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Thursday, February 23, 2017

Why Share Price is Not Important while Buying Stocks?

Dear Reader,

Why is a stock that cost Rs. 50 cheaper than another stock priced at Rs. 10?

This question opens a point that often confuses beginning investors: The per-share price of a stock is thought to convey some sense of value relative to other stocks. Nothing could be farther from the truth.

In fact, except for its use in some calculations, the per-share price is virtually meaningless to investors doing fundamental analysis. If you follow the technical analysis route to stock selection, it’s a different story, but for now let’s stick with fundamental analysis.

The reason we aren’t concerned with per-share price is that it is always changing and, since each company has a different number of outstanding shares, it doesn’t give us a clue to the value of the company. For that number, we need the market capitalization or market cap number.

The market cap is found by multiplying the per-share price times the total number of outstanding shares. This number gives you the total value of the company or stated another way, what it would cost to buy the whole company on the open market.

Here’s an example:

Stock price: Rs. 50

Outstanding shares: 5 Crores 

Market cap: Rs. 50 x 50,000,000 = Rs. 250 Crores

To prove our opening sentence, look at this second example:

Stock price: Rs. 10

Outstanding shares: 30 Crores 

Market cap: Rs. 10 x 300,000,000 = Rs. 300 Crores

This is how you should look at these two companies for evaluation purposes. Their per-share prices tell you nothing by themselves.

What does market cap tell you?

First, it gives you a starting place for evaluation. When looking a stock, it should always be in a context. How does the company compare to others of a similar size in the same industry?

The market generally classifies stocks into three categories:

• Small Cap under Rs. 1000 Crores 

• Mid Cap Rs. 1000 - Rs. 10000 Crores

• Large Cap above Rs. 10000 Crores

Some analysts use different numbers and others add micro caps and mega caps, however the important point is to understand the value of comparing companies of similar size during your evaluation. You will also use market cap in your screens when looking for a certain size company to balance your portfolio. Don’t get hung up on the per-share price of a stock when making your evaluation. It really doesn't tell you much. Focus instead on the market cap to get a picture of the company’s value in the market place.

IMP Note: This article is written to safe-guard our readers who are new to stock market, and make them understand about the actual facts. We keep on receiving mails from our readers regarding the price range of stocks we covers under our Hidden Gems or Value Picks service. The misconception in mind of new investors is regarding the stock price, majority of them believe that if stock price is less, like below Rs. 50 or even below Rs. 10, changes of stock price appreciation is very high and they can buy more no. of shares rather than buying a limited no. of shares of high priced stock. 

We started Hidden Gems annual subscription in late 2010 followed by other services like Value Picks, 15% @ 90 Days and Wealth-Builder, today we have a strong subscriber base covering almost all major states in India and from 20 other countries across globe. During the last 6 years we have interacted with several investors seeking multibagger return from stocks. 

It was 17th Dec 2011, we recommended Cera Sanitaryware as Hidden Gem stock of the month at price of Rs 167, later it went up to Rs. 450 in period of 15 months. Based on strong quarterly numbers, attractive valuations and consistent performance, we recommended buy again in the range of 400-450 which was taken as a surprise by our members as we received several queries and feedback.

Below are some of the common queries of our subscribers which often lead them to opportunity losses.

1. How come a stock priced at Rs 450 can generate Multibagger returns?
2. Cera is almost 3 times moving from 170 to 450, why are you suggesting buy again?
3. Where is the room to generate Multibagger return from this level?
4. I don’t like such high-priced stock, please give me stocks priced below Rs. 100.
5. I want to buy more no. of shares, hence please recommend low price stocks below Rs. 10.

Cera Sanitaryware touched its life time high of Rs 2895 last year, today stock closed at Rs. 2503, stock has given as on date returns of 1400% in 5 years from our initial recommendation and 456% return from our reiterated buy at Rs. 450, which was not liked by our subscribers.

The story does not end here, there is a long way to go. Our suggested stocks is with a view-point of 1-3 years at least and not just 6-9 months. If fundamentals of the company are intact, we would not suggest our members to do profit booking or exit. Investors who stayed away just because of high price simply missed yet another opportunity. We continuously recommended Cera during last year to our members at much higher levels.

There is a general misconception among the investors that high priced stocks can't generate multibagger returns. They often think that high-priced stocks are overvalued. In terms of valuation, a 50 rupees stock may not be cheaper than that of a 1000 rupees stock. There is no co-relation between the valuation and market price of a stock. To understand whether a company is small or large, you must look at market capital of the company and not at stock price. To judge valuation you must have to look at Price to earning ratio, Price to book ratio, Price to sales ratio etc.

Lets try to understand this with an example, Tide Water Oil share price was Rs. 1450 on 1st Jan'12 (stock split and bonus issue adjusted price, actual price was 5800). Today the stock price closed at Rs. 6010 giving absolute returns of 315% i.e. more than 4 times within 5 years against double digit return of Sensex in the same period. We suggested Buy on Tide Water Oil and many of our subscribers might not have invested in it thinking that they can buy hardly 2 shares by investing Rs. 12,000 but now those 2 shares are actually 8 shares post stock split and issue of bonus share and share price is also near to the the recommended price.

There are many examples like above by which we can illustrate that there’s nothing called high price. Multibagger returns is not dependent on the current market price of a stock, so don't be afraid of investing in high priced stock. You need to look at fundamentals like PE ratio, PB ratio, ROE, ROCE, debt on books, cash reserves along with other parameters to judge a stock whether it is undervalued or overvalued. We agree with you that judging valuation is not an easy task. So, take expert’s advise when ever required.

Another misconception among investors is to buy more no. of shares. They often think that its better to buy more no. of shares of a low price scrip (ranging below Rs. 10 or say below Rs. 50) instead of buying less no. of shares of high priced stocks. They often think that low price stocks can generate multibagger return quickly. During last 5 years, we have reviewed existing portfolio of our members under our Wealth-Builder (an offline portfolio management service) subscription, we have noticed that many of their portfolio is filled with such low-priced stocks and most of those are in great loss because of poor fundamentals. You may think that a two rupees stock can easily generate multibagger returns even if it touch to Rs. 5 or 6. At the same time don’t forget that the same can even come down to Rs. 0 levels which can evaporate all your investment giving you 100% loss! In terms of valuation a two thousand rupees stock may not be expensive than that of a two rupees stock.

Lets try to understand this also with a simple example, Lanco Infratech is a well-known company from Infrastructure sector. At the beginning of 2010 the stock was around Rs 55. Today it is hovering at just Rs 3.80. Those who purchased that stock during 2010 are in 93% loss! Rs. 1 lakh invested in Lanco Infratech in Jan 2010 is valued at merely Rs. 7,000 today, a complete wealth-destroyer! Isn't it? Those who bought this stock at levels of Rs. 30 and later again at Rs. 10 to average out thinking that stock has came down from all time highs of Rs. 85 are still waiting to get their buying price back. There are many such stocks like Suzlon Energy, GMR Infra, GVK Power and Infrastructure etc which have continuously destroyed wealth of investors over a period of last 5 to 7 years.

We do not state that all low price stocks are wealth-destroyers, it all depends on the fundamentals of the company. So, do ensure that you check out the fundamentals and valuations while investing in stocks instead of looking at stock price. Please get out of the misconception that low priced stocks will fly high faster giving you extra-ordinary returns. Always remember that stock price is just a barometer, actual valuations of a company can be determined by its fundamentals.

If you wish to invest in fundamentally strong small and mid cap companies which can give you far superior returns compared to major indices like Sensex or Nifty in long term and help you creating wealth, you can join our services like Hidden GemsValue Picks & Wealth-Builder.

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.

Recent market correction is giving good opportunity to invest in fundamentally strong small and mid cap companies at lower levels to get rewarded in long term. Start investing some portion of your savings in high quality small and mid cap stocks backed by strong fundamentals. Avail attractive discountss 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. 

Team - Saral Gyan

Saturday, February 11, 2017

Releasing Soon! Wealth-Builder Portfolio Update - Feb'17

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 significant correction in market from current levels 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 January and February and later in 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 Feb'16, many investors were expecting further fall in stock market with indices testing new lows and hence remained on sidelines. However post union budget 2016, we witnessed strong rally across all broader indices as FII turned to be net buyers. This year also, we may experience similar upside in major indices. However, as stock market already rallied in last one month, it will be wise to start accumulating good stocks on dips which are available at reasonable valuations.

As normal correction, we may see downside of 3% to 5% in major indices. However as mentioned in many of our previous posts, we do not believe in timing the market and always suggest our members to avoid it and invest in equities in a systematic way keeping a long term horizon. 

Any sharp corrections give great entry point to long term investors as they get an opportunity to add high quality companies with strong fundamentals at discounted price.

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 47.8%, Sensex returns is 44.7% where as our Wealth-Builder portfolio has given returns of 281.7% to our members.
In terms of performance, 8 top performer stocks out of 16 of Wealth-Builder portfolio have given returns in the range of 50% to 750% since 1st Jan'13 that too when many of these stocks out of 16 were added in portfolio during last couple of years. Moreover, 8 stocks out of 16 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. 

Note: Wealth-Builder portfolio update - Feb'17 will be released on 12th Feb'17 and we will share the same with our Wealth-Builder members.

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.

Team - Saral Gyan

Monday, February 6, 2017

Book Profits: 15% @ 90 Days Stock - Oct'16 Target Achieved

City Union Bank was recommended at price of Rs. 144.20 with target price of Rs. 168 (upside potential of 16.5%). City Union Bank has achieved its target price today giving overall returns of 16.6% to our members in period of 3 months and 10 days.

As 15% @ 90 Days service is based on buy to sell and gain strategy, we have informed our members today to book complete profits today in City Union Bank at Rs. 168.20.

To view/download 15% @ 90 Days stock recommendation of Oct 2016, click here

Imp Note: We do not suggest our members to put all their savings in 1 or 2 stocks to make quick bucks, diversified portfolio is must to have while investing in equities. Our 15% @ 90 Days stock is recommended on the basis of technical analysis (chart patterns) and there is no guarantee of getting 15% returns within 90 days. However, probability of our 15% @ 90 Days stocks achieving their target price is high.

We suggest our members to allocate only 2% of their equity portfolio in our 15% @ 90 Days stocks and do a higher allocation in our Hidden Gems and Value Picks which are the companies backed with strong fundamentals and reward investors with handsome returns in medium to long term.

To know more about our 15% @ 90 Days annual subscription service, click here.

Subscribe to Hidden GemsValue Picks and 15% @ 90 Days and start investing systematically. Avail attractive discounts by subscribing to our combo packsclick here for details.

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

Wish you happy & safe Investing.

Team - Saral Gyan.

Saturday, February 4, 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 @ 244% Vs Small Cap Index Returns @ 54.1%

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 244% compared to 54.1% 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. 22.02 lakh with overall profit of Rs. 15.62 lakh. However, if you would have invested the same amount in Small Cap index, you would be sitting with overall gains of Rs. 3.45 lakh. If we look at past performance from Sept 2010 till Dec 2016, Hidden Gems SIP stocks have given annualized returns of more than 40%.

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 4th Feb'17.
We are glad to inform you that 39 Hidden Gems stocks out of 64 during last 6 years have given more than 100% returns to our members. Moreover, 30 stocks out of these 39 have given returns in the range of 200% to 1800%.

Note: Total 64 Hidden Gems stocks were released 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: 237% >>> Read / Download

3. CAMLIN FINE >>> Rec. Date: 27 Mar'11 >>> ROI: 1769% >>> Read / Download

4. WIM PLAST >>> Rec. Date: 30 Aug'11 >>> ROI: 1588% >>> Read / Download

5. KOVAI MEDICAL >>> Rec. Date: 27 Oct'11 >>> ROI: 967% >>> Read / Download

6. CERA SANITARY >>> Rec. Date: 24 Dec'11 >>> ROI: 1370% >>> Read / Download

7. SUPERHOUSE >>> Rec. Date: 29 Feb'12 >>> ROI: 226% >>> Read / Download

8. MAYUR UNIQ. >>> Rec. Date: 31 Mar'12 >>> ROI: 590% >>> Read / Download

9. PREMIER EXPLO. >>> Rec. Date: 22 Jul'12 >>> ROI: 422% >>> Read / Download

10. ROTO PUMPS >>> Rec. Date: 05 Aug'12 >>> ROI: 216% >>> Read / Download

11. TIDE WATER OIL >>> Rec. Date: 30 Oct'12 >>> ROI: 227% >>> Read / Download

12. ACRYSIL >>> Rec. Date: 25 Nov'12 >>> ROI: 424% >>> Read / Download

13. BAMBINO AGRO >>> Rec. Date: 25 Dec'12 >>> ROI: 515% >>> Read / Download

14. TCPL PACKAGING >>> Rec. Date: 31 Jan'13 >>> ROI: 758% >>> Read / Download

15. ATUL AUTO >>> Rec. Date: 28 Feb'14 >>> ROI: 200% >>> Read / Download

16. RANE BRAKE >>> Rec. Date: 31 May'14 >>> ROI: 387% >>> Read / Download

17. DYNEMIC PROD. >>> Rec. Date: 29 Jul'14 >>> ROI: 211% >>> Read / Download

18. ASIAN GRANITO >>> Rec. Date: 29 Sep'14 >>> ROI: 175% >>> Read / Download

19. CONTROL PRINT >>> Rec. Date: 30 Nov'14 >>> ROI: 52% >>> Read / Download

20. PLASTIBLENDS >>> Rec. Date: 31 Jan'15 >>> ROI: 104% >>> Read / Download

21. MOLD-TEK PACK. >>> Rec. Date: 22 Mar'15 >>> ROI: 92% >>> Read / Download

22. SMS PHARMA >>> Rec. Date: 09 May'15 >>> ROI: 63% >>> Read / Download

23. CHEMFAB ALKAL. >>> Rec. Date: 06 Sep'15 >>> ROI: 197% >>> Read / Download

24. ULTRAMARINE >>> Rec. Date: 11 Oct'15 >>> ROI: 102% >>> Read / Download

25. STYLAM IND. >>> Rec. Date: 08 May'16 >>> ROI: 143% >>> 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.

Team - Saral Gyan

Friday, February 3, 2017

Stylam Industries - ROI @ 145% in 9 Months

Dear Reader,

We are pleased to inform you that our Hidden Gem stock of April 2016 - Stylam Industries Ltd (BSE Code: 526951) which was released on 8th May'16 has given absolute returns of 145% to our Hidden Gems members in period of 9 months. Our team suggested Buy on Stylam Industries Ltd at price of Rs. 217.80 on 08 May'16 with a target price of Rs. 430. We are glad to inform our readers that stock has already achieved its target price in matter of 2 months and we suggested our members to continue to hold it. Stock has made its 52 week high of Rs. 649 last year and currently trading at Rs. 533 giving as on date returns of 145% to our Hidden Gems members. C
onsidering robust growth outlook of the company in coming years, we suggest our members to continue to hold the stock for long term. 

Recently, the company has published an advertisement on Economics Times regarding sale of the commercial space developed by the company having covered area of 13500 square meter facing golf course, IT park, Panchkula. This has been decided by the management to focus on its core business. This is a positive development as fund raised by selling this commercial property will be used to reduce debt on books as indicated by management last year.

Stylam Industries will declare its Dec quarter results on 14th of this month. In Sept quarter. net profit of Stylam Industries rose 92.42% to Rs 5.08 crore in the quarter ended September 2016 as against Rs 2.64 crore during the previous quarter ended September 2015. Sales rose 22.85% to Rs 74.02 crore in the quarter ended September 2016 as against Rs 60.25 crore during the previous quarter ended September 2015.

If we compare Sept quarter results of the company with bigger players like Century Plyboard and Greenlam (Rushil Decor yet to declare its Sept results), we find Stylam has delivered much better revenue growth compared to other players with significant improvement in margins during last 2 quarters. Below are the results update of Stylam, Century Plyboard and Greenlam of Sept'16 quarter.

Stylam Industries has delivered consistent profit growth of 25.2% over 5 years and growth prospects of the company look bright. Stylam is a manufacturer of high pressure decorative laminates and is almost doubling its capacity. This segment has more unorganised players (almost 65%) while Stylam is the organised player in the sector and will directly benefit with implementation of GST.

Moreover, its interesting to know that some of the well known value investors like Dolly Khanna and Dheeraj Kumar Lohia have invested in the company and increased their stake during last financial year.
However, investments of institutional investors in the company is negligible at 0.9%. Stylam is a smaller company with market capital of 390 crores whereas Greenlam and Century Plyboards are much bigger in size. As the company continues to perform well and keeps on growing in size with increasing its market share, we expect DIIs and FIIs to invest in the company which will help Stylam to get rerated in terms of valuations with significant rise in its market capital over next couple of years.

Management of the company is confident to drive robust growth achieving significantly better results in coming years. Some of the recent developments shared by the management are as under:

i) The company is in process of expanding its capacity to manufacture additional 40 lakhs laminate sheets per annum. As per management, civil construction work is already over and the installation of machineries for the new production lines is under progress which is expected to complete by mid of this financial year.

ii) Management has decided to install machinery to produce laminates for the commodity market to consolidate in domestic market. The company will also produce large size premium laminates to cater export demand.

iii) Construction of building at Panchkula IT Park is completed and the building is operational by first half of this fiscal. In view of growing business and demand of office space, management has decided to use one fifth of the space for corporate affairs and design spaces. Balance will be monetized during the year which will be used to reduce debt. Monetization of office space will bring down the debt equity ratio of the company significantly.

iv) To create bigger footprint to enable expansion into new markets, the company has budgeted for branding activities to attract new customers. Moreover, company continue to conduct various connect initiatives like architects meet, distributors meet, dealers meet, to drive brand visibility and demand generation.

v) CARE has carried out a credit rating assessment of the company for both short term and long term exposures in compliance with BASEL  II norms implemented by RBI. The rating of the company has improved to one notch point to Triple B+ for long term bank facilities at CARE BBB+ and assigned A Three rating on the short term bank facilities at CARE A3.

Once the GST comes into force, the tax advantage currently enjoyed by the unorganised players would diminish sharply and the market share of the organised players would surge. Moreover, the government imposed a heavy anti dumping duty on imports of medium density fibre board (MDF), mainly used in decorative furniture. Anti-dumping duty on plain MDF Board (also known as custom-wood or craft-wood) will be levied on boards having a thickness of 6mm or above and will be valid for five years. The duty is highly positive for domestic players in laminate and plywood segment as these companies will be able to improve their business margins going forward.

Below is the summary of Stylam Industries Ltd shared by our team under Hidden Gem stock of April'16 released on 08th May 2016.

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 Stylam Industries. 

1. Company Background:

Stylam Industries Limited (Stylam) manufactures high pressure laminates for home and industry use, under the brand name ‘STYLAM’. It offers decorative, compact industrial, fire retardant, fabric based, post forming, cabinet liner and metal laminates. These products constitute basic interior building materials responsible for residential and commercial space attractiveness, safety and security.

Company is the pioneer in up-bringing the decorative laminates in India. Company’s capability to provide end-to-end high quality decorative laminate designs has helped company to consistently innovate and create value-added products for its clients.

Stylam was set up by late Mr. N R Aggarwal in 1991, by the name of Golden Laminate Pvt Limited. Later in 1995, company got listed on BSE as a public limited company. The company changed its name from Golden Laminates Ltd. to Stylam Industries Ltd. in January 2010.

Stylam is promoted by Jagdish Gupta and Satish Gupta. Jagdish Gupta is the managing director and Satish Gupta, executive director, manages production and marketing operations of the company. Stylam headquarter is at Chandigarh and the company has its manufacturing facility in Panchkula (Haryana).

Stylam manufactures high pressure decorative environmental friendly laminates. The organization specializes in manufacturing premium quality wide array of laminates and adhesives. Over the years, Stylam has developed products that have become benchmark in the laminate and adhesive industry. Stylam become foremost manufacturing company of high pressure laminates, adhesives, exterior cladding, exterior flooring and door skins throughout PAN India and across the globe.

Stylam today has state-of-the-art manufacturing plant of laminate and adhesive at Panchkula near to Chandigarh with installed capacity of around 7 million (60 lakhs) sheets per annum. The company has witnessed remarkable growth from past 25 years of excellence in producing high quality laminates.

Stylam is well equipped with advanced technology machines with latest sophisticated moulds of various finishes from France & Germany to assure maximum production of laminates in minimum time. The back sanding of the laminates is done by the ITALIAN IMEAS Machine, one of the best manufacturers of sanding machines in the world.

Product Range

Stylam decorative laminates: These are suitable for a wide range of applications in both home furniture and professional environment like wooden claddings/lining of walls and columns, lift linings, doors, shelves, vanity units, table tops, worktops, office partitions, counters, cubicles, store fittings, desks, storage units etc. Stylam decorative laminates are available in wide range of colours in Solids and Woodgrains designs and in many evergreen and new texture finishes and are available in 5 different sizes to cater to varying needs.

Stylam Metallic (metal foil) laminates: These laminates provide a modern decorative and innovative appeal to interiors. Stylam Metallic laminates have bright and reflective surface aspects which render the ambience a modern and sleek look. These laminates are ideal for use in the hospitality, interior design, gaming, entertainment, retail, display and furniture industries.

Stylam Compact laminates: These are formulated with inner core of celluloid fibres impregnated with special thermosetting resins. These resins and the special heat and pressure cycles impart properties of a solid, load bearing hard laminate, which is resistant to wide range of atmospheric and chemical agents for use in internal and external atmospheric conditions. High values of flexural strength and tensile strength ensures that these laminates are suitable for saw cutting, drilling, machining and punching as per requirement.

Stylam Exterior laminates: These laminates are manufactured by European technique to withstand adverse action of atmospheric Ultra Violet Rays and to withstand exterior atmospheric effects with minimum fading of colours.

Adhesives: Company has developed adhesives with decades of understanding and expertise in the furnishing industry. Company offers highly specialized range of adhesives suited for decorative laminates, wood and other industrial uses. Laminates and wood are extremely versatile mediums. Therefore, only specialized and high quality adhesives will ensure their application.

Stylam has recently launched the pre-laminated particle boards on wood base. They are laminated on both surfaces with imported design paper by short cycle lamination. The products are known for color-fastness and being eco-friendly and conforming to the above standards.

Globally Renowned Quality Credentials

The company has ISO 9001:2008, FSC, Greenguard and many more environmental related credentials for manufacturing laminates and adhesives.  Today, Stylam has a strong brand presence in all over India and around the world. Stylam is recoginized as Star Export House from the Govt. of India; company exports to more than 80 countries across globe including important markets - USA, Asia, Australia, Middle East, Europe, Russia and Africa

i) Greenguard – By using Greenguard certified laminates, one can substantially reduce or eliminate the negative effect of toxic emissions on the nature and the health of occupants and habitants. This ensures superior indoor air quality and increased work productivity of staff in case of commercial establishments as it is healthier for the people living in it.

ii) FSC - The Forest Stewardship Council (FSC) is an international not for-profit, multi-stakeholder organization established in 1993 to promote responsible management of the world’s forests. As part of its corporate responsibility towards sustainable forest development, Stylam is among the very few laminates manufacturer who has been awarded the FSC certification by Rain Forest Alliance, Indonesia.

iii) CE - Stylam Industries Limited has achieved pioneer European CE Certification for both Internal and External application Compact laminates range by ITC Inc., Czech Republic and has fulfilled all the requirements as applicable as per the harmonized standard EN 438-7:2005. Stylam is the first laminate manufacturer in India and among very few in the world to be awarded this coveted certification.

iv) Green Label - The Singapore Green Labelling Scheme Secretariat has granted Stylam Industries Limited the right to use the Singapore Green Label for Stylam High Pressure Laminates for environmentally improved low emission low toxicity.

v) ISO 9001:2008 - Stylam Industries Limited being awarded the latest ISO 9001:2008 certification for the complete range of laminates manufactured from certification agency accredited with reputed certification agency JAS-ANZ.

vi) ISO 14001 - World’s most recognized environmental management certification standard. Environmental management system certification, ISO 14001, basically requires the organization to monitor and manage its impact on the environment.

vii) OHSAS 18001 - Includes Policy and commitment, Hazard identification, risk assessment & risk controls, Legal requirements, Objectives and Programs, Organization and personnel, Training, Communication and Consultation, Documentation and records, Operational Controls, Emergency Readiness, Measurement and monitoring, Accident and incident investigation, corrective and preventive action, Audit and Review, and Application and Relevance in the Industry.

viii) BIS - Stylam Industries has achieved ISI certification as per IS:2016-1995 from Bureau of Indian Standards for its thin laminates range of 0.8 mm and 1.0 mm thickness.

ix) Biocote – Stylam Industries HPL laminate has achieved the Biocote minimum antibacterial performance requirement of 95% “Reduction against the initial for E.Coli and MRSA” according to ISO 22196: 2011 (certificate of antibacterial) analysis.

x) EXOVA - This determines the performance if product subject to its specifications. The test is performed in according to a specified procedure for measuring the lateral spread of flame along the surface of a product oriented in vertical position.

Understanding Laminates as a Product

Laminates, also known as Sunmica, is commonly used for furniture fabrication purpose.  Because of excellent durability, these Laminates can be used as substitutes to veneer, melamine, paints, varnish and furniture foil.

Laminates are broadly classified into 2 types - High Pressure Laminates (HPL) and Low Pressure Laminate (LPL), the actual difference in these 2 type of laminates is mainly due to the manufacturing process that goes into developing these products.

HPL is manufactured under pressures of 70 to 100 bars and temperatures of 270 to 320 degrees Fahrenheit using adhesives. On the other hand LPL is developed under pressures of 20 to 30 bars and temperatures of 330 to 375 Fahrenheit with no adhesives.

The main difference between the two products is the price & durability. LPL is available for much cheaper prices than HPL. On the other hand, high pressure products score high on durability as compared to LPL.

Materials used for developing HPL and LPL include impregnating layers of Kraft paper. It can be defined as a cardboard or firm paper. The paper is generally impregnated with melamine resins to create a laminate. After that, the product is merged with a decorative film layer. The final straw is to attach it to a wooden substrate. The bases widely used include fiberboard or particle boards. Thus, the final product is on the table for use. These products are widely used for designing furniture, walls, floors, countertops, kitchen tops and much more.

Types based on Usage - Based on the final or intended use of the product, the laminates are of two types viz. Decorative and Industrial. For decorative laminates the look and feel are the important aspects as they are commonly used to decorate and protect wooden furniture, while for industrial laminates the focus is more on having a surface that has higher strength, higher resistance to scratches and wear and tear, and which is very durable. Industrial use products such as circuit boards are made using industrial laminate materials.

The High Pressure Laminates (HPL) drives the market mainly due to three key features:
  • Design & Style Trends – New colours and patterns representing style and panache must continue to hit the market. These products must also score high on longevity and usability.
  • Global Accessibility – Many companies are looking to target the international markets by developing unique collection of product range for Europe, Asia and North America.
  • Technology – Various companies that produce High Pressure Laminates are now looking to implement various technologies to create products where solid colours coordinate with patterns to provide a better end product.
Laminate Industry Outlook

Rebounding construction activity, high credit availability, increased interest in home decor and interior improvement options, and a surge in demand for non-residential upgrades, will provide ample opportunities for decorative laminates industry to grow by leaps and bounds. High Pressure Laminates are put to use for churning out a large variety of building components such as cabinets, countertops, store fixtures and wall panels. The enhancement of this industry and continuous evolution and implementation of these products will always open doors for sales growth amongst the people that consider value for money. In addition, laminate manufacturers continue to focus on improved textures and printing techniques that rival the aesthetics of solid wood, natural stone and other materials, but at a lower cost.

The growth of laminate industry is mainly driven by increasing demand from housing market and growing significance of new construction industry. The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country's Gross Domestic Product (GDP).

In construction, after cement, plywood laminate and steel related products are essential part right from initial brick to final stage of furnishing; the demand for these products is directly related to the growth of infrastructure and real estate sector, the demand for company’s products is expected to remain buoyant.

In the period FY08-20, the market size of this sector is expected to grow at a CAGR of 11.2 per cent. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.
Laminates have become an indispensable part of big and evolving segment in housing sector, it is widely used in furniture, modular kitchen as well as in flooring. The increasing demand of better interiors are major triggers for demand of laminates.

The domestic laminates industry is highly fragmented with majority of sector comprising unorganized players leads to pricing pressure for the players in the industry. However, the implementation of goods and service tax (GST) in the near future will provide an impetus to organized players in the laminate industry. In the exports segment, demand has been stable on account of shift from the wood based panel products to engineered panel like MDF and particle board.

India is the one of the largest exporters of the laminates in the world. Players with the establish track record of delivering quality products in the export markets, including Stylam have been consistently able to register growth in turnover over the years despite the global slowdown though the prospects of the company will be primarily driver by the demand from the real estate sector and its ability to manage currency fluctuations.

2. Recent Developments:

i) Stylam Industries wins Power Brand Rising Star Award 2016 – 11th Apr 2016

Planman Media – a journalism, through its ‘Power Brand Rising Stars’ platform recognizes promising brands that have shown sustained growth over the past and have been able to create a huge impact etching a strong impression to ‘elevate’ and capture the imagination of a resurgent India.

Given the unmatched capabilities and competitiveness of Stylam Industries Ltd. amidst decorative laminate & adhesive industry, the organization was selected for the Power Brands Rising Star Award 2016 on account of its superior Brand Equity assessed through research on Brand Image & Perception, Brand Performance, Brand Loyalty, Brand Awareness and Brand Association. The award was conferred at a scintillating ceremony held in the Capital, New Delhi presided over by Dr. Najma A. Heptullah Hon’ble Union Minister of Minority Affairs, Sh. Syed Shahnawaz Hussain with others of India Inc. in attendance.

ii) Stylam Ind emerges as a leading exporter of laminates in Italy – 31st Jan 2016

Stylam Industries has emerged as country prominent exporter of laminates in Italy. The demand of products of company in Italy is on rise due to their astonish designs and quality. Stylam is specialist in manufacturing avant-garde premium quality wide array of laminates, exterior cladding, exterior flooring and adhesives. The company is also a leader in manufacturing high quality environment-friendly decorative laminates in India.

Stylam has established itself as a strong Indian player with great significance on exports. Being a star export house of laminates and having realized the demands of international markets, company has expertise in understanding the global design requirement and fulfilling them respectively. Company has developed products that have become benchmark in the laminate industry. At present, Stylam laminate has a strong brand presence in more than 80 countries and company intent to take this number to 100 plus countries in this fiscal year.

Moreover, Stylam has a committed R&D division which takes constant steps to evolve with global markets. The company has been investing heavily in the R&D.

Recently, the company has also introduced anti bacteria and chemical resistant laminates in the country.  The company has a passionate group of workforce who travel round the world to develop and innovate with laminates designs with global suitability.

iii) Development of New Building at Panchkula IT Park, Haryana – 2nd Sept 2015

To put all the inventiveness measures under one roof, this includes development of new designs, finding of new vendors, to study product dynamics and to explore market for export and domestic business; at their separate location at Panchkula Technology Park, Haryana. The construction of building having built-up areas of 20697.200 sq. mtrs is almost complete.

The company has planned to lease out portion of constructed building to other players for commercial office space and for service sector businesses. The building will be operational before the close of this financial year.

iv) Stylam Industries embarks on Expansion Plan – 8th Jun 2015

The company is putting up an 8,000-tonne hydraulic press of 6 x 14 feet, and three 4 x 8 feet production lines, which would be the first of its kind in terms of technology and innovation in the world of laminates. As per management, this environment-friendly and energy conservation know-how will result in less carbon emission and less power consumption.

After this expansion, Stylam's production capacity will increase by 6 million (60 lakh) sheets a year. The automated cutting edge technology will boost the quality of products and increase efficiency with less human intervention. This will help company to extend its outreach in the Indian market with the aim of growing the domestic business along with exports as the total production will increase to match the demand on both fronts. 

The new hydraulic press would be fully operational by this year and this will make Stylam one of the largest manufacturers of laminates in Asia. The company is one of the world's top exporters, with a major presence in European markets.

Stylam Industries has one unit each at Panchkula and Ramgarh in Haryana and the new facility is coming at Raipur Rani, in the vicinity of the existing units with an approximate cost outlay of Rs. 45 crore.

3. Financial Performance:

Stylam Industries standalone net profit rises 7.35% in the December 2015 quarter

Net profit of Stylam Industries rose 7.35% to Rs 2.92 crore in the quarter ended December 2015 as against Rs 2.72 crore during the previous quarter ended December 2014. Sales rose 7.67% to Rs 58.09 crore in the quarter ended December 2015 as against Rs 53.95 crore during the previous quarter ended December 2014.

Stylam Industries standalone net profit rises 13.30% in the September 2015 quarter

Net profit of Stylam Industries rose 13.30% to Rs 2.64 crore in the quarter ended September 2015 as against Rs 2.33 crore during the previous quarter ended September 2014. Sales rose 17.26% to Rs 60.25 crore in the quarter ended September 2015 as against Rs 51.38 crore during the previous quarter ended September 2014.

With growing demand of HPL (High Pressure Laminates) globally, Stylam achieved revenue of Rs. 178 crores from exports in FY 14-15, which is 78.25% of its total revenue. This is expected to increase significantly as company plans to increase its exports to almost 100 countries in this fiscal year.

As company has doubled its capacity recently, we believe company will post decent growth sales and profits in coming quarters.

4. Peer Group Comparison:

On valuation parameters, we find Stylam Industries trading at significant discount compared to other listed players in the Industry. Moreover, important financials like OPM (operating profit margin) and ROE (return on equity) of Stylam are better compared to Greenlam Industries. Also once recent capacity expansion is completed, Stylam Industries Laminate capacity will be at par with Greenlam Industries
5. Key Concerns & Risks:

i) Competition from Unorganized Players – The domestic laminates industry is highly fragmented with majority of sector comprising unorganized players though there has been increasing shift in consumer preference from unbranded to branded goods. Competition from both organised as well as unorganised players leads to pricing pressure for the players, hence impacting margins of the company.

ii) Delay in GST Implementation – Implementation of GST will be a positive for Stylam as it would bring in a shift of consumers from the unorganised to organised space with a reduction in the price differential, going ahead. GST will address inefficiencies in the current tax system. However, any delay in implementation of GST could impact Stylam, as it would be difficult for company to gain market share in domestic market.

iii) Change in Consumer preference & trend – Currently, in the furniture industry, products like plywood, MDF, particle board and laminates are being widely used. However, going ahead, with a change in consumer preference or trend, substitutes like plastic or steel could evolve and pose a challenge to the plywood and laminate industry.

6. Saral Gyan Recommendation: (as on 08 May'16)

i) With recent expansion, Stylam production capacity will get almost doubled to 13 million sheets from existing capacity of 7 million (70 lakh) sheets per annum. As per management, the automated cutting edge technology implementation will boost the quality of products and increase efficiency with less human intervention. This will help company to extend its outreach in the Indian market with the aim of growing the domestic business along with exports as the total production will increase to match the demand on both fronts. The company currently exports to more than 80 countries and plans to expand its reach to 100 countries in this fiscal year

ii) Stylam is investing heavily on R&D to stay ahead on the innovation curve in the global Laminate Industry to develop with global markets. The company has showcases its products in major exhibitions in strategically important markets. Company is exporting its products in European and Southeast Asian countries. More than 80% of the products are being exported to more than 80 countries around the world, along with exports to 20 countries in Europe which is testimony to best in class quality products manufactured by the company. Moreover, Stylam enjoys strong reputation for its products with globally renowned quality credentials.

iii) Stylam continues to explore markets to understand product dynamics for exports and domestic business. The company has developed HPL exterior grade premium flooring product, under the brand name of ‘Walkon’. The company is the first to manufacture this product in India. Beside this, the company has enhanced production of Exterior Cladding which is marketed under the brand ‘Fascia’. Moreover, the interior grade laminates for premium and standard grades are marketed under brand name ‘Violam’ and ‘Wakalam’ respectively. Company is aiming for healthy growth which will be achieved through an appropriate mix of international and domestic business. The Company is also trying to add a new product segment in Laminates which will help to penetrate into newer markets

iv) In last 5 years, OPM increased from 5.37% to 10.96% and company managed to sustain OPM above 10% in 2015 which is good indication about operating efficiency of the company. Company also managed to bring Debt to Equity ratio below 2 from 2.38 in FY13. However with recent expansion, debt may be high on books for this fiscal but can be managed with strong cash flows from operations. Working Capital Days also reduced from 140 days to almost 100 days which is another positive.
v) Apart from Laminate business, Stylam has also set up a new building having built up areas of 2.23 Lacs square foot at Panchkula IT Park, Haryana. Company has planned to lease out the major portion of this built up areas to other players for commercial office space and for service sector business which will boost company’s revenue growth and profitability going forward.

vi) As of Mar’16, promoter’s shareholding in the company is at 58.83% out of which promoters have pledged 10 lakhs shares i.e. 23.23% of their holding since Dec 2011. In Public shareholding, 4.86% stake of Stylam is held by Mr. Manav Gupta, who is the son of Mr. Satish Gupta. Hence, promoters total in direct holding in the company is at 63.69%. Institution shareholding is negligible at 0.91%.

vii) In view of continuous expansion and investment strategies, company has not paid dividend to its shareholders during last 5 years. The last dividend paid by the company was in 2010, since then Stylam is retaining its profits to continuously increase its capacity. With significant expansion, the company has achieved revenue CAGR of 27.3% and profit CAGR of 25.2% during last 5 years.  As company has taken aggressive expansion by doubling its capacity with outlay of almost 45 crores recently, we expect company may continue retaining its profit in near future. 

viii) As per our estimates, Stylam Industries can deliver PAT of 13.75 crores for full financial year 2016-17, annualized EPS of Rs 18.80 with forward P/E ratio of 11.6X for FY16-17. Company’s valuation looks discounted compared to peer group companies on account of better financials. With completion of recent capacity expansion and increase in value added products, we believe company will continue to deliver strong revenue growth and profitability going forward.

ix) On equity of Rs. 7.32 crore, the estimated annualized EPS for FY 16-17 works out to Rs. 18.80 and the Book Value per share is Rs. 71.55. At current market price of Rs. 217.80, stock price to book value is 3.04.

Considering high earning visibility and attractive valuations of the company compared to other peer companies, growing demand of decorative laminates globally and company’s plan to extend its outreach to domestic market along with exports with recent capacity expansion, Saral Gyan team recommends “Buy” on Stylam Industries Ltd at current market price of Rs. 217.80 for target of Rs. 430 over a period of 12 to 24 months.

Buying Strategy:
  • 75% at current market price of 217.80
  • 25% at price range of 190-195 (in case of correction in stock price in near term)
Portfolio Allocation: 3% of your equity portfolio

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