I agree over all it looks very interesting and valuations are attractive.
However the sales have gone up only from Rs340cr to Rs440 cr, I know you mentioned the issues of Andhra /Telangana but how do you explain the demand in housing loans in general last few years in Andhra? We have to make sure it can grow and continue to grow, thats what will create wealth.
Posts in category Value Pickr
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
US based NRI’s – How do you guys invest in equity now? (04-10-2015)
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Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
The capacity expansion happened along with the slowdown in the andhra region. in cement, you cannot expand markets too far from you.
Also, its not that they are totally laid back. Sales have gone up 5 times in last 10 years @ 15% cagr.
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
The capacity expansion happened along with the slowdown in the andhra region. in cement, you cannot expand markets too far from you.
Also, its not that they are totally laid back. Sales have gone up 5 times in last 10 years @ 15% cagr.
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
Again nice story, promoters have made it integrated (sorry I havnt verified but counting on your summary), but considering the age of company and though they had decent cash flows why couldn't they expand the market to utilize the capacity to even half?
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
Promoters are very reputed. One good thing i heard is that they even pay intrerest to banks many months in advance , which is rare and commendable.
The other moat is that it takes many years to setup a plant. Getting mining leases , etc is tedious and time consuming.
Sometimes it is better to have a promoter who is not very ambitious. There are many instances where promoters chasing growth have misread the demand leading to companies going under.
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
agree.
I'm looking if it has a moat here as Cement is a commodity and entry barriers are not very high.
I gather from your report the below advantages --> can they become moat?
- Proximity to new capital.
- Lower transportation costs leading to 'low cost' supplier.
- One time BIG construction activity for next few years.
a. Having captive power plant and limestone are good but even other cement companies mostly have it, like Sagar cement.
During your research, what did you feel about promoters? Any nice points, any blemishes? Do they have the passion to make it big in the business?
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
Thanks Ashish. there are many infra triggers in the region. Google will give you all the details.
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
Transportation of cement is one of the biggest costs. Local cement companies will have huge cost advantages compared to those far away. The cement required has to be supplied by all...one guy just cant do it. the rising tide will lift all the boats, we just need to see which will give the maximum ride with highest margin of safety.
Sagar is a confusing story. They sold a plant. Then they bought another plant. Debt levels are also high.
Deccan Cement : Dull company.Dull business.Big wealth creation opportunity (04-10-2015)
really impressed man. good write up.
the company is located at such a perfect location. also a tech zone is planted in raysellam district, a dam,a capital, polavvaram canals.
its being at the right place at the right time.