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Friday, April 19, 2019

Are you Investing in Top 10 Small & Mid Caps of FY 2019-20?

Dear Reader,

We would like to inform you that we selected 10 scrips from universe of small and mid cap stocks which can benefit investors in the financial year 2019-20. We are confident that these carefully selected stocks can outperform major indices like Sensex and Nifty during this financial year. We released portfolio of 10 small & mid cap stocks for FY 2019-20 on 1st April 2019 and shared with with all our paid subscribers of Hidden Gems, Value Picks and Wealth-Builder.

Our selection process includes lot of research and data analysis. We first identify the sectors that are likely to do well in coming financial year. Having that done, we further refine our search to select companies from that sector. We create a portfolio worth Rs. 1 Lakh comprising 10 stocks so that it can help investors to create a model portfolio with lump sum investment upto 1 Lakh.

We have given the different allocation to each of the scrips keeping in mind the risk versus returns ratio. We also fine tuned the portfolio with mid-cap and small cap scrips from different sectors so that the investors can invest in a complete mix of stocks to balance their portfolio. Saral Gyan Portfolio of 10 stocks for FY 2019-20 also include best of Hidden Gems and Value Picks recommended by our equity analyst’s team during last couple of years.

We continue to follow our simple but effective approach by evaluating each stock on the basis of below mentioned criteria’s.

(i) Top Quality management with high integrity:

This is an absolutely non-negotiable condition. If the management is not honest, will they want to share the goodies with you? No, they will look for the first opportunity to siphon off the profits and pull the wool over your eyes.

(ii) The scale of opportunity must be big:

Multi-bagger stocks are created because they are able to scale the opportunity rapidly. Titan Industries is a great example. In 2003-04, Titan‘s market cap was 500 crores. As on date, it is more than 1 lakh crores market cap company. The fact that India is a booming marketplace of 132 crores consumers means that most products and services have a head start at trying to scale up their activities.

(iii) Low debt; free cash flows:

We learnt from the great crisis of 2011 that companies with high debt on their books simply get slaughtered. While debt per se is not bad (if the company is able to borrow at a lower rate and deploy it in its business at a higher rate, the operating leverage works in its favour), excessive debt with high interest and repayment obligations can crunch the stock in times of downturn. So, as a long-term investment philosophy, it is best to steer clear of high-debt companies.

(iv) High ROE – Efficient users of capital:

Some company’s management is able to squeeze that little extra of every buck. A ROE of at least 20% is necessary to make into the hallowed list of model portfolio.

(v) No High Capex Requirements – No Serial Diluters of Equity:

We know the demerits of investing in stocks like Suzlon & GMR which have an insatiable appetite for more and more capital. To feed their perennial hunger, these companies dilute their equity by making FPOs, GDRs & FCCBs resulting in total destruction of shareholders’ wealth. Companies should be lean and mean requiring minimal capital but generating huge returns there from.

(vi) Reasonable growth expectations:

“If you get a tax-free return of 18% for your portfolio, you must be very happy”. So, stop craving for that overnight multi-bagger. You’ll only end up losing your precious capital that way. Instead, look for well established small and mid cap companies that are growing at a reasonable rate of return (15 – 25%). With time and the magic of compounding, you will have your muti-bagger in your portfolio.

(vii) Valuations:

Most investors are obsessed about valuations, refusing to buy any stock that is “expensive”. However, one must remember that “expensive” is a relative term. If a stock is compounding at 25% on an annual basis, paying a price of 30 times earnings may be very reasonable. A stock like Nestle, for instance, has always been “expensive”. However, if an investor had gone ahead and bought the stock, he would have had an incredible multi-bagger on his hands. On the other hand, in trying to buy a “cheap” stock, one may get saddled with unsavory companies. After all, there is a reason why such stocks are “cheap”.

Of course, one should be careful not to buy in euphoric or bubble times when the pricing may be extravagant and not at all reasonable.

(viii) Concentrated Portfolio:

We like Warren Buffett approach, a believer in the concept of a concentrated portfolio. If you believe in the prospects of a stock you should be prepared to put a substantial chunk of money in it – or nothing at all. There is no point in buying a bit of this and a bit of that because that dilutes your returns.

Of course, we are no match for Warren Buffett and we do not have his conviction levels. So, we’ll stick to 10 stocks to begin with, which means that from 5% to 12% of the wealth will be invested in each stock.

(ix) Diversification:

Last but not the least; a proper portfolio must be diversified across sectors. A bit of Finance, a bit of consumption, some autos, a pinch of chemical etc will make a balanced portfolio.

Saral Gyan Portfolio of 10 Stocks for Financial Year 2019-20 was released on 1st April 2019 and was shared with all our Hidden GemsValue Picks and Wealth-Builder members. Portfolio stocks holding period is minimum of one year. If you wish to receive our Portfolio of FY 2019-20 of 10 Small & Mid Caps, you can opt for any of service - 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.

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

Start building your equity portfolio by making educated investment decisions, subscribe to our Hidden GemsValue PicksWealth-Builder annual subscription services. You can avail attractive discounts by subscribing to our combo packs. Below are the details of our annual subscription charges, simply click on SUBSCRIBE! link to subscribe to our services online using debit / credit card or net banking facility.

SARAL GYAN
SUBSCRIPTION SERVICE
ANNUAL SUBSCRIPTION
PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden Gems
Rs. 10,000
Value Picks
Rs. 6,000
15% @ 90 Days
Rs. 4,000
Wealth-Builder
Rs. 20,000
Combo 1: HG + VP + WB + 15%
Rs. 32,000
Combo 2: HG + VP + 15%
Rs. 16,000
Combo 3: HG + VP
Rs. 14,000
Combo 4: HG + 15%
Rs. 12,000
Combo 5: VP + 15%
Rs. 9,000

In case if you are not comfortable in subscribing online, you can make the payment through cheque / cash deposit / NEFT transfer in any of our bank and writing back to us sharing transaction details. Click here for bank details.

Below are the details of our services:

1. Hidden Gems (Unexplored Multibagger Small Cap Stocks): Based on fundamental analysis, our equity analysts release one Hidden Gem research report every month with buy recommendation and share it with all Hidden Gems members. Stock finalized as Hidden Gem belongs to small / micro caps space with market cap of less than 500 Crores, expected returns from Hidden Gems is above 100% in period of 12 - 24 months. Once target is achieved, we inform our members whether they should continue to hold the stock or need to do partial / full profit booking. If fundamentals are intact and valuations are reasonable, we suggest to continue to hold the stock for long term for multibagger returns. Annual subscription charge of Hidden Gems is INR 10,000 under which you will receive total 12 Hidden Gems research reports (one on monthly basis). Click here to read more about Hidden Gems.

2. Value Picks (Mid Caps with Plenty of Upside Potential): Our equity analysts team consider Warren Buffet approach to short list stocks from mid cap segment as Value Picks. Market cap of Value Pick will range from 1000 crores to 10,000 crores. Holding period of Value Picks is 12 - 24 months and one can expect returns of 40-60%. Annual subscription charge of Value Picks is INR 6,000 under which you will receive total 12 Value Picks research reports (one on monthly basis). Click here to read more about Value Picks.

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

4. Wealth-Builder (An Offline Portfolio Management Service): Wealth-Builder is our model portfolio of Rs. 10 lakhs and currently we are holding 15 stocks in our portfolio. We suggest higher allocation in our Wealth-Builder stocks which includes best of our Hidden Gems and Value Picks released during last couple of years. Our team suggest all our Wealth-Builder members to invest in the stocks which are part of our Wealth-Builder portfolio. Every month our team updates our Wealth-Builder members which stocks they need to buy / sell / hold with % allocation of these stocks in their portfolio, the suggested changes need to be replicated in the same proportion. Annual subscription charge of Wealth-Builder is INR 20,000 under which you will receive total 12-18 portfolio updates. We also review existing equity portfolio of our members and advise them which stocks to hold and which to exit based of fundamental analysis under Wealth-Builder service. Our Wealth-Builder service is suitable for those investors who have an existing portfolio of at least 2 to 3 lakhs or planning to invest similar amount or more in equity market. Click here to read more about Wealth-Builder.

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

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

Wednesday, April 17, 2019

Check Fundamentals & Not Share Price 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 8 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 157, 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 3918 in January 2018, post severe correction in small and mid cap stocks over last 15 months, stock is down by -28% and is at Rs. 2809 today. Even after such a correction in stock price, Cera Sanitaryware is a 18-Bagger stock giving as on date returns of 1690% in 7 years from our initial recommendation and 525% 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 couple of years 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 is at Rs. 5051 giving absolute returns of 248% i.e. 3.5 times in 7 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 near 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 future growth prospects of the company, 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 was a well-known company from Infrastructure sector. At the beginning of 2010 the stock was around Rs 55. Now it is hovering at just Rs 0.42 and trading is suspended in the stock. Those who purchased the stock during 2010 are in 99% loss! Rs. 1 lakh invested in Lanco Infratech in Jan 2010 is valued at merely Rs. 1,000 today, a complete wealth-destroyer! Isn't it? Those who bought this stock at levels of Rs. 30 and later again at Rs. 10 or Rs. 5 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 6 to 9 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.

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


Start building your equity portfolio by making educated investment decisions, subscribe to our Hidden GemsValue PicksWealth-Builder annual subscription services. You can avail attractive discounts by subscribing to our combo packs. Below are the details of our annual subscription charges, simply click on SUBSCRIBE! link to subscribe to our services online using debit / credit card or net banking facility.

SARAL GYAN
SUBSCRIPTION SERVICE
ANNUAL SUBSCRIPTION
PRICE
PAY ONLINE 
CARD / NET BANKING 
Hidden Gems
Rs. 10,000
Value Picks
Rs. 6,000
15% @ 90 Days
Rs. 4,000
Wealth-Builder
Rs. 20,000
Combo 1: HG + VP + WB + 15%
Rs. 32,000
Combo 2: HG + VP + 15%
Rs. 16,000
Combo 3: HG + VP
Rs. 14,000
Combo 4: HG + 15%
Rs. 12,000
Combo 5: VP + 15%
Rs. 9,000

In case if you are not comfortable in subscribing online, you can make the payment through cheque / cash deposit / NEFT transfer in any of our bank and writing back to us sharing transaction details. Click here for bank details.

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

Also Read: Are you Investing in Techno-Funda Stock of 2019? It's Free!

Wish you happy & safe Investing. 

Regards, 
Team - Saral Gyan

Monday, April 15, 2019

Cera Sanitaryware - Our 18-Bagger Stock in 7 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 7 years 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 hold it for long term. Cera Sanitaryware made all time high of Rs. 3918 in January 2018 and today closed at Rs. 2808.20. Even after correction of nearly 30% since Jan 2018, Cera Sanitaryware is a 18-Bagger stock for our Hidden Gems members giving absolute returns of 1689% in 7 years and 4 months.

Considering strong fundamentals of the company with robust YoY growth, we added Cera Sanitaryware in our Wealth-Builder portfolio almost 5.5 years back at price range of 400 - 450 and continuously suggested our subscribers to invest in this stock even at higher price range of Rs. 1600 - 1800 levels with a long term view. In 2018, we suggested profit booking in the stock under Wealth-Builder above Rs. 3600 levels as valuations of the company turned expensive in near term. As on date, Cera Saniwaryware is giving returns 1689% returns to our Hidden Gems members in period of 7 years and 4 months and returns of 525% to our Wealth-Builder members within period of 6 years.

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.

As on date, Cera Sanitaryware is giving returns of 1689% and is almost a 18-Bagger stock for our Hidden Gems members in 7 years and 4 months. Moreover, there are total 43 Hidden Gems stocks out of 72 published by our equity analysts till Dec'17 which have given returns in the range of 100% to 1700% to our members during last 8 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.


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Team - Saral Gyan

Saturday, April 13, 2019

Are you Investing in Techno-Funda Stock of 2019? It's Free!

“The first rule of investment is ‘buy low and sell high’, but many people fear to buy low because of the fear of the stock dropping even lower. Then you may ask: ‘When is the time to buy low?’ The answer is: When there is maximum pessimism.” 
Sir John Templeton

Since Jan 2018, broader markets have witnessed significant correction. At current scenario, when Small & Mid Cap Index is down by 26% and 15% respectively from their peak made in January last year and significantly underperformed Sensex & Nifty, no body want to touch that space. Most of the liquidity in small & mid caps has dried up and found its way to large caps over last 10 to 12 months. At this juncture, large caps looks fairly valued or expensive in terms of valuations, however small & mid cap companies with robust businesses look attractive to reasonable and can reward long term investors in big way. In fact, some of the worst times to get into the market turned out to be the best times for long term investors and same seems to be applicable now for Small & Mid Caps.
To encourage investment in equities during current scenario when overall market sentiments are negative, we decided to share our Techno-Funda Stock Pick 2019 Report for free. This is a complimentary report for our readers. We are confident that you will find our research work useful in making informed investment decision.

We released Techno-Funda Stock Pick 2019 Report on 12th Dec 2018. The stock selected under this report is a small cap company with market capital of less than 500 crores and is available below our recommended price.

This report covers both technical as well as fundamental analysis about the company along with positive developments in the company as well as sector. The stock offers significant upside potential and could be a multibagger stock delivering 2x to 5x returns from current levels over next 1 to 3 years.

Techno-Funda Stock Pick 2019 report is a detailed report which covers company's background, Industry outlook, positive developments, financial performance of the company along with peer group comparison, key concerns & risks, technical analysis, fundamental analysis and Saral Gyan recommendation.

To receive our Techno-Funda Stock Pick 2019 report, simply fill up the form below. Once submitted, you will receive the report directly in your inbox.



If you are unable to view the form, click here to fill it online to receive our Techno-Funda stock report directly in your inbox.

Also Read: Know your Risk Tolerance before Investing in Equities

Wish you happy & safe Investing!

Regards,
Team - Saral Gyan.