Balaji Amines - Results Update

Balaji Amines came out with their quarterly results today.

Sales grew from 63.67 cr to 96.69 cr (growth of 51.86%)
Operating profit grew from 9.18 cr to 15.99 cr (growth of 74.18%)
Net profit grew from 4.21 cr to 8.72 cr (growth of 107.13%)
EPS has grown from (1:5 split adjusted) 1.3 to 2.69 (growth of 106.92%)

Note: These are yoy Q3 comparisons.

Supreme Industries - A strong company (both fundamentally and technically)

Supreme Industries is a very large part of my portfolio. A few weeks back someone I was discussing stocks with asked me why. We discussed the fundamental story for Supreme. But there is another reason why I hold such a large percentage in my portfolio. If you look at the last six months chart, you will realize that the stock touched 165 before its split and has subsequently been consolidating. It does not move down with the Index which provides great comfort. And this has been true in previous minor market corrections also. It simply moves in a very small range but refuses to go down substantially. You need some stocks like these in your portfolio to cushion market movements.

Andhra Sugars - A quick look

A friend of mine suggested I look at Andhra Sugars. I took a quick look and here are my observations.

Andhra Sugars is mainly involved in manufacturing sugar, alcohol & alco chemicals, aspirin, chloro alkali, sulphuric acid and super phospate. To support its operations, the company has its own power generation capacity including a wind power generator.

There is some traction in its sugar and caustic soda areas. Caustic soda prices have gone up by nearly 30% in the last few months and sugar prices are also firm.

The company has initiated carbon credit trading benefits.

Financials:-
1. Overall, the company's financial numbers does not inspire much confidence. The revenue growth over a 5-year period is nearly flat.
2. The same situation is present for both operating earnings and Net Profit. The FY06 to FY10 EPS CAGR is 2.57%.
3. There has been no equity dilution in the last 5 years
4. The company pays a healthy dividend and the yield is nearly 4% (Rs 5 on CMP of Rs 120) although the payout has been fluctuating and has been Rs 7.5,6,5,6,5 in the last 5 years.

Observation:-
The company may well perform in the near term due to its twin engines of sugar and caustic soda price realization, but I would be very reluctant to invest here as this is purely a commodity business and it results are hostage to the various commodity cycles. So, if you decide to invest, you need to track the commodity prices closely and pick ear;y signs of topping. That, too me, is a lot of work which I am not very good at.

Balaji Amines: An Update

Balaji Amines has moved down from around Rs 56-58 the current levels of Rs 40-42. I am actually expecting it to do better than 7 EPS for Fy11. Pre-split my expectation was around Rs 35-38 for FY11 and Rs 44-46 for Fy12. ( I would not be very surprised if it does a little better than that). That means an EPS of 7-7.6 in FY11 and 8.8-9.2 in FY12.

Balaji's core business is doing well. Realizations have improved and the new product Morpholine is likely to enjoy better margins as it may attract anti-dumping duty in India.

This stock is a good candidate for attractive returns for the medium term (2-3 years) with a tentative price target of 70-80 by Mar-Apr 2011 and 95-100 by Mar-Apr 2012.

Sintex - Good Long Term Pick

Sintex is a solid company and has been in business for nearly 80 years. They are primarily known for their rooftop water storage tanks. Today, the tanks business is a small part of the overall company. Sintex has moved to becoming a major player in the infrastructure and plastics segment.

Some points for Sintex:-
* Promoter Holding has increased in the last 2 quarters (from Mar 2010 to Sep 2010) from 30.20% to 33.77%
* Has been paying dividends uninterrupted for 77 years
* Dividend paid is 5.98% of Net profit
* By 2012, India is expected to emerge as the world’s third largest plastic consumer after the US and China, consuming 12.5 mn tonnes annually and attracting US$80 bn fresh investments

Strategic developments, 2009-10
* Invested 137.89 crores in its standalone operations to enhance production and operational efficiency
* Established a new plant in Nalagarh while Nagpur and Namakal plants are under construction
* Nief Plastics acquired two companies named SICMO and SIMOP, increasing the European customer base; these companies are specialised in making and testing metallic moulds for plastic injection and light metal alloys
* Incorporated a wholly-owned subsidiary, Sintex Infra Projects Ltd to capitalise on the growing domestic infrastructural developments
* Acquired Esveegee Steel (Gujarat) Pvt. Ltd (100% equity stake) and renamed it Sintex Oil and Gas Pvt.

Building Materials Division:-
* 65% of sales
* Monolithic Concrete Housing Solutions, Prefabricated Structures, Liquid Management Solutions and Waste Management Systems
* Pioneered the manufacture of a range of panels used as roofing and wall materials. Energy Conservation Building Code (ECBC) 2007 is expected to drive energy-efficiency discipline in future, increasing sandwich-panel demand.

Core custom moulded products:-
* During 2009-10, Sintex initiated a project with Rafael, an Israel-based Company, supplying carrier cases for missile components

Areas of Future Growth:-
* Monolith construction, prefab construction
* The Company anticipates huge opportunities in the feeder pillar box segment owing to the growing popularity of underground cabling.
* Increasing focus on FRP transformer fencing, which is expected to generate enormous returns and volumes (received approvals in Gujarat and is likely to enter Uttar Pradesh)

On a consolidated basis, EPS for FY11 is expected to be around Rs. 30 (Rs 15 on the new FV of Rs 1) with a target of Rs 250-300 in the next six months. I am expecting the company to grow at an average of 20% over the next 3-4 years. With its existing consolidated PE at around 16, I do not expect any major re-rating to happen, so the growth in the stock price will come from the earnings growth.

LIC Housing Finance-Scam and Life thereafter

By now, everybody is aware and discussing about how people who earn so much and have such respect in their industries can stoop to such low acts as taking bribes!!! I will not dwell on the moral low that our leaders (both in the corporate and political world) seemed to have sunk to. Our job is to look at LIC Housing Finance as a business and a stock.

So, what really has happened here? A couple of people have allegedly taken bribes and given out loans to companies. LICHF's share in this is approximately 300 crores. For a company with assets of 38,000 crores and a net profit of 662 crores (FY10), the amount is not back breaking. Also, let us not jump to the conclusion that all of the 300 crores would end up as NPA. The company is operationally sound and is unlikely to go out of business. After six months, people will forget about this scam (the sad truth is that in this country nobody gets punished for white collar crimes!!!) and LICHF will continue to do well.

The stock has come down from 1300 to around 930 in a span of 3 days. So, what should you (or I for that matter) do? Well, I would think that this might be a good long term opportunity to BUY!!

The situation reminds me of the American Express situation when Buffet bought into it. So, if you have the courage of conviction and your wallet supports you, it might not be a bad idea to be a contrarion and buy LICHF now.

Notes from Investor Presentation dated 12 Nov 2010

* Supreme Industries Ltd (SIL) owns 29.88% of Supreme Petrochem. PAT of SPL was Rs. 60.58 crores in 2009-10, thus SIL's share of the PAT is 18.10 crores.
* Supreme Petrochecm is one of the largest single site Polystrene ( PS )producer accounting for 2% of world capacity. It owns 60% of domestic installed capacity.
* Sales volume to grow at CAGR of 15.60 % and likely to reach 3,24,000 MT by 2014-15
* Debt-Equity ratio has reduced from 0.8 to 0.6
* Positive cash flows at its operating as well as net level every year
* Even during tough times of FY09 company has made investment towards future

Supreme Chambers (Andheri Commercial Complex)
* Total Saleable Area : around 2,75,000 sq. ft.
* Total Project Cost : about Rs. 155 crores .
* Already sold about 40000 Sq.ft. with revenues of Rs 60.20 Crores.
* Plan to sale entire complex excluding one floor.
* Estimated total revenues from Sale about Rs. 375 Crores.
* Entire sale likely to fructify by Dec.2011

2015-15 Plan
* Capacity Expansion: The existing capacity to be enhanced to 595,000 MT by 2014-15 with Rs. 1000 crores of capex. This is to be funded by sales proceeds of the commercial complex and internal accruals.
* Diversify Product Portfolio: Focus on technological innovations
* Increase Share of Value Added Products: Enhance the overall contribution of VA products from 25% to 30%
* Widen Distribution Network: Increase channel partners and widen as well as deepen the distribution network

* Aim to become a Rs. 4500 crore turnover company
* Maintain 15% operating margins
* Overall growth of 17% y-o-y

Plastic Industry
Current Per Capita Polymer Consumption
US - 71.46 Kgs
Brazil - 22.71 Kgs
China - 30.74 Kgs
India - 5.66 Kgs