Monday, February 17, 2014

Camlin Fine Sciences - Hidden Player In Food Industry

Much like the surge in demand led to growth in the steel industry in the 19th century, the growing demand for
processed food is creating larger opportunities in food protection business. At the heart of food protection business, is food preservation and shelf life extension. Food protection is a complex business encompassing elements of basic chemistry, food chemistry, bio-chemistry and bio-technology.

Camlin, the corporate group was established in 1931 and is a pioneer in art & stationery material in India. Camlin diversified into Pharmaceuticals and Fine Chemicals two decades ago.
Camlin Fine Sciences Ltd. is focused on a vision to be the largest food antioxidant and ingredient manufacturer worldwide. They will achieve the mission by placing the needs of their customers first, creating quality products, innovating technology, and fostering continuous improvements in employees, products, and processes.

The company primarily operates in Food division, but it also has a good presence in Industrial Products and Agri Products division. The food division of CFS has taken a leadership position globally in the synthetic food antioxidant segment, mainly because of its 2 anti-oxidants, TERT-BUTYL HYDROQUINONE (TBHQ) and BUTYLATED HYDROXYANISOLE (BHA).
To achieve stability, in availability of raw materials and supply of products to customers, on 8th March 2011, company acquired Borregaard, Italy S.p.A, now called CFS Europe. After that, the company has become the world's largest integrated manufacturer of TBHQ and BHA.

Salient features of TBHQ
- ANTOX (TBHQ) gives excellent antioxidant potency to edible oils and fats.
- Minimizes nutritional losses in edible oils.
- Maintains freshness and quality of crude oils during long distance transportation.
- Broadens the range of oils in food processing.
- Offers carry through protection to fried foods, thus enhancing their storage life and freshness.
- Facilitates use of saturated oils, thus preventing excess levels of cholesterol in oils and fats.

Salient Features of BHA
- The most effective antioxidant, imparting excellent stability for an array of food products, fats, shortenings, vitamins, pet foods, cosmetics pharmaceutical products and packaging materials
- ANTOX BHA, reduces the oxidative deterioration of edible oils and fats, loss of flavour, colour and nutritive value of foods
- ANTOX BHA, THE BETTER ANTIOXIDANT : BHA normally is a mixture of 2 isomers, 2 tert butyl and 3 tert butyl isomers 3 tert butyl isomer has better antioxidant property
- White free flowing crystalline Flakes
- Stable to heat and mildly alkaline conditions
- 20% colorless solution in propylene glycol remains colorless even when heated at 1940F for 1hr.
- ANTOX BHA SYNERGISTIC EFFECT : ANTOX BHA gives greater synergistic effect with TBHQ, BHT and propyl gallate than that which might be expected from contribution of each individual antioxidant

The applications of these 2 anti-oxidants are plenty and can be viewed in detail on company's website, in product details section. To add to that, in the Food business, Vanillin – the aroma compound manufactured by the Company, is also poised to take a larger share of the market.

Camlin Fine Sciences management is expected to increase its market share in high growth evolving markets like
China ,India, Latin America and Middle East , where the food processing industry has been growing at a higher rate when compared with the Global market. The company is continuously focusing on Research & Development and new product launches in food antioxidants sector.

On the products front, in the industrial Products business, the Company launched downstream products such as
TBC, Guaiacol and Veratrole. These value-added products have been developed with technical expertise of CFS
Europe, and hold a high growth potential. The agri-products division has started commercialisation of the products developed by CFS in India and has obtained success in high cash crops and fruits. The division has appointed dedicated technical sales teams who are assisting farmers and cooperatives to develop better farming practices and CFS products are helping in reducing damage to crops.

Talking about numbers now, the company has been growing at a very good pace over last 5 years, and this year seems no different.
In FY'13, the company achieved total sales of 316.4 Cr vs 255.62 Cr in FY'12, growth of 24%.
In FY'13, the net profit was at 14.76 Cr Vs 10.14 Cr in FY'12, growth of 46%.

For the nine months ended this year, the company has achieved
Total sales of 263.77 Cr vs 232.39 Cr last year, a growth of 14%.
Net profit of 15.57 Cr Vs 10.7 Cr last year, a growth of 46%.

I am expecting FY'14 to end with total sales of 365 Cr and net profit of 20.5 Cr approx, which will be a very good achievement. Recently, the company made an aggregate investment of 80.46 Lakhs by acquiring the share capital of SOLENTUS. Hence SOLENTUS has become the 100% subsidiary of the company.
Also, Camlin Fine Sciences plans to set up a wholly owned subsidiary in Canada for undertaking trading and distribution of antioxidants, food ingredients, blends and formulations in the US and Canadian markets.

My Views:
At a market cap of 115 Cr, the stock looks very attractive, with the kind of business expertise they have, and the scope available in the operating sector. I mentioned about the stock earlier also, in the comment section of earlier post, but was waiting for the company to declare its numbers before posting the details. The numbers came in line with the expectations, along with the news of setting up new subsidiary in Canada, which attracted me more towards the company for a good long term investment prospect. On 14th Feb, the managing director of the company, Mr. Ashish Dandekar, bought around 43,000 shares from the open market, which is also encouraging. The company has been a very good dividend payer also over the years. A range of 15-26 Rs in last 12 months suggests that the stock has been very steady, with very less volatility, but its about time, the stock comes into the eyes of big investors, with its continuous performance, which will take the stock to higher levels.
One can expect good returns over next few years in the stock. Not giving any specific target for now.

Saturday, February 15, 2014

Cera Sanitaryware - Q3 Result Updates

Financial Results & Limited Review for Dec 31, 2013
Link: Click Here

Results Press Release
Link: Click Here

CRISIL Recent Report on Cera Sanitaryware
Link: Click Here

Revenues stood at 160 Cr Vs 128 Cr YoY, growth of 25%.
Net Profit stood at 10.76 Cr Vs 12 Cr YoY, a growth decline of 10% YoY.
EPS at 8.5 Vs 9.48.

For the nine months ended Dec'13 Vs Dec'12
Revenues stands at 445.5 Cr Vs 329.9 Cr, growth of 35%.
Net Profit stands at 32.57 Cr Vs 32.27, growth of 1%.

I am not too far from CRISIL report which suggests that the stock is over-valued currently. But, again, as I said earlier also, it is more because of very bright future speculated ahead, for the company. The growth of 25% might seem reasonable to few, but actually its a big achievement when compared with its peers. The largest sanitaryware manufacturer in India, Hindware Sanitaryware (HSIL), reported a decline in sales this quarter, which confirms the depression in industry and forces investors to put their investment in a good growth story like Cera.
Fundamentally, even CRISIL have rated this stock 4/5.

Few important points derived from Conference Call with Cera found in ResearchBytes:
1) The margins were hit because of higher input cost, which is probably, the story, with all manufacturing companies.
2) As the company started focusing more on faucetware, which is less margin business than sanitaryware, the operating margins are expected to be under pressure for some time. Last year, they achieved operating margin of 17%, which is unlikely this time. It will take time for the company to build on margins. But the good thing is that the company is able to build on revenues because of such business, as it is higher in demand.
3) The company is taking some steps to improve margins by 2 ways
a) By reducing the input cost. They have set up 2 windmills for power generation for starters to achieve that.
b) By increasing the prices across all segments
4) At present, the company has around 10000 dealers across India and they are expecting it to grow by 20% in coming years. As they are providing "Value For Money" solutions to customers, they are not much concerned about competition.
5) The company has a strong market share of 30% in Tier II and Tier III cities, and it is slightly higher in South India.
6) They have confirmed that they are ready to enter in JVs for expansion. Their advertisement expense is close to 5% of total sales.
7) Even in difficult times, the company is expecting the topline to grow by close to 30% in coming 2-3 years.

My Views:
As said, the stock is over-valued, but long term investors can continue to hold. The future is bright here, as seen now. For those, looking for new entries can look to enter in dips, and average out if it goes down further.
When I posted first time about Cera, I gave a very conservative target predicting the difficult times ahead, here:
http://fundamentalstockideas.in/cera-sanitaryware-a-safe-investment/
I stick to that same target for now, and will be upgrading further, if company continues to outperform.
All the best!!!!!

Saturday, February 8, 2014

Dhanuka Agritech - Q3 Result Updates

Financial Results & Limited Review for Dec 31, 2013
Link: Click Here

Board declares Interim Dividend:
Dhanuka Agritech Ltd has informed BSE that the Board of Directors of the Company at its meeting held on February 06, 2014 inter alia, has declared Interim Dividend @100% (Rs. 2 per Equity Share having Face Value of Rs. 2/- each) for the Financial Year 2013-14. The payment date of the Interim Dividend shall be on or before March 07, 2014.

Dhanuka to invest Rs 50cr on new plant; eyes Rs 750cr revenue: (For those who missed the news earlier)
Link: Click Here

Decent numbers given by Dhanuka Agritech in terms of sales, and a very good net profit to go with that.
Revenues stood at 167 Cr Vs 139.6 Cr YoY, a growth of 20%
Net Profit stood at 21.27 Cr Vs 11.68 Cr YoY, a growth of 82%, which was higher than expected.
Hence, EPS stood at 4.25 Vs 2.34 YoY.

For the nine months so far,
Revenues stands at 586.52 Cr Vs 451.13 Cr YoY, a growth of 30%.
Net Profit stands at 70.67 Cr Vs 46.57 Cr YoY, a growth of 51.75%.
EPS for the nine months stands at 14.13 Vs 9.31.

In the link above, as they mentioned, it seems they will be able to achieve 750 Cr revenues this fiscal. Sales of somewhere close to 165 Cr, would help them achieve the figure of 750 Cr for FY14, which doesn't look difficult as of now. To do so, they will have post a growth of 24% in sales, for the next quarter.
The net profit growth this fiscal has been remarkable, and it purely justifies the high P/E ratio for the company, when compared with its peers.

The PAT margin was seen at 12.75 this quarter. With company continuously posting a better growth in net profit than revenues, the margins will continue to impress, and it seems, they should be able to achieve PAT margins of at least 12.5% for FY14, whereas it was close to 11% last year. Once they gain more and more popularity among farmers, it won't be difficult for them to post PAT margins in the range of 15-20%, in future, as they will save plenty required in brand building.

According to company's Managing Director M K Dhanuka: "During this quarter, despite the weak economic environment, we have achieved superior sales growth. Our new products have been enthusiastically received by farmers and continue to gain market share. South and West zones are our key markets and have done well. We are happy that our branding initiatives, including advertisements featuring Amitabh Bachchan as Brand Ambassador have helped us achieve this sustainable growth and we are confident of achieving even better growth in future."

My Views:
Going by the numbers, one would feel that 20% growth in sales, is not that great, but understanding the nature of business they are in, its very difficult to achieve such growth also, in off-season. Still, they have plenty of scope to improve, and their brand building expense, will help them achieve further growth. Good dividend is being paid by the company twice a year, which will bring more stability to stock price.
I personally feel, that, in off-season quarters, people will find plenty of opportunities to enter the stock, as the interest among the traders and investors would be lesser in these quarters. Hence some dips in between are inevitable.
Recommending a hold for those who are already invested, and suggesting a buy on dips strategy for those who are looking for new entry. But always make sure to study things yourself, before taking such decisions. :-)

Wednesday, February 5, 2014

Suven Life Sciences - Q3 Result Updates

Financial Results with Results Press Release & Limited Review for Dec 31, 2013
Link: Click Here

Communication to investors - Dec 2013
Link: Click Here

Don't see over 40% margins; open to partnerships: Suven
Link: Click Here

Much to the expectations of markets, Suven came out with another strong set of numbers. The reactions on stock after the results suggested that, it was almost expected. More than four-fold jump in net profit was almost a non-event, at least for today.

Revenues stood at 119.42 Cr Vs 62.39 Cr YoY, registering the growth of 92%.
Net Profit stood at 36.43 Cr Vs 7.75 Cr YoY, registering the growth of 370%.
EPS stood at 3.12 from 0.66 YoY.

For the nine months ended in FY14 so far Vs nine months of FY13,
Revenues has grown by 109%.
Net Profit has grown by 403%.
R&D expenditure has grown by 43%.

The growth in profit was a result of prelaunch supplies of 3 products under CRAMS, as per management.
Suven’s major thrust on innovative R&D in Drug Discovery continues with a spending of 35.6 Cr
(9.27% on revenue) for the nine months period ended Dec ’2013.
Suven has 614 product patents for 18 inventions and 35 process patents.
The number of active CRAMS project during the period was 98.
SUVN-502 undergoing phase 1b clinical trial in USA.

In addition to this, the interview with management, as seen in link above, draws a good picture regarding company's future.

My Views:
Not much to say after what is mentioned above. The numbers speaks for itself. The stock was trading around 24, when it was suggested on this blog around Jun '13:
http://fundamentalstockideas.in/few-more-multibaggers-for-long-term/
The management has been able to justify the price rise, and hence the stock is able to stay around all time high levels, even after posting a 200% price jump in past 8 months.
Most importantly, being a small cap company, they have managed to show very strong margins, which is why, they have been highly appreciated by the investors. The R&D expense continues to impress, and forcing us to stay invested with the company for long term.
Recommending a hold on this stock for now, and raising the target of 100 Rs for now.

Tuesday, February 4, 2014

Can Fin Homes - Q3 Result Updates

Financial Results & Limited Review for Dec 31 2013
Link: Click Here

The consistent performance of the company continues with yet another strong set of numbers. The story of growing 10% every quarter continues, which makes a 40-50% growth YoY, which is more than appreciable for a company involved in housing finance.
At the start of this fiscal, company had about 69 branches across India. The management has plans to achieve 85 by the end of this fiscal. The additional branch network is expected to provide increased market penetration to cater to the evolving needs of our existing customers and tapping a growing potential customer base in tier II and III towns in the country.

Revenues stood at 151.7 Cr Vs 102.8 Cr YoY, indicating a growth of 48%.
Net Profit stood at 20.3 Cr Vs 12.6 Cr YoY, indicating a growth of 61%.
EPS stood at 9.9 Vs 6.2 YoY.

Primary reason for growth was increase in net interest income which was up by 38%, and flat expense incurred by the company in this quarter.

My Views:
Once again, we have a company which seems to have a very bright future. But what we, as an investors are concerned with is the stock price movement. Similar to Dewan Housing, there is a huge upside possible, but certainly can't be guaranteed, because we are not the policy makers in this country. Government and RBI policy will continue to guide their prices for now. Fundamentally, both the companies, are very strong, and can be held for long term, but not sure of the returns one can get, it may be huge, it may be flat.
Not looking in that direction, I think the fair value of the company now seems to be around 225 considering its peers. Earlier, when I posted about the stock in June 13, I gave a target of 200
http://fundamentalstockideas.in/few-more-multibaggers-for-long-term/
Upgrading it to 225 as of now, and of course, this is not considering any severe policy changes in the country.
Investors have to understand the associated risk before investing. Rest is one's own decision.