Buy Panchsheel Organics at cmp of 31.35

Panchsheel Organics was started in 1990 by Turakhia Brothers and deals in  globally sourced, as well as indigenously manufactured, best-in-their-class life-saving medicines covering APIs, Intermediates, Specialty Chemicals, Hormones, Steroids etc. Its products complies  with complies to all the norms applicable as per Schedule ‘M’, GMP & WHO standards.

Companies clientele are names like Dr Reddy’s Labs, Ipca Labs, Nicolas Piramal, Macleods, Lintas etc. Company’s product include familiar names like Levocetrizine, protomax, Coldarex, Gripe water etc among hell lot of products. Just browse through Products on company’s website. I am sure one would be able to identify many familiar names.

·         Company’s topline has been consistently increasing over the Years.

·         At the end of June 2014, company networth comes to be Rs 16.47 Crs and book value comes to around Rs 32.83. Further a company with sales Rs 40 Crs is available at a market cap of Rs 16 Crs!.

·         At an EPS of Rs 3.51 for FY 14, the current PE comes out to be less than 9, which is very low compared to the industry average.

·         What caught my attention is the fact that promoters have been consistently increasing the stake. In the month of August, promoters have further acquired 3.53% shares thereby taking total holding to close to 67%. This is a big comfort for the investors.

·         As on 30^th June 2014, there are only 1395 individuals holdings shares under public shareholding which would have further come down post above.

·       Company declared the dividend for the first time in past few years which is a big positive for the  investors. 5% dividend has been declared today for FY 14.

·       There is hardly any long term debt on the book as on March 2014.

Basis the strong product portfolio, vintage, customer profile, aggressive promoter stake increase  and low floating stock, recommending to buy.

Buy Aro Granite Industries Limited

Buy Aro Granite Industries Limited at cmp of Rs 57.05

There has been a lot of investors interest in Granite Industry and stocks from this industry are scalog new heights on the back of anticipated demand in future. The demand is expected to come from revival in domestic housing and infra sector as well as from overseas emerging markets and improvement in US economy.

India is blessed with unique colours and large deposits of granite and is among the best for granites so far as colour, variety, quality and pricing are concerned.  Let us look at one such company from this sector which is into 100% exports.

Aro Granite Industries Ltd (Aro) is 100% Export Oriented Unit (EOU) promoted by Mr Sunil Arora and is engaged in the processing of granite tiles and slabs. Aro has two processing facilities at Hosur and Krishnagiri in Tamil Nadu  and has  an aggregate installed capacity of 5.4 Lakh sq m per annum for granite tiles and 5.9 Lakh sq m per annum for granite slabs. Aro mainly exports its products to USA, Europe, Africa and other Asian countries. For FY 14, there was a 33% increase in the sales to North America, 314% increase in sales to Libya, 50% increase in Germany and double the sales in Poland, Italy and Japan.

The major challenge to the company comes from shortage of quality raw material in the domestic market resulting in an increased dependence on imported raw material resulting in less margin. The problem is compounded from with depreciation in rupee. Though company’s imports are naturally hedged to some extent. However company incurred forex loss of Rs 4.21 crs in FY 14 on account of working capital borrowings in foreign currency which was left unhedged.

However the company looks to be a great buy opportunity at current market price basis:

1. The entire sector is getting rerated due to anticipated demand in future. Company’s sales has been consistently increasing sales over the past 5 years and has shown huge growth in export market. Operating margins for Q1 FY 15 has increased both QOQ and YOY. Company will also benefit from stable INR and increase in the capacity in the past.

2. A company with sales of Rs 251 Crs and Pat of Rs 21 Crs in FY 14 is available at a market cap of just Rs 87 Crs.

3. Company’s book value as on 30 June 2014 is Rs 96.15 as against cmp of Rs 57. Low PE of 5 as compared to industry average of 15.

4. Consistently dividend paying and infact gave 1:2 bonus shares in FY 13.

Buy for long term at cmp of Rs 57.05.

Buy Eco Recycling Ltd.

Search Google for the article “Attero Recycling mops up more PE money for expansion”. The company has recently raised Rs 100 Crs in equity funding from PE Firm. The company has so far raised Rs 190 Crs from various investors. Attero is India's largest integrated end to end electronics asset management company and posses proprietary technology to recycle electronic waste and extract precious metals, and counts companies such as General Electric, Google, Wipro and Samsung as its clients.

With e-wastes piling up each day, there has become an ever increasing need to have a disposal mechanism in an organised way. The need for e-waste disposal would become all the more compelling with smart cities coming up in future.

Recommending to buy Eco Recycling from the same line of business as Attero for a long term view. Eco Recycling Ltd. is a long term buy due to reasons as under:

1. Presence in a niche segment with huge growth potential in future.

2. Sales constantly increasing for past 5 years. The PAT for June 15 has decreased YOY but I feel that company is in a growth phase and one should focus more on the topline. PAT may be lower due to various reasons like interest out go on expansion, high fixed cost on assets etc. Once company stablises and achieves a decent market share, profits automatically comes in.

3. Increase in promoters shareholding over the years.

4. Media Giant Times Group (Bennett Coleman & Company Ltd.), has acquired 7.98% stake in the company at Rs 43 per share.

5. Ecoreco is in the process of setting up another facility for recycling of home appliances near Bhiwandi, Maharashtra, with the kind support of NEDO, Mitsubishi Materials Corporation and Nippon Magnetic Dressing Co. Ltd. These are all big Japanese names taking interest in the company. Nippon Magnetic Dressing is a 60 year old company, pioneer and world leader in recycling and is holding 4.56% stake in the company at Rs 40 per share. Do a google to read more about it.

6. Further Catholic Syrian Bank also holds 1.94% stake in the company.

7. Recent PE deal in Attero further reinforces investors interest in this segment.

Recommending to buy at cmp of Rs 24 with a long term view for multibagger returns.

Buy Rathi Graphic Technologies - update

There was an error on the no. of paid up shares thus giving the wrong picture of book value. Apologies for the same, the correct fig has been updated:

1. Company with sales of Rs 433 Crs is available at a market cap of Rs 17.15 Crs.

2. Trading at significant discount to the book value of Rs 33.66

3. Stabilisation of INR would help contain raw material costs which is mainly through imports.

4. Equity infusion by promoters in FY 13 and increasing their stake from 55.72% to 60.63% thereby improving the leverage ratios.

5. Company has 52% stake in its subsiidary RGTL Industries Limited which manufactures TMTbars. Subsidiary contributes the major chunk to the consoildated nos.

6. RGTL Industries has recently increased its capacity in FY 13 and would see boost from rising acitivity in Infra sector going forward.

7. ICRA had recently upgraded the rating of the subsidiary comapny from BB+ to BBB-

The company has negatives like high working capital requirement due to inherent nature of TMT business in subsidiary. Further the company has not paid dividend so far. But I still feel it is still a decent buy at one fourth of book value and very low valuations.

Buy at cmp of Rs 8.