When I learnt in September 2014 that Saurabh Mukherjea Of Ambit is bullish on Century Ply on the basis that the company will “deliver 52% EPS CAGR over FY 2014-16 backed by volume traction and margin expansion” I immediately rushed off an alert with the suggestion that we should also pocket the stock before the savvy investors do.
In hindsight, Century Ply is/ was a no-brainer stock given the scope for branded plywood products in the Country (especially in the wake of NAMO’s dream of urbanization) and the Company’s own dominance over the market place.
The other impressive factors about Century Ply are that over the past 10 years, the company has reported a 25% CAGR in income and profits, which is quite commendable. Also, the promoters hold nearly 75% of the equity. The company has richly rewarded investors with a 7000% return since the IPO in 1997, apart from uninterrupted dividends.
After Saurabh, Sharekhan recommended a buy on 4th December 2014, when the stock was at Rs. 168.
Well, today, Century Ply reported block-buster Q3FY15 results. The net profit surged 110 percent to Rs 41.4 crore from Rs 19.7 crore, in the same quarter last year. The net sales surged 25.8 percent to Rs 381.8 crore as against Rs 303.5 crore, YOY. The EBITDA was up 102 percent at Rs 69 crore against Rs 34 crore, YOY.
Delirious investors thronged the counter, sending the stock surging nearly 12% to an all-time high of Rs. 192.
Saurabh’s followers are looking at gains of nearly 90% in just about the four months that have elapsed while Sharekhan’s followers are sitting on a pretty gain of 14% for a month’s work.
As to the future prospects, Century Ply’s Chairman, Sajjan Bhajanka, came on CNBC TV18 today to state that he expected the EBITDA margins to be maintained at 16-17 percent. He also pointed out that traditionally, from the last 17 years, the Company has been maintaining 25 percent growth. He said that this is a “very sacrosanct target” and that it would be met by either new acquisition or by the expansion of capacity in the existing unit or by starting new units.
If you haven’t studied Century Ply yet, the best way to get started is to read their “Investors Presentation” and the research reports by Ambit Capital and Sharekhan.
Now a days it is very hard to get undervalued yet high visible growth stock. My new hiddengem pick is DIL Ltd.Current Market Cap of DIL Ltd on 21 Jan 2015 is around 160 crores and what you are getting by paying 160 crores is amazing .
Indian Govt will spend nearly Rs 2 lakh crore in a five-year span as part of its ambitious plan for clean India .
There are going to be 3 types of beneficiaries companies .
1. Companies putting wastewater treatment plant ( EPC contractors like Va Tech Wabag Ltd , Thermax and help revival of Praj Industries )
2. Biological wastewater treatment products ( Listed companies like again Praj , Sudarshan Chemical Industries Ltd , CHEMBOND CHEMICALS and Fermenta Biotech and non listed novozymes india(MNC) )
3. Proxy companies to these sector like HIL , Everest Industries for roofing sheets and Sintex which is market leader in pre-fabricated toilets (90% marketshare)
By seeing current valuation I can put my money either on Praj Industries or Fermenta Biotech . But ,I will put my money on Fermenta Biotech Ltd because I am getting this company absolutely free .
You will say it is not listed, how are you getting it free ? You are right It not listed yet and it is subsidiary of listed DIL Ltd .
You will surprised to see undervaluation of DIL ltd in this bull market because some of the investors still evaluate companies based on just PE that throws opportunity for investors like me who can hold it for next few years .
Current Market Cap of DIL Ltd on 16 Jan 2015 is around 165 crores and what you are getting by paying 165 crores is amazing .
1. DIL Ltd has cash of around 37 crores on March 2014 .
2. They own commercial properties which gives them stable rental income of around 13 crores( Excluding ThaneOne ) . Generally , companies get rental yield of 3 to 5% , if we do reverse maths then value of this property itself should be around 260 (on 5% rental yield) to 434 (on 3% rental yield) .
3. They own (associate company) and operate two Zela Luxury Health Clubs in Bangalore . Truly Luxuries !!!!
4. They have 6.5 acres of land in Thane (Mumbai) in prime locations . They are developing this land into ThaneOne Corporate Park which awarded the “Best Office Architecture 2013” at Asia Pacific Property Awards, Malaysia. It is outstanding Corporate Park check their website. First phase (around 25%) is going to be around 198000 sq ft lease able area which will give rental yield of around again 12-15 crores per year and saleable rate in this area for commercial properties is around 13000 to 15000 so first phase itself has commercial property worth at least 260 to 300 crores . If you add phase-2 then it will be huge value even though they will need spend few more crores on phase-2 . After completion of both phases value of ThaneOne should be at least 1000 crores at current valuations.
5. Fermenta Biotech was valued around 190 crores when Evolvence India Life Sciences Fund (EILSF), a private equity fund focused on the Indian life sciences industry had invested Rs.40 Cr for 21.05% stake in Fermenta Biotech Limited (FBL) in 2010 . We are now in 2015 and that too in bull market this valuation should have been increased by few fold .
Negative :
1. Too much diversification even their one of division is going to produce films Chupake Chupake remake.
2. Exposure to real state sector . I don’t like real state sector as such but I like Ashiana Housing (prof Bakshi pick) , Poddar Developer and Nesco Ltd . Business model of DIL is somewhere close to Nesco. However , Nesco has good moat and cash flow .
Postive :
FBL manufactures Vitamin D3 (Cholecalciferol) (the only manufacturer and supplier in India and among the top few manufacturers in the world) and constantly looks for value addition. They even do have some good set of granted patents .FBL provides customized environmental biotech solutions through consultancy, supply of suitable biotech products and services in three segments – sewage treatment plant (STP), lake and pond remediation and oil sludge remediation. Their proprietary product technology cleans the lake even if it is receiving a continuous input of waste water, which gives it an advantage over other existing cleaning methods.Generally Biotech and life science companies has very long gestation period .The total revenue of FBL in the year 2013-14 was 127.16 cr as compared to 101 cr.In 2013-14, Profit after tax was 7.96 cr as against 1.1 cr in the financial year 2012-13 (around 800% increase in profit ) . Clean India mission is going to provide huge opportunity on low base for them they need to grab it by both hands.
ThaneOne phase I completion will boost their profit once it get operational and phase II will start after that and it will also contribute down the line.
At current market price and market cap of just 165 crores it is hugely undervalued . We are getting so much out of this 165 crores . There are going to be following triggers for this counter .
1. Once, overall market becomes expensive , investor start finding hidden value stock where PE is misleading the actual value and what can be better than DIL ltd .
2. Management in past indicated listing of Fermenta Biotech Ltd and even Evolvence India Life Sciences Fund whould also like to get good exit . If shareholder of DIL get shares of FBL and it get listed then It will unlock huge value . FBL itself may get listed at more than 500 to 700 cr because FBL is moving from investment phase to realization phase. If strong shareholder enters in DIL and push management for listing of FBL then it will be surely get listed .
3. As per latest update ThaneOne’s PHASE 1 TARGET COMPLETION date is MARCH 2015 we can safely assume that it will be by move to June 2015 . Once, it starts contribution to profit, rerating will happen .
4. Any order/sub contract to FBL for clean India mission .
5. Any new patent news for FBL .
Thanks bro for the info.