Shyam Sekhar’s debut stock recommendation yields 48% gain
Sintex Industries Ltd, Shyam Sekhar’s debut stock recommendation, has yielded mammoth gains of 48% in just a few days.
Obviously, novice investors who obediently followed Shyam’s recommendation and bought Sintex are laughing their way to the Bank.
No doubt, the interest of heavyweight investors like Morgan Stanley in the stock has helped matters.
Textile sector will see better days in exports
Shyam Sekhar has made the confident pronouncement that the exports from the textile industry will see better times.
Spent 2 days in Tirupur, TN's textile hub. We are clearly into better times for exports. The confidence of private exporters was gratifying.
— Shyam Sekhar (@shyamsek) July 20, 2017
We have to compliment Shyam Sekhar for doing old-fashioned scuttlebutt by going all the way to Tirupur, a trait that novice investors do not possess.
Tirupur is said to be one of the nerve centers for knitwear production in India (the other is Ludhiana). It is popularly called the “dollar city” of Tamil Nadu because of its dominance in exports.
The first hand information collated by Shyam corroborates the point made in my earlier article that the textile industry is slated to touch a mammoth size of $250 Billion in two years.
The Hon’ble Textile Minister has also claimed that GST will provide the much needed impetus to the textile sector.
Dolly Khanna’s textile stocks will also sparkle
We must also note that Dolly Khanna’s favourite textile stocks, namely, Nandan Denim, RSWM, Sutlej Textiles and Nandan Denim are well poised to reap the benefits of the boom in the textile sector.
Sutlej Textiles has also emerged as a favourite after Kotak Securities issued an initiating coverage report on it and recommended a buy. Kotak’s logic is very sound and it has foreseen a target price of Rs. 1220 for the stock.
It goes without saying that we have to load up on one or more textile stocks in our respective portfolios.
Prima Plastics, a “mega multibagger in making”?
Now, let us get down to the main story of the day.
Prima Plastics, a micro-cap (Rs. 287 crore) engaged in the manufacture of plastic moulded chairs, was first discovered in July 2014 by Chetan Phalke, the illustrious founder of Alphainvesco, a stock advisory service.
He rightly pointed out that Prima Plastics has a number of virtues such as average ROIC of 20%, low P/E, low debt, CAGR sales growth of 16%, CAGR profit growth of 39%, high dividend yield which make it investment worthy.
It is unbelievable that the stock has since surged from a paltry Rs. 19 to the CMP of Rs. 261, putting mammoth gains of 1300% into the pockets of its investors.
Aceinvestortrader, the famous anonymous blogger, is next in line to receive credit for recommending a buy of Prima Plastics.
In his typical bombastic style, he described Prima as a “mega multibagger in making”.
“I was awe struck the moment I realized what a great brand I was missing in my core portfolio”, the mysterious blogger exclaimed.
He assured his followers that the stock “will not just double or triple and stop. It will go wayyyy beyond” and advised them to “grab the opportunity while the big guys are busy analyzing messed up big businesses”.
Needless to say, the stock has surged like a supersonic rocket since then and notched up gains of 550%.
Of course, the target price projected by the experts was too conservative and Prima has effortlessly taken them out.
Aggressive ramp up by Shyam Sekhar in Prima Plastics
Shyam Sekhar has given yet another example of his astute investing abilities by slowly but steadily increasing his stake in Prima Plastics.
He made his debut in March 2015 with a holding of 71,173 shares. By March 2016, the holding was increased to 178,507 shares. As of 30th June 2017, the holding stands at 2,35,816 shares.
He has the single largest individual holding and towers over the other individual shareholders in the Company which includes names like Punit Shailesh Bhuptani, Subramanian P and Pandian Ilangovan.
No doubt, this is a classic example of “averaging upwards” i.e. buying more stock as the fundamentals of the Company improve even though the stock price has also increased.
Novice investors are loath to average upwards and instead lie in wait for the price to slump to their original buying price, which seldom happens.
The investment is worth Rs. 6.13 crore at the CMP of Rs. 260.
The stock has yielded a 24 month gain of 233% and a YoY gain of 53% which are very handsome gains indeed.
Jyotivardhan Jaipuria makes debut into Prima Plastics
We are familiar with Jyotivardhan Jaipuria’s profile. He has had an illustrious career as an equity analyst with big-ticket brokerages like BoA ML and is frequently seen on TV pontificating on abstract issues relating to the stock market.
He has now started his own PMS Fund called Veda Investments.
Unfortunately, Jaipuria has never offered stock recommendations and so there is no way we can objectively evaluate his stock picking prowess.
Anyway, the important aspect is that he is now the proud shareholder of Prima Plastics with a holding of 48,000 shares as of 31st March 2017. The holding as of 30th June is not known.
What are the prospects for Prima Plastics?
There is also an investors’ presentation which lays bare the growth plans etc.
Prima facie, Jyotivardhan Jaipuria may have been drawn to Prima Plastics owing to the benefits that will accrue to it from GST.
He referred to this fact in his latest interview to ET:
“We are nibbling at some of these stocks which will gain from the GST. So as the domestic unorganised sector loses share, the organised sector will gain market share. So there are some stocks we have been nibbling at. A lot of these things are known and valuations are expensive. So we keep looking where we can get it a little cheaper and buy some of these.”
It is well known that unorganized manufacturers are the bane of the plastics furniture sector. If GST sounds their death knell, organized manufacturers like Neelkamal and Prima Plastics will prosper.
The annual report explains that the new manufacturing unit at Ongole, Andhra Pradesh, the expansion of the Joint Venture at Cameroon by doubling the capacity and the setting up of the subsidiary company at Guatemala, Central America during FY 2016-17 will drive revenue and profits.
It is also stated that the Company has launched new range of plastic articles with better consumer taste which are expected to fetch higher demand of these products.
The demand growth of plastic articles will obviously increase with higher capita income of Indian middle class.
There is also a huge untapped market in new territories of Indian market. Export markets will also prove to be a goldmine opportunity.
The Company has stated that it expects to achieve about 10-15 percent annual growth in turnover in the medium term, which is quite commendable.
Prima Plastics is still a micro-cap with a market capitalisation of only Rs. 287 crore. Obviously, this is nothing for a company with powerhouse capabilities, high RoE, debt-free status, brand image, insatiable demand etc. We should not be surprised to see the duo of Shyam Sekhar and Jyotivardhan Jaipuria bask in more riches from the stock in the near future!