Wednesday, February 15, 2006

Prasanth's comments and 'value picks'

This blog is in response to Prasanth's comments. Prasanth found these stocks enlisted in the capitalideasonline round table. Enclosed is my evaluation of the same -

1. India Nippon Electricals

The evaluation in numbers –
NCAV (incl invts) – 97.14 rupees per share
Dividend – 8.50 rupees per share
FV – 10 rupees

There is nothing exciting about this stock, neither is there anything I feel rather uncomfortable about. The sales are rather constant, so are the profits. At a CMP of 276 rupees per share (Feb-14) and a fwdPE of 12.50, the stock is attractive enough. The dividend yield is also a decent 3.08%. It’s a fairly stable stock which has had rather minor swings over the last 12 months (the highest being a rise from 245 to 300 in 30 days). There is a fair chance of the stock going up in the next 5-6 weeks with moderate returns of 12-20%.

2. Cheviot Company Ltd.

A similar company to India Nippon Electricals, Cheviot has an NCAV (incl invt) of 225.98 on a CMP of 512.00 which is very decent. I approximate the fwdPE of this stock to be 6.42 and is currently at a dividend yield of 1.95%. The big spike in the Cheviot stock came in the month of August 2005 when it jumped up from 330 rupees to 600 rupees in 20 days; otherwise the going has been easy over the last 4 months. Very stable - sales and profits – not too exciting from a company standpoint, but a little under valued. I would not be able to comment on further movements in this stock, although there is a higher probability of the stock going up rather than down.

3. Investment and Precision Castings

A stock I held at one time (bought at 275, sold in a month at 525) and still retain one share (I tend to retain one share, because I get the annual report of the company then). Before dwelling on the financials, my advice is to not invest in stocks where the profit per quarter is very low. In this case, we are looking at close to 2 crores per quarter or 66 lakhs a month. This was one factor for me to move out of this stock. Surely one cant be comfortable with such a company. The business stats are enclosed –
a) NCAV – 126.61 rupees
b) CMP – 617.00 rupees
c) FwdP/E – 9.56
d) Dividend yield – 1.22%

4. Fem Care Pharma

Just the kind of stock you should never buy. A truly un-Graham stock with no “margin of safety”. Its more of a “Value shock” rather than a “Value Stock”. Examine these –
a) It has an NCA per share (incl invt) of 1.12 rupees per share against a CMP of 428 rupees
b) The company has never given a dividend in the last 5 years, except the last yr when it shelled out 5.1 rupees per share
c) The stock is at a fwdPE of 16.10 which is also very high
d) Sales and profits are growing at a miserly 15-20%

5. Motherson Sumi Systems Ltd

A good profitable company with expanding sales, Motherson Sumi is an evolved and fairly valued stock. The business stats of the same are enclosed –
NCAV – negative 1.67 / share
CMP – 82.00 rupees per share
FV – 1 rupee per share
Div. Yield – 1.22%
Profit (LY) – 62.09
P/E of 31.02 and fwd P/E of 27.92

An excellent company with a good management, the stock is largely overpriced given the specs above. Advise buy only if the stock goes down to around rupees 60.

In summary, Cheviot Company Ltd. seems to be the best buy of the 5 stocks listed. For it's stable revenues, stable profits, good NCA/CMP ratio, management and P/E ratio.

6 Comments:

Blogger Prasanth said...

Shankar,

Good analysis. Let's wait to see what exactly was spoken about these companies when Capital Ideas online publishes the full transcripts.

1:50 PM  
Blogger Shankar said...

Cool.. do email me the transcript at shankarnath@gmail.com

2:01 PM  
Blogger Rakesh said...

Prashant/Shankar,

Any input on Amtek India and Gini Filament. Planning to enter Amtek India based on its results. Not sure about any catch though

3:14 PM  
Blogger Shankar said...

Hi Rakesh,

See the blog on Amtek India.

Warm Rgds
Shankar

10:04 PM  
Blogger Prasanth said...

Hi Shankar,

Saw this mail on the Caoital ideas online round table . Here it is :

the CIO list is below:

- Ramdeo Aggarwal just mentioned Hero Honda, Bajaj Auto, Bharti Televentures as growth stories with demographic advantage.

- Sonjoy talked about the following:
o Cheviot – Current earning of Rs. 17, 150 cr sales, focus on profitable growth only – rare in jute industry, CMP of Rs. 530 includes Rs. 120 cash and Rs. 10 expected dividend.
o India Nippon Electrical – Monopoly business, 11-12 P/E, ROE in last 12 years of 40% avg and min of 26%, among the only 22 companies in India to show absolute PAT growth consecutively for last 10 years
o Investment & Precision Casting – 35% ROCE, 30% ROE, PE of 9.5 FY06, expected EPS growth of 14% minimum

- Bharat Shah :
o Motherson Sumi – Global Opportunity size of USD 80 b, Rs. 900 cr current turnover, should be USD 1 b in 4-5 years, 26% CAGR, maintain 37% ROCE, depreciation similar to Capex so PAT = FCF
o Fem Care Pharma – in personal care sector – liquid soap, hair removal, bleach and is leader in 2 out of 3 segments, turnover should increase from Rs. 70 cr in FY06 to Rs. 100 cr in FY07, ROCE in 3 digits, payout policy reasonable, expected topline and earning growth of 30-35%, huge size of opportunity and current PE of 20 will be 7-8 in FY07
o Wimicare ?? – speciality chemical to lifestyle companies, requires 3-4 years of approval before launch hence barrier to entry, capital productivity of 50%, 3 year expected topline growth of 40% and earning of 50%, turnover will increase from Rs. 70 cr to Rs. 120 cr
o Alstorm – alternative energy & transportation, both high growth with little investment requirements, available at 5-6 EBITDA times

We will have to wait till Capital ideas online publishes the full transcripts to get the whole story.

9:25 AM  
Blogger Prasanth said...

Shankar,

Capital ideas online has posted the transcripts of the conference on their website. Check it out.

regards,

Prasanth

2:18 PM  

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