Neha Majithia (formerly of Microsec and now with Crisil) and her former colleagues at Microsec have an enviable track record at finding winning stocks.
Stellar stock picks like TTK Prestige, Hawkins, Greenply, La Opala, Somany Ceramics, Dhanuka Agritech, PI Industries, Cera Sanitaryware, Amara Raja Batteries, Whirlpool etc, etc tell you that this bunch of ace stock pickers knows what they are talking about (see the research reports of August 2009 and September 2012 for proof). The best part is that these stocks were recommended when they were unknown and not in fashion. Each stock has since given manifold returns to its investors.
Neha Majithia issued a report dated 31st July 2014 in which she recommended a “strong buy” of a micro-cap called Lloyd Electric. She gave nine reasons in support of her thesis. Each reason is striking for its clarity and simplicity. At the end, Neha promised a target price of Rs. 205 for the stock, which meant an upside potential of 67%.
Well, the stock then was at Rs. 123. Today, about a year later, it is at Rs. 232. This means that Neha’s target price has been exceeded and her followers are basking in fantastic gains of 89%. The stock touched a 52-week high of Rs. 252 on 13th July 2015.
Now, if you are one of the lucky shareholders of Lloyd Electric, you have to hold on to your shares tight because Dolly Khanna, our favourite stock wizard, has decided that Lloyd Electric has a lot more potential that Neha Majithia gave it credit for.
Dolly holds 140,177 shares of Lloyd Electric as of 31st March 2015. The holding is worth Rs. 3.25 crore at the CMP of Rs. 232.
It is easy to see why Dolly is so bullish about this micro-cap. Lloyd has been growing at a steady pace over the past several years. Over the past five years, the sales and profit have both grown at a CAGR of 21%. The average ROE is about 11%. While this is not spectacular, it is reasonable.
The Company has put in a spirited performance in FY 2013-14. On a consolidated basis, the revenue from operations for the FY 2014-15 was Rs. 2172.67 crore as against Rs. 1775.96 crore for FY 2013-14, registering an increase of 22%. The EBITDA was Rs. 245.59 crore as against Rs. 214.29 crore, higher by 14.6%. The PBT was Rs.111.11 crore as against Rs.97.03 crore in the previous year, registering a growth of 14.5%. However, the PAT for the year was Rs.88.41 crore as against Rs.89.12 crore in previous year. The marginally lower PAT was mainly on account of extra tax provisioning as against the previous year, wherein due to deferred tax credit, the aggregate tax expense was reduced.
Further, as the annual report points out, the Indian air conditioners market is projected to grow at a CAGR of around 15% during 2014-19. The market for air conditioners in India has been on a steady growth ever since, apart from certain exceptions. It is also stated that the perception of people towards the category of this product has witnessed a paradigm shift over the years from a luxury product to becoming a necessity in hot humid weather conditions of India. With extremely low penetration, rising per capita income and hot and humid climatic conditions in most part of the country are boosting the sales of air conditioners. In addition to the growing demand for room air conditioners on account of the improving lifestyle of expanding middle-class households, the central air conditioning systems are also anticipated to grow due to the growing construction market in the country.
There is also an “Investor Presentation” which gives us all the data about Lloyd’s ambitious plans.
So, one shouldn’t be surprised to see Lloyd Electric touch new heights, bringing cheer to Neha Majithia and Dolly Khanna and their vast legion of fans.