Generally It takes a lot of time to
study a stock…but It has happened with me many times that while final analysis
of some share was under completion, it just went above the roof and finally of
my buying zone. So if I am 50% confident about some stock then I’ll buy it and
after final study I take the final decision. But some of my friends asked me to
share those also as many of those shares have skyrocketed before I shared my
final analysis with them. Like Last year I bought Shreyas shipping at 20/- and
D-link at 30/- before I finished my study they just blasted. Now Shreyas is at
480/- and D-link is at 190/- I am still holding these. Greenply is also one of
these.
So I am sharing some of my recent
buys which are still under final study.
Venky’s India: I am buying it from 500/- to 360/- today….my avg is around
410/- now. It is a 1800 crores company, one of the largest poultry sector behemoth. It
gets 1000 crores from poultry, 650 cr from oilseeds and around 150 crore
from animal health products. It has also ventured into Quick service restaurant
business by opening XPRS chains which serves chicken and only chicken in direct
competition with KFC. Its market value is just 320 cr but it is having 200 cr
in cash. It promoters are good as in spite of huge dealings with a number of
group companies, they don’t have cross holdings in these companies.
Maize and corn are their major raw
material which comprises around 60-70% of their total cost. Prices of these are
falling as evident from their dec-14 quarter results wherein the company turned
profitable due to savings in raw material costs. But I feel as we are earning
more money so demand for good quality poultry product will only grow. The chicken
we are eating now from our backyard poultry farms are highly toxic treated with
huge doses of anti biotics and growth hormones. So I see a shift will happen in
the near future and we’ll realize that healthy chicken is costly. Godrej
industries is selling their chicken brand Real Good chicken competing with
local chicken. Also around 2004 I was buying chicken around Rs 70/- per KG
which now trades at around 140/- although other major commodities like milk,
rice, sugar, pulses, vegetables like onions etc now trades at around 4-5 times
of their lows of 2004. A major shift is coming.
Gujarat Borosil: It manufactures Low iron glass which is used in solar power modules
as a protective layer for solar cells. It protects the costly solar cells and
also helps in transmitting the sunlight into solar cells. Normal glass with high
impurity of iron does not absorb major sunlight due to iron and reflection of
the surface…it absorbs around 83% of the sunlight. But Low iron Glass does around 95% after
curing iron and applying a protective coating. Glass is a major component of a
solar cell module comprising around 60-70% of total weight. India is investing
huge in solar power and wants to build around 100000 MW of solar power capacity
around 2022. For a perspective, it requires around 7-10 tonnes of silicon to
make a solar panel for generating 1 MW…so we need a lot of silicon wafer. But we
don’t even produce one kg of semiconductor grade silicon in india. Our local
solar cell producres like Moser Baer and Tata power don’t produce solar cell
from the scratch…they import silicon wafers which are then turned into solar
cell by incorporating an electricity circuit around it to produce electricity
by photovoltaic effect.
Although there is nothing wrong in these
companies for not producing silicon wafer which itself is a highly technical
process requiring huge investments and power. Conventional manufacturing
processes consume 40-50 kWhr of electricity to make a kilogram of polysilicon. SunEdison
of USA is developing FBR technology which
would need just 3-5 kWhr. But india can’t dream of building this huge capacity by importing all of the
silicon…it will be a very costly proposition and may turn out costlier than oil
and coal imports. So we need local manufacturing and Gujarat Borosil just does
this.
It is the only local producer of low
iron glass in india catering to local and export markets. The best thing about
it is- its very low debt, only 40 crores. Last year turnover was 132 cr with net
profit at 8 crore…so it is perhaps the only solar sector company which is
profitable. Moser baer is having a debt of 3300 cr, indosolar of 800 c. Net worth
of Moser baer is -1657 cr and of indosolar is -40 cr, while Gujarat Borosil’s
net worth is 130 cr and its market value is 170 cr.
So I am sure Govt is going to do something
very serious to promote our local solar industry. Gujarat Borosil is poised for
a huge growth as it can use debt route for countering this coming solar storm. It
is a good buy at current price of 23 and can be bought around 20-25-30 and at every fall.
Zee learn: I am holding it from 16 and few days back make another entry at 33/- our
education sector is the most underdeveloped and incapable of shaping or giving
direction to a natural prodigy. With its useless study materials and teaching
techniques it can only ruin or delay the blossoming. So we’ll see major paradigm
shift in this sector. Many companies have entered in this noble industry but
their shares prices plummeted due to tainted promoters and shabby standards of accounts.
So options are very few and Zee Learn is one of them. It owns Kidzee and Mount
Litera chain of schools. Just give it some time and it’ll blossom.
Himadri Chemicals: At present there is no Lithium battery maker in India. But there is one indirect option and that is Graphite. Lithium batteries use high amount of Graphite (5 times than Lithium). Most of the weight of Li battery is of graphite. Graphite is of two types, natural and synthetic. Natural one is mined and synthetic is made from petrochemical raw material.
Himadri Chemicals: At present there is no Lithium battery maker in India. But there is one indirect option and that is Graphite. Lithium batteries use high amount of Graphite (5 times than Lithium). Most of the weight of Li battery is of graphite. Graphite is of two types, natural and synthetic. Natural one is mined and synthetic is made from petrochemical raw material.
Mined graphite
is somewhat impure as purity requirement of Li battery is around 99.99% which
is given by synthetic graphite. Now they have innovated a cheap technology for
making mined graphite more pure. But i think fall in oil prices will benefit
synthetic graphite players and also mined graphite supply may not catch up with
demand. Again China is having around 70% share in natural graphite, india is at
second with some 12%.
However we have
some good synthetic graphite players in India. Himadri chemicals is one of
them. Largest player in india and it is also making lithium grade graphite
products for japan also. but it is deep in red and high debt. But its fortune
can change any time because it is very costly to transport petcoke (raw
material) so mostly synthetic graphite markets are regional. I have entered in Himadri
around 20 and will add more when it will perform. It main business where it
supplies graphite to graphite electrode makers like HEG/Graphite India is also
on the verge of turnaround. This one can really surprise when market will
realize its potential.
Surya Roshni: Although Bajaj electrical is the major player in the
kitchen appliances, fans and lighting in india but it outsources around 90% of
its business to outside producers. Some analysts call it asset light model but i want to make some more study. In house production gives one better control over quality and
inventory management. Surya Roshni is a bigger player in lighting sector than
Bajaj with one difference. It produces everything from scratch In its factories
starting from glass.
In lighting sector, we have seen one
revolution from incandescent bulbs to CFL bulbs. LED bulbs are the next big
thing. LED bulbs use half the power of CFL bulbs with much longer life. CFL
bulbs use mercury for production which is very dangerous for humans hence need
very careful disposal. No such issue is there with LED. Govt is focusing big
for led revolution and has placed huge orders for led lighting systems for
streets which has brought down the prices of bulb from 500 to 200. The price
will go down further.
Surya is having grand plans for LED and it is
having india’s most advanced lighting research centre equipped with photometric
laboratory at Noida which is approved by DSIR ( Department
of Scientific & Industrial research, Ministry of Science
& Technology) and also it has been listed as one of the best testing
laboratories in India by BEE ( Bureau of Energy Efficiency).
It has also entered into fan and
home appliances business which is growing very fast and can be a real value
creator as the company can count on its huge portfolio of distributors and
retailers which is the main differentiator.
Its turnover is 3000 cr, with
2000 cr from its steel piping division and 1000 cr from its lighting business.
Its net operating margins from steel business is very low around 3% as compared to
10-12% of lighting. Steel piping is a very low value addition business as all
it does is to roll a flat sheet of steel into round pipes making it vulnerable
to vagaries of ever changing steel sector.
I am yet to study about the
future plans of the company regarding their steel business, capital employed,
further investments or selling the same etc. capital invested in lighting business
is 600 cr with 1200 cr in steel division which I feel is a bit skewed towards
steel although we know Surya for light. Gross Operating profit earned from steel is
73 cr, it is 108 cr for lighting business. Operating margin to capital employed
are just 6% for steel business while these are 18% for lighting. I think it makes much sense for
Surya to invest more into lighting and expend more for brand building. It has
also entered into UPVC pipes recently which are growing faster than steel pipes
in india.
Regards
Gurpreet Singh.
(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)
