DIC India - will it continue its journey on the turnaround

Views invited

Watch the Q2 results today

 

Results just in.....

YoY sept qtr PBT up over 6times and sequentially QoQ up 27%

Full year EPS expected to be upwards of 30/- (FV 10/-). PE reasonable ~ 20-22 at the moment. But its a multinational and a leader.

For those who may not be aware Coates of India is now DIC

 

Is this a buy candidate for long term

 

GREAT RESULTS. I think it will go for circuit today

 

In my view it is very expensive stock in chemical industry ,
CMP : Rs.680

DIC India PE Ratio is at 36.98

and also Last 5 years net profit Decline continuously and last year company showed loss Rs. 30.89 Cr.
Just because of one quarter result never buy this stock ...
don't calculate PE Ratio with latest quarterly profit , take annual profit and EPS only ,

and also major point is company profit margin is very low ....

for long term investor please watch next quarter also ....

In my view in chemical industry so many companies are strong and available at low valuations ,
" TATA CHEMICAL " is available at PE Ratio 17.14

please avoid this stock

 

I suppose you will have a similar opinion about Ricoh India

 

Ricoh India PE Ratio is at 74.44
it is very high price stock ..

Jun 2015 quarter PAT is 4.05 Cr. , and major point is it is not come through sales profit , in that quarter other income is Rs. 20.50 cr. Very low profit margin earnings

It is a heavy debt company Total Debt of the company is Rs. 700 Cr.

In my view AVOID this stock

 

Btw -

- DIC is specifically in the printing (ink) and stationery segment and not chemicals generally
- the last 4 qtrs PBT are 0.0, 5.76, 9.5 and 12.04 (crs).
- 9months to sept EPS is already 23.5. Capital is just 9.1crs (FV 10). With CMP Of 724/- ( stock is up 5% today) how does one get a PE of 37
- last year the company showed a loss of 31crs.... Do you know the reasons why?
- do you miss that my thread is titled ' will it continue on its journey of TURNAROUND'. Surely with your expertis and knowledge i dont need to clarify that in turnarounds its the future which is to be looked into and not past.

Anyways differing opinions are healthy. Having invested at levels of 500 just a couple of months ago i have no regrets for my take is it will touch 1000 by march 16

 

DIC India :

DIC India (DIC) is a part of the World's largest manufacturer of printing Inks and allied material, DIC Corporation of Japan. DIC Japan has a 71.75% share holding in DIC India Limited

DIC India is one of the largest companies in the Indian printing, publishing and packaging industry segment, serving top-of-theline newspapers, magazines, packaging and printing establishments in the country. Formerly known as Coates Of India Limited

The company has continuously surpassed its own milestones year after year and today has become the supplier-of-choice of national and international printers and conversion agents through continuous enhancement of quality and offering best services and products. Growth and product leadership has been the key to the company’s strong financial performance, allowing it to appropriately reward both its associates and stake holders

DIC India's revenue was stagnant over the past three years because of weak macro-economic conditions and increasing competition. The company reported an operating margin (loss) of 1% in 2014 as against an operating profit margin of 4% in 2013, following a slowdown in end-user industries and higher raw material prices. Furthermore, in 2014, bad debts and transport expense had increased substantially. Certain high-value debtors were written off, leading to increase in bad debts, which are non-recurring in nature. Moreover, price hike to its transporters and change in distribution channels resulted in higher transport expenses. Also there was a sharp rise in raw material prices in 2013 (due to rise in crude oil prices and USDINR rate), which resulted in losses. The company could not pass on the increase in the raw material prices to the customers. In 2014 DIC India also provided for VRS payments to its workers at Mumbai (pre closure of its unit) amounting to Rs.21.1 cr

However, DIC is likely to benefit from strong operational and technical support from its parent with respect to its focus on value-added products, increasing exports, and cost-reduction initiatives; these are expected to improve the company's operating performance in 2015. indications of this is available in the results of CY15

Land bank worth Rs.400-500 cr: DIC India has closed the manufacturing unit of the company located at Chandivali Farm, Mumbai as it now fell within a residential area. The closure of the Mumbai unit has in no way affected the overall production capacity of the company as relocation of the manufacturing process has taken place. It currently has a land bank of 7-8 acres at Chandivali which is worth Rs.400-500 cr. The land use conversion process has already taken place. The probable sale of the Mumbai property could result in increase in cash flows/profits.

Stability in crude and raw material prices to result in better operating leverage. Crude being a major input for DIC India has aided in the company improving its operating margins

DIC essentially caters to the FMCG and print media industries, whose volumes are less susceptible to any economic slowdown.

Recent change in top leadership (March 2015) and renewed focus by parent could result in sharper focus and better growth

 

It is a Diversified specialty chemical manufacturer related printers , Chemical solution materials business segment to the country which includes DIC's varied products and technologies based on synthetic resins and organic pigments applicable for a variety of industrial fields including electrical/electronics, automotive, and housing.

i know the title of this thread " will it continue on its journey of TURNAROUND' "

 

I think you miss a few points
- my thread is about the ongoing turnaround and not the past which your analysis focuses on to conclude that the stock is overrated / expensive
- comparisons neec to done between peers and not unrelated companies which may happen to be within the chemicals universe

Your extract relates to the Chemical solution business ( one of the 4 divisions of Parent DIC) which DIC India has brought to India, but its primary business segments are still Inks and Adhesives...

 

@Sachin

you missed my points , ongoing turnaround is depend and based on profit turn out and consistency in future quarterly also , i am trying that point , you missed that point
with out past numbers how can assess company strength it is also major part in fundamental analysis ...

In dalal street investment journal DIC India is in " MEDIA PRINT " sector

company inform to bse stock exchange it is a " Specialty Chemicals " sector

 

@Sachin

past always reflecting company strength through result numbers , if suppose any company turnaround to
lose to profit , there is no guaranty that it may fall again into lose next year ....

if anybody invest in a low priced stocks in turnaround companies , you are trying to buy a lose making company a turnaround to profit in a price of Rs. 710
if next year it again fall into lose making company , what you will do ? after that stock is in a worst fall ...
be careful with this type of stocks ...



My reply to this is simple : Past is past. It doesnt provide any guarantee or strength about the future....in future what if there is a union carbide like industrial accident at Tata Chemicals? Do you really think its low PE and past financial stability will be of any help to it and will it also help the poor investors who may invest basis an advice.

Focusing on past like what seems to more often emerge from your posts will just ensure you missing out on good/sustainable opportunities and their associated value creation.

I dont hand out an advice whether to buy or not. Leave it to individuals to take a call on the opportunity highlighted.

 

my reply

you are coated rare case like union carbide accident ..... that is not applicable to general ...
If like that nobody will not buy any oil company or boarder state companies ... like reliance ind ..jamnagar is very nearer to pakistan boarder with in 50 km
Nestle ...magi issue also there that is not our main subject

so all sectors are some or other risk is there , in pharmacy so many cases about patents on top class companies we are not discussing about those maters ....

thread is not for that .....

Please remember hole fundamental analysis is depend on past numbers

 

What dalal street or bse category is doesnt change the fact that DIC India is into Inks and Adhesives... Even if it falls into chemicals generally and BSE/NSE listed stock category generally. I dont think Tata Chemicals even fits into Chemicals is suppose being a fertilizer company

So basis your approach/points / inputs of : ongoing turnaround is depend and based on profit turn out and consistency in future quarterly also &
with out past numbers how can assess company strength it is also major part in fundamental analysis ...

You concluded its overpriced and not to be invested in. Investors run the risk of losing money.... This without any assessment of what future quarters are likely to be ( ignoring or maybe not even looking at what the most recent 3 qtrs indicate) and a proper study at the past should have shown you a PBT CAGR of ~18% (between 2005-2011), why the big loss in 2014 ( essentially one-off's), why stagnant revenues and profit erosion. This has been captured in one of earlier threads which also tries to highlight what positives the company can currently leverage on.

I didnt miss the points you highlighted. Just that i dont see them to be the primary drivers/most important.

My thread was about whether DIC will continue its turnaround journey - first indicated at the start of 2015? The answer is a short and simple YES for even Q3 FY15 indicates this.

 

S

So basis your whole fundamental analysis, please dont invest in DIC India whilst i enjoy the fruits of my fundamental analysis plus emerging opportunity and have a 2x in less than a year.