & flex. These wall panels are also available in seamless appearance, clad with tongue & grove system offer permanent utility / decorative paneling designed to provide flexibility, durability & beauty.

Door Panel/Partition

Cello Bubble Guard Part ions / Door Panels are versatile to use available in various attractive designs, which don’t need paint or polish.

They are easy to install and easy to cut, can be fixed by any unskilled laborer. The panels are light weight, water proof, termite proof & non-toxic. The panel offers high tensile strength, resists stress cracking, retain stiffness & flex. These panels are used as filler of aluminium, PVC, Wood & other frame. They are non-staining. The panels are insured of better durability, longer functional life & also effective cost.

Floor Protector

In the under construction sites, the floor tiles are laid prior to the finishing of the buildings. All the electrical and other fittings are done after the flooring is completed. Portable scaffoldings, tools and other equipments move on the floor, to complete the remaining work.

To avoid the damage to the tiles, Plaster of Paris (POP) is laid on the Flooring and removed after the completion of the job. POP has many disadvantage as it is cumbersome to lay & remove, Skilled labour is required, Time Consuming , Disposition of debris after completion is the major problem, while removing / scrapping operation chances of getting scratches to the tiles. Construction site becomes shabby, uncomfortable, dusty, and unhygienic.

Recent Developments  (as on 30 Aug'11)

Business Expansion Plans, 24 August 2011

Wim Plast Ltd has informed BSE that the Company has initiated following expansion projects:

1. The Company has acquired land of 8092 sqmt. at Haridwar, for setting up of manufacturing unit of Plastic Moulded Products. The commercial production of the Unit will start by the end of last quarter of current financial year.

2. The Company is in the process of setting up of new extrusion plant at Daman for manufacturing of Flutted & S-flutted polypropylene sheets. The sheets will mainly used for packaging and advertisement. The Commercial production of the unit will start by the end of the second quarter of current financial year.

Total cost of the above projects will be funded by internal accruals of the Company.

Investment Rationale

1. Earnings Visibility: Wim Plast revenues are expected to improve significantly on the basis of manufacturing unit at Daman getting operational by the end of 2nd quarter of current financial year.

2. Innovative Product Launches: Management is focusing on innovative products like Cello Bubble guard board offering unique benefits to its consumers. Company has the advantage of early entrant in this segment with minimum competition and wide distribution network across the country.

3. Open Market Purchase of Shares by Promoters: Promoters share holding is 72.96%. Promoters have been continuously making open market purchase since last one year. During last one year, promoters have increased their stake by almost 1%. (as on date, promoters holding is maximum at 75%)

Saral Gyan Recommendation (30 Aug'11)

i) Management has been conservative in past but now with new developments with expansion plans for their existing facilities and set up of new plants at new locations give visibility for revenue growth in coming years. New facilities at new location will also give opportunities to company to move into new regions expanding their customer reach.

ii) The Management holds 72.96% equity in the company and has been continuously increasing its stake at current valuations (increased holding by 1% during last one year) which gives confidence of growth prospects in coming quarters.

iii) The stock is available at low valuations, existing P/E ratio of 6.5 make the stock valuations attractive while comparing it with peer stocks like Nilkamal and Supreme Industries.

iv) The operating margins and net profit has grown significantly. Since last 2 years, company has improved its margin and profit margins of 11-13% seems sustainable even after expansion due to less dependence on debt, currently cash balance is in excess of total debt of the company. No equity dilution since last many years is another positive.

v) At current market price of Rs 204.55, dividend yield works out to be more than 2% (Company has announced Rs. 4.50 dividend per share). On equity of Rs. 6 crore the estimated annualized EPS for FY 2011-12 works out to Rs. 38 and the Book value per share is Rs. 139.16. At a CMP of Rs. 204.55, stock price to book value is 1.47. Currently, the scrip is trading at 6X FY 2011-12 estimated earnings which make it an attractive buy at a price range of 175-180.

Saral Gyan Team recommends “BUY” for Wim Plast Ltd for a target price of Rs. 430 over a period of 12-18 months.

Buying Strategy:
  • 20% at current market price of 204.65
  • 80% at price range of 175-180
To Read/Download Hidden Gem Aug'11 Research Report - Click Here 

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