Deepak,

If you go through co’s conference call and presentations – they mention that 80-85% of the business is from replenishment – implying recurring nature (the frequency may not be yearly though)

Also, the products – towels, sheets – think for yourself what would be the life of such products? naturally after every 1-2-3 years we would require such products again. Also, around 60-65% of business is from US – which is in great shape atleast in terms data coming out for home sales, etc. Welspun is increasing geographic reach by expanding in Japan/Middle East. They are also expanding their product base and now catering to hotels, etc wherein the frequency of requirement would be much higher. Hence, I believe management guidance of mid teens growth in revenue for next 3-4 years is very much possible and realistic I believe.

See these charts below to get a macro view on whats happening in US regarding home sales – which in turn would automatically translate into demand for Welspun’s products in addition to many many other home building/related products (think of Pokarna and its products, can be another good medium term bet)

In fact being export oriented is a major plus, I find export oriented co’s better relatively.

Disc: My largest holding and views will be biased.

Conf Call Key highlights by Capital Mkt
Overall hair oil volume grew by 0.5% during April to August period. Light hair oil (LHO) grew by 6.6% during same period. Coconut oil, cooling oil and ayurvedic oil volume declined during same period.
The net sales for September 2015 quarter have increased by 11% to Rs 208.19 crore. Volume grew by 8%. Almond Drop (ADHO) sales grew by 11% to Rs 187.46 crore with volume growth of 6%. OPM increased by 337 bps to 31.1% due to fall in raw material cost and advertisement cost. As a result, the operating profit increased by 24% to Rs 64.72 crore. The profit before tax and EO has increased by 20% to Rs 71.21 crore due to rise in OPM. The net profit has inclined by 25% to Rs 46.78 crore due to rise in OPM. During the quarter, average price of LLP decreased to Rs 58.82/kg from Rs 84.27/kg in corresponding quarter of previous year. Average price of Refined Oil increased to Rs 82.02/kg from Rs 69.99/kg in corresponding quarter of previous year.LLP for Q3 is fully covered.Current LLP buying is at Rs 52-53/kg.The mgmt said that the full drop of LLP prices is not yet captured in P&L due to stock buildup.
ADHO primary offtake grew by 7.8%. Secondary volume offtake grew by 9%.ADHO value market share is 61%.ADHO is now present in 2.91 retail outlets.The price gap between LHO and coconut oil has decreased.ASP was 17% of sales in Q2. Ad spend on Nomarks brands double in last 2 quarters.
Nomarks turnover in Q2 was Rs 10.3 crore, drop by 26%. As per the management, it is in 2nd phase of integration of brands of Nomark into Bajaj Corp, as such there was reduction in SKU and stocks at retails, which impacted the sales.Anti-blemish cream category has grown by 23% during April – August period. Facewash category has grown by 34%.60% of cream sales come from chemist shops and for facewash it is 10-12%. The company is now shifting distribution from chemist to general trade.
The company has added 6 new countries in its international business. It is doing registration of Nomarks brands across various countries. It will enter into Africa and CIS countries.For Q2, growth came from Urban region. Rural growth was disappointing. The gap between rural and urban growth has reduced to 4%.The mgmt said that it don’t see any scope of good volume growth in near future.Tax rate would be around 20% plus.

Coverage of Kitex in US local media

http://www.northjersey.com/news/business/indian-baby-clothes-maker-opens-montvale-office-to-target-u-s-1.1428531

Notes:

a) As we are aware, Kitex is looking to design its own clothing for the U.S. market, to be sold under its own brand, “Little Star,”

b) It has acquired exclusive rights to sell Lamaze baby clothes in the U.S.

c) The company opened a 4,000-square-foot office on Summit Avenue earlier this month, and officially launched it at a ceremony Tuesday attended by Montvale Mayor Roger J. Fyfe and local business leaders. The office has three employees, and expects that to grow to about 20, including executives, sales people and designers, in the coming months

d) Kitex is foraying into ‘design ‘ . Let’s see whether it can integrate its manufacturing capabilities with the not so easy aspect of ‘design’. ‘Design’ is completely a different ball game and generally success rate of new players isn’t very high.

e) As per the above link, company is opening its online website

f) Kitex USA will begin selling the Lamaze brand next fall, and Little Star the following spring

g) ‘Organic Clothing’ – It is foraying into this new trend. Need to understand / get info about it- how much sales Kitex is targeting/ cost and margins of organic clothing / Is it a future revenue segment or just an experiment / etc.

h) Linda Harmon, executive director Lamaze International–spoke affirmatively about Kitex regarding its manufacturing and production capabilities

Risks/ Key item to monitor–Creating its own brand would definitely pump up Kitex’s profitability but branding (esp in the land of Brands -US) is not everyone’s cup of tea.

As mentioned in the article, Indian and Chinese players in US suffer from a perception bias wrt quality of products.

Let’s see how things pan out.

Disclosure: Invested from lower levels

Had some discussion with Investor Relations of Pokarna about questions that I had posted here earlier.
At this point of time they are sourcing all quartz raw material from Chettinad and the he wasnt sure if they had any written contract with the supplier. I asked what if there is any interruption in supply considering the background of Chettinad, he spoke very positively about Chettinad and sounded like they are working with them for a while and are very happy, he spoke as if like its their own mine, tried to assure it will never be an issue. I wasnt that convinced though. He also said they are trying their best to get the license for their quartz mine.
He wasnt sure if there is any other Quartz stone competitor from India that exports to US. He said they should be the only one.
The Capacity for Quartz is 6 lac Sqr meter. Surprisingly, he said Quartz stone capacity is running at 80% in last 2-3 months.
He couldn’t tell me which dealer is sourcing more and more in recent quarters, he said its confidential and couldn’t share.
Having found all this info, I continue to work on this, and gather more and more info from from their dealers. Early this week I spoke to one of the Slab store of Daltile in Anaheim California, the store manager said 90% of their Quartz slabs come from Quantra. And to be honest, his feedback was too overwhelming to believe. He spoke very high of Quanta’s quality/ colors/size options. Then I asked him if they are buying more and more from them in last few quarters, he confirmed their sourcing is increased and sounded very confident, he also said their Quartz slab business is going to grow in upper 20%.
If we map all the data of spike in Quartz Slab imports from India to USA, the capacity running at 80% (Quartz) and the Daltile’s confirmation, Pokarna’s 2nd quarter has to be extremely good.
I needed some help from the guys in Dallas Texas area to speak to Daltile Corporate office and find out info matches with the data I gathered from their Store in California (since I am in eastern zone time, the corporate office is generally closed by the time I get home, they aren’t open on week ends).

Hello All,
Neo Corp International is a Technical Textile Company and it’s the leader in this Industry in India, which worth looking for the below reasons. Company is ISO 9001:2008 , ISO 22000:2005 & BRC/IOP certified.
1) It has very high CAGR growth rate of 38% for last 3 years and 34% for last 5 years which is huge and this attracts attention for this single reason.
2) NP CAGR is also good, which is 22% for last 3 years and 27% for last 5 years.
3)Although the promoter holding is less (24.11%) but Promoters have bought the shares from open market and increased their stake from 19 to 24% in last few quarters and pledged shares % came down in last few quarters.
4) Consolidated P/E is only 2.5, which is very much cheaper. A good holding company “VLS Finance Limited” (who has discovered gems like “Relaxo”) is silently accumulating the shares in this company and increased their holding from about 3% to 9-10% in last 1year. And it is still accumulating the shares from open market (please refer to the latest SAST updates in BSE)
3) OPM is about 11% and NPM is about 4 %( which would increase dramatically once debt is reduced).
4) ROCE is 20.58%, which is good considering the Textiles industry.
5) Company’s immediate future growth is very much visible with the company’s entrance to South America and overall demand outlook in world and India. The textiles business is going to be of big size in the world and going to have market share of 60% of overall textiles Industry.
Please refer to the well written Annual Report for further details on the business outlook and company’s operation (Company has installed SAP ERP for the better business operation maintenance which will show result in long term and also the innovative approach has started paying off with new and innovative products being made, company recognized as “Export house” by govt. of India for huge contribution in exports).

Risks/Negatives:
1) Promoter/management quality is not so good, not shareholder friendly, they declare dividend but never gets credited to the bank account (probably they send cheques but do not reach shareholders’ home)-any further details on promoter/management is welcome.
2) Historically IT dept raided them twice the most recent being in Feb 2015. Although the company mentioned that nothing incriminating docs/money found during raid but the IT raid itself a bad thing for shareholders. Most probably they will come clean and Tax pay % looks okay.
3) Recently Swiss govt. published name of Neo in the black money account holders’ list, however company clearly informed BSE that the account was opened for GDR but closed a long time ago. So this is not a problem but again these kinds of news hurt investors’ sentiment.

Future Outlook:
With good capacity, innovation power and growth initiative taken in South America and good demand of Technical textiles makes sure that company’s revenue is all set to grow at least CAGR 25% in next 2-3 years. If the reduce debt then NPM will also increase. So overall it looks like a growth machine.
Business operation wise it is all set to improve day by day , however company needs to improve financially and debt reduction should happen in near future.
As far as stock price movement is concerned, its fair value is around INR 70-80 , it is trading around INR 40 , so soon or later the stock price is going to increase to get its fair value and with big players like “VLS Finance” increasing their stake consistently , stock should get fair value sooner.

Immediate triggers:
1)Company is going to issue Convertible Warrants on preferential basis soon(actually it was approved by shareholder to issue them at INR 65 around Feb-March but for technical reason it got postponed and that should be done in this FY and is around the corner.
2) As the company’s revenue is growing at brisk pace, “Q2” result should be very good and that should help stock price moving higher.
3) Stock was trading on NSE via MPSE(Madhyapradesh Stock Exchange) but as per new rule of NSE, it is not allowed now. This has caused several companies to stop the trading on NSE. Our Neo has submitted the necessary documents to NSE and it should start trading on NSE as well which will increase the liquidity and bug players comfortable to enter this stock to unlock the value.
4) The stock got hammered recently to its name in the Swiss govt.’s list for black money , however the company has cleared the air and the account has been closed long time ago and also company has not file any case against Swiss govt. for disclosing the information so that Indian IT dept can access all information and Neo can come clean. This proves that nothing wrong in Neo with respect to black money and official announcement of this by IT dept should help stock getting strength.
5)Technicals: Although I do not have much knowledge on technical but high deliver % and high volume from this week suggests that any of the good news(may be Warrant issue) is around the corner and some big guys has taken informed decision and accumulating the shares of this company(could be “VLS Finance” again), so technically it should look good(technical experts here please give more input on technicals so that we can estimate immediate trend of this stock).
Company website: http://www.neocorp.co.in/
Neo Corp’s Official blog: https://neocorplimited.wordpress.com/
Chartered Accountant blog covering Neo Corp:
“http://www.charteredinvestor.blogspot.com/2015/04/neo-corp-international-ltd.html” (not allowing to post more than 2 links, so putting it within quote)

My sincere request to all the senior ValuePickrs(specially Hemant sir, Donald sir and others) to please check this company, study this company, understand their business and take this discussion go forward with healthy discussion so that we can understand the future potential of this company. Any healthy discussion/argument is welcome.

Disclosure: Invested.