Q3 FY'15 Result Updates - SSWL, Somany Ceramics, TCPL Packaging, Ajanta Pharma and Granules India

1) Steel Strip Wheels:

The performance of the company has been improving slowly, and it seems that the worst is certainly over, which was predicted in the original post here:
http://fundamentalstockideas.blogspot.in/2014/07/steel-strips-wheels-ltd-sswl-seems-to.html

The company again came out with decent set of numbers with sales increasing  by 7%. The sales figure didn't looked bad considering the decline in growth for the month of Oct on account of more holidays in that month with festival of Diwali and Dusherra. Plus there was a shut on account of elections in Haryana and Maharashtra. So overall, I feel numbers are looking decent. As per management, SSWL is looking at a volume growth of 16-18 percent for the full year and turnover of around 15-16 percent.
The company is likely to achieve an annual EPS of close to 25, so I don't think the stock is too expensive even at current levels. However, debt levels has been increasing because of nature of business and is the only worry right now. Promoters increasing their stakes is also a positive.

One expert view on the company is also shared on left hand side panel.

2) Somany Ceramics:

Though expensive, the company is growing stronger and stronger, and proving that the given higher valuations are justified, and there is further room for more growth in terms of revenues as well as market cap.
Sales were up by 31% and net profit up by 131%.
Not thinking of commenting much, but sharing few links which speaks a lot about the positives of the company:
Confident of achieving 20% growth in FY15
Somany Ceramics’ new campaign focuses on brand promotion
Somany Ceramics to add 30 mn sq metres capacity in 5 years, scouting for JVs
Swatch Bharat Abhiyan Will Help Sustain Growth — Somany Ceramics

Overall I am still positive on company's prospectus, but on account already existing higher valuations, it may take some time to reward further as far as stock price is concerned.

3) TCPL Packaging:

The stock has given unbelievable returns in very short time since its recommendation here:
http://fundamentalstockideas.blogspot.in/2014/06/tcpl-packaging-probable-candidate-to.html

The results after that has been fabulous which has led to this rally, and once again it did not disappoint. The sales went up by 28% and net profit went up by 169%. If one takes a look at past 2-3 quarters result, they have significantly improved their operating efficiency, which has reflected in their amazing growth in profits. An annual EPS above 30 this year is very likely now, and because of which the stock, even after such rally, is still trading at a P/E ratio below 15, based on expected FY'15 numbers.
At present valuation, I would remain neutral to positive on the company.

4) Ajanta Pharma:

I have no words to describe this company. As I said earlier also, this is one company, which a new entrant can use to learn as an ideal company. Sales once again grew by 21% and profit by 36%.
The company has been able to maintain net profit margins above 20% for past many quarters consistently, which further enhances my confidence in the company.
We have seen company growing from being a small cap to a mid cap company, and if the growth pattern continues this way, I am sure, we will see Ajanta Pharma as one of the major large cap pharma company of India.
Company has approved sub-division of equity shares from face value of 5 earlier, to face value to 2 now. I am still highly positive on the company and their future growth.

5) Granules India:

Flat numbers this time were expected as per recent management interviews, where guided 15% growth in FY'15, even after very good Q1 and Q2. To an extent, there was some production loss due to cyclone in Vizag. The sales grew by 13% and profit by 8%. Lesser growth in profit, was mainly on account of loss through Auctus Pharma.
As per management, Auctus Pharma is expected to post profit in next quarter. Also, they are expecting the company to grow at 26% next year. The Omnichem JV is currently going through clinical trials, and it expected to contribute about 50 Cr in next 2 years or so. This will be very important for the company as Omnichem JV is focused on CRAMS business, which is probably the highest margin business in pharma industry. Also, the company is focusing more towards Finished Dosages, and they are aiming to achieve 65% of their revenues for FDs in next 2-3 years, which indirectly, will improve their margins for standalone business as well.
Overall, if one has a long term view, the company is not trading at high valuation.

I have given my views on the results of above companies, but the decision whether to buy/sell/hold these companies depends on reader.

2 Interesting Small Cap Companies - A Case Study For Readers

1) Vinyl Chemicals - Pidilite Ka Saath Hai, Chootega Nahi

The Company is currently engaged mainly in trading of Vinyl Acetate Monomer (VAM). The Company will validate the opportunity and decide whether to expand trading activity by trading in other chemicals.
The price and demand of various chemicals undergo fluctuations. Similarly, there are fluctuations in foreign currency rates. Hence, there is an inherent risk in trading activities.

Talking about history, VAM was manufactured in the plant located at Mahad in Raigad Dist, Maharashtra , India and was sold all over the World. The company was having major share of business of this product in India. Lately during Dec'07 the said plant was de-merged to resultant parent company M/s. Pidilite Industries Ltd for strategic reasons.
However, the Company's main focus remains in its product, VAM. The VAM is now imported/sourced from various Global suppliers and distributed / traded in India. M/s. Vinyl Chemicals India Ltd. will maintain its major presence in the field of Trading of various Speciality Chemicals in future all over the world.

Under the strong hands of Pidilite group, the company is secured as the parent company will protect its own image. It falls on the positive side of what is called a SWeT effect by Mr Amit Arora
http://multibaggersindia.blogspot.com/2012/02/swet-effect.html

Talking about the numbers, I don't see any major negatives.
The company has been giving very good quarters off late and might continue to do so.
The company is also debt free.
ROE has been superb for last 3 and 5 years.
The dividend payout history is also very good.
The company has been growing at a CAGR of 32% in sales and 20% in profit for last 5 years.
All these positives have taken the stock from levels around 10 to levels close to 100 now in past year, but is it enough?

The only concern why I am not putting this as a direct suggestion, is that, I am not convinced about the way management is going about their business. They have shifted their focus based on the context i.e. from manufacturing to trading now, as they find this more profitable one.
However, I may be wrong here in my judgement.


2) Indian Toners And Developers - Commited To Excellence

This is probably the 3rd time, I have found a stock, which was not in my radar, but was suggested by some of the readers of this blog. I thank all the reader for their queries on this blog, as it increases my knowledge and my radar.

Indian Toners & Developers Ltd. is India’s largest manufacturer and exporter of compatible toners for use in laser printers, the new age digital machines, multi-function printers, analogue copiers as well as wide format printers and copiers. Indian Toners & Developers Ltd. also offers premium quality chemical color toner products for use in laser printers and copiers. Indian Toners formed a subsidiary by the name of ITDL Imagetec Limited which became operational in 2009. While the manufacturing plant of the parent company i.e. Indian Toners is located in Rampur (U.P.), the manufacturing facility of its subsidiary, ITDL Imagetec, is located at Sitarganj (Uttarakhand).

Indian Toners & Developers Ltd. has a manufacturing capacity to produce 2400 metric tons of toners per annum. The facility at Rampur has a manufacturing capacity of 1200 metric tons of toner per annum, while the facility at Sitargunj also has a manufacturing capacity of 1200 metric tons of toner per annum, with a total of 4 production lines (600 metric tons each).
As per the Annual Report of FY'14, the subsidiary company is planning to expand its manufacturing capacity from 1200 MT to 1800 MT by 31st March, 2015.

Again, we have a company, which is debt free and trading at almost the same level as its book value.

Talking about numbers, the company has been growing at a CAGR of 14% in sales and almost 34% in profit for last 5 years. This year, so far, the sales have gone up by 18% and profit by 27%, which is very decent.
Based on FY'14 numbers, the company is currently trading at a P/E multiple of just above 6. Looking at six months data so far, it is expected that the annual EPS will be even higher.
Also, with the expansion getting completed in about 3-4 months, we can expect a much better performance in times to come.
The cash flow also has been impressive for past few years.
During the year FY'14, the company incurred R & D expenses of Rs. 48.58 lacs in various heads.
In terms of export, in FY'14, the company was able to increase it by 20% over past year

To check all the awards received by the company so far, visit:
http://www.indiantoners.com/awards.aspx

The few concern I have, is that in spite of making decent profit, the company is not paying dividend. Also, most of the revenues (almost 100%) is coming from export, and hence frequent and wide fluctuations in foreign currency and tough competition in the international market continues to be a challenge for your company.

Overall, I like the data and prospects of the company, and feel, it has the potential to achieve much more.

Note:
In both the cases, I completely leave it up to the reader to decide his/her way of approaching this company now, as I have put all the pros and cons to the best of the knowledge, I have about the company. I am not sure of the multibagger potential of both these names, but they seems to have the ability to become one. Hence I am not putting both of them as direct suggestion.

I do not have vested interest in both the stocks at present.

All The Best!!!!