Nitta Gelatin Ltd - CMP 196

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by Guru Vachaal, Apr 19, 2017.

?

Are you interested in this stock?

Poll closed Jun 18, 2017.
  1. yes

    2 vote(s)
    33.3%
  2. no

    2 vote(s)
    33.3%
  3. will study first

    2 vote(s)
    33.3%
  1. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Bringing your attention towards Nitta Gelatin Ltd for long term investment purpose.

    Annual Sales 349 cr
    Market Cap 177 cr
    Net Profit 20 cr
    PE 8 / FV 10
    OPM 13%
    Reserves 125 cr

    In 1975, jointly with Kerala State Industrial Development Corporation Ltd. (KSIDC), Nitta Gelatin started its operations in India. This successful Indo-Japanese venture set new industrial standards through a smart combination of technically qualified people, state-of-the-art technology, service and a focused approach.

    Nitta Gelatin India Ltd. (NGIL)’s extensive product range includes Gelatin for pharmaceutical & food applications, Wellnex Collagen Peptides for joint health & skin beauty, Di-Calcium Phosphate as poultry feed ingredient, NutriGold as agricultural growth promoter, Ossein and Chitosan for agri and industrial application. More than 60% of NGIL’s products are exported to over 35 countries including Japan, USA, Canada and the European Union countries.

    In 2009 NGIL started production of Wellnex Collagen Peptides, which has been proven to be effective in joint pain management, bone health and skin beauty. This is extensively used in healthcare, cosmetic, food products and confectionery.




    Nitta Gelatin Confident of Turnaround - Sajiv K Menon
    http://www.thehindubusinessline.com...-confident-of-a-turnaround/article9569821.ece

    Residents prevent Nitta Gelatin from drawing water - TOI report
    http://timesofindia.indiatimes.com/...n-from-drawing-water/articleshow/57068210.cms

    I feel stock is already trading at very low PE because of the pollution and raw material cost concerns but likely to turn around in mid term - long term.

    I have entered in this stock.

    CMP 196
    @RAMA MURTHY SASTRY CHALLA @Srouta Mukherjee @w4wealth @Meenakshi Razdan @Farhan Ghumra @good stocks @kharb
     
    Last edited: Apr 19, 2017
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  2. ksr

    ksr New Member

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  3. ksr

    ksr New Member

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    Very good company. Only problem it is based in Kerala. Environment extremists are after this company. In Kerala they can close down any Co. temporarily with political backing. I buy only bank stocks from Kerala and ones like v guard which is opening factories in other states
     
  4. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Kerala State Industrial Development Corporation itself is invested which is a government agency.

    In contrary of that problem this is what MD Sajiv Menon said on CNBC
     
  5. Farhan Ghumra

    Farhan Ghumra Active Member

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    Promoter holds 75% that's quite good.
     
  6. ksr

    ksr New Member

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    It is good Monopoly stock. No doubt.
     
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  7. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Just like China, India is also moving towards industrialization at a rapid pace and in such an environment nobody cares about the environment :p

    Stock is cheap. Consider it. ;)
     
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  8. Manmohan Gupta

    Manmohan Gupta Member

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    Bought 150 shares at 200 today for long term.

    Guruji ki jai.
     
  9. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Make sure you dont invest big amount in this risky bet. Infact all my bets are usually very risky.

    Recently promoter has increased his own stake in the company. This may be seen as a positive signal about future growth.
     
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  10. ksr

    ksr New Member

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    On April 25 NGT rejected Nita plea to stay conditions imposed for pollution control. Justice S Nair said in Chennai the affected Chalakudi river is a source of drinking water.
     
  11. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    24 April 2017
    Green activists need a better legal vigil
    The Chennai Bench of the National Green Tribunal (NGT) giving almost a clean chit to the Nitta Gelatin plant at Kathikudam in Thrissur came as a surprise to the activists engaged in a struggle against the plant for the past many years. :p
    http://www.deccanchronicle.com/nati...reen-activists-need-a-better-legal-vigil.html
     
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  12. Manmohan Gupta

    Manmohan Gupta Member

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    Aaj accha move diya stock ne.
    Volumes are also good.
    Lagta hai upward journey start :)
    Guruji ki jai
     
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  13. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Yes stock is likely to move higher with good volumes. Lets see what happens.

    CMP 207
     
  14. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    I have been observing the rising delivery based volumes for the past 3 days.

    Tomorrow is the result date. Lets see what we get. Although production may get a hit due to water issue but that is probably already factored within the price.

    CMP 216
     
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  15. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    (recent article published on a business magazine)
    Nitta Gelatin India Limited (NGIL), a joint venture between Nitta Gelatin of Japan and Kerala State Industrial Development Corporation Ltd (KSIDC), has been around since 1975. It manufactures gelatine for pharmaceuticals and food applications, Wellnex collagen peptides for joint health and skin beauty, di-calcium phosphate as poultry feed ingredient, NutriGold as agricultural growth promoter and ossein and chitosan for agricultural and industrial applications.

    NGIL has three plants in Kerala, at Kathikudam, Ernakulam and Alappuzha. Its subsidiary, Bamni Protiens, has an ossein and di-calcium phosphate plant in Gujarat and another subsidiary, Reva Protiens, has an ossein and limed ossein plant in Maharashtra.

    For the December 2016 quarter, sales fell by 15.14% year-on-year (y-o-y), reaching Rs80.3 crore; operating profit shrunk by 22% y-o-y, to Rs10.26 crore; and net profit fell by 29.96% y-o-y, to Rs5.26 crore. For the past five years, the average sales growth has been 12.75%. During the year, the crushed bone quality for exports could not be met which led to a decrease of 19% in export volume of ossein and limed ossein. The unit realisation during the year increased, covering the decline in sales volume. The margins, however, did not increase much because of the 11% increase in crushed bone prices. Exports accounted for 50% of the total sales in FY15-16. The management also reduced the overall utility cost by Rs6.08 crore, selling expense by Rs3.52 crore and finance cost by Rs2.48 crore, which led to an increase in pre-tax profit of the company to Rs18.15 crore, from Rs1.39 crore in FY14-15.

    For FY15-16, the return on net worth (RoNW) was 9.38% and return on capital employed (RoCE) was 13.48%, the debt:equity ratio stood at 0.67 and the cash earnings per share (EPS) stood at Rs22.20. Calculated on trailing 12-month basis, the stock is trading at market capitalisation-to-sales ratio of 0.53, market-capitalisation-to-operating profit ratio of 4.19 and price-to-earnings ratio (P/E) of 9.17. The company had free cash flows of Rs6.79 crore at the end of FY15-16. It announced a dividend of 25% (Rs2.50 per share) as the final dividend for FY15-16.

    The management announced on 2 February 2017, that the company will be lowering the production of ossein at the Kathikudam unit (Thrissur district), as it had received an order from the district collector to reduce the consumption of water until the monsoon season during June/July 2017.

    The growing use of gelatine in applications such as food and beverage, pharmaceuticals and nutraceuticals is expected to drive the demand for gelatine in the years to come. The volume of domestic sales of gelatine rose 11.27% during the year and touched 2,120.9MT.

    A study on the global collagen peptide and gelatine market published recently by Transparency Market Research states that the global gelatine market is anticipated to rise at a compounded annual growth rate of 7.50%, reaching $3 billion by the end of 2020, up from $1.8 billion in 2013.

    [​IMG]
    The availability of good quality crushed bone at a reasonable cost is critical for the competitiveness of the domestic ossein and gelatine industry. The government has now allowed imports. The global price of crushed bone is under Rs25/kg, whereas Indian prices are at around Rs28-Rs30/kg which is a sharp drop from last year’s price of nearly Rs35/kg. This reduction in raw materials cost is expected to improve the bottom-line. Since crushed bone can now be imported, the quality issues will be resolved, raising exports in the coming years. The management has been able to reduce costs in FY15-16, and with better raw materials prices, increased exports and cost reduction, the company is likely to grow. The environmental issues at the Kathikudam plant in Thrissur, highlighted by environmental groups, have resulted in concerns being expressed by the Japanese joint venture partner. NGIL has invested Rs20 crore for environmental management systems in the past two years, but the protest is continuing. It is, therefore, also looking at other options, including scaling up production at the company’s Rs80-crore greenfield plant at Gujarat.

    The promoters hold 74.48% and the balance 25.52% is held by the public. The stock rose to its 52-week high of Rs245 on 7 November 2016 from its 52-week low of Rs160.40 on 30 May 2016. The stock was trading at Rs207.70 on 4 May 2017.
     
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  16. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Q4 result was well expected due to water issues but still I would say that company has performed well.

    There is an increase in stock in trade by 10.61 cr due to which profit appears to be poor at first sight.

    Check Q4 results here
    http://www.moneycontrol.com/financials/nittagelatinindia/results/quarterly-results/NGI04#NGI04

    Dividend declared at Rs 2.5 per share.

    CMP 200 (stock recovered from Rs 194 during the day)

    today I have increased my stake in this risky stock.
     
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  17. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Currently the Company is restricted to draw water from challakudi river due to shortage of water in nearby areas. Now that Met department has estimated that monsoon with 96% rain is likely to hit kerala by 30th may 2017, company may perform well in coming quarters.

    CMP 197
     
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  18. Manmohan Gupta

    Manmohan Gupta Member

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    Can we buy more at CMP? For 2-3 year view?
     
  19. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Yes you may buy for 2-3 years but this is a high risk stock so invest that you can lose with least pain.
     
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  20. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

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    Had a recent conversation with the Managing Director of Nitta Gelatin.

    Water Drawal restrictions have been removed and management is looking forward to sustain the profitability and drive growth.

    8% YOY drop in turnover of NGIL is due to change in the business model of subsidiary company Reva Proteins Limited which was earlier operating as a tolling unit for NGIL but is operating as a standalone unit with effect from April 1, 2016

    I personally feel that India is preparing to become a drug manufacturing hub and Nitta products can play a crucial role in that. Since its a government owned JV so may be external issues (pollution and other legal issues) can be tackled more effectively. (You know what I mean).

    The common treated effluent discharge pipeline for Reva Proteins Ltd (subsidiary) set up by M/s. Narmada Cleantech Limited, was expected to be commissioned during mid 2015-16 is likely to start by the end of first quarter 2017-18 (as per latest annual report).

    CMP 185
     
    Last edited: Jun 9, 2017