I have been going through threads related to guidelines at Valuepickr to come up with a proposed template to initiate a stock story.
Was wondering if we should remove the word 'Recommendation' from the above post in the light of SEBI guidelines etc.,. I understand though that the above post is an old one and posted before the SEBI guidelines were released.
Regards.
I have been holding the company from IPO days and had high expectations from the management but hopes have been unanswered till now.Product range,Technical collaboration all looks good but management seems to be the problem in capitalising the opportunities.Even during growth times of industrial activity they were far behind in increasing market share.
I have studied this business and feel that one should give a serious thought on owning this business at the right valuation.
I had a few questions on the business and they are as below.
1) Why is the tiller market in India only 56000 units, in spite of tillers being introduced in India in the 1970's. In Japan the market of tillers is 6 million units and in China it is 1.9 Million units.
2) Why is no body wanting to enter the tiller business, has it got any barriers to entry ? There are only 3 players in India. VST - 50% share, Kamco ( state government of Kerala) - 25% and Chinese imports 25%.
3) Why is the average price of a tiller Rs 130000, is it the engine that is expensive? otherwise tiller's body and other parts should not cost that much.
4) 80% of land holdings in India are small, this should drive the tiller sales. Why is the tiller market in India growing at only 10-12%. Shouldn't it be growing at a much faster rate given that land holdings in India are small and fragmented.
If I am not wrong seniors at VP had meet the management earlier and visited their hosur plant. If the seniors are looking at meeting the management again to conduct a Q&A I would like to contribute. In addition if any of members have spoken to end users, distributors or people related to the agriculture sector please post your findings.
Regards,
Chetan Chhabria
Firstly the disclosure - holding from lower level - 5% of pf
I would supplement few observations:
1. The company has successfully made a turnaround on the back of new strategy of m-messaging.
2. Company has spent large capex over last 4 years in creating infrastructure to support the new strategy
2. The capex spent cycle is complete, so no further capex need immediately.
3. The company never gave guidance on quantum of revenue it may add from the capex?
4. Revenue from overseas Capex spent is at least 2-3 quarter late? Now that the Singapore center is finally operational in Oct-15- more important thing is how much of the revenue materializes now in Q3?
5. It is zero debt, cash surplus company. History indicate that the Management is not debt savvy. A good indicator.
6. m-payment has not grown while management continues to focus on that space.
7. The company is already market leader in India in m-messaging and is aiming to further grow its share.
8. m-messaging seem to have significant growth potential at least for 2 years. Must be on watch for emergence of any disruptive technology to this model.
8. All in all it is a very interesting play at very reasonable valuations at present. The real growth is yet to come!
Thanks
I had doubts on the FX handling of this business. On going through the material on the company my understanding is as below.
1) The company imports its raw materials from outside, hence any appreciation in the USD/EUR (depending in which CCY it pays) will benefit the company. Hence the company needs to hedge on the required CCY (let us call this the first leg)
2) Company derives majority of its revenues from outside, 55-60% from Europe and 15-20% from USA. Hence a depreciating CCY (EUR/USD) will help the company. Company needs to hedge against appreciation (let us call this the 2nd leg)
3) As the company imports its RM, the import and export gives it a natural hedge. However degree of imports need to be weighed against the exports.
4) Company books revenues on the day of generating the invoice, the exchange rate that it takes is the once that is provided by the custom department. However when it realizes the amount depending on what the rate is, it books a profit/loss and puts it on the P&L account.
5) The company realization per tonne may be effected by CCY. In Q1FY16 the management realized 219000 per tonne, the figure for Q1FY15 was 241000. As per the management this is not due to price drop but due to CCY movements which is not hedged uniformly through out the year.
However on going through few of the con calls, the management has not hedged the second leg EUR-Rupee. It seems that the company is taking a bet on the direction of the currency.
The above is my simple understanding. I would like to understand if there is anything more to it and what more does one look at. However one would buy the business based on its operational strength and not on any currency movements.
Regards,
Chetan Chhabria
Hi @dkirand ,
I would agree with @varadharajanr that this could be more due to some re-classification or may be there were loans to be repaid last year which get classified as current liabilities. It can't be due to decrease in customer advances as it used to be just about 15-20 Cr last year as per the annual report.
Regards,
Ayush
Yes, out of the 7% odd increase in EBITDA margins, 4% is driven by lower fuel costs.
But if you see the qoq sequential results, the fuel costs have actually gone up by 6%.
The debt reduction figures have been taken from the screener.
Why Vinati has stopped the investor conference calls? Does this indicates lack of passion? Just a thought
Other current liabilities have decreased sharply from 110 cr to 11 cr. Major contribution to this comes from Customer Advances. This could be a strategic move by the management to increase the margins. since their receivables is in comfortable position and they have enough cash balance, they might have taken this decision to improve margins (higher selling price)
Couldn't agree more Vardha. Crisply captured in a concise manner.
Regards.
Discl: Invested.