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.

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.

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-

1. 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?

2. 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.

3. 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

4. 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.

I too have attended the con call and Rohit has summed it up well.

I think it was fairly understood that organic growth will be 10% thereabouts in the near future while inorganic growth through acquisition(s) will be responsible for revenue doubling. With 175 odd crore in mutual funds and with person like Nishith at the helm and with patience the right acquisition will happen, it is only a matter of time. Any acquisition related question is answered by Nishith and rest of the questions Rahul answered.

I hold MPS stocks as per my portfolio thread and I’m holding my position as is, so I may have a vested interest in my posts. MPS as a company has a long way to go. Once MPS attains a certain scale which it is trying to, revenue growth will also gather pace like a snowball effect. The company is trying its best to get into this ‘top tier’ vendor bucket is what I understand.

MPS results were fairly good.
Revenues up 13%
PAT before exceptional items up 24% to 17.5Cr
Trailing EPS is now 34.8, so at current price of 835, it trades at 24x trailing EPS.
EBITDA margins have come down to 35.1 from 38.7%
Top 5 client contribution has gone up to 70% and top 10 are 88%.
Cash on books is now 185cr.

I attended the concall. Here are my notes

EBITDA margins are down because of the acquired businesses.

Someone pressed the management about the reasons for poor growth inspite of the big opportunity size. Management said that the momentum is slow but numbers will eventually come in. They said that the clients generally test the vendors and then slowly increase outsourcing. Even an existing client, when outsourcing a new kind of work/project, starts small and then scales up.

Management said that they are growing at par with the industry. They said they have USD35mn revenues and the biggest player is USD100mn. (I am beginning to think that they are facing challenges in growing. The response was not convincing enough for me. They should be growing faster than the industry)

Rahul and Nishit reiterated that they wanted to double in size through a mix of organic and inorganic growth. But I felt they were not sure when this will happen. They said that it may take 2-3-4 years or a bit more.

Reply regarding acquisition was on the same old lines. They dont want to overpay. Someone asked that when company raised capital, it was assumed that they were already in advanced stages..but then nothing has happened for 6 months. Nishit Arora said they will not overpay 20% just because the money is there, and asked investors to be patient.