quiz: guess the stock

I got a message from Katalyst wealth...guess the company

Details on latest Alpha stock

In general we look for small, simple, easy to understand businesses as we don’t find ourselves capable of analyzing companies like RIL, Infosys, L&T and the Nov’15 stock perfectly fits in our criteria of simple, easy to understand, scalable and decent business.


Product profile – The company deals in plastic related products. We like the plastic/plastic related products space as the consumption of the plastic products is increasingly improving and the products are fast substituting conventional products like steel, wood, etc in several spaces.

As per the report by Tata Strategic, India’s per capita consumption of plastic products is ~10 kg against 32 kg in Brazil, 45 kg in China, 65 kg in Europe and 109 kg in US. Current low per capita consumption level of plastic products as compared to developed countries per capita consumption suggests that India offers a huge opportunity over long term.

In fact, in the past we have initiated reports on companies like Wim Plast, Supreme Industries, etc with Wim Plast delivering more than 1000% return and still going strong in terms of business performance and we hope even Nov’15 stock delivers similar returns as the stock is still available at reasonable valuations.

Management – The promoters/management of the company have wide-ranging experience of plastics industry as the group is involved in several plastic based products ranging from machinery to key ingredients.

In small family run companies, it’s important from minority shareholder’s perspective that promoters own a large chunk of stake in the company and in the case of Nov’15 Alpha stock, promoters own more than 50% stake and have been continuously increasing their stake through market purchases.

Overall, company’s disclosures policies, remuneration to the promoters and related party transactions are within reasonable range and we haven’t found any major issues in terms of corporate governance.

As we will notice in the financial performance section, the management has also done a fine job of maintaining reasonable growth, profitability and has been rationale with capital allocation decisions.

The management has not diluted equity in the last 10 years and has managed to grow the business through internal accruals and low debt.

Operating Performance – If both the business and the management are good, it should reflect in the operating and financial performance of the company.

We strongly believe in the consistency of the past performance or improvement in operating performance based on carefully analyzed data and the current strength of the balance sheet to support the future growth and in the case of Nov’15 stock we find all the three.

Over the last 5-10 years, the company has consistently maintained 18-20% + growth, while during the same period the capital employed in the business has grown at a rate of 12-13%, thus indicating improvement in utilization ratios. The company’s debt equity ratio is also very low at less than 0.30.

Overall, the financial performance of the company has been good in terms of growth, profitability, return ratios and cash flows from operations.

As far as valuations are concerned, despite very strong operating performance and growth over the last several years, the stock is available at less than 10 times pre-tax earnings and offers dividend yield of 1.5%.

 

You must make rule that Katalyst subscribers cannot participate because other wise it is cheating and not fair.

I am almost 100% sure stock is Prima Plastic. Stock has map of only Rs. 123 cr. Promoter hold 58%. It is in plastic business. Stock has given 135% return in one year. But PE is 25x. It has low debt 0.8x.

Katalyst has found some good stocks. Prima Plastic appears to be one of it.

 

I can also think of Wim Plast and Supreme but it is referred in clues. Another plastic stock is Astral Polytechnique it makes plastic pipes.

 

Above mentioned all parameters matched..But promoters have not increased their share holding for last 8-10 years/...And stock already gave a handsome return...

 

Can be Plastiblends India Ltd ? Promotors increased their stake in june - sep qtr from 61.77 to 62.05.

 

Plastiblends is fulfilling all above parameters and promoters are increasing their shareholding consistently...But what their products portfolio...
I think the answer is Plastiblends India...but stock has already run and trading at 52 week high....what u say guys..