If you carefully ponder over Ashish Kacholia’s stock picks, you will find that he follows a rather elementary method for finding winning stocks.
First, he looks for stocks that are reporting good quarterly results. Then, he checks whether the growth is sustainable and likely to get better in the foreseeable future. If he believes that the company is on a secular growth track, Ashish Kacholia does not hesitate for a second. He grabs a mighty truckload of the stocks and sits tight.
It is this simple but effective technique that has enabled Ashish Kacholia to add winner stocks like Gati, Kitex Garments, Shreyas Shipping, Vadilal Industries etc into his portfolio.
Man Industries, Ashish Kacholia’s latest stock pick, fits that mould perfectly. On Wednesday, 8th July 2015, he stormed the counter and scooped up a chunk of 500,000 shares at Rs. 110.76 each. His investment in the stock is Rs. 5.54 crore.
Man Industries is a micro-cap with a market capitalisation of only Rs. 680 crore. It is engaged in the manufacture and export of large diameter Carbon Steel Line Pipes for various high pressure transmission applications for Gas, Crude Oil, Petrochemical Products and Potable Water. It has state-of-the-art manufacturing facilities for LSAW & HSAW Line Pipes and also for various types of Anti-Corrosion Coating Systems.
NVS Wealth Managers has summed up the salient features of Man Industries quite well. Let’s take a quick look:
(i) MIL posted robust financial performance for Q4FY15 with revenue increasing by 80% YoY to Rs. 655 Crs as compared to Rs. 364 Crs in Q4FY14, net profit rose by 1,559% to Rs. 45 Crs (Rs. 3 Crs) the EPS working out to Rs 7.8 and OPM & NPM stood at 13% and 7% against 7% and 1% respectively.
(ii) MIL’s FY2015 consolidated total income increased by 36% YoY to Rs. 1,364 Crs. (Rs. 1,005 Crs). Net profit for the year increased by 458% YoY to Rs. 50 Crs. (Rs. 9 Crs.) and EPS working out to Rs. 8.8 on a tiny equity capital base of Rs. 28.6 Crs. At a CMP of Rs. 73 the share trades at a PE multiple of ony 7x and the Mcap at only Rs. 418 Crs.
(iii) MIL has a strong presence in exports market with Middle Eastern countries as major of its business volumes is exported to that region. MIL also exports to other regions like USA, Europe, Africa and South East Asia.
(iv) MIL’s marquee clients list includes GAIL, IOCL, HPCL, BPCL, ONGC, Reliance, Adani, BHEL, L&T, etc. in domestic market and in the international market it caters to SHELL, Kinder Morgan, Kuwait Oil company, Hyundai Engineering & construction Ltd., Petrobrass – Brazil and many more.
(v) MIL has the opening order book at Rs. 1,000 crs and in month of May bagged further export order of Rs. 510 crs aggregating to Rs. 1,500 crs + in the beginning of the fiscal year, indicating a strong financial performance. MIL has outstanding bids over USD 2 billion at various stages of evaluation for several other oil, gas and water projects in India and abroad. Normally this orders are executable over a period of 3-6 months and further orders during the course of the year should enable robust performance in the current year too.
(vi) Assuming 30% topline growth (36%), company could gross the Topline of over Rs 1,775 Crs in FY16, EBITDA of Rs. 187 crs and PAT at Rs. 85-90 crs with potential EPS at Rs 15 +, making the share available a little over PE of 4x.
NVS advised its investors that Man Industries offers an “excellent opportunity for growth” and “strongly recommended” the stock for investment.
NVS sent out the recommendation on 19th June 2015 when the price was Rs. 73. Today, barely a couple of weeks later, the stock is at Rs. 119, reflecting a gain of 63%.
However, given that Ashish Kacholia bought the stock at Rs. 110, it may be reasonable to assume that there is still a lot of value left in the stock.
NVS have also pointed out that the proposed demerger of Man’s real estate business into Man Infraprojects Ltd will result in “value unlocking” for both companies. It explains that the real estate division has a land bank worth about Rs. 185 crore, which will work out to about Rs. 15-20 per share.
The other research report by Sunidhi Securities paints an equally rosy picture about Man Industries.
There is also an interview of RC Mansukhani, Chairman of Man Industries, where he explains the future prospects of the company. He points out that the company presently has an order book of Rs. 1000 crore for mostly high value added products and that it has put in bids for orders worth about Rs. 12,000 crore. He also emphasizes that while the average EBITDA margins last year were around 10.82 percent, the company would be able to now maintain roughly 12 percent in the year 2015-16.
So, it does appear that Ashish Kacholia has once again made a sensible stock pick which will enrich his portfolio.