Vijay Kedia is one of our favourite stock pickers. His life story of rags to riches is inspiring and tells us that we can also reach similar heights with hard work and a bit of luck. His stock picking acumen is shown by his multi-bagger stock picks like Cera Sanitaryware, Atul Auto, Liberty Shoes, Premier Explosives, Manjushree Technopack etc. It may be a coincidence but several of his stock picks mirror those of Dolly Khanna.
Vijay Kedia’s latest stock pick is Apar Industries, a small cap company with a market capitalization of Rs. 1600 crore, engaged in the manufacture of aluminium conductors, transformer oil, specialty oil and cables etc, used in the power sector. On 3rd November 2014, his firm, Kedia Securities Pvt. Ltd, bought 200,000 shares at Rs. 389 each, shelling out a cool Rs. 7.78 crore.
Another big ticket investor in Apar is Prashant Jain’s HDFC Mutual Fund which bought a chunk of 402,000 shares in July 2014 at Rs. 365 each.
Credit for putting Apar Industries on the investors’ radar has to go to Rajen Shah of Angel Broking. Rajen first recommended the stock in December 2011 and followed it up in December 2012. On both occasions, Rajen conducted a brilliant analysis on why Apar Industries is a great buy. He made several points but one of the important ones is that the promoters along with eight entities own 91% of the equity and the floating stock in the market is hardly 9%. Rajen recommended a buy on the basis that the scope for “re-rating is huge” and that the “downside is very low and the upside could be very huge”. Rajen was perfectly correct in his analysis because Apar Industries is up nearly 268% since his first recommendation in December 2011.
The best way to understand Apar Industries’ future prospects is to read their investors’ presentation, issued after the Q2FY15 results.
The report points that a host of reforms initiated by NAMO for the power sector, such as the Coal Ordinance, fixation of gas price, fast tracking of project clearances etc means that the power sector is on the path of revival. It is emphasized that Apar is “well poised to grow with multiple growth drivers” and details are given of each of the drivers. The presentation also explains the financial performance of H2FY15 and why the EBITDA margins and PAT dropped for Q2FY15.
From a look at the presentation and the other research material, it appears that Rajen Shah’s advice of 2012 that the scope for “re-rating is huge” and that the “downside is very low and the upside could be very huge” appears to still hold good.