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Posts in category Value Pickr
Sarla Performance Fibres – Another Interesting Textile Story in Making? (05-11-2015)
I am using the Nylon 66 thread now and let me tell you, there is no one who cam make ropes like the ones made by Sarla Flex in the US. There are top quality and as their usage in human life goes up, so shall the stock price, they have just started the US thing and at 59 I took a sizeable position. I am expecting that after these umbers posted in Nov 15, the company can do wonders over the next few quarters till 2020 if it goes to 100% capacity in US too.
Prashanth Jain and Kenneth Andrade have a positive view on this too, just a matter of time before they get in.
Lincoln Pharma … the next mid-cap pharma in the making …? (05-11-2015)
@ansii77 heyy....stake doesn't matter. My question is on the operation of the subsidiary where PAT margin is too low to be believed. Chances of cash being taken out is high in this scenario.
While I noted ur point on the stake.
MPS Ltd (05-11-2015)
@Mahesh Mahesh
Just want to acknowledge your early work in MPS.
The competitive data that you had put up brought a lot of perspective for the early investors into MPS. You were he one who pointed to different margins at play among the bigger players, and other such data painstakingly put together.
Guys, if you give importance to this type of work at VP, please go back in this thread, and provide big-thumbs up (add your Likes) to that specific post that really stands out even today when you go back and browse the thread, among others
My perspective is that MPS is well known as a brilliant turn-around story in the last 2-3 years. What is interesting is that it could well be in the "Global Sweet Spot" that Management paints in 2015 AR (we should ignore the sleekly hyped up parts by Kolkata based AR expert, but not IGNORE the facts either)
Having said that, let me re-iterate for the benefit of newbies at VP
Do not start salivating at Mahesh's well-meaning comments either, no matter how much you respect anyone's work/contribution . Don't think the Verdict is out in the open. I wouldn't venture such adjectives as NO-BRAINER or mouth-watering prospects with some fixed multiples like EV/EBITDA or Acquisition track record, just yet. Can't be as simple as that, can it. As Hitesh has astutely observed A lot depends on how the Management walks the Talk in the next 2-3 years; how it executes, especially on acquisition front - that can make or break it - Ticket sizes are much bigger 10x last times - one can't help overemphasise.
The endeavour from here should be to dissect - Is it really in a Global Sweet Spot? Really? Why or Why not? Lets focus on that.
Let's ask tough questions on Business Quality. Sustainability of Competitive advantage for a Long Time, Can someone dislodge it from its perch? What all can go wrong?? Predictability of the Revenues/Profitability, Can it be a consistent performer over 3-5-10 years, why or why not? A lot lies on the answers to the above questions - Valuations will reflect that.
Disc: I am invested, as disclosed in the Management Q&A post. Very small allocation 2 years back. Having set the contours of the business that MPS operates in, I now find it has very little operational challenge, or disruptive competition, or Customer pressure. Everything works to its advantage, unlike many other quality businesses, It's quite free to keep executing. Much of my confidence is an ACT of FAITH ...The story can play out differently, if execution falters
Everyone - As influencers in this discussion/debate don't forget to add your disclaimers. Its a MUST. Also Like to remind we need similar disclosures if & when you exit, within reasonable timeframes.
Automated Stock Analyzer (05-11-2015)
@Doonsrini, error corrected and file reuploaded. Thanks.
Sarla Performance Fibres – Another Interesting Textile Story in Making? (05-11-2015)
Minutes of concall (note - had to be in/out of concall due to some work)
- Volume grew marginally by 4% y-o-y
- USA plant has broken-even
- Company is enjoying gross margin expansion due to crude price fall. Gross margins for H1 FY2016 have been 62%. However, historically gross margins have been ~52%, which is also very appreciable
- Nylon 66 plant commenced operations. Full year sales from Nylon 66 is expected to be ~INR 15 cr. hence, contribution to H2 FY2016 is INR 7.5 cr. 2 shipments already made till date
- RM/sales ratio is USA ops is 30% implying gross margin from USA plant of 70%!! RM/sales ratio from India ops has been ~50% over last decade!
- For H1 FY2016, India capacity utilized = 4700 TPA and USA capacity utilized = 1900 TPA
- Training manpower in USA ops is creating delay in USA plant's ramping up
- Guidance for FY2016 sales of INR 350 cr. and PAT of ~INR 46 cr.
Lincoln Pharma … the next mid-cap pharma in the making …? (05-11-2015)
Your assumption on stake in Lincoln Parenteral Ltd is wrong... It has increased its stake in the entity to 98.58%...
MPS Ltd (05-11-2015)
Great job ayush and rohit.
Two documents give most of the insights one needs to have about the business and management.
A few things which come across are;
If the trend of outsourcing continues and accelerates in the industry, (currently at 2-3%) then there could be a huge addressable market. By getting into relationships with the biggies, MPS is ensuring that if and when the market opportunity explodes, it is there with all the right armaments to tap the opportunity.
After reading the book OUTSIDERS, and looking at the things MPS management did, it gives me a de javu feeling.
Turning around an ailing business, effective utilisation of cash (high dividend payout), dilution when the time is right to build a warchest for potential acquisitions etc point to a very astute management. It has till now had a stellar track of wealth creation and could continue to do so.
The economic characteristics of this company are fantastic. All it needs is some strong organic growth and a few smart acquisitioins. How these things pan out would decide the kind of returns generated hereon.
MPS Ltd (05-11-2015)
Excellent work as always.....Donald, Ayush, Rohit and others you all deserve a big round of applause for this...you guys are doing outstanding work out there.
All positives are more or less covered in Q&A, MQ, BQ.....having studied this company in quite detail myself and being significantly invested in it over last more than one year, some points deserve attention :
(1) It's almost a one person story -- of Mr. Nishith Arora -- it is this person who has transformed this company, has put all the pieces together, has created an exceptional brand image amongst investors, has been keen and instrumental to see that nowhere company falters be it profitability strategy or handling distressed investors at AGM. Agreed there are capable senior managers to handle every unit as also now his son is CEO but without this man I see such determination in no other guy and that's a fact I need to accept. Tomorrow if this man is for some reason out of the story, the entire story will be very difficult to fructify.
(2) MPS has lagged and is still lagging relative to its capable Indian peers be it SPS, Newgen or even TNQ. First it was because of transformation into a profitable entity but even after the transformation, MPS seems to be not able to get organic growth. In my previous posts in this thread have enlisted YoY growth and EBITDA margins of each of the said and other entities and MPS clearly seems to be lagging in top line growth. Even if we see FY15, it's because of acquisitions that the growth seems good otherwise it is just a single digit growth. Agreed, SPS has the backing of a large client but other few players have also grown well and really well.
(3) MPS is not having macro triggers as our other stories like PI had nor it is having any competitive advantage. It's the positioning of the company in the industry that is majorly working to its advantage as industry doesn't have room for too many players. In addition to positioning, what MPS is doing is putting all pieces or capabilities together so inline with industry trend, a client will not have to go to any other player if it chooses MPS. However, 70 % of the industry players are finding it difficult to post topline growth and are sustaining because of niche margins or confirm specific amount of yearly work they get.
(4) QIP was a great step as manager of a company but from investor point of view it was not that great if there was nothing on drawing board. In industries like this where new business is not coming thick and fast, time lost is opportunity lost.....It's not that only MPS is out there to grow and reach top, there are other players too....Agreed a late well thought out decision is much better than a cash burning decision, but there is a time limit to everything especially when you are raising money by promising something and six to nine months is ok but if this thing goes on and on it will surely have an effect on brand image of the company amongst investor community unless the late acquisition decision is like Macmillan which shuts every critics mouth.
Having said all these, it's the current valuations which make MPS a no-brainer and risk seems to be very low as even without acquisitions it is trading at just 13 times FY16e EV/EBITDA which is mouth watering considering the past track record of Mr. Arora in acquisitions. If acquisitions are profitable without much debt then it could rerate the stock significantly from here on. Downsides seem to be capped unless company commits some sort of blunder that's what I feel.
Rgds.
Discl. - invested in MPS