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Monday 21 September 2015

Filter Out The Noise

I have stopped blogging over the last few months to be on the right side of SEBI's guidelines. Now, that there is some amount of clarity, atleast in my mind, I have decided to continue chronicling my thoughts once more. The only change is I will restrict myself from discussing specific stocks or valuations related to stocks. 

The last few months saw a tremendous amount of volatility. We have seen both 29000 and 25000 on the Sensex since April 2015. We have seen the Green drama, the unending US Fed rate hike soap opera keeps playing in the background every few months. We are also witnessing a human tragedy of great proportions in the Syrian refugee crisis. The run-up to the US elections has started and is likely to pick up momentum in the months to come.

Closer home, the Bihar polls are heating up. Lalu-Nitish-Modi are battling it out - or so the media would want us to believe. Hardik Patel wants reservations for the Patels in Gujarat. Monsoon session in Parliament did not achieve much, again as expected. Raghuram Rajan did not decrease rates.

So, where am I going with all this? I just want to highlight that all of this is noise. I sometimes go back and read old newspapers. I am yet to see an issue where there is no news printed. There is always something going on. As an investor it is critical to filter out the noise from the signal.

The signals which are important to me as an investor are the following:

  1. Passing the GST bill - this has long term implications as it is a fundamental shift on the taxation front. This bill has been making for over a decade and we may be in the last lap of the marathon. 
  2. Land Bill - After the Singur agitation, land acquisition all over India has become a non-starter. India needs a stable land acquisition policy so that industries can realistically acquire land for projects. The government does not seem to be making much headway on this.
  3. Improvement in Corporate Results - Quarterly results in general have been quite dismal. Management of nearly all the companies' for which I have attended conference calls stated quite candidly that on the ground there is very little traction in the core sectors.
I am skeptical of a major impact of rate reduction that everyone is so keen on. I cannot think that a company will decide to invest in capacity expansion because interest rates are 0.5% down. We need some major projects in the infrastructure space either by the government or incentivized by the government through tax cuts to kick start the real economy.

In the meantime, filter out the noise and remember that in India, news channels are for entertainment ;-)

Tuesday 19 May 2015

Stock Update: Sintex

Sintex has come out with a decent set of results for FY2015. 

FY2015 Results (Consolidated)
Sales : 7006.6 cr (up 20%)
PAT : 528.8 cr (up 45%)
EPS (Diluted) : 13.5
Building materials grew 16% yoy (from 2734 cr to 3176 cr)
Custom moulding grew 21% yoy (from 2566 cr to 3107 cr)
Textile grew 33% yoy (from 546 cr to 724 cr)

The company also announced that it had won a large government order for rural RO water shelter enclosure and healthcare centre from couple of states.

The company will add about 1 lakh spindles by Sep 2015 and 2.2 lakhs by Mar'16 bringing the total spindle capacity to 3.2 lakh spindles. Overall the company plans to increase total spindle capacity to around 10 lakhs but that depends on capacity utilization of the initial setup. Company expects operating margins from the textile division to improve by 0.5%  with economies of scale coming in with new capacities getting on-stream.

In building product segment, new products in segments of environment & clean fuels, cold chains and warehouses are driving growth along with education and healthcare sectors. The company has received fresh orders in Prefab segment from new territories and for new product ranges. The company is the only company in India to get government approval for prefabricated biogas plants.

Custom moulding did very well both in India and Europe and is likely to continue with good performance with a pickup in industrial activity.

Of the total US $ 120 M FCCB conversion, only US $ 17 M is yet remaining to be converted, which will happen in Q1 FY'16.

High debt and low promoter holding (and promoter pledging of shares) remains a risk and creates an overhang on the stock.

Overall, it is an interesting stock to keep a watch on.