Vijay Kedia’s portfolio boasts of several glittering multi-bagger stocks like Atul Auto, Cera Sanitaryware, Liberty Shoes, Premier Explosives etc. Of these, Atul Auto is probably the most successful one with an incredible return of 5700% in nine years.
In the wake of his spectacular success from Atul Auto, Vijay Kedia gave a detailed explanation of his technique for finding winning stocks.
Vijay Kedia’s latest stock pick is Amrutanjan Health Care. He bought a chunk of 609,865 shares of Amrutanjan in the December 2014 quarter. At the CMP of Rs. 396, the investment is worth about Rs. 24 crore.
Amrutanjan Health Care is a micro/ small-cap company with a market capitalisation of only Rs. 583 crore. It was started in the year 1893 and is a household name, at least in South India. It has several top selling products like Amrutanjan Pain Balm (the flagship brand), Gripe Water, Inhaler, Dermal Ointment, Cetomix cough mixture, Castor Oil, Swas Mints ‘Salofin’ tablets, etc.
|Amrutanjan Health’s Quarterly Financial Results|
|(Rs cr)||Sep 2014||Sep 2013||YOY|
|Adjusted Net Profit||4.10||2.98||37.58|
To understand what it is about Amrutanjan Health that must have appealed to Vijay Kedia, we have to turn to Sagarika Mukherjee of SBI Cap Securities who has analyzed the stock in detail. The salient points made by Sagarika Mukherjee are as follows:
(i) Amrutanjan is implementing a strategy to manufacture and sell faster growing categories like body pain management products, female hygiene products and food beverages products. Over the next three to four years, this strategy will propel the earnings growth at the topline by at least 16 percent odd. The bottomline is expected to grow by 28 percent odd. Though the margins may dip in the short run, they will eventually rise up because of high gross margins coming in from the other products;
(ii) Apart from new products, Amrutanjan is also intending to venture into other geographies. So, the overall the story is driven by venturing into new products, other geographies plus increase in distribution in modern retail outlets;
(iii) Amrutanjan is virtually debt-free. The cash flows are around Rs 10 crore-12 crore odd every year at the operating level. The capex requirements are also light.
Sagarika Mukherjee cautioned that there is a potential risk from aggressive credit extended to dealers in a bid to push sales. She also pointed out that Amrutanjan would get into competition with heavy duty competitors like Proctor & Gamble etc, who are already well entrenched in the FMCG/ OTC products that Amrutanjan was venturing into.
Of course, Sagarika Mukherjee’s target price of Rs. 300 for Amrutanjan has long come and gone. The CMP is Rs. 396.
So, now that we know why Vijay Kedia bought Amrutanjan, we need to see whether it will match the performance of its peers, Atul Auto and Cera Sanitaryware.