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.

VST Tillers Tractors Ltd

BSE Code : 531266, CMP 510. Buy in range of 480-510, and hold for 1.5-2 years for handsome gains...

V.S.T Tillers Tractors Ltd is a bangalore based company. It is promoted by the V.S.T Group, in collaboration and joint venture with Mitsubishi Heavy Industries and Mitsubishi Corporation, Japan for the manufacture of Power Tillers and Diesel Engines. The company is into manufacturing of Power Tillers, Engines and Tractors.

As India economy is dominated by Agriculture and still it is have large scope for introducing technology into it. Since population is growing, food prices are also rising slowly. To increase productivity in agriculture sector government is bringing in various schemes and giving subsidies to farmer on use of Tractors and other machinery. The sales of power tillers have been increasing since last couple of years and VST tiller future looking promising as per that.

The Company is a market leader in Power tiller and have 50% market share. Earlier company was producing tiller and tractor on its same Bangalore plant, but seeing the demand of tiller company had started a new facility for tractors and Bangalore plant will be making tiller, so it should post good growth in sales of tiller in coming years..Company is planning to focus on tiller with 65-70% revenues coming from tiller segment.

The company has market capitalization of INR 440 Cr, and trading at FY 12 PE of 9.5 approx. We expect it to command PE of 13-15 in good markets and as its profit grows, one should see re-rating happening in the counter. The company maintains a very good operating profit margin of 17.41% and net profit margin of 10.86%. The company has proved its worth over the years by maintaining Return of Equity of over 33%.

Company is looking good at this valuation and one can look forward to 100%+ returns in next 1.5-2 years in this counter.

For any query mail us at multibaggerpicks.info@gmail.com

Piccadilly Agro Industries Ltd

Piccadilly Agro Industries Ltd. Bse Code: 530305
CMP: 34 Rs
Collect 70% at CMP and 30% at 31 levels.
Target short/medium term 54-60 rs till March 2012. Long term target of 150-180 levels in next 2-2.5 years.


Piccadilly Agro started with Sugar business long back, and struggled a lot. Last 4 years they started liquor production and expanding it very fast. As we all know demand for liquor will never end in this world so it business is going to grow many folds. They are in Haryana region and have strong presence of thr brand in that region. They have good contacts which is helping them in getting license and all process done smoothly. Results of liquor started showing in, and the demand is good and revenues growth is good. Last year EPS was 11.4 but posted weak results in June qtr hence had to witness the fall, expect good results again soon and re-rating of the counter in coming 6-12 months..So next 3-4 qtr will be good for this counter. Since it is very much corrected from highs and now in range of 30-34 we recommend 70% buying now and 30% at deeps. Dividend of 2 rs is on card which gives 6% approx dividend yield on cmp and record date is 23rd Sep 2011. Also it had shifted to liquor industry but PE re-rating is still not done, hence expect PE re-rating as per sector in coming years, So buy this counter at cmp and falls and hold for 2-3 years to get handsome returns....

For any query mail us at Multibaggerpicks.info@gmail.com

Updates

Atul Auto--Giving right for every 4 shares investor will get 1 shares @ 30 rs per share. One should definitely apply and hold the stock for long term.

Dhanuka Agritech--If sold higher buy on fall to 98 and 84 levels.

Cera Sanitary ware--Buy on falls..

Shirpur Gold--As gold prices increased, and looking to go higher further, it margins and bottom line also should rise with increasing top line, so expect total re-rating in the counter in next 12-15 months...Hold and buy more and more...

for any query mail at multibaggerpicks.info@gmail.com

General Updates

Dhanuka Agri--Reched 110 and correcting, hope short term members made profit and long term holding.

ABC India--Recommended at 120 now trading at 136.

Sah Petroleum--Booked Profit once...good chance to re-enter again at 34...

Shirpur Gold--Hold recommended.

Atul Auto---Good levels to add are 110-120 and low...target in medium term 150-175 levels.

Cera Sanitary--Moved after we recommended to 240 levels...and corrected...hold recommended...and those who havent added add at 190-200 levels...

For any query mail us multibaggerpicks.info@gmail.com

Shirpur Gold

Shirpur Gold--512289---For high risk taker...CMP 102...

We all know the story behind shipur, if one dont knows a small review below...

This company is into Gold refining business and was started once in 2001, and that time Shirpur gold was promoted by the Patels of Autoriders group and it is the first and largest gold refinery in India. Autoriders group started the commercial production in 2001 with a set-up of 300cr plant, but due to death of the promoter Mr. Mukesh Patel...the project got de-railed...and company could not ramp up its business. After this they were not able to run the operations and less working capital and non-payment of loans company went into the hands of Asset Re-construction Company of India. From there Jayneer Capital Private Ltd JCPL (Zee Group) acquired the financial assets of the Company through a bid process which was awarded in their favor by ARCIL. JCPL also had converted loans on Shirpur to equity and started the commercial production for last 3 qtr. But still it need to show profits to its investors...whr risk lies...Company is running at very less capacity as of now...once it uses 70-80% of its capacity and shows profit it will be completely re-rated... company current market cap is of just 159cr..... which is much lower than what quality of assets they have as of now...if company goes for liquidation it will be surely more than 200cr...

So not much to loss...and long term can get very good returns....

Buy with 3-5 years view...not less than that...

Cheers
Sanket

Cera Sanitary Ware

Add Cera Sanitory ware on every falls...CMP 214. Low volume counter, so add in small lots at every falls for 1-2 years view...Very good portfolio stock...

Company is into manufacturing of Sanitary products. And every house uses it...and consumer industry story...and that too Indian domestic market growth story...so long way to go....

FY11 EPS of the company is 27 (but thr might be error, as EPS should be around 21.7 approx as per Net profit figure..) and PE of just 8, Hence short term it can move to 270 levels and long term also. a good bet....

FII buying from the market and March qtr had seen increase in holdings, promoter also increased holding...

Sales increases slowly and should see more rise as more and more construction of houses and offices increase in India.

Expect 300cr sales by FY12 and hence EPS of 29-30 approx and with PE of 10, we can easily get targets of 300...which is 50% approx move from this levels...good for long term investment....as sales grows...

Add at CMP and on every falls...

Cheers
Sanket