Topline is ok at 218cr, bottomline disappoints at -0.2cr. Promoters are very ethical. The company is in turnaround mode (foray into PVC pipes) and may take sometime before it could realise its full potential.
I am a buyer at today's closing price 600-610.
Omkar Specialty Chem - Concall Update – 2H will be better than 1H on topline growth (Fund raising on cards if they go for acquisition)
· Revenue breakup - Of the total sales, for Q2 about 44% came from Iodine derivatives, about 34% from intermediates, about 17% from API's, Selenium derivatives about 4% and rest came from resolving agents. During Sep'15 quarter, about 92% sales came from India and rest were from exports. For 1H, about 31% of total sales came from Iodine derivatives, about 43% from intermediates, about 20% from API's, Selenium derivatives about 4% and rest came from Resolving agents. For 6 months ended Sep'15, domestic sales contribute about 61% of total sales and rest were from exports.
· Higher trading volume led margin contraction - OPM was lower on YoY basis by about 190 bps YoY, as sales for Q2 included Rs 20crs of trading business. These trading business were relating to sales on trail and error of products before going for a complete commercialization. As per the management, commercialization of some of these new products which are iodine derivatives will take place in H2FY16.
· Leverage - Gross debt stood at Rs 218cr vs Rs 224cr in Mar’15. There were deferment of some short term debt in consultation with banks which led to increase in LT debt from Rs 60cr to Rs 115cr while ST debt declined from Rs 140cr to Rs 100cr as of Sep’15. D/E at 1.17x vs 1.32x in Mar’15. Company plans to reduce debt by Rs 20-25cr by Mar’16.
· WC Cycle – Company’s WC cycle stands at 103 days as of Sep’15 vs 111 in Jun’15 and 143 days in Mar’15. Company targets to bring it down to 90 days over a period of time. In near term WC cycle will be around 95-100 days.
· Capex and expansion - Unit V received environmental clearances of its Unit V at its Chiplun facility and commercialization to start from Nov 2015 onwards. Thus the overall capacity of the company will increase gradually by 3000 tons by early FY17 and will further increase by another 2000 tons by early FY18. The company has done most of the capex and residual capex of about Rs 15 crore will be required further if any. At optimum capacity utilization of all the plants and units, the company can generate revenue of around Rs 800-850cr.
· 2H will be better than 1H on topline growth – Management guided that H2FY16 will show higher revenue growth on YoY basis than H1 growth. Further, OPM is expected to improve further and will inch towards 21%. As per the management, new products in higher margin segments and newer geographies will drive higher margins and revenues going forward
· Fund raising only if company go for acquisition (Key Overhang) – Company is look out for Formulation API plant in veterinary space with approved facilities for EU/US markets. Company will fund it through equity (QIP) mostly. Not yet zeroed down to any potential target and its strategic plan to integrate its business. For ongoing business, no need for funds and is currently FCF positive.
· Update on Pledge - Mgmt guided that pledge to come down gradually going forward. Pledge was to fund WC requirement
Overall..fund raising and another acquisition is unnerving...
Discl...not invested.. will wait for better entry point
Any view on Q3 Results?
Hi Raj,
TPP is a potential threat for Kitex. Forget vietnam, why we are not seeing the threat from Singapore based Gimmell - which is the second largest manufacturer of infant wear after China's Wingloo. It produces its own yarn and fabric, so the so called restrictive clause of having yarn and fabric from a member country is not applicable to them. They are already backward integrated. They have a good portfolio of brands already - having a good name in the global market. 15-30% duty on US imports is a major chunk which will surely shift the clients to the Singapore based company. Quality which we see as a barrier will not apply here, since gimmell ranks 2nd and Kitex ranks 3rd. Gimmell supplies to brands like Nike - proof of their quality. India needs to do something, else Kitex price is just going to tumble.
Apart from this, the cash issue worries me to a huge extent. I was ready to invest, just didnt because of this reason.
Where is the corporate governance gone - Mr. Sabu M Jacob??
The promoter keeps 250 cr idle in the listed company...and sets a 50:50 JV between his childrenwear and the listed company. If he is so great promoter, he should have invested all the 250 cr idle money in this US company and give the benefit to the investors.
Do not under estimate the promoter...He is also an equity research analyst..and has his own brokerage firm...till I know...He knows well..how to dress the financials and make them look lucrative...
I might be rude towards the promoter...but the fact makes my behaviour correct...
Keerthi Industries is a stock in cement space. The company is in Nalgonda district which is near to Amravati city. Company has high debt but through financial structuring, its Interest coverage ratio is good. Also, its margins are amazing. June qtr is generally not a good quarter for Cement companies but even then it reported good sales increase compared to Mar qtr. March qtr was also very good. In June qtr, it used bigger part of profit to pay debt so profit was little less than March qtr.
Overall you will find that debt is not a problem when earning is visible. When interest coverage is already good then we are almost safe from any downside. Location is a big advantage. In that area, all companies are doing good. NCL industries is another good investment from that area.
One disadvantage of Keerthi is its low floating market cap. 75% is owned by promoters group. High ownership is assuring but this resulted in low liquidity of stock. This disadvantage cannot change.
It has given 10 times in 52 w, so currently resting but this has given a buying window for us. Even at consolidation phase, it is going up. Coming result will cement its turnaround and will be a strong trigger.
Another segment it is in its Circuit board. It got order from defense. Stock in defense is trading high. In future, if it can get another order like that then we can't say what high valuation it can command.
It is trading at very low PE of 4. P/B ratio is high- 5. But seeing its operating margin, that is not a big deal.
Remember - before bifurcation of state, development became standstill due to protests. Govt spending became low. With that economic downturn has resulted in big loss to cement companies in that area. High power cost added worry to cement companies. Now, coal is also cheaper. Both newly formed states are big on development agenda and going good.
Overall revival in reality space will take time but in that part of India, reality and infra is state reason.
Only big thing unknown to me which can help me guage more of coming profit is utilization rate at present.
Disclosure: invested here. And NCL ind.
Reasonably good Q2 quarter despite slowdown stories by analysts.
http://www.bseindia.com/xml-data/corpfiling/AttachLive/CEE1F746_4465_46AC_8BCC_81DB26CF7188_174936.pdf
Summary - 258.32 Cr Topline & PAT 4.58Cr
My take away is following,
1) Results are GOOD, improving.
2) If you start looking at gross & net margin its not lucrative per say, 6Cr goes for loan interest. But long term story is intact. They are in the process of setting new showrooms, they are in expansion mode. Once everything is in place, next infra & housing boom AGL will beat Kajaria. I am saying so with the great conviction because the quality of AGL tiles/quartz slabs is great with competitive price.
3) Ex Somany COO is CEO of AGL group. Sales & customer orientation will take a shift.
PS : Invested from 70 levels. One should do the due diligence before buying.
Thanks Abhishek, Great work. I went through the story of Hengdeli. I think what worked for them was the fact that they had exclusive distribution rights of renowned international brands which KDDL lacks. Also, it formed a JV with Swatch group to engage in wholesale business of Omega and Rado. Due to this arrangement I believe their procurement costs were lower. As a result, other retailers partnered with Hengdeli to buy watches from them which led to topline and profit growth.
YoY numbers are flat. Company has reported decrease in long term borrowings while short term provisions have gone up.
Disc :- I hold
Thanks guys..Just went through the thread..very insightful
I think the main concern in this story is the growth. I have no doubt that this is a strong business. However it caters to a structurally weak industry and hence I feel there is only a limit to which it can grow. I have been thinking if the business still has some runway. The growth of the business will depend on the following factors-
Increase in Passenger traffic- Since their revenue is based on per transaction basis this becomes an important criteria. As per the forecasts, passenger traffic is expected to grow at the rate of 4.9% for the next 20 years. What do you guys make of this?
Profitability of airline sector- The medium term outlook is good due to fuel costs. Also, I believe the software cost will be a minor portion for the customer compared to other expenses. Accelya Kale will lose the customer only if it goes completely out of the business. Since their softwares are based on financial solutions, Kela is focusing on the pain point of the industry. As per a Forrester Research report(that Kale paid for) the ROI for the airline will be 77% on a risk adjusted basis with payback period of just 8 months.
New products- One of their main products is RIVERA which is considered one of the best in the industry. All other products , I believe will be cross sold to its customers. The company has been innovating and coming up with new products. Whether these products are good enough to be sold individually is yet to bee seen
New customers - The top 15 players account for more than 50% of the revenues in the industry. . The top 20 players account for 80% of the passenger volume.
If I go through the list of customers on their website then out of the top 15, Accelya Kale has tapped into just two players - Air France and Cathay Pacific. The total market Kale caters to in terms of revenue is less than 20% of the industry. However, as per an ICICI report, Accelya Kale boasts of 17 of the top 20 companies as its clients. Can anyone verify on this? If its the latter then the scope of growth is lower right?
Would request fellow boarders to share their views on the above issues.
Concall details:
Day/Date: Wednesday, October 28, 2015 Time: 12:00 noon
Access Numbers
Primary Number: +91 22 3960 0711
Secondary Number: +91 22 6746 8311
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