**Mr. S V Raghavendra, CFO, Mr. Rajesh Jindal, VP & CMO of Automotive division,& Mr Srinivasa Rao Ganga, VP & CMO of Industrial division,addr the call.Highlights by Capital Mkt****
Amara Raja Batteries has registered 9% growth in net sales revenue to Rs 1158.29 crore for the second quarter ended September 2015. The growth was powered by demand from original equipment manufacturers and sales in the aftermarket.The Company's Automotive Battery business continued its robust growth across all verticals. The four wheeler batteries volume grew phenomenally backed by improved sales in replacement battery segment in both of our preferred brands of Amaron and PowerZoneTM. The volume growth momentum in two wheeler batteries in both Amaron and PowerZoneTM brands continued, further adding to the performance of the business unit. During the quarter, sale to OEM sector grew aided by growth in the OEM production of automobiles. The Company growth in aftermarket and OEM beyond the industry growth helped in gaining market share in both four and two wheeler segments. The Company continued trading operations in tubular batteries to sustain the growth, during a quarter which is treated as an offseason for the inverter business.
The Company's Industrial Battery business registered moderate volume growth over Q2 of previous financial year, in a challenging & competitive market conditions. The growth in demand from telecom sector is primarily driven by data growth and the drive for energy optimization by Tower Companies. The demand for UPS batteries is moderate. Increased Imports due to our country's Preferential Free Trade Agreements with ASEAN are a concern since the raw materials continue to attract higher import duty. Amidst these challenges, the industrial battery business improved the overall performance by virtue of its "preferred supplier status" with all major customers, efficient after sales service, customer relationship management, optimal product mix and consistent product performance of its flagship brands PowerStack, Quanta and QRS Series batteries. The Company has progressively started providing total solutions to customers enabling it to forge strategic alliances.
The Company 4W business grew 21% YoY while the 2W business grew 20% YoY in Q2FY16. On segment wise growth- 4W OEM rose 17% YoY and 4W Replacement grew 22% YoY, meanwhile, 2W OEM grew 15% YoY and 2W Replacement grew 24% YoY.
During the quarter, prices of major raw materials have been lower but the gains were partly offset by sharp depreciation of rupee against dollar. The reduced prices were passed on to the customers as per the contractual obligations resulting in marginal reduction in topline. However, the realization per unit for certain products and services have been better on account of cost improvements and better value proposition to various customers. The operating cash flow generation remained strong driven by improved profitability. The Company continues to have healthy liquidity position. The major projects of two wheeler expansion, inverter tubular batteries unit, LVRLA expansion are progressing quite well and are on track.
The Company capacity utilization for the 4W and 2W segment stood at 85% and 90%, respectively, in Q2FY16. 4W capacity has increased from 6 million to 8.25 million. Further increase in capacity to10million is possible in a short time frame of ~5 months when the need arises. 2W capacity will increase from the current 8.4 million to 11 million by end of the year. The Company expects that with the above mentioned capacity expansion it is well placed in the automotive segment to meet demand until early FY18
The Company capacity utilization for the LVRLA and MVRLA stood at 98% and 80%, respectively. LVRLA capacity will increase 20% to 1.4 billion AHby FY16 end. MVRLA capacity is 800-850 million AH with no plans of capacity expansion. However, incase of requirement, capacity can be added in a short time frame.
The Company plans aninvestment of ~Rs 500 crorein the tubular battery plant with total capacity of 1.5 million units. First phase with capacity of 0.9 million units is likely to be commissioned by end of thisyear and the remainder 0.5 million will be setup by December 2016. The Company presently sources tubular batteries from smallerplayers and plans to reduce or end sourcing fromthese players once its own plant ramps-up. Also, with its own capacity in place, the Company expects profitability from the segment is likely to increase by 400-500 bps. The Company expects the plant to achieve full capacity utilization of the initial 0.9 million units by end of FY17E.As per management estimates, the inverter market in India is ~8 million units. Currently,Company sells ~0.36 million units through the trading route.
The Company Powerzone brand priced ~10% lower than Exide and is growing at ~25%.Powerzone is positioned as a brand somewhere between the small/unorganized/localbrands and established brands like Exide/Amaron. In terms of margins it is not significantlydilutive, owing to its single level distribution model vs two-level distribution model forAmaron
The Company automotive replacement segment market share increased to~27% from 25%in FY15 while Exide's market share stood at 30%. The Company market sharein telecom segment stood at ~60% and in UPS segment stood at ~33%.
The Company plans Capex of ~Rs 600 crore for FY16Ecapex of ~Rs 300 crore for FY17.
The Company guides slowdown in replacement growth to 7-8% in medium term owing to poor OEM sales in the last 4 years. Telecom segment is likely to grow at ~8% driven by tower additions, in a bid to improve voiceclarity/calldrop scenario and on replacement demand. Industrial segment is likely to grow in double digit driven by revival in business cycle.
Posts tagged Value Pickr
Amararaja Batteries Limited: Powering Ahead (06-11-2015)
Cranex Ltd : A Material Handling Company and a value buy (05-11-2015)
As per below link Cranex Ltd owns 10000 sq mt land in Sahidabad Industrial Area
14 kms from Connaught Place NewDelhi .
Those from Delhi can confirm but when i search 99acres i get indicative rates ranging from Rs.30000 - Rs.60000 per sq mt . At lower end of 30000 this translates to land value of 30 Crs ( Co m'cap 4 Crs ) . Book value of this land in the annual report for March 2014 is just Rs.1835000.
Link of 99 acres which i accessed is given below for ref .
This is only an academic exercise since the land is where the factory is.But its an attempt to measure value.
Marico Kaya (MaKE) (05-11-2015)
Q2 Results continued to be mediocre. EBIDTA margin has seen slight improvement to 3.8% sequentially from 2.1%. Y-o-Y sales growth at 5% with both India and KME growth slowing down. 35 new Kaya Skin Bars opened this quarter though. No. of customers contracted in Kaya India while they grew marginally in KME.
In short, the struggle for the company continues.
Cranex Ltd : A Material Handling Company and a value buy (05-11-2015)
- Que : why should i look at Cranex when i have so many other "sure
shot " 20% cagr opportunities ? Ans : In Cranex we are betting on
non linear lumpy growth which if it works out will give us much
bigger upside with limited downside risk.Conservative capital
allocation of < 1% gives us the flexibility to "buy,ignore and watch
" this opportunity.
Que : Do you know or trust the management ? Can you give some
pointers ? Ans : No I do not . I have not seen any red flags yet .
However low ROE,low stake,and low npm makes me cautious in committing
not more than 1%.
Que : Have you sold or added to your holdings more post your initial
original post ? Ans : Added small portion - Will update the day i
sell .
Que : Whats your timeline for holding ? Ans : At this point of
writing wish to give them 2 years till Sep 2017
Que : How to get more info about the co ? Ans : AGM is the best bet
. Otherwise specific ques can be addressed either in this board or
better still one can write to the md/cfo thro' investor relations
email id available in their website.
Que : Do you think mgmt will share information if i ask ? Ans : Cant
say but my gut is that they will not share much as their priority
would be to hike their stake.
Que : Whats your current strategy for this stock ? Ans : My current
plan is to sell half of my holdings at a certain price so as to make
the remaining half zero cost and then let it ride.
Que : Are you a "materials handling " sector expert ? Ans : No . I am
a learner.no specific expertise .As good (or as bad) as anyone else.
Que : Is this stock suitable for concentrated PFs ? Ans : I dont
think so . I will advise this for those who want to take a lottery
type bet with very limited downside as part of diversified
portfolios.
Granules India Ltd (05-11-2015)
Motilal Oswal Target 185
Results Overview- Above est. quarter; EBITDA margin expansion by 180bp leads to PAT growth of 40% Revenues at INR 366cr, +19% YoY were 2% above our estimate of INR 360cr. The expanded PFI capacity of 4,000 tons commenced operations during the quarter in addition to the existing capacity of 14,400 tons. This contributed to incremental growth from PFIs which was affecting revenue growth since the last four quarters. We believe revenue growth should accelerate moving into 2HFY16.EBITDA at INR 68.9cr, +32% YoY was 13% above our estimate of INR 60.8cr. EBITDA margin at 18.8% was higher by 180bp YoY and 90bp QoQ against our estimate of 16.9%, a beat of 190bp. Management is targeting EBITDA margins of 20% over the next couple of years. PAT at INR 31.0cr (+40% YoY) is 16% ahead of our estimate of INR 26.7cr
Valuation and view
Granules is a high quality play on the mid-cap pharma space. The company is climbing higher in the pharma value chain by focusing on formulations which is expected to reach 65% of standalone revenues from 32% in FY15. While we expect the base business to solely drive profits until FY18E, we expect Auctus and the Omnichem JV to start contributing meaningfully to profitability by FY19E.
Based on the strong margins displayed by the company in 1HFY16, we raise our margin assumptions for FY16/17 by 1.5%/1.6% to 18.1%/19.3% and accordingly raise our EPS estimates by 15% for FY16/17. Overall, we expect the company to grow its Revenues/EBITDA/PAT at 17%/27%/34% respectively over FY15-18E and improve pre-tax ROCE from 19% in FY15 to 28% in FY18E.
We value the business at 20x Sep 2017E EPS which is a 10% discount (being a B2B player) to the mean multiple commanded by midcap formulation companies and maintain BUY rating on the stock with a target price of INR 185 / share (earlier INR 160).
P. I. Industries Ltd. – A Unique Business Model can make it a Great Play on Agri & CSM Space (05-11-2015)
Motilal Oswal : Target 800
Growth to rebound; margin expanding due to better mix
Revenue growth below estimate; to recover in 2HFY16, driven by CSM: PI reported overall revenue of INR4,461m (est. INR5,204m) in 2QFY16 as against INR4,266m in 2QFY15, a 4.6% YoY growth. Domestic agri-inputs registered a 10% growth while CSM exports growth was flat during the quarter. Despite a poor south-west monsoon, the company’s performance in the domestic-agri business was encouraging—driven by growth in branded portfolio of products. In the CSM business, the management informed that revenue has been deferred to 2HFY16 as the off-take was lower in 2QFY16.
EBITDA margin expands 200bp; adj. PAT below estimate: EBITDA margin expanded 200bp to 19% (est. 18.1%), led by better mix of products within the domestic agri and CSM exports business coupled with softening of raw material prices. EBITDA during the quarter stood at INR848m (est. INR942m) as against INR726m in 2QFY15, up 16.7% YoY. Adj. PAT grew from INR455m in 2QFY15 to INR550m (est. INR598m) in 2QFY16, a 21% YoY growth. Tax rate was lower at 27.7% due to higher capitalization; the management has guided for 30% rate for the full year.
Outlook remains strong: Jambusar Phase II is now operational and Phase III will be operational by December 2015 (income tax exempt for first 5 years); coupled with commercialization of 1-2 molecules every year, this shall drive the CSM revenue going ahead. The order book in CSM as on September 30 is USD610m and the company has received 20% more inquires than last year. The long-term outlook in domestic agri-business continues to remain strong with the launch of Vibrant and re-launch of Bio-Vita expected by year-end.
Valuation and view: With best-in-class capital efficiency (40% RoCE), insignificant debt-to-equity and robust growth outlook (21% revenue CAGR and 26% PAT CAGR), we believe PI is one of the best plays on India’s agri sector and CSM opportunities. We believe mix change in favor of the R&D-intensive CSM business would continue to drive rerating for the stock. PI trades at 31x FY16 EPS and 23x FY17 EPS. We maintain Buy rating with a target price of INR800, valuing the stock at 28x FY17E earnings.
Tera Software – any value? (05-11-2015)
Hi guys,
tera software is a 70 cr market cap software hyderabad based company which recently got a 300 cr order form the AP govt..what do you guys feel?
the one big negative is the huge amount of recievables on the balance sheet.
Lincoln Pharma … the next mid-cap pharma in the making …? (05-11-2015)
Yeah Mann.... I got my error.
Thanks and cheers
MPS Ltd (05-11-2015)
Great work @ayushmit, @rohitbalakrish_, @aveekmitra and of course @Donald for making this all available to the forum.
One aspect which might add to the margin of safety for fresh buys at current levels is the possible exit route through a takeover of MPS itself!
Assuming that MPS reaches the 500 Cr sales over next 3 years (through both organic growth and acquisitions) at that time it might become a lucrative enough takeover candidate for biggies looking to enter the segment for sticky revenues (remember the entry barriers!)
And given both the larger peers SPI Global and Aptara got acquired (Links here and here) this might provide a possible exit route. With Nishith having nurtured and sold businesses at attractive valuation earlier this option might indeed play out.
Astral polytechnik ltd (05-11-2015)
Yet another quarter of very impressive top line growth but bottom line degrowth
I have been observing the results of a lot of companies. One common thing I observed is that, very poor top line growth. but very good bottom line growth. ( operating leverage, cost cutting whatever you call it). But astral is just the opposite.