Updates...

As expected both the stocks reported good results. continue to hold them for long term. One turnaround story which I came across is Bharat Immunologicals and Biologicals Corporation(a small cap which looks interesting). I could only find the below link. Will be looking for more news the coming weekend.

http://www.business-standard.com/article/companies/can-a-condom-maker-churn-out-vaccines-for-the-nation-112041900068_1.html


Happy Weekend!!!!

Can try following stocks for short term

Alembic Limited and Store One retail are expected to deliver good results..try for 10-20% gain

End of Gold Era!!!

Guys read the below report and then take decision whether to buy gold or not

http://www.businessinsider.com/citi-the-commodity-super-cycle-is-dead-2013-4

Day's Of High Inflation ,High CAD, High Fiscal Deficit Gone!!!!!

What to Expect Next????

a)Inflation.. Heading to Below 5% In Next 12-18 Month

b)Gold... Heading to Below Rs.20000/- In Next 12-18 Months

c)Oil Subsidy Expected to be Nil in Next 1-2 Years.

d)Intrest Rate Below 5 % In Next 2-3Years.

Two Stocks worth looking at!!!

1) MPS Ltd : New Mgmt has done a fabulous jobs of turning it around.
2)Orient Exports : Great Expansion Plans

Will be writing about them in detail shortly..

Next Multibagger in Ceramic Sector---Orient Bell

Orient Bell!!!!---Targets Huge, just have Patiencee

The total size of Indian Tiles Industry is approximately 18000 crore of which around 7200 crore is organized and the remaining is unorganized. The industry is cyclic and is characterized by high fuel cost, working capital requirement and competition. The Delhi headquartered Orient Bell is in the business of manufacturing and selling primarily Ceramic, Vitrified, Ultra Vitrified and Decorative tiles. In the year 2010 the company Orient Ceramics acquired Bell Ceramics and later on merged with itself and was renamed as “Orient Bell Ltd”. They acquired a listed company and merged with it. This is the only such acquisition in the history of Indian tile industry. Earlier it used to cater to Northern and Eastern markets but because of the merger it has now captured the Southern and Western markets also. The market share of the company has shot up from around 8% to roughly around 15% just lagging behind Kajaria Ceramics (around 20%) as of 2012. With this merger the company’s installed capacity has increased from 14 million square meters to 28.6 million square meters and has now become the fourth largest company by sales in India. The operational efficient of the company has also improved from 60-65% to around 80% with little or no investment. The company is having a strong marketing network of close to 2500 dealers and about 9000 retailers. Orient Bell has now become a pan-India company with 41% of the sales coming from North, 33% from South, 17% from East and 9% from West.

Financials

The company has recently announced its Q3 2013 results. The y-o-y results are good as the company has reported almost 50% growth in topline but all of this has not been translated into bottomline. The only thing which has been hurting this company has been its 174.80 crore debt (as of Mar 2012). This has translated into higher interest cost. For the nine months ended Dec 2012 the interest cost has increased to 18.91 crore from 7.57 crore for the same period last year. Also the company is incurring almost 30% (109.82/337) as fuel cost for manufacturing tiles. The interest cycle is taking a U-turn as can be seen from RBI reducing the repo rates and if the company can take some steps to reduce the debt and restructure the balance sheet by infusing fresh equity the gearing ratio can be lowered which will help unlock the full potential of the company. Recently (in February 2013) GAIL has completed 1000 km Dabhol-Bangalore Gas Pipeline and if the company is able to get gas from GAIL for their Hoskote (Karnataka), the company should be able to reduce their fuel cost. We need to keep a watch on this front. Earlier the company had plans to set up a tiles unit at Kakinada in East Godavari district of Andhra Pradesh but the management has mentioned that they would be going slow on this project. One way to reduce the debt can be selling off this 70 acre unit of land. The company has been paying dividend for last so many years.

Investment Rationale

Comparing to Kajaria Ceramics (industry leader) which is available at PE of 14.67(TTM) and 5.09x book value (as of 3th April 2013), Orient Bell is available at a PE of 6.87(TTM) and 0.62x book value. If it turnarounds and is able to reduce the debt it will command a higher PE multiple. If we check the market capitalization to sales ratio across the ceramics sector this stock is the cheapest amongst all with the ratio being .17 while Kajaria Ceramics which is the leader in this sector has a ratio of almost 1. The company plans to achieve three-fold growth by 2015 and is aiming at a turnover of 1500 crore. Their recent acquisition of Bell Ceramics which has been reporting losses for last few years) and turning it around within 18 months is a classic example of professional and class management. Any change in construction sector outlook will also add fire to this script. The promoters have been mopping up shares even at current market price (Rs 70) which shows their confidence. Orient Bell is now concentrating on value added premium segment where competition is less from small players. So all in all it’s a good buy at current level.