Tuesday, 22 December 2015

Vacuum Fillers: Dredging corporation of India Ltd and Snowman Logistics Ltd



Vacuum Fillers: Presently I am studying some companies which have the strength or can achieve the scale to fill up the huge demand supply gap in the near future for some much needed products or services which have in them to make our production very competitive.  Study is under progress but I am sharing the snapshots just in case somebody likes it and have it right at the moment. Incidentally these are related to indian logistic sector which is so far a drag to the economy as logistics cost in india are 14% of GDP as compared to 6-7% of developed world. Any Improvement in this can bring huge gains.

Dredging corporation of India: Dredging is making the depth of ports at a certain level so that Ships can navigate easily as they need depth from 10 m to 15 m. With the use, sediments accumulate deep down the port Bed which are then removed with the help of Dredgers. Some of the big ships need around 20 m to 24 m. as usual we Indians are way behind in this also with depth of around 12 m to 14 m in most of the ports here which render us unable to reap the benefits of economies of scale by transporting the cargo by bigger ships. A much larger ship like one with 14000 TEU (twenty feet equivalent units) capacity , the cost is almost 60% of a ship with capacity of 6000 TEU.  It becomes a double edge sword when big ships unload their cargo at bigger ports like Dubai and Colombo; from where cargo is shipped to india via smaller ships. 

No indian company is having a deep anchor in this sector with PSU Dredging corporation of india being the largest but with much of its dredging fleet being older dated back to 1970-80. 

Another big opportunity is Inland waterways projects of Indian Government which will make it possible for us to fully reap the benefits of large rivers like Ganga. We can pollute our Mother Ganga with all possible garbage but can’t use it for the best. India has just 14500 KM of inland waterways even these are not used for transportation of goods which can be very cheap as compared to road and rail. And our Non-religious Neighbor China has waterways of 100000 km and it transports around 47% of its cargo via water, we are at 3-4%. Even  EU is at 44%, Bangladesh at 35% !!

Number of inland vessels in india are just 1000, in china there are 200000 and 11000 of EU.
But now india is waking up and just recently they planned a waterway from Varanasi to Haldia of 1620 KM. Dredging is constantly required to keep these waterways navigable.

So we will see huge demand for dredging. DCI is the biggest indian Dredging service provider but garners just around 700 cr of turnover. But it has acquired 3-4 new vessels in last 2-3 years and plans are for better planning of its finance.
I am buying it regularly around 360-370. CMP is 370.

Snowman Logistics: We do not want to waste our life in tiny worldly matters. We see life as Maya but when we move in a Temple, all we seek is; Girl next door named Maya. We are a country of contrasts. We proudly regards agriculture as our identity but every year we waste fruits and vegetables equivalent to the UK’s yearly consumption!! No contrast here…UK do not consume smaller amounts of fruits and vegetables; it is we who waste big…around 40% of annual production. It is worth 50000 cr.

A quantity of wheat equivalent to one tonne per person for the entire population of Australia is wasted by India every year. India is the second largest producer of fruits and vegetables (about 200 million metric tonnes) but it has a very limited integrated cold-chain infrastructure, with only 5,400 stand-alone cold storage having a total capacity of 23.6 million metric tonnes. Most of this (around 80%) is for Potatoes and Onions. No wonder we only process just 5-6% of our agri produce against 80-90% of the western world. This is one of the main reason of wide swings in the prices of these; either we are long or most of the times short but never in balance for much of the time. Traders call the shots in indian agriculture produce.

So again here too, possible scale is huge but Snowman Logistics, the largest in indian cold chain scores just 250 cr as annual turnover. This is nothing and I hear some says it is overvalued!!! PE ratio of 30-40 is irrelevant at this time as it is investing big regularly in capacity expansions, the benefits of which will accrue in the near time.
Gateway distriparks ltd is the promoter of it, with negligible debt (70 cr) it is poised to show stellar performance in the future. Our eating habits are changing. Our new friends like Pizza, Burger king, KFC’s etc all rely on cold chain infrastructure to constantly provide us the same taste.



CMP is 82. Just Freeze it.


(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. I am not a certified Sebi Analyst and holding the shares discussed in this Post)





28 comments:

  1. Dear Sir, Thank You for the valueable information. I have watched Modernisation of Major Ports Press conferance by Nitin Gadkari couple of months back.

    Thanks,
    Satpal

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  2. Hello sir

    Nice write up and good information. Pleasure reading your blog.
    would be happy to know your thoughts on DENORA india

    Thanks
    Shilpa

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  3. Thanks Dear...I have never studied Denora...but in spite of interesting portfolio of products, its turnover is hovering very low around 30-40 cr for last 4-5 years...although the target area of its products is quite big. What are their plans for getting the scale? So can't say much but the reason of this needs to be checked before committing anything. I think BASF and Clariant Chemicals are much better...i am invested in these.

    I think you also posted about Valiant comm, which i could not study fully due to lack of time. But be careful while picking these small caps during bull market. Getting an order is not a winning the race but completing it profitably.

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    Replies
    1. Will note your points and thanks for the update.

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  4. Hi sir,
    Great post again and like your simple ways of explaining complex sectors. Congratulations and thanks for your beautiful picks. scary of buying these days as many small caps are hitting UCs but sitting on cash(little though:)) is bit difficult seeing the euphoria in markets. Your thoughts sir? Also any pharma stocks in you radar?
    Thanks again...keep writing and educating us.

    ReplyDelete
    Replies
    1. Orchid Pharma is looking to be at an inflection point. Recent FDA approvals, CDR, UK group ready to loan upto 5300cr, company exploring new growth opportunities in export market.

      Its a quality company (Serum is invested here!) but debts are huge - 3000cr odd which may hinder the turnaround. Will let Gurpreet sir comment if he is tracking it (lately).

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    2. Dear Pawan, Nice to see you back. Well, Orchid is under my watch list for long but never got the chance of studying it fully. But yes, If it can solve the issues related to quality then scale will come which will take care of debt.

      The same thing happened with Jubilant life sciences ( I am invested in it from 150).
      Although i am not heavily invested in indian pharma except Biocon. Biocon is a unique dose due to its superior research capabilities and low exposure on USA. The same thing is with Piramal Enterprises, in which i am heavily invested, although it is a quasi play of Pharma and NBFC. Its pharma arm is focusing big on indian market.

      i have always found USA a very matured and dangerous market that is why i am not invested in these companies although i am very positive on indian story.

      Pharma is very complex although it looks that india produces cheap generic drugs from raw material. but thins are not that simple. In fact we are importing 90% of API (raw material) for 15 very essential life drugs from China like paracetamol, aspirin, amoxicillin etc. Indian drug makers imports around 60-70% of their raw material. So things are very complex here.

      So every pharma company is not same. It should be weighted according to product line and exposure which requires very deep analysis. Like now as we know that we import bulk of our aspirin, there is a company named Aandhra sugar ltd which is one of the major producer of the same in india. So we can sense the business opportunity here.

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    3. Yes Sanjeev, you are right in that so many useless small caps are rising; typical of a bull market. we need to escape from these traps. Although small caps and mid caps can give huge returns but they also much greater analysis especially with regard to fairness of books and promoters. so it is much better to stick to high quality mid caps and small caps.

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    4. Hi Gurpreet , Did u see Managlam drugs ? You have replied on the same in earlier post. All the way from 450 to 240 to lower circuits.50% down in just 15 days.

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    5. Hi, The defense ties are happening aggressively and I feel it might be ok to pay premium valuation if worth.
      Please advise ur opinion.

      1. Sankhya - Don't like promoters
      2. Avantel - There is a lot discussion in web that it will be 20 bagger from 100 levels.
      3. Centum - At 660 , I am more keen because of management.
      4. Axicades (software) - Good promoters and no. of biggies too. Not sure of the 50% fall in last few months and picked up again . I think "Zen technologies" is in similar lines too.
      5. Precision - Just 10 cr revenues. Not sure about buying at 50-60 cr mcap. But at 35+ , google Ex-head (LALITESH KATRAGADDA) purchased 72000 shares.

      Ignoring Astra,Nelco (Book value 2),BEL & BEML (Alerady huge M.cap ) .

      Please advise do u track any of these or anything related to defense . I am holding "Tata Power" though.

      Thanks
      Sridhar

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    6. Hi Sridhar, i have just seen Mangalam and it has again shown us to be very careful w.r.t to these small bombs.

      I was having Avantel 2 years back but sold around 70..although i like the business idea but sold it as i was a bit skeptical but now will take a look again.
      Others are also worth looking. Thanks for sharing

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    7. Thanks Gurpreet sir for your views on Orchid. Thanks also for your timely advice on Mangalam, you got me rescued this time :) (as I recall my experience in Pochiraju)

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  5. Hi Gurpreet

    Could u please explain how the FREE floating stock should be calculated. Assuming 75% is holding by promoters , what is the rest of % holding to be deducted which is not available for daily trades.

    Institutions - As these guyz enter for long term , is it safe to assume stocks wont be available for trading
    Bodies corporate - This % is frozen , correct ?
    Investors holding more than 1% - Do we need to deduct this as well.
    We also have different categories like "Trusts , Foreign individuals " in Others category.
    (or)
    Can we simply say "Individual shareholders holding nominal share capital up to Rs. 1 lakh" is called "Free floating stock" ?

    Thanks
    Sridhar

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    Replies
    1. In General, to calculate Free Float, we deduct Promoter holding, Government holding, any institutional holding which is not meant for trading and other restricted stocks. Actually it has a floating meaning...it basically means the shares which are available for trading in the market... so FII's holding can be free float if it is not institutional means it is not a strategic investment with promoters.
      For simplification, you can treat all public shareholding (more than 1 lac also) as free float.

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    2. Thanks for the clarification

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  6. Replies
    1. A Prosperous and Shining New Year to You Sir

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  7. Hi Gurpreet

    Wish you a very sweet and prosperous New Year.Hope you have a great time ahead.

    Thanks
    Sridhar

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    Replies
    1. My Best Wishes for the Best Ever New year full of Peace, Energy, success and Divinity.

      Delete
  8. Dear Gurpreet,
    Development of port sector has been long pending, neither Govt spending nor PPP model has worked. It's all in papers. Why will this time be different. All I find is words/intent of politicians but the same has not percolated down to actions.

    ReplyDelete
    Replies
    1. Dear Arvind, Policy paralysis should not be always treated as a limitation; especially for a value Investor since this long inaction is an opportunity. Off late, policy makers have really taken some tough decisions. Even KM sheth of GE Shipping has confirmed the lowest level of red tapism in shipping now.

      And sometimes tough decisions have to be taken as there is no option left...case in the light is recent even odd formula in New Delhi. So there are encouraging signs here for Ports, inland waterways and shipping since a lot of WATER has already been lost. Do you think that we can still afford to pollute our Ganga anymore PROFITABLY? No, limit is already crossed...so there is no other option but to go for Cleaning and we can see an opportunity for Our Praj Industries :)


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  9. Hello sir...Happy new year!
    i have been holding skm for a year now and adding frequently and 2016 should be a good year for skm.i am in chennai and off late buying BEST eggs (skm brand) and also PORNA rice bran oil (skm feeds).Porna rice bran oil is very famous here in chennai...
    i just want to know whether skm revenues include skm feeds revenues in any manner? also i have been checking zauba export website for rough estimates of skm sales...excluding zauba what other sales should we keep in mind sir?
    Thanks
    Sanjeev

    ReplyDelete
    Replies
    1. Happy New Year Dear. SKM Feeds is a different company owned by the SKM group. Its revenues are not included into SKM Egg. Never checked Zauba...so can't say about this. I have left tracking it long time back since growth is back.
      I don't think that it has achieved a big scale in india, so majority of its turnover is of exports.

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  10. Hi Gurpreet ,

    Thanks for the regular updates in these volatile market.
    Just wondering do u ever feel , market is very heat and u feel stepping aside may be 3-6 month or so despite of the stock u like getting at cheap valuations (stock specific approach) ?

    Thanks
    Sridhar

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    Replies
    1. Actually it depends upon the level of our involvement...if we are already having big exposure and only having routine cash then it is better to wait...but if we are having low exposure then it makes sense to invest in high quality dividend players...avoiding the temptation for unknown small wonders.
      Making money in the stock market is never easy...in fact it is true everywhere. This type of Volatility tests the character and will power of ours as investors....and we have to live it to learn and experience this wonderful, prompt, never delaying judge...the stock market

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  11. Hello sir

    Long time no post...would be great if you can share your thoughts on current volatility and stocks worth accumulating...also waiting for your inputs on valiant communications
    Thanks
    Sanjeev

    ReplyDelete
    Replies
    1. Hi Dear,
      Actually busy in so many other things...so just couldn't finish some new posts although there are some i have started. However i am sharing my views via blog email ID oscillationss@yahoo.com. Are you added into the list? if not then send an email to this ID and i'll add you into the list.
      Regards

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