Balaji Amines - Takeaways from their quarterly conference call

Balaji Amines had a conference call on July 28, 2011.

Here are the key takeaways from it:-

1. Methyl Amine capacity is getting increased from 24,000 to 54,000 tons
2. Production of dimethylformide is to start by end of 2013. Total capacity planned is 30,000 tons. Currently, only RCF manufactures this in India and has a capacity of 5,000 tons. India imports the rest of the demand of around 30,000 tons. After Balaji's capacity comes online, India may be in a position to meet all of its needs domestically with some export opportunities as well.
3. The expected revenue from both these initiatives from a 3-year timeframe (2014-15) is about 350 cr. 180 cr is expected from the methyl amine expansion and another 170 cr from  dimethylformide.
4. The company has filed for European DMF for PVP K30. It will take about 6-8 months to get approval. Once approved, the company will be able to export PVP K30 to Europe.
5. The interest costs have gone up dramatically from 9-10% to 13.5-14% currently. This has resulted in high interests costs this quarter and is likely to remain like this for the next few quarters.
6. Prices of key raw materials have also increased after accidents in BASF and Nan Ya Plastics, two large global suppliers.
7. The company has a capex plan of 70 cr out of which 50 cr is for the methyl amine expansion and 20 cr for setting up dimethyl formide production.
8. Company has a working capital loan of about 80-85 cr and total loan book of 157 cr.
9. The newly added capacities are working at 40-50% of capacity currently.
10. The company is targeting a topline of 420-450 cr in FY12
11. The company is targeting a PBT of 47-48 cr in FY12
12. The promoter holds 54% of the company's stock and another 20% is held by close relatives. 20% of promoter holding is pledged to banks to get beneficial terms for the term loans.

Results Update Q1 2011 - JK Lakshmi Cement

	Q1 2010	Q1 2011	% Growth
Sales	323.59	391.79	21.08%
Op Profit	34.62	54.47	57.34%
Net Profit	16.81	22.75	35.34%
EPS	1.37	1.86	35.77%
Cash EPS	3.05	4.76	56.07%
Op Margin	10.70%	13.90%
Net Margin%	5.19%	5.81%

• Margins have increased
• Good overall growth
• Interest expenses have doubled and may go up higher in the next few quarters

Results Update - Shriram Transport Finance

Good set of numbers from STFC. Profit growth has been better than my expectation. But continuous rise in interest rates is surely going to have a more serious impact in the coming quarters.

	Q1 2010	Q1 2011	% Growth
Sales	1233.51	1393.22	12.95%
Op Profit	948.29	1039.49	9.62%
Net Profit	288.94	347.3	20.20%
EPS	12.76	15.34	20.22%

Results Update - Supreme Industries, Balaji Amines

Supreme Industries (Consolidated):

	Q4 2010	Q4 2011	% Growth	FY 2010	FY 2011	% Growth
Sales	669.98	732.52	9.33%	2007.02	2436.2	21.38%
Op Profit	100.82	113.94	13.01%	298.68	357.39	19.66%
Net Profit	51.91	60.25	16.07%	155.98	195.84	25.55%
EPS	4.09	4.74	15.89%	12.28	15.42	25.57%
Cash EPS	5.28	6.01	13.83%	16.45	20.29	23.34%
Op Margin	15.05%	15.55%		14.88%	14.67%
Net Margin%	7.75%	8.23%		7.77%	8.04%
RoCE%	7.47%	8.70%		21.95%	26.35%
RoE%	9.48%	11.00%		28.48%	35.76%
Assets	1138.48
Net worth	547.71
Loaned Funds	511.24

• Dividend of Rs 3 per share has been declared.
• No news on the real estate sale. 
• Q4 growth has been muted, although annual results are reasonably good.
• Net margins have been consistently been increasing last few years. Stands at 8.04% vs 7.77% last year and has actually doubled in the last 5 years from 4% in 2006.

Balaji Amines

	Q1 2010	Q1 2011	% Growth
Sales	78.91	114.52	45.13%
Op Profit	12.03	15.04	25.02%
Net Profit	6.22	7.17	15.27%
EPS	1.92	2.21	15.10%

• Interest outgo has nearly than doubled - from 2.65 cr to 4.95 cr

GEI Industrial Systems - Q2 results update

Good set of results from GEI Ind. The growth momentum continues.

	Jun-11	Jun-10	Growth
Sales	626	503.3	24.38%
NP	47.74	43.34	10.15%
EPS (Basic)	2.87	2.61	9.96%
EPS (Diluted)	2.49	2.61	-4.60%

Pledging of promoter shareholding has reduced from 45.03% to 37.77% of promoter holding.

Margins have reduced due to rise in raw material costs & higher interest rates. 

Portfolio Construction: What is the maximum percentage that a single stock should be within the portfolio?

After having answered the first question on portfolio construction (read about it here), the next question that came to me was about the maximum percentage that a single stock should constitute in one's portfolio. Again, there is no "rule" which prevents you from having your 90% of your equity networth invested in one stock. But like the decision to diversify, here also, I personally comfortable to invest up to 25% in one stock. But that would be really rare. I have to be very very convinced of the story and the fact that my downside is limited for me to go to that extent.

I had in two occasions invested close to 25% in one stock. One was in Tata Motors at 100-110 levels. I sold it off around the 980-990 levels after it had failed to break the Rs 1000 barrier and I got frustrated holding on to it :-)

The second instance was Supreme Industries. I had invested around the 40-45 levels (split adjusted). The downside was limited by their real estate value of their Andheri complex. It has since moved to 200+ levels. Although, I have not yet sold my positions in Supreme, the portfolio weightage has reduced because I have added other stocks.

In general, I prefer to have somewhere close to 5%-10% invested in one stock. I typically increase or decrease the position based on market price and my conviction level.

Sintex Ind - Results Update

Good set of results from Sintex. The growth momentum continues.

Consolidate Net Sales is up from 930.9 cr to 1128.8 cr (up 21.3%)
Net Profit is up from 78.8 cr to 94.6 cr (up 20.1%)
EPS up from 2.91 to 3.49 (up 19.9%)

Monolithic segment order book at Rs 3000 cr after Q1 execution.

Category	Q1 FY11 (cr)	Q1 FY12 (cr)	Growth (%)	Remarks
Building Material	358.4	473.2	33.5%	Company adding execution capability in Bihar Private sector orders flowing in, reducing the dependency on the government projects for Pre-fabs
Custom Moulding	450.7	523.9	16.2%	Pursuing growth opportunities at 12-15 new companies
Textile	98.3	109.3	11.2%

Negative
The pledging of promoter holding has gone up from 29.6% (Q1 FY11) to 38.14% (Q1 FY12).