Dear Reader,

If we look at major indices of 2 years back, Investors have not made money from stock markets. Major indices like Sensex and Nifty have moved no where. On 1st Dec 2010, Sensex was at 19,850 and today closed at 19445 giving negative returns of -2%. Small Cap Index and Mid Cap Index have seen a deeper cut during the same period.

Moreover, big daddies of dalal street, companies like Reliance, SBI, Infosys and L & T have given negative returns in the range of -15% to -30% to investors who invested in them during Dec'10.
 
We always suggest salaried employees as well as businessmen / entrepreneurs to invest via SIP (Systematic Investment Plan) route. Simply get some savings from your monthly income and Invest in equities for long term. SIP 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.

Lets review how SIP approach have benefited our Hidden Gems members during last 2 years. Below is the table which illustrates value of Rs. 10000 invested (every month) in Hidden Gems (Unexplored Multibagger Small Cap Stocks) vis a vis value of Rs. 10000 invested in BSE Small Cap Index during last 2 years.


We are delighted to share that average returns of Saral Gyan Hidden Gems during last 2 years is 42.2% compared to -1.5% of BSE Small Cap Index. Investment of Rs. 10,000 in Hidden Gems during last 2 years not only allowed you to save Rs. 2.4 lakh but also appreciated your investment giving overall profit of Rs. 1.01 lakh, making your total Hidden Gems stocks portfolio of Rs. 3.41 lakh. However, if you invested the same amount in Small Cap Index, you would be sitting with an average loss of Rs. 3741.

In fact, actual returns of Hidden Gems are much higher as we suggested partial profit booking at higher levels in few of our best performing Hidden Gems and exit in few of non performing companies.

We are delighted to share that 9 Hidden Gems out of 24 during last 2 years have given more than 100% returns to our members. We are hopeful 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.

Subscribe to Hidden Gems and start investing systematically. Avail attractive Discounts, Freebies and New Year Surprise Gift under our ongoing Merry Christmas & Happy New Year 2013 offer.

To know more about Merry Christmas & Happy New Year 2013 offer, click here. Hurry, offer closes on 31st Dec'12 at 11.59 pm.

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

Wish you happy & safe investing!


Regards,

Dear Reader,

We will release our 2nd issue of Hidden Gems - Flash Back report in next few hours. We received overwhelming response from our members for 1st issue of Hidden Gems - Flash Back report which we released on 10th Sept'12.

Below is one of the feedback which we received from Mr. Naveen Kumar, Hyderabad for our 1st issue of Hidden Gems Flash Back report (Hidden Gems subscriber since Nov'11):

Dear Saral Gyan Team,

Appreciate your efforts and  your flash back report which will help me to sell unwanted stocks and have more exposure in some of the better performers.

Good Job!

Regards,

Naveen.

The objective of Hidden Gems Flash Back report is to share the past performance of Hidden Gems recommended by our equity research team in last 2 years along with update on stocks, which to hold and which to buy or sell. This report contains update of 24 Hidden Gems research reports published by our equity analysts in last 2 years (from Sept'10 to Sept'12).

Flash Back report covers company's second quarter results, recent updates & development along with Saral Gyan views and recommendation. It will help all our members to rebalance their small cap stocks portfolio by buying or selling previous recommended Hidden Gems stocks. In other words, out of these 24 stocks, you can identify the best seeds which you continue to nurture and the weeds which you can cut down from your equity portfolio.

We will share Hidden Gem - Dec'12 issue will all our active subscribers of Hidden Gems so that they can take necessary action to tune their small cap stocks portfolio.

Its a fact that 9 out of 24 Hidden Gems stocks recommended in last 2 years gave more than 100% returns to our investors. That's not all, another 1 stock is ready to cross 100% returns in next couple of months to take the tally to 10. 

Below is the past performance of Hidden Gems stocks (last 2 years):

Subscribe to Hidden Gems today to receive Saral Gyan - Flash Back report. This report will give you a complete update on 24 Hidden Gems stocks released during last 2 years along with Saral Gyan views and recommendations.

Grab discount of 20%, subscribe to Hidden Gems @ Rs. 7500 6000 ($155 125). 

Now you can save upto 40% subscription cost under our Merry Christmas & New Year 2013 Offer along with Freebies and New Year Surprise Gift.

Hurry! Offer is for limited period and will disappear on 31st Dec 2012. Click here to know more about the offer.

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

Regards,

Team - Saral Gyan

Saral Gyan Capital Services

(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. In 2011-12, it is close to 19,500 crores. The fact that India is a booming marketplace of 120 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 25% is necessary to make into the hallowed list of model portfolio.

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

We know from (bitter) experience 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, mid and blue chips 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 12 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.

 

We have given the different allocation to each of the scrips keeping in mind the risk versus returns ratio. We have also fine tuned the portfolio with mid-cap and small cap scrips so that the investors can invest in a complete mix of stocks to balance their portfolio. Saral Gyan Wealth-Builder Portfolio of 12 stocks includes best of Hidden Gems and Value Picks recommended by our equity analyst’s team.

Regards,

Equity Desk,

Saral Gyan Capital Services.

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 and our team recommended buy at price of Rs. 75 for target of Rs. 155 in period of 18-24 months. 

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. 257 giving absolute returns of whopping 240% 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 rewarding share holders with regular dividends) 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.

To view / download Saral Gyan Hidden Gem - Nov'12 Research Report - Click Here

De Nora Ltd today closed at Rs. 257 giving absolute returns of 240%. 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.

An opportunity missed an opportunity lost. Start building your equity portfolio by investing in Hidden Gems and Value Picks of stock market.

In case of any queries, simply write to us. We will be delighted to assist you!

Regards,

Team - Saral Gyan

Dear Reader,

If we look at 2012, it was far better compared to 2011 for Indian stock market. Equities have outperformed other asset class during the year. We believe that stocks will still remain in favour for investments for next couple of quarters.

If we look at indices since beginning of 2012, mid-cap index of the BSE has given a return of 31.37 per cent, the small-cap index has gained 29.28 per cent. In comparison, the gain in the blue-chip barometer index BSE Sensex has been much lower at about 21.42 per cent, as per data available with the BSE.

During uncertain times mid-cap and small-cap counters witness bigger losses but when markets rally, these stocks move ahead of the frontline blue chip stocks.

Most stocks in the mid and small-cap segments were beaten down heavily during 2011, falling 34 per cent and 42 per cent, respectively. On the contrary, the Sensex had lost about 25 per cent during the same period. After suffering a heavy blow last year, the mid-cap and small-cap indices bounced back smartly during this year.

We take this as an opportunity to share the peformance of 12 Saral Gyan Hidden Gems (Unexplored Multibagger Small Cap Stocks) vis a vis small cap index. We are delighted to share that we continue to outperform major indices during last 1 year.

Below is the past performance of last 12 Hidden Gems released by Saral Gyan equity analysts.

 (click on the image, if not visible)

As clearly illustrated in above table, last 12 Hidden Gems stocks published by our equity analysts have given average returns of 44% compared to small cap index average returns of 9%. In fact, actual average returns are higher as we suggested partial profit booking to our members in Indag Rubber at Rs. 325. Cera Sanitaryware and Mayur Uniquoter are another 2 stocks out of last 12 which are giving returns of more than 100% to Hidden Gems members.

Also read: Stellar Performance - 5 Hidden Gems out of 12 of 2011 gave ROI above 100%

We are confident enough that 5 Hidden Gems of 2012 will also double investment of our members in period of next 12 - 18 months like that of 2011.

Start investing some portion of your savings in Hidden Gems for long term. Subscribe to Hidden Gems annual subscription (12 monthly research reports) @ Rs. 7500 [$ 155]. You will also receive 3 Freebies at no additional cost.

1. Saral Gyan Hidden Gems - Flash Back Report - Last 21 Hidden Gems update

2. Saral Gyan eBook - "How to Grow your Savings?"

3. Best 3 Saral Gyan Hidden Gems for long term investment

An opportunity missed is an opportunity lost. Make an educted investment decision, subscribe today to grab recently released Hidden Gem - Nov'12 research report. Click here for payment options and facilities.

To view Hidden Gems Past Performance & Download Research Reports - Click Here.

In case of any queries, simply contact us.

Regards,

It has been one of the biggest wealth creators in the Indian stock market and given almost 50 per cent annualised return over the last 11 years. The company had a market cap of Rs 7,950 crore on 1st Nov 2012 while its stock is trading at Rs 124.

On 2 January 2002, Sesa Goa had a market cap of Rs 99 crore and its stock was at Rs 1.28. On 1st Nov'12, the stock price closed at Rs 172 and the company's market cap is Rs 14,880 crore.

Do you own such stocks which can give you similar returns in future?

The number of small-cap stocks is large and finding a quality stock that can give high returns over a long period is tough even for equity analysts. One reason is that such stocks usually have a short history and are not tracked by many analysts and brokerage houses. Then there are risks such as low liquidity, governance concerns and competition from larger players.

Scores of once small companies have over the years grown big, giving investors a 30-50 per cent annual return over 10-15 years and creating fortunes for investors. However, more often than not, we find ourselves at the wrong side of the fence and regret our inability to spot such stocks on time.

If these factors scare you but you still want to gain from the upside potential of such stocks, Saral Gyan Hidden Gems is an ideal choice for you.

It’s a fact that now 9 Hidden Gems out of 21 released by our equity analysts in last 2 years have given more than 100% returns. Stellar performance during tough time of stock markets (all major indices have given negative returns since last 2 years), imagine how these companies will flourish during good times.

We are delighted to share the 9 Hidden Gems recommended by our equity analysts during last 2 years which gave more than 100% returns.


Earlier it was 8 stocks, Mayur Uniquoter is the 9th one which has doubled the investments of our members in short span of 7 months. We have suggested partial profit booking with above 100% returns in many of these stocks. Hence, our members hold remaining 50% quantity of these stocks for free in their portfolio.

Buying Strategy for Small Caps

1. Go for companies with low debt ratio (preferably less than one)

2. A high interest coverage ratio (above 3x) and a high return on equity are big advantages

3. Avoid companies with huge liabilities in the form of foreign currency convertible bonds / external commercial borrowings

4. Look at the quality of the management, its governance standards and how investor-friendly the company is.

5. Mid-cap and small-cap companies can be future market leaders, so be patient with your investments

Saral Gyan equity analysts have identified 3 Multibagger small cap stocks with promising future in terms of earnings and growth, these 3 small caps have the potential to multiply your investments by 3-5 times in next 3 years.

What else we need? Simply invest in these stocks and hold them tightly for next 3 years to create wealth. We are going to accumulate these 3 small caps in our portfolio and hold them for atleast 3 years to get rewarded in big way. What about you?

Those who wish to invest in small-cap stocks should do so only if they have a long investment horizon and tolerance for volatility. Small-cap stocks suffer the steepest falls in a bear market and rise the most in a bull market. An investor should stay invested for at least three-five years to allow their portfolio to gain from at least one bull run.

Saral Gyan team do take care of associated risks of investing in equities by doing indepth research and analysis of small cap companies before releasing Hidden Gems research reports with buy recommendation. Its sincere efforts, dedication and passion of our equity analysts that 5 out 12 Hidden Gems of 2011 and 2 out of 9 Hidden Gems of 2012 have given more than 100% returns to our members.  If you have patience and want to add extra power in your portfolio, start investing some portion of your savings in fundamentally strong small companies - Hidden Gems. 

In case of any queries, do contact us.

Regards,

Team – Saral Gyan,

Saral Gyan Capital Services.

Saral Gyan equity analysts team recommended this stock as Hidden Gem - Dec 2010 at price of Rs. 35.95, currently it is trading at Rs. 54 giving returns of almost 50% to our investors in period of 6 months.

Piccadily Agro Industries Ltd. (PAIL), a Public Limited Company was incorporated in the year 1994. It is spread over an area of 168 Acres of Land. It started its operation in the year 1996 - 97 for manufacture of White crystal sugar with installed capacity of 2500 TCD along with in-house facilities for 6 MW Co-generation of power at Umri-Indri Road, Tehsil Indri, Distt. Karnal, (Haryana).

The company there after started expansion & modernization of the Sugar Mill and enhanced the crushing capacity to 5000 TCD w.e.f. 02/12/2004 i.e from crushing season 2004 - 2005.

The company further expanded its business & set up a Distillery Unit with a installed capacity of 60 KLPD in year 2007, which has further been expanded to 90 KLPD.

The Sugar Mill Crushed 3388670 quintals of sugar cane during the season 2010-11 & produced 318585 bags of sugar as against 2910239 quintals of sugar cane during the season 2009 - 10 & produced 275275 bags of sugar 2009 - 2010 . The mill also produced 163700 & 136515 quintals of molasses in the year 2010 - 11 & 2009 - 10 respectively, Molasses is a major raw material used in the Distillery unit of the company.

The distillation plants are designed & executed by M/s Destichem & Praj Industries Ltd. Along with this the company also installed fermentation house to cope up to supply quality wash, & are gradually expanding the existing unit by inducting ultra modern machineries. Further two Grain plants of 100 tons / day Grain handling capacity each have been setup for distillation.

The company has set up an automatic 750 ml & 180 ml Pet Bottle plant. The unit is producing pet bottles to cater to the distillery’s own consumption.

The company is planning to set up a 10 KL per day Malt Spirit plant to produce Malt Sprit made from Barley. The company is setting up a food grade CO2 plant supplied by Wittaman of USA. Co2 will be recovered from fermentation process and compressed in cylinder.

Besides this the company has also obtained a license for setting up a Brewery with a capacity of 3,00,000 HLPA expandable to 5,00,000 HLPA.

i) At the end of Sep'10 the Management holds 68.89% (now its 70.90%) equity stake in the company which is very good by any standards.

ii) Over the last 2 years the Management has increased their stake by almost 10%. At the end of Dec'08 they had 59.18% stake in the company while at present they hold 68.89% (now its 70.90%) stake. The Promoter's made open market purchase as recently as May'10.

iii) For the half year ending Sep'10, the company has recorded a more than 100% growth on YOY basis. The company is trading at a forward earnings PE multiple of 3.5 while the other listed companies command much higher PE multiples of 15-30, hence looks grossly undervalued stock.

iv) Although company is a small player in comparison to the larger players in the same liquor segment, however it maintains one of the highest margins in the liquor segment.

v) Company has paid dividend of 10% in 2010. At current market price, dividend yield works out as 2.78%. (For FY 2010-11, company has annouced payment of Rs. 2 per share, hence dividend yield at CMP of 54 is 3.7%)

vi) On equity of Rs. 235.85 million the estimated annualized EPS works out to Rs. 10.3 and the Book Value per share is Rs. 26.51 (now Rs. 33.6). At a CMP of Rs. 35.95 (now Rs. 54) , stock price to book value is 1.36 (now 1.6). The scrip is trading at 3.5 X FY 2010-11 estimated earnings which make it an attractive buy at current market price.

Saral Gyan Team recommends “BUY” for Piccadily Agro Industries Ltd. at current market price of 35.95 for a target of Rs. 75 (target revised to Rs. 90) over a period of 18-24 months.

Company 90% revenue comes from liquor division which was commensed in 2007 and is growing with very healthy operating margins but still the company is considered as a sugar company. Piccadily Agro is trading below its intrinsic value and seems to be grossly undervalued. 

Click here to read complete research report circulated on 19th Dec to all Hidden Gems members.