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Friday, May 26, 2017

How Small & Steady Steps can count Big in Wealth Creation

Dear Reader,

A small investment of Rs. 10,000 a month over a period of 10 years can help you create a corpus of Rs. 25 lakhs. Total amount invested over period of 10 years by you will be Rs. 12 lakhs and you will have profit of Rs. 13 lakhs. Not Good? This might look less to you as we are assuming returns of 13.5% per annum. If we assume returns of 27% per annum, your corpus will be Rs. 50 lakh and your profits would be more than 3 times of your actual investments that too when you are investing a nominal amount of Rs. 10,000 on monthly basis. Impressive! Right?

You might think that investing in mutual funds could be one of the way to start SIP (Systematic Investment Plan). However, returns may not be that high which you can generate by directly investing into good quality small and mid cap stocks. Hence, we suggest our members to start SIP by directly investing in stocks every month. What you are suppose to do is to invest your savings in a particular stock once in a month instead of putting it into mutual fund. Next month, same amount would be invested in another stock which at that point of time gives you good medium to long term investment opportunity. This could be an ideal choice for salaried employees as well as businessmen / entrepreneurs, as it will help you to directly invest in fundamentally strong small and mid cap companies to build a diversified portfolio of high quality small and mid cap stocks over a period of time to achieve wealth creation.

Investing in stocks is a great way to build your diversified investment portfolio. It is a simple and time tested approach for accumulation of wealth in a disciplined manner. Simply get some savings from your monthly income and invest in equities for long term. It not only allows you to save every month in a disciplined way but also help you ride through ups and downs of stock market.

Invest some portion of your monthly income in good companies without  timing the stock market and you will definitely get rewarded in long run.

Just take care of Basic Principle of Investing in Equities:

1. Invest in stock market with a long term view (3 - 7 years or more).
2. Invest in companies which are fundamentally strong with scalable business.
3. Follow disciplined approach by Investing regularly in equities.
4. Build a diversified portfolio by investing in small & mid cap companies.
5. Avoid frequent buying / selling of stocks, Its trading not Investing!
6. Review performance of your holding companies at least once a year to decide whether to buy / sell or hold.

Hidden Gems - SIP Returns @ 256.2% Vs Small Cap Index Returns @ 73.2%

It gives us immense pleasure to share that average returns of Saral Gyan 64 Hidden Gems stocks (Our Unexplored Multibagger Small Caps) released since inception (from Sept 2010 to Dec 2016) during last 6 years is 256.2% compared to 73.2% returns of BSE Small Cap Index. Monthly investment of Rs. 10,000 in Hidden Gems till Dec'16 during last 6 years not only allowed you to save Rs. 6.4 lakh but also appreciated your investment by more than 2 times making your total Hidden Gems stocks portfolio of Rs. 22.8 lakh with overall profit of Rs. 16.4 lakh. However, if you would have invested the same amount in Small Cap index, you would be sitting with overall gains of Rs. 4.68 lakh.

Below is our Multibagger Stocks - Hidden Gems performance scorecard since inception  (from Sept 2010 to Dec 2016) which illustrates value of Rs. 10,000 invested every month in Hidden Gem (Unexplored Multibagger Small Cap Stocks) stock of the month vis a vis value of Rs. 10,000 invested in BSE Small Cap Index during last 6 years as on 26th May'17.
We are glad to inform you that 42 Hidden Gems stocks out of 64 during last 6 years have given more than 100% returns to our members. Moreover, 32 stocks out of these 42 have given returns in the range of 200% to 1800%.

Note: Total 64 Hidden Gems stocks were released (till Dec'16) during last 76 months, we have not released Hidden Gems for the months not displayed in the table above.  

We also suggested our members, which earlier recommended Hidden Gems stocks can be added more in their portfolio based on company's strong fundamentals. Ex: Mayur Uniquoter, Cera Sanitaryware, Wim Plast, Camlin Fine Chemicals, Acrysil, Kovai Medical, Superhouse, De Nora, Atul Auto, Control Print and Stylam Industries were some of the stocks which we recommended to our members to accumulate later also at higher price from our initial recommended price. Now profits can be seen as these stocks have given multibagger returns.

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: 225% >>> Read / Download


3. CAMLIN FINE >>> Rec. Date: 27 Mar'11 >>> ROI: 1243% >>> Read / Download


4. WIM PLAST >>> Rec. Date: 30 Aug'11 >>> ROI: 1522% >>> Read / Download

5. KOVAI MEDICAL >>> Rec. Date: 27 Oct'11 >>> ROI: 1040% >>> Read / Download


6. CERA SANITARY >>> Rec. Date: 24 Dec'11 >>> ROI: 1760% >>> Read / Download

7. SUPERHOUSE >>> Rec. Date: 29 Feb'12 >>> ROI: 212% >>> Read / Download

8. MAYUR UNIQ. >>> Rec. Date: 31 Mar'12 >>> ROI: 560% >>> Read / Download

9. PREMIER EXPLO. >>> Rec. Date: 22 Jul'12 >>> ROI: 490% >>> Read / Download

10. ROTO PUMPS >>> Rec. Date: 05 Aug'12 >>> ROI: 420% >>> Read / Download

11. TIDE WATER OIL >>> Rec. Date: 30 Oct'12 >>> ROI: 193% >>> Read / Download

12. ACRYSIL >>> Rec. Date: 25 Nov'12 >>> ROI: 352% >>> Read / Download

13. BAMBINO AGRO >>> Rec. Date: 25 Dec'12 >>> ROI: 363% >>> Read / Download

14. TCPL PACKAGING >>> Rec. Date: 31 Jan'13 >>> ROI: 755% >>> Read / Download


15. ATUL AUTO >>> Rec. Date: 28 Feb'14 >>> ROI: 197% >>> Read / Download


16. RANE BRAKE >>> Rec. Date: 31 May'14 >>> ROI: 440% >>> Read / Download

17. DYNEMIC PROD. >>> Rec. Date: 29 Jul'14 >>> ROI: 214% >>> Read / Download

18. ASIAN GRANITO >>> Rec. Date: 29 Sep'14 >>> ROI: 261% >>> Read / Download

19. CONTROL PRINT >>> Rec. Date: 30 Nov'14 >>> ROI: 58% >>> Read / Download

20. PLASTIBLENDS >>> Rec. Date: 31 Jan'15 >>> ROI: 110% >>> Read / Download

21. MOLD-TEK PACK >>> Rec. Date: 22 Mar'15 >>> ROI: 171% >>> Read / Download

22. VISAKA IND >>> Rec. Date: 05 Jul'15 >>> ROI: 179% >>> Read / Download

23. CHEMFAB ALKAL. >>> Rec. Date: 06 Sep'15 >>> ROI: 178% >>> Read / Download

24. ULTRAMARINE >>> Rec. Date: 11 Oct'15 >>> ROI: 115% >>> Read / Download

25. STYLAM IND. >>> Rec. Date: 08 May'16 >>> ROI: 240% >>> 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.

Through Hidden Gems and Value Picks, we are providing you opportunities to invest in such small / mid cap stocks today. Infosys, Pantaloon, Dabur, 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 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 growth outlook.

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 with medium to long term perspective. 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.

Add power to your equity portfolio by investing in high quality small & mid cap stocks - Hidden Gems & Value PicksSubscribe to Hidden Gems & Value Picks and start investing systematically. 

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, May 23, 2017

Are you Investing in Potential Multibagger Small Cap Stocks?

Dear Reader,

When the word "Small Cap" is mentioned in the investor community, lack of interest and confidence is observed which shows the disillusionment that investors have towards this category.

Most of the retail investors keep themselves away from investing in small and little known companies which they never heard of and find themselves comfortable investing in companies which they are aware and keep a close watch on price movement instead of looking at important parameters like recent performance of the company, its quarterly results, debt on books, earning per share, dividend yield, PE ratio, ROE ratio etc along with future prospects considering macro and micro environment for the industry to which stock belongs to.

There are a lot of reasons why investors not directly get into small cap stocks as some of them can be illiquid and concerns may arise about the way the company is being professionally managed. Moreover, these companies have limited media coverage and they are largely unknown among investors, which means the information in public domain will be very limited.

However, at this juncture, we would like to differ from the general view and recommend risk taking investors not to follow the herd but rather they can consider taking a small exposure into the small cap stocks.

We always suggest our members not to time the market and follow a disciplinary approach while investing in equities with medium to long term perspective. Historical data indicates that most of the new investors get fascinated towards stock market to make quick bucks and finally end up loosing their capital as they cant hold on their stocks in case market corrects and sell out their stocks in a panic. Stock market is not a money making machine, you need not to be greedy on rising market or fearful when stock market falls, simply buy right and sit tight having sufficient patience with you to see your investment growing over a period of time.

Few Multibagger Small Cap Stocks

Century Plyboards is a leading player in the fast growing plywood and laminate segment, with an overall share of 25 per cent of the organised plywood market, which is estimated at Rs 4,700-5,000 crore. The organised plywood and laminate segment is growing at healthy double digits due to an improving demand environment and a shift towards branded products. As per our estimates, it can grow ahead of the industry, at 22% CAGR, over the next three to five years.

Inspite of poor state of construction sector due to demonetization, Century managed to post much better set of numbers in Mar'17 quarter. Century Plyboards net profit rose by 34.4% to Rs 55.91 crore in the quarter ended March 2017 as against Rs 41.60 crore during the previous quarter ended March 2016. Sales rose 11.6% to Rs 539.99 crore in the Mar'17 quarter as against Rs 483.76 crore during the previous quarter ended March 2016. Century Plyboards is a high-quality consumer play with a dominant market share and any improvement in demand will augur well for the company.

You might be surprised to know the fact that Century Plyboards was one of the star performer - multibagger stock of 2014, a 9-Bagger stock rising about 800 percent in just 12 months. Those who entered in the stock before fund managers started accumulating it in big chunk may have a 50-Bagger stock in next 3 to 5 years as still there is lot of scope for business growth during next couple of years.

Lets take another example of little known company Mayur Uniquoters which is our 7-Bagger stock. We recommended this stock 5 years back at price of Rs. 56 (adjusted price after 2 bonus issues and stock split in last 5 years, actual recommended price was Rs. 448) and yesterday it closed at Rs. 380 giving absolute returns of 575%. You might be surprised to know that Mayur Uniquoter is a 126-Bagger stock for investors who invested in it 8 years back. Investment of Rs. 1 lakh in Mayur Uniquoters in Jan 2009 is valued at Rs. 1 Crores and 26 lakhs today. That's too excluding dividend payouts. Mind boggling, isn't it? It's a fact! Company has posted strong growth YoY and rewarded share holders in big way, Company was trading at Rs. 3 (bonus / split adjusted price) with market cap of merely 13 crores in Jan 2009, today market cap of the company is 1,730 crores.

Mayur Uniquoters is still a great value stock considering its consistent performance and leadership position in artificial leather industry and robust demand for its products by esteemed clients from auto and footwear industry.


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 41 Hidden Gems out of 64 released by our equity analysts in last 6 years (till Dec'16) have given more than 100% returns. Moreover, 30 out of these 41 stocks have given returns in the range of 200% to 1900%.

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 research reports with buy recommendation. Its sincere efforts, dedication and passion of our equity analysts that 41 out of 64 Hidden Gems released by us during last 6 years (till Dec'16) have given more than 100% returns to our members. In fact 30 out of these 41 stocks have given returns in the range of 200% to 1900%.

Let us evaluate the performance of Hidden Gems stocks of 2014, 2015 and 2016 compared to BSE small cap index.

Hidden Gems Stocks 2014 Vs Small Cap Index:
As illustrated in the table above, average returns of Hidden Gems stocks released in 2014 is 187% compared to small cap index average returns of 62.6%. Hidden Gems stocks of 2014 are outperforming small cap index by whopping 124.4%.

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 6 months to 2 years.

Hidden Gems Stocks 2015 Vs Small Cap Index:
Total 7 stocks of 2015 have already achieved their target price. As illustrated in the table above, average returns of our Hidden Gems stocks released in 2015 is 93.3% compared to average returns of 31.3% of small cap index, out performance of 62%.

Hidden Gems Stocks 2016 Vs Small Cap Index:
Our Hidden Gems stocks of 2016 have also outperformed small cap index. As on date, average returns of our Hidden Gems 2016 stocks is 53.7% compared to small cap index average returns of 28.5%, out performance of 25.3%.

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.


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

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

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan

Saturday, May 20, 2017

Wealth-Builder - Portfolio of High Quality Small & Mid Caps

Dear Reader,

We continue to remain invested in high quality small and mid cap companies with strong fundamentals and increase allocation in these companies in case of fall in stock prices during market correction.We believe any major correction in current market must be considered as a buying opportunity. We expect cyclical stocks with strong fundamentals will continue to outperform going forward considering ease in interest rates, stable crude oil prices and higher spending.

If we look at last year, we find stock market extremely volatile, major indices - Sensex and Nifty corrected in Jan and Feb 2016 followed by sharp recovery of more than 25% during next 6 months from lows of Feb'16. Later again seen significant downside due to global as well as local factors like Trump winning US elections, demonetisation impact and increase in crude oil prices.

Sharp fall in stock prices last year in the month of November created panic situation for many new investors without any cues and put them on back foot when it comes to investing in equities. In the month of Dec'16, many investors were expecting further fall in stock market due to demonetization impact and hence remained on sidelines. However, since beginning of this year, we witnessed strong rally across all broader indices as initially Domestic Institution were buying and supporting the market and later FII turned to be net buyers. 

BJP victory in UP with the biggest margin in 37 years has set the markets to keep making new highs this year. The BJP landslide victory with clean sweep in UP and Uttarkhand gives further comfort for 2019’s Lok Sabha elections with high expectation of stable government for next seven years. Political stability is one of the most important factor for economic growth and development of any country, it not only give confidence to Investors but also allows government to implement various policies and reforms smoothly. This will augur well for Indian stock market in long term and hence we continue to remain bullish on Indian equities.

High quality companies reporting 20-30% + annualized growth can deliver exceptional returns for the shareholders in long termIn case you have not yet started building a portfolio of high quality and high growth stocks for long term wealth creation, please find below the Wealth-Builder portfolio allocation for your reference.

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

Since inception, our Wealth-Builder portfolio has outperformed Nifty and Sensex by wide margin. Since 1st Jan 2013, Nifty has given returns of 58%, Sensex returns is 54.2% where as our Wealth-Builder portfolio has given returns of 341.1% to our members.

In terms of performance, 8 top performer stocks out of 14 of Wealth-Builder portfolio have given returns in the range of 80% to 760% since 1st Jan'13 that too when many of these stocks out of 14 were added in portfolio during last couple of years. Moreover, 10 stocks out of 14 have made 52 week high / all time high recently. We continue to hold these stocks as we believe these companies are registering good growth every quarter and doing all the right things to continue delivering robust top line and bottom line with strong operating margins.

There were few laggards also which have not performed up to our expectations and we exited these stocks and allocated the available funds to other good investment opportunities to ensure that Wealth-Builder portfolio continue to outperforms major indices by wide margin. 

Wealth-Builder is our offline portfolio management service. Using Wealth-Builder, you can manage your portfolio like a professional.

1. You Plant – You will manage your money at your own. Using your own Dmat account, you will purchase and sell shares at right point of time.

2. We Nurture – We will guide you with detailed report suggesting which stock to buy, at what price to buy and of course how much to buy, when to sell and how much to sell. Based on our recommendations, you will create and modify your portfolio to maximize your returns on your investments over a period of time.

3. You Harvest – It’s a fact that equities can give you maximum returns compared to any other asset class if invested with a long term horizon (3 to 5 years and above). Investing in fundamentally strong small and mid cap companies ensures that you keep harvesting your money in form of regular and higher dividends year after year along with capital appreciation.

Below are the unique advantage and benefits of Wealth-Builder over conventional PMS and Mutual Fund:

1. You manage your money at your own without giving it to mutual fund or PMS with benefit of any time access to your portfolio.

2. You will not be charged any asset management fee, exit / entry load, administration charges. Only one time nominal annual subscription cost will be charged.

3. Wealth Builder ensures capital protection; your portfolio will not be over churned to earn higher brokerage like many brokerage houses.

4. Exposure to our well researched stocks - Hidden Gems and Value Picks.

5. Limited transactions – once or twice in a month, you can manage your portfolio giving only 30 – 60 minutes in a month without affecting your busy schedule.

Wealth-Builder ensures giving better returns compared to major indices like Sensex or Nifty.

Wealth-Builder subscribers need to replicate our recommended portfolio in exact proportion. For ex: If we recommend to invest Rs 50,000 in “x” company with portfolio allocation of 5% in Rs. 10 lakh portfolio, subscriber starting his portfolio with Rs. 2 lakh need to invest Rs. 10,000 in “x” company with similar portfolio allocation i.e. 5%. On monthly basis, we review Wealth-Builder portfolio and update our members in terms of any changes in allocation or exit / entries in stocks based on fundamental analysis and recent developments in these companies.

Start managing your equity portfolio like a professional, subscribe to Wealth-Builder by paying nominal annual fee of  Rs.20,000 for entire year.

Click here to subscribe to Wealth-Builder online. You can avail attractive discounts on our combo packs, click here for details.

In case if you are not comfortable in making online payment, click here to know about our other payment options and bank 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, May 19, 2017

6 Steps to Explore Best Stocks for Investment

Below are the 6 Important Steps to Explore Best Stocks for Investment

Step-1: Find out how the company makes money
Step-2: Do a Sector Analysis of the Company
Step-3: Examine the recent & historical performance of the Stock
Step-4: Perform competitive analysis of the firm with its Competitors
Step-5: Read and evaluate company’s Financial statements
Step-6: Buy or Sell

Step-1: Find out how the company makes money

Before you decide to invest in a company’s stock, find out how the company makes money. This is probably the easiest of all the steps. Read company’s annual and quarterly reports, newspapers and business magazines to understand the various revenue streams of the firm. Stock price reflects the firm’s ability to generate consistent or above expectation profits/earnings from its ongoing/core operations. Any income from unrelated activities should not affect the stock price. Investors will pay for its earnings from its core operations, which is its strength and stable operation, and not from unrelated activities. Thus, you need to find out which operations of the firm are generating revenues and profits. If you do not know that you are bound to get a hit in future.

Warren Buffet once said that “if you do not understand how a company makes money, do not buy its stock- you will always end up loosing money”. He never invested even a single penny in technology stocks and yet made billions and billions of dollars both during tech bubble and bust.

Step-2: Do a Sector Analysis of the Company

First is to figure out which sector the stock is in. Then, figure out what all factors affect the performance of the sector. For example, Infosys is in IT services sector, NTPC is in Power sector and DLF is in Real Estate sector. Half of what a stock does is totally dependent on its sector. Simple rule-Good factors help stocks while bad factors hurt stocks.

Let’s take an example of airlines industry. The factors that affect it are fuel prices, growth in air traffic and competition. If fuel prices are high, tickets would be expensive and hence fewer people will fly. This will hurt the airlines sectors and firms equally. This would make the sector less attractive because there would be less scope for growth of the firms.

The idea is to find out the good and bad factors for the sectors and figure out how much they will affect the stock and how. What we are really looking at are reasons that will make stock price good or bad or a company look more or less valuable, even though nothing about the company changes. This will give you a broader view whether the stocks will do well or poorly in the future.

Step-3: Examine the recent & historical performance of the Stock

By performance we mean both operational and financial performance of the company. Take out some time to find out how the company has done in its business over the years. Were there issues with its operations such as labor strike, frequent breakdowns, higher attrition or lagging deadlines? If any company has a history of serious problems, it does not make a good buy because chances are high it may have similar problems again. History is a good predictor of future! It is also extremely important to find out the historical financial performance of the company – growth in revenues, profits (earnings), profit margins, stock price movements etc.

Step-4: Perform competitive analysis of the firm with its Competitors

This is most important step in analyzing a stock. Unfortunately, most of the retail investors do not bother to do this. It takes time to do this step but it worth trying if you don’t want to loose your money. Many investors buy a stock because they have heard about the company or used the products or think companies have excellent technologies. However, if you do not evaluate or compare those features of the company with other similar firms, how will you figure out whether the firm is utilizing them effectively or is better/worse than others? We also need to find out whether company is growing rapidly or slowly or has no growth. We would like to cover couple of financial ratios here in brief and explain how to use them to figure out a good stock.

P/E: Price-to-earnings ratio is the most widely used ratio in stock valuation. It means how much investors are paying more for each unit of income. It is calculated as Market Price of Stock / Earnings per share. A stock with a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to the overall market, as investors are paying more for today's earnings in anticipation of future earnings growth. Hence, as a generalization, stocks with this characteristic are considered to be growth stocks. However, P/E alone may not tell you the whole story as you see it varies from one company to another because of different growth rates. Hence, another ratio, PEG (P/E divided by Earnings Growth rate) gives a better comparative understanding of the stock.

PEG = Stocks P/E / Growth Rate
We do not want to go into the calculation part as values for P/E are available on internet for most of the companies.
A PEG of less than 1 makes an excellent buy if the company is fundamentally strong. If it is above 2, it is a sell. If PEG for all the stocks are not very different, one with lowest P/E value would be a great BUY.

Step-5: Read and evaluate company’s Financial statements

This is the most difficult part of this process. It is generally used by sophisticated finance professionals, mostly fund managers who can understand different financial statements. However, there are few things that even you should keep in mind. There are three different financial statement- balance sheet, income statement and cash flow statement. You should focus only on balance sheet and cash flow statement.

Balance Sheet: It summarizes a company’s assets, liabilities (debt) and shareholders’ equity at a specific point in time. A typical Indian firm’s balance sheet has following line items:

• Gross block
• Capital work in progress
• Investments
• Inventory
• Other current assets
• Equity Share capital
• Reserves
• Total debt

Gross block: Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset.

Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset is worth to the company.

Capital work in progress: Capital work in progress sometimes at the end of the financial year, there is some construction or installation going on in the company, which is not complete, such installation is recorded in the books as capital work in progress because it is asset for the business.

Investments: If the company has made some investments out of its free cash, it is recorded under it.

Inventory: Inventory is the stock of goods that a company has at any point of time.

Receivables include the debtors of the company, i.e., it includes all those accounts which are to give money back to the company.

Other current assets: Other current assets include all the assets, which can be converted into cash within a very short period of time like cash in bank etc.

Equity Share capital: Equity Share capital is the owner\'s equity. It is the most permanent source of finance for the company.

Reserves: Reserves include the free reserves of the company which are built out of the genuine profits of the company. Together they are known as net worth of the company.

Total debt: Total debt includes the long term and the short debt of the company. Long term is for a longer duration, usually for a period more than 3 years like debentures. Short term debt is for a lesser duration, usually for less than a year like bank finance for working capital.

One need to ask-How much debt does the company have? How much debt does it have the current year? Find out debt to equity ratio. If this ratio is greater than 2, the company has a high risk of default on the interest payments. Also, find out whether the firm is generating enough cash to pay for its working capital or debt. If total liabilities are greater than total assets, sell the stock as the firm is heading for disaster. This debt to equity ratio is extremely important for a company to survive in bad economy. What is happening now-a-days should make this extremely important. Companies having higher debt ratio have got hammered in the stock market. Look at real estate companies- their stocks are down by almost 90% from all time highs made in 2007 - 2008. This is because they have high debt level which means higher interest payments. In case of liquidity crisis and global slowdown, it would be extremely difficult for such companies to survive. Remember, a weak balance sheet makes a company vulnerable to bankruptcy!

Step-6: Buy or Sell

Follow all the steps from 1 to 5 religiously. It will take time but worth doing it. If you do it, you won’t have to see a situation where you loose more than 50% of stock value in a week! In fact you can expect much better returns than any other asset class in medium to long term. Buying or selling will depend on how your stock(s) perform on the above analysis.

If you find it difficult to follow above steps to explore high quality stocks with strong fundamentals, leave it to us. Simply subscribe to Hidden Gems (Unexplored Multibagger Small Cap Stocks) and Value Picks (Mid Caps with Plenty of Upside Potential) and start building your portfolio of high quality small and mid caps to get rewarded 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 for details.

Also Read: Multibagger Stocks - Hidden Gems Vs Small Cap Index

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, May 18, 2017

Cera Sanitaryware - Our 19-Bagger Stock in 5.5 Years

Dear Reader,

Our equity analysts published Hidden Gem - Dec 2011 research report with Buy recommendation on Cera Sanitaryware (BSE Code: 532443, NSE Code: CERA) and shared it with all Hidden Gems members. Research report was published 5 years and 5 months back on 24th Dec'11 and Buy was recommended on Cera Sanitaryware Ltd at average price of Rs. 157 with a target price of Rs 350. When target price was achieved, we suggested our members to continue to hold it. Today, Cera Sanitaryware is a 19-Bagger stock for our Hidden Gems members, stock made its all time high of Rs. 3315 on NSE recently and today closed at Rs. 3006.65 giving absolute returns of 1815% in 5 years and 5 months.

Considering strong fundamentals of the company with robust YoY growth, we added Cera Sanitaryware in our Wealth-Builder portfolio almost 4.5 years back at price range of 400 - 450 and continue suggesting our subscribers to invest in this stock even at higher price range of Rs. 1600 - 1800 levels with a long term view. We have not suggested any profit booking in this stock so far and stock has multiplied investments of our Hidden Gems members by almost 19 times. As on date, Cera Saniwaryware is giving whopping 1815% returns to our Hidden Gems members in period of 5 years and 5 months and returns of 652% to our Wealth-Builder members within period of 4.5 years.

In Mar'17 quarter, net profit of Cera Sanitaryware rose 8.35% to Rs 32.30 crore against Rs 29.81 crore during the previous quarter ended March 2016. Sales rose 12.83% to Rs 311.24 crore in the quarter ended March 2017 as against Rs 275.84 crore during the previous quarter ended March 2016. We suggest our members to continue holding the stock for long term.

Note: Its important to diversify your small cap stock portfolio, you can't just bet on one or two stocks. Our objective is to protect & grow your capital giving 100% to identify best of Hidden Gems but we do not guarantee similar returns from all our recommendations. Few of our Hidden Gems can perform better in a lesser span of time, few may take more time and need to hold for longer period.

Below is the summary of Cera Sanitaryware Ltd published in our Hidden Gem research report - Dec'11.
1. Company Background

Launched in 1980, Cera is a pioneer in the sanitaryware segment in India. The first sanitaryware company to use natural gas, Cera has been on the forefront of launching a versatile colour range and introducing the bath suite concept. It also launched innovative designs and water-saving products. The twin-flush model launched in India by Cera for the first time, reduces the water needs of households considerably. WCs designed to flush in just 4 litres of water is another notable innovation by Cera.


Based in Kadi, Gujarat, Cera Sanitaryware Ltd. uses International technology, which has ensured Cera’s superiority over others in quality. Established with an initial capacity of 3,600 MTPA, the plant has undergone several periodical upgradations and modernisations to expand to 25,000 MTPA. To achieve growth in the rapidly changing retail market in the country, Cera, has launched its one of a kind Cera Bath Studios in Ahmedabad, Bangalore, Chandigarh, Kolkata, Cochin and Hyderabad, Mumbai. With the opening of the Cera Bath Studios, the discerning consumers, architects and interior designers can have full view of the Cera’s premium ranges of WC’s, Wash Basins, Shower Panels, Shower Cubicles, Bath Tubs, Shower Temples, Whirlpools, CP fittings etc. Cera Bath Studios will complement its existing network of 600 dealers and 5000 retailers. Several Bathrooms are displayed live, so that the customers can get a feel of Cera’s vast range of products. 

Having shown a growth rate of more than 25% since last 3 years, Cera Sanitaryware Ltd. today is the fastest growing sanitaryware company in India.  For its contribution towards the industrial growth, Cera's ED 'Mr. Vidhush Somany' received "The Nirman Ratna Award" in September 2010.

Revenue Streams

1. For Cera there are two revenue streams. Manufacturing and Outsourcing. The company manufactures sanitary ware locally, while it outsources bath ware and faucet ware.

2.The company has registered a good growth of 19% CAGR over the last 5 years in the Sanitaryware segment. This is well above 12-13% industry growth.

3. In the Outsourced premium segment, the growth has been more spectacular at 33% CAGR over the last 5 years. Outsourcing doesn’t require the company to set up a plant and therefore it’s relatively easier to scale up and test market the products.

Strong Branding with Pricing Power

1. In the Sanitary ware segment both the raw materials and the Power and fuel are the major inputs. Over the last 5 years, while the cost of raw materials has not increased much, the energy cost has gone up substantially.

2. In case of Cera the company has been able to pass on any major increase in input price without much lag, while it doesn’t have to reduce the prices in case the commodity prices go down. A sign of both the branding power and efficient management.

Strong Marketing and Distribution Network




















Cera Bath Studio & Bath Gallery


Cera pioneered the concept of Cera Bath Studios, the company owned company display centers, where architects, interior designers, builders, consultants, customers, etc. can touch and feel its range of sanitary wares, shower cubicles, steam cubicles, whirlpools, faucets, sinks, mirrors, sensors, etc

2. Recent Developments (as on 24 Dec'11)

Cera embraces new Identity, Dia Mirza to Endorse, Nov 03, 2011

Cera Sanitaryware Ltd (CSL), has unveiled a new logo to capture the imagination of young and modern India. “Our new logo is the most sweeping transformation of the company’s corporate identity ever since it started its journey in 1980,” says Vidush Somany, executive director of the company. “Cera is one of the most preferred brands in the country, and the trust it generates from its customers is immeasurable. We are giving our logo a more contemporary look that is relevant for business today.”

Delving in to the semantics of the new logo, Somany explains, “Our new logo has been designed by the Ahmedabad-based creative agency Aakriti Promotions & Media Ltd, and has been infused with a sense of dynamism and openness. It is free from its boundaries, just as we are all set to become a total bathroom solutions provider. It aspires to evolve as a brand that provides style solutions to its core target group. Besides, the new and modern typeface indicates a strong sense of purpose and confidence in the brand’s ability.”

Somany believes that the new logo will connect seamlessly with the company’s customers, business associates and influencers. “Retaining the blue colour keeps Cera connected with its rich heritage of design and innovation for which it is immensely popular. While remaining rooted, it also aspires to adhere to core values of stability and sincerity.”

According to Somany, Cera has become a versatile brand by virtue of its expansion into new markets, creation of new businesses and strengthening of capabilities. “We are targeting those areas where our presence has been minimal. Soon our company will significantly scale up capacity from the current 75,000 pieces per month at the new faucet plant at Kadi. We will also aggressively increase the production of sanitaryware from 20 lakh pieces to 27 lakh pieces per annum to make it the largest plant in the country. Our new logo reflects this versatility.”

Along with the launch of the logo, CSL is also rejuvenating its marketing programmes. “We will kickstart our media campaign from December, which will spill over to the next financial year and span print, television and hoardings. We have signed up Bollywood actress Dia Mirza for endorsing the Cera brand. Our customers will get to see the new logo on all the products, packaging and signages within the next three to four months.” He adds that an array of new designs in sanitaryware and other products will also be launched in the coming year. “In our faucet vertical, we have launched four new ranges, and are planning to roll out some more shortly. Very soon, a new display centre will be thrown open in the western suburb of Mumbai.”

Cera Sanitaryware looks at acquisition in Italy, Oct 13, 2011.

Cera Sanitaryware Ltd, the third largest sanitaryware maker in India, is in talks with a number of companies to acquire a brand and a factory in Italy. Cera's board of directors is likely to take a decision on this by next year. Apart from this, the company is also in the process of expanding its manufacturing facility at Kadi in North Gujarat involving an investment of Rs 100 crore over the next couple of years.

With a view to catering to high end sanitaryware segment in India, we are looking at acquisition in Italy. This would be the first acquisition by Cera outside India," said Vidush Somany, executive director, Cera Sanitaryware Ltd. However, he did not disclose the size of the acquisition and the names of the Italian companies that Cera is in dialogue with.

According to Somany, the company is looking at acquiring either a brand or a factory or brand and factory both. Apart from this, the company may also buy out a research and development (R&D) studio. Cera has been scouting for a suitable company for almost a year.

Cera, which currently enjoys 21-22 per cent share in Rs 1500 to Rs 1800 crore organised sanitaryware market in India, is increasing the production capacity of its sanitaryware division at Kadi facility from current 2 million pieces to 2.7 million pieces. The expansion is slated to be completed by April 2012. In addition to this, the taps manufacturing division will see its capacity going up almost three times to 2 million pieces from current 0.7 million pieces over the period of next 12 to 18 months.

"For sanitaryware division around Rs 60 crore will be infused, while for taps capacity increased Rs 40 crore would be pumped in," said Somany adding that the company is eyeing to capture 25 per cent market share by next year.
The company is also aggressively entering into luxury segment of shower enclosures, shower trays and equipped panels and cubicles. It has also tied-up with Italian company Novellini for this.

At present the company is the third largest player in Indian sanitaryware market with 21-22 per cent market share, while Hindustan Sanitaryware and Industries Ltd (HSIL) is on top with 41 per cent followed by Global giant Roca Bathroom Products Pvt Ltd with 26 per cent.

3. Financial Performance (as on 24 Dec'11)


Cera Sanitaryware net profit rises 25.62% in the September 2011 quarter 

Net profit of Cera Sanitaryware rose 25.62% to Rs 7.65 crore in the quarter ended September 2011 as against Rs 6.09 crore during the previous quarter ended September 2010. Sales rose 28.90% to Rs 73.29 crore in the quarter ended September 2011 as against Rs 56.86 crore during the previous quarter ended September 2010.

Cera Sanitaryware net profit rises 15.19% in the June 2011 quarter

Net profit of Cera Sanitaryware rose 15.19% to Rs 6.90 crore in the quarter ended June 2011 as against Rs 5.99 crore during the previous quarter ended June 2010. Sales rose 27.29% to Rs 64.64 crore in the quarter ended June 2011 as against Rs 50.78 crore during the previous quarter ended June 2010.

4. Key Concerns / Risks (as on 24 Dec'11)

1. Over the last 1 year the raw material prices and the prices of other key inputs have increased, while on the same hand the global economy is slowing down. The company could be in for some tough times over the short term.

2. In view of the inflationary environment, the RBI has continued with its monetary tightening. The same is hurting the growth and more specifically that of Real estate. The sale of Bath fittings is directly proportional to growth in real estate as replacement demand commands a very small share.

3. Jaguar and other local and foreign brands are trying their hands at Indian Sanitary ware market. Jaguar has a very strong brand identity and distribution network. We believe it could come across as a major competitor to the established players.

5. Investment Rationale (as on 24 Dec'11)

Strong Brand Equity – In the sanitary ware segment, there’s strong brand identity against that in Tiles segment. At present there are only three major players i.e. HSIL, Parryware Roca and Cera. Cera’s achievement of 20% + market share is commendable in the light of the fact that Cera started almost 20 years later than HSIL and 30 years later than Parryware.

Strong Marketing & Distribution network – Cera sells it’s products through a marketing network of 500 dealers and 5000 retailers spread across the country. It’s difficult to replicate such a network and is one of the major business moats for Cera against the onslaught from foreign players and other local players.

Relatively slowly changing industry - It’s a relatively slow changing business (makes it easier for us to hold it for long term in comparison to education or technology stocks where the trends change very fast and thus a company doing well today may end up on a losing side in a very short period of time).

No Institutional holding - There’s no institutional holding in Cera, probably because of low liquidity. There is a very high probability the stock can get re-rated to higher PE multiples once it comes in sight of smart investors. At present the stock is quoting at 6.8 times trailing twelve months earnings.

Very attractive valuations – Murugappa group sold of their 47% stake in Parryware-Roca joint venture in 2008 for a sum of Rs 720 crore while the company had recorded a turnover of Rs 360 crore for FY 08, thus valuing the company at 4 times its annual turnover. Cera’s market cap is approximately equal to its annual sales. Though not 4 times, however Cera can still get re-rated to twice the annual sales considering its efficiency and growth.

Regular Dividend Income – Since 2002, company has continuously rewarded its share holders paying regular dividend. Management has increased the dividend payouts every year from 2003. In last 8 years, dividend payout is increased by almost 9 times from Rs. 0.30 per share in year 2003 to Rs. 2.50 per share in 2011.

6. Saral Gyan Recommendation (as on 24 Dec'11)

i) Cera Sanitaryware net sales have grown at a rate of 26% on yearly basis during last 6 years whereas industry growth average is around 12-13%. Being into manufacturing sector, Cera commands higher margins, operating margins are at 20% and PAT margins are above 10%. PAT margins improved significantly from 4% in FY 2005 to 10.4% in FY 2011.

ii) Cera has achieved sales growth of 26% during last 6 years without any major equity dilution or debt funding and now it’s a debt free company. Moreover, company is evaluating various parameters for an acquisition opportunity in Italy.

iii) For FY 2011, company has achieved 100% capacity utilization and in view of strong demand, it is increasing the production capacity of its sanitaryware division at Kadi facility from current 2 million pieces to 2.7 million pieces. The expansion is expected to be completed by April 2012. In addition to this, the faucetware manufacturing division will see its capacity going up almost three times to 2 million pieces from 0.7 million pieces over the period of next 12-18 months.

iv) Cera Sanitwaryware Ltd is consistantly paying dividends since 2002 to reward its shareholders. In last 10 years, dividend payout is increased by almost 9 times to Rs 2.5 per share in FY 2011 compared to Rs. 0.30 per share in FY 2002. Visibility of robust earnings in FY 2012-13 on account of increased production capacity, acquisition opportunity in Italy and increase in housing demand due to softening of interest rates makes CSL a good buy at current market price for investors who can hold it for period of 12-24 months.

v) At current market price of Rs 166.40, dividend yield works out to 1.5%. On equity of Rs. 6.33 crore the estimated annualized EPS for FY 2012-13 & FY 2013-14 works out to Rs. 32 and Rs. 44 respectively. Book value per share is Rs. 88.15 and at CMP of Rs. 166.40, stock price to book value is 1.89. Currently, the scrip is trading at 5.2X FY 2012-13 and 3.8X FY 2013-14 estimated earnings which make CSL an attractive bet at CMP.

Considering ongoing expansion, healthy operating margins with effective brand positioning and pricing power, better earning visibility on account of robust demand and strong marketing and distribution network, Saral Gyan Team recommends “BUY” on Cera Sanitaryware Ltd for a target price of Rs. 350 over a period of 12-18 months.

Buying Strategy:

  • 50% at current market price of 166.40
  • 50% at price range of 145-150 (If stock price falls during market correction)
Click here to read/download Cera Sanitaryware Ltd (Hidden Gem - Dec 2011) research report.

Cera Sanitaryware has given returns of 1815% and is a 19-Bagger stock for our Hidden Gems members in 5.5 years. Moreover, there are total 41 Hidden Gems stocks out of 64 published by our equity analysts till Dec'16 which have given returns in the range of 100% to 1900% to our members during last 6 years.

Through Hidden Gems and Value Picks, we are providing you opportunities to invest in such small / mid cap stocks today. Infosys, Pantaloon, Dabur, 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 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 growth outlook.

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 with medium to long term perspective. 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.

Add power to your equity portfolio by investing in high quality small & mid cap stocks - Hidden Gems & Value PicksSubscribe to Hidden Gems & Value Picks and start investing systematically. 

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