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Tuesday, November 6, 2012

Multibagger Stock: De Nora Ltd - ROI @ 190% in 24 Months

Dear Reader,

Our equity analysts published Hidden Gem - Nov 2010 research report and shared it with all Hidden Gems members.  Research report was published exactly 2 years back on 7th Nov 2010. Hidden Gem stock of Nov'10 was De Nora Ltd. 

When research report was shared with all our Hidden Gems members, we received few queries on recommendation of this little known company. In fact, many of our members have never heard of this company earlier but they invested in this micro cap company with lot of trust and faith on us and our research work.

Today, our members are holding it for free as we suggested partial profit booking by selling 50% of their stock holding in De Nora Ltd in the range of Rs. 160-165 and holding remaining quantity for long term. Today, De Nora Ltd is closed at Rs. 219 giving absolute returns of whopping 190% to our members in 24 months. 

There are 8 more Hidden Gems out of 21 published by our equity analysts in last 2 years which gave more than than 100% returns to our members. We suggested partial profit booking in many of these stocks and our members registered more than 100% returns and now hold remaining quantity for free in their portfolio.

We also like to share that there are Hidden Gems which gave negative returns to our members but downside was limited. We suggested our members to exit some of these non performing companies to ensure that they utilize their capital in the most optimum way. We strongly believe that as an smart investor, we should keep on nurturing the best seeds (companies generating free cash flows and utilizing it effectively) and erode off the weeds (non performing companies) from our equity portfolio.  

Below is the summary of De Nora Ltd published in our Hidden Gem research report - Nov'10.

Company Background 

De Nora India Ltd is a public limited company with 51% equity held by De Nora. The company is a subsidiary of the De Nora and has brought to India the latest technologies with the complete support of De Nora's technical expertise and management. The company is headed by Mr. S. C. Jain, Managing Director, who leads a team of professionals with vast experience.

De Nora India as part of De Nora is leader in the field of:

1. Electrochlorinators
2. Cathode & Anode for Chlor-Alkali Industry
3. Cathodic Protection Systems
4. Electrowinning

With its factory in Goa with state-of-the-art facilities, De Nora India meets the demands of the rapidly developing Chlor-alkali industry. This factory also provides access to the Goa port facilities for company’s future export commitments. This service is provided through a team of specialists, a centralized data bank and access to the vast technology resources of De Nora. De Nora India's strength lies in its technical expertise backed by its well trained team of specialists. Of course, there is the additional benefit of the direct technical support of De Nora’s highly trained engineering staff, ready to discuss the needs of any prospective client, to define the best optimized solution.

In keeping with the philosophy of the De Nora, De Nora India Limited provides its valuable customers, not only a superior product, but also technical assistance, in installation and operation of their electrodes, for both, new and retrofitted cells of different technologies, through out their operating life.

De Nora provides products and services based on electrochemical technology through two main product lines:

1. Chlor-Alkali which makes a full range of products and systems for chlorine and alkali, and sodium and potassium chlorate commodity chemical producers.

2. Oxygen & Specialties designs, develops and manufactures electrodes, anode coatings and systems for several electrochemical applications.

Recent Developments (Nov 2010)

i) De Nora – A Distinguished presence at the KPCA show 2010 in Korea (Aug 2010)

The KPCA show was an excellent opportunity for the company to look around the recent trends of the electronic circuit industry and to show the latest PCB production technologies.

De Nora stands presence at the exhibition has been an ideal opportunity to create possible business opportunities for De Nora and to allow its customers to be informed on the most advanced insoluble anode technology in copper plated micro via metallization as well as via filling in both vertical and horizontal plating processes. Company exhibition was successful at the KPCA 2010 show in Korea

ii) Acquisition of full control of Permelec Electrode Ltd. and majority of Chlorine Engineers Corp. Ltd. (Sep 2010)

Industrie De Nora S.p.A. (De Nora) has reached an agreement with Mitsui and Co., Ltd. (Mitsui), for the purchase of all the shares held by Mitsui in order to reach 100% ownership of PERMELEC ELECTRODE Ltd. (PEL), in Fujisawa-shi, Japan. PEL was founded by Mitsui and De Nora as a 50-50% Joint Venture in 1969 to serve the Japanese Chlor Alkali market.

This acquisition is an important step for De Nora to improve its global manufacturing capacity and will further strengthen the ongoing technical exchange between De Nora and PEL for the continuing development of high performing electrodes.

The move shall ensure that the world Chlor Alkali Industry will benefit even more from De Nora’s well proven experience in cutting edge coating manufacturing facilities and electrochemical technologies.

In the framework of the final agreement reached with Mitsui in this transaction, De Nora has also secured the control of CHLORINE ENGINEERS Corp. Ltd. (CEC), in Tokyo, Japan, Mitsui’s subsidiary engaged in engineering and manufacturing of sodium chloride electrolysis plants. CEC has been expanding its activities since its foundation in 1973 and has licensed a significant share of the worldwide chlorine production by ion exchange membrane process.

De Nora and CEC will align a combined portfolio of products and solutions to improve plant performance and will offer to CEC Licensees, prompt and reliable assistance in the maintenance and servicing of their plants, deploying the resources of De Nora’s Network of Companies.

With the acquisition De Nora is also enlarging its technology platform, since both PEL and CEC are involved in the development and the commercialization of novel electrochemical processes driven by the environmental pressure, especially in the field of Water Treatment and Clean Energy.

The move reflects De Nora’s renewed commitment to further develop its business, remaining very focused on the electrochemical technologies – both in Chlor Alkali and Environmental applications and its goal, to not only be a reliable supplier of technologies but also a dynamic and innovative partner with a long term vision.

Financial Performance

De Nora India reports net profit of Rs 9.72 million in the September 2010 quarter

De Nora India reported net profit of Rs 9.72 million in the quarter ended September 2010 as against net loss of Rs 10.2 million during the previous quarter ended September 2009. Sales rose 55.72% to Rs 44.13 million in the quarter ended September 2010 as against Rs 28.34 million during the previous quarter ended September 2009.


De Nora India net profit rises 105.17% in the June 2010 quarter

Net profit of De Nora India rose 105.17% to Rs 11.9 million in the quarter ended June 2010 as against Rs 5.82 million during the previous quarter ended June 2009. Sales rose 56.08% to Rs 46.3 million in the quarter ended June 2010 as against Rs 29.6 million during the previous quarter ended June 2009.

Saral Gyan Recommendation (6th Nov 2010)

1. De Nora India is into a niche segment and commands market share of 75%. Company uses advance technologies for coating of anode and cathode using in Chlor Alkali plants and corrosion systems used for preventing corrosion in saw pipes. De Nora products offering with latest membrane cell technology is opening new growth opportunities in the country. Further, company also supplies electro chlorination equipments for water purification.

2. De Nora India Ltd is an MNC which is expected to trade at premium when compared to local players, but company is available at decent valuations with current P/E ratio of 14, giving an opportunity to investors to buy the stock at current market price. Company business seems to be complex which could be one of the reasons that stock has overlooked by Investors.

3. As per our estimates, De Nora can deliver bottom line of 47.5 million for full financial year 2010 – 11, annualized EPS of Rs 8.55 with forward P/E ratio of 8.83 X for FY 2010-11, which makes stock of the company an attractive bet at current market price.

4. Company has paid consistent dividend in past except the last financial year when company performance was poor due to slowdown in chlor alkali industry. Dividend of 70% was paid in 2006, 69% in 2007, 58% in 2008, 25% in 2009. De Nora India Ltd is expected to do well with revival in chlor alkali industry.

5. On equity of Rs. 55.55 million the estimated annualized EPS works out to Rs. 8.55 and the Book Value per share is Rs. 47.14. At a CMP of Rs. 75.50, stock price to book value is 1.6. The scrip is trading at 8.83 X FY 2010-11 estimated earnings which make it an attractive considering the past track record and strong global presence of De Nora Group.

Saral Gyan Team recommends “BUY” for De Nora India Ltd. at current market price of 75.50 for a target of Rs. 155 over a period of 18-24 months.

De Nora Ltd today closed at Rs. 219 giving absolute returns of 190%. Complete update & review of De Nora Ltd along with other Hidden Gems will be published in Hidden Gems Flash Back report on the basis of recent developments and 2nd quarter results declared by these companies.

De Nora Ltd is 1 of those 9 Hidden Gems which gave more than 100% returns to our subscribers in last 2 years. Team of equity analysts at Saral Gyan put lot of efforts & smart work to identify Hidden Gems (Unexplored Multibagger Small Cap Stocks) and Value Picks (Mid Caps with Plenty of Upside Potential) which not only grow your capital at a healthy rate but also ensures protection of your capital during market downturn.

Remember, an opportunity missed an opportunity lost. Start building your equity portfolio by investing in Hidden Gems and Value Picks of stock market. Avail attractive discounts, special gift and freebies during this festive season under our Special Dussehra Diwali Offer of the year. Click here for details.

Hurry! Last few days... Offer closes on 10th Nov 2012.

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Regards,

Team - Saral Gyan