Bajaj Electricals Ltd

Due to year end closing and audit, i am unable to post regularly. However few days back i have entered in Bajaj Electricals at 220/-. In my earlier post, i have preferred surya roshni over it due to loss incurred by Bajaj. But after delving dipper, it has emerged that for first nine months of this year, its consumer product division has posted a profit of around 117 cr, while its engineering contract business has posted a loss of 110 cr. Engineering division is showing losses due to aggressive bidding in the past. Now management has decided to bidding for profitable projects only. Order backlog for loss making projects is reducing.

So bajaj is going to show huge profits in future years. Its consumer divison is having a ROE of around 70-80% (need to recheck, but it is near this) which can envoy even greatest of FMCG giants like Nestle. It has also come into my knowledge that company has gone for outsourced business model for consumer products mainly because of Govt. regulations which has stipulated this segment for small scale units only. It also needs to be confirmed.

But I have replaced my entire holding of Surya Roshni with BEL due to its superior business model and brand recall. Surya has blocked a lot of capital in low margin Steel business.

I will post a complete study on Bajaj electrical whenever I’ll have time.

CMP is 222/-

(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)

Gas supply issue of Gujarat Borosil

One reader has highlighted the problem faced by Gujarat Borosil of reduced supply of Gas from Gail as it has to import high cost LNG/CNG.

Yes, this gas issue was a concern since last year. This year for first nine months, total power cost is 17 cr for a turnover of Rs. 107 cr, last year it was 13 cr for 96 cr….not much difference though. But this is going to fall by big margin because of the recent fall in oil prices. Internationally Gas prices are linked with oil and unlike oil (OPEC) there is no such producers’ cartel to control the supply side of the game. LNG prices skyrocketed last year in asia due to strong demand from japan due to closing of many nuclear plants and strong demand across the region. But now Japan is reopening some of its nuclear plants again, growth of china is not going to be that much high, huge supply of Gas/LNG is coming in the market from Australia and Brazil, China is also investing big for shale gas and any success in this will bring more gas into the market.

In the short to medium term, prices of gas will be low as most of the producers has already committed the huge investments and till they are getting their operating costs they will produce gas. But huge emphasis worldwide on renewable energy means that we won’t see historical high prices of gas back again. As per latest estimates, Indian LNG prices will be around $9.5 in first quarter of 2015 as compared to $20/15 last year. I think Gujarat Borosil will be able to counter this Gas issue.