VISAKA INDUSTRIES LTD Rs 124: Undervalued Investment Idea

Rationale for Recommendation:

• Consistent Dividend paying for 28 years
• Book Value Rs 209
• Diversified Product Range
• 11 manufacturing plants
• 2nd Largest producer of Asbestos Sheets in India
• Strong focus on emerging generation products (V-Board, V-Panel)
• Interest cost  2.16% of Total Revenue, Gearing at 1.00 and Interest
• coverage at 2.50 provides great fiscal comfort
• Brighter Industry prospects due to planned big expenditure on
• affordable housing and creation of Telangana state
• Trading at 4.28xFY16Eeps and 3.33xFY17Eeps
• Market cap 0.20xFY15 Sales
• Cmp @ 124/ substantially lower than 52 week high of Rs 189 gives buying comfort

PRODUCTS AND FINANCIALS:

VIL has 3 product divisions:

1. Asbestos Sheets: With installed capacity of 8.02 lac tonnes, VIL is second largest producer of Asbestos Sheets in India. In 1996, VIL was 6th largest producer which shows that its efficient and visionary management has made big strides in the industry. This division contributes around 71% of total revenues.

2. Fibre Cement Flat Products (V-Next division): Comprising of V-Board and V-Panels and called as emerging generation products division, VIL with installed capacity of 1.30 lac tonnes has emerged as the largest

producer in India. This division contributed 11% to company's total revenues. V-Board and V-Panels are substitute for Plywood and Gypsum Boards. These panels are not only cost competitive but also environment friendly and are used for: Acoustic Partition,Roof Underlays,Gate Cladding,False Ceiling,Wall Panelling,Kitchen cabinets,Mezzanine flooring,Garden fencing,Wall partition.

These products have huge potential and management has strong focus for big growth of this division in coming years

3. Textile: VIL is producing synthetic yarn through air-jet spinning with capacity to produce 9000 tonnes yarn annually and contributes 18% to its topline.

 

VIL paid Rs 5 per share dividend for FY15.

CURRENT PERFORMANCE AND FUTURE:
                              Q1/FY16         Q4/FY15

Sales                       321                 285
Depreciation             9.50               9.50
Interest                    5.47               7.17
PAT                       13.61               6.06
Eps Rs                     8.57               3.82


VIL has performed extremely well in Q1 of current year with PAT jumping 224% and Q1 alone has Eps of Rs 8.57

VIL has strong professional management in place with diversified product portfolio having 11 manufacturing facilities. Co's V-Next division has been operating at 60-70% capacity. Management is confident of running this division at optimum capacity due to increasing demand. Currently non-asbestos sheet products contribute 29% to its topline. Management is confident of increasing it to 40% in next 3 years.

                          2015-16E        2016-17E

Sales                   1130               1250

PAT                        46                  58

Eps Rs                    29                 36.50

VIL appears an excellent buy in smallcap space considering the following;
1. Stock is trading at 4.28xFY16Eeps and 3.33xFY17Eeps. Such valuations are screamingly low
2. Consistent Dividend for 28 years
3. Book Value Rs 209
4. Current market cap is just 20% of FY15 sales
5. Much better industry prospects
6. 52 week high share price Rs 189 and Low Rs 85, One month high Rs 161 and Low Rs 114. Hence, buying comfort at current price Rs 124

We feel that asbestos sheet industry is due for re-rating and VIL offers an excellent investment opportunity with perspective of 6-24 months.  If broader indices do not slide substantially and remain range bound, VIL should provide OUTPERFORMER appreciation and stock has potential to be Rs 350 in 18-30 months (depending on market conditions). A safe bet with bright chances of substantial appreciation for genuine investors

DoW.Exclusive: Blue Star Infotech Ltd cmp260

Blue Star Infotech Ltd (BSIL) , part of Blue Star group, offers software solutions in Digital Transformation and Software Product Engineering with operations in USA, UK, Europe, Malaysia and Singapore. Company is focused on delivering valued-added and future-proofed software solutions by leveraging emerging technologies and trends while preswerving existing investments for gaining competitive advantages. BSIL caters to the IT and software R&D needs of enterprises globally and offers a broad spectrum of services ranging from Application Development and Management, Product engineering, Package Implementation and Testing to emerging areas such as Business Intelligence/Analytics, Mobility and Cloud Computing. Its technology labs for Mobility, Cloud Computing, Analytics and Usability engineering incubate and propagate new methodologies, standards, tools and solutions.

BSIL has been delivering consistently good financials:

For FY15, BSIL had reported revenue of 264.88 crores out of which exports (overseas revenues) were 235.45 crores. It means co is deriving nearly 90% of its revenues from overseas clients. Eps for FY15 stood at Rs 17.18.

For Q1/FY16, BSIL has achieved revenue of Rs 74.29 crores , growth of 15.2% YoY basis. However, PAT has flared up YoY 134% to 7.26 crores, translating into Eps of Rs 6.73. During the quarter, co has procured a big order worth Rs 96 crores and such steep rise in profits has been possible due to closing of unremunerative business, streamlining internal processes and result of past rationalisations.  BSIL can report Eps of Rs 24-26 for FY16.  Weakening rupees should enhance its earnings further as major revenues are from overseas clients.Stock is trading at just 12xFY16Eeps.

BREAKING NEWS:  It is reliably learnt that PROMOTERS HAVE DECIDED TO SELL THEIR ENTIRE 51% stake to a foreign co (name of buyer not being disclosed here) @ Rs 380 per share. Announcement in this regard can be expected in next 2-4 weeks. In recent weeks, we had provided ABSOLUTELY ACCURATE information on companies like Rain Industries, Jindal Poly, CIPLA etc.  Our Info/Breaking News on Blue Star Infotech should also turn out to be fairly accurate. 

In immediate short term, stock should rise to Rs 350-360. However, under new management of overseas buyers, BSIL can and should witness big increase in its revenues and profits in next 12-36 months. Investors may remember that how Kale Consultants  has delivered huge appreciation to its investors within 2-3 years of acquisition by foreign co. We estimate that similar transformation should happen with Blue Star Infotech also. Hence, if investors hold on to Blue Star Info for 2 years, stock may rise to Rs 750+

In this devastated market, sellers outnumber buyers and fear psychosis has gripped investors. However, our experience indicates that even in down market, if there is definite big corporate trigger/action/Breaking News on a particular stock, then such stock rises (even swiftly). Hence, we feel that depressed scenario offers an excellent opportunity to buy BSIL today at very attractive price which should provide decent appreciation in a very short period. Once, official announcement comes, stock will zoom to its fair price (in parity with open offer price)

MARUTI SUZUKI INDIA LTD: A SHORT TERM INVESTMENT

Our recommendation SUN TV Networks has been doing reasonably well with price moving from Rs 359 to Rs 380 in just 3 days.

Maruti Suzuki India Ltd looks another stock worth buying. Share should be bought on every correction (with Rs.4,400 as a strong  support area) for a target price of Rs.5,200. Time frame: 3-4 weeks. We  expect Maruti to report strong Q2FY16 numbers.

 Our calls are from an investment  point of view. The market conditions are highly volatile & presently favor  short term investments, provided you get into strong counters, as the  broader market trend is turning bearish. If the Nifty fails to fill-up the big gap area formed around 8100-8200 in the Nifty in August 24, 2015, you  can see a whip-saw which can take the Nifty all the way down to re-test  7540. We have to keep this in the back of our mind to avoid a bear trap. In  the circumstances, one has to take out small profits wherever you get till  the market direction/trend becomes clear.

 Post August 2015 correction, We see a change in the trading pattern -- the  mid & small cap stocks are performing better than the large caps with good  P/V action. One explanation is that, the selling in large caps is still  coming from FPI investors & Hedge funds, while Indian MF & HNI's are making  delivery based investment in small/mid-caps, which is driving their prices  up. Make merry while the sun shines.

Short term trade SUN TV

Buy Sun TV  for a target price of Rs.400. Timeline: 2 weeks.


Keep stop loss below Rs.350

DARK HORSE: TRIVENI GLASS LTD Rs 14.70(Repeated)

DARK HORSE: TRIVENI GLASS LTD Rs 14.70(Repeated)

Promoters of Triveni Glass Ltd are amongst pioneers in glass industry in India. TGL has commenced its operations in 1976 for manufacture of Float Glass. Subsequently, company had also set up plant in Meerut and 2 plants in Rajamundry for manufacture of Figures/Patterned Glass. Due to various expansions , TGL was suffering from large debt and simulataneously, float glass manufacturing had become loss making business. Hence, TGL had decided to close down its Allahabad factory and Meerut plant. Currently, 2 plants of Rajamundry are operating ( at

low capacity) where Figured/Wired/Patterned glasses are being produced.

Figured/Patterned glasses are decorative glasses with pattern on one side/surface. Patterned glasses offer decorative benefits to Architects, Builders, Interior designers giving exciting designs for Homes, Offices, Restaurants, Hotels etc

Patterned glasses are used for:

*Office Partitions

* Glass doors and Windows

*Glass tables

*Shower cubicles

*Shelves in fridges/Shops

*Upmarket homes

OUT OF DEBT TRAP:  In order to rid of large debt, TGL had gone for One Time Settlement with all lenders and decided to sell its Meerut plant and Allahabad plant to pay off OTS amounts.

TGL had sold its Meerut Plant to a Japanese co for Rs 20 crores in 2012 and used the proceeds to pay off HSBC, SBI and IDBI.

Allahabad plant is closed since 7 years which is one of the biggest in India in Gloat glass. This plant is spread over 72 acres of land, is touching new highway. At that time, TGL had enjoyed the distinction of second best float glass manufacturer in India with 400 TPD plant. Its rival Saint Gobain had installed capacity of 1000 tonnes and had spent 995 crores for its Chennai plant.

TGL had outstanding loan of Rs 110 crores as on 313/03/2014 . Same came down to Rs 49 crores as on 30th September 2014. Break up of the debt as under:

Canara Bank  Rs 5.90 crores

SBI               Rs 3.27 crores

IDBI              Rs 35.50 crores

Others           Rs 4.33 crores

TGL has written back amounts benefitted from OTS in Q3 results of FY15. Hence, Book Value of TGL has BECOME POSITIVE due to write back of interest (waived, no more payable)

FINANCIAL PERFORMANCE:

                                 

For FY14, TGL has reported sales of Rs 49 crores and PAT was 6.67 crores. Eps stood at Rs 5.28. During the year, company had one-time write off for 2.23 crores. But for the same, Eps would have been still  higher

For FY15, TGL slipped into losses as co reported NET LOSS of 3.86 crores on SALES OF 45.30 crores. Main reason for sharp deterioration in profit margins was due to temporary slackness (a new co in U.P. had commenced production of similar product range) due to new competition from a fresh entrant  AND TGL stopped receiving gas from KG Basin. As a result, its production cost shot up as TGL has been running its plant on diesel

FUTURE OUTLOOK:

It is reliably learnt that company has FINALISED sale of its Allahabad plant for Rs 85 crores. Announcement in this regard is expected by August-end 2015 itself. And TGL has already RECEIVED advance/part payment against sale of this surplus land. Out of 85 crores, TGL will use Rs 49 crores topay off its entire debt. It shall leave TGL with cash in hand of around Rs 36 crores. It works out to Rs 30 PER SHARE CASH IN HAND.

Against the same, share is quoting only at Rs 15/.

Patterned glass is a profitable business and has good future due to increased useage of same in offices/homes/hotels/restaurants etc.Presently, its Rajamundry plant is working at LOW capacity due to paucity of funds. Rajamundry plant is in Godavari basin where ample gas and electricity is available which are major input costs for glass manufacturing. In FY14, TGL has achieved Eps of Rs 5.28 (although company had written down some bad debts and old inventory). Although not sure, as and when KG Basin gas supply resumes, TGL can achieve excellent profit margins

SHAREHOLDING;  As per Bse website, promoter holding is 6.6%. However, we believe that 8.54% shown in name of 3 entities as Public category BELONG TO PROMOTERS. We also believe that another 10% in different

names (less than 1%, hence not visible in shareholding) also belongs to promoters. Finally, IDBI holds 28% shares under pledge which have refusal of first right with promoters. Thus the collectived holding of promoters should be around 53%.

Once TGL pays off its lenders and surplus cash in hand (payment to be received from sale of Allahabad land), performance of Rajamundry plants will witness huge improvement. Firstly TGL will be in a position to incur some capex for modernisation of the plant. Secondly, TGL may also go for capacity expansion. Thirdly, profit margins will also improve (after OTS is buried).

LATEST RESULTS:

                          

QoQ basis, TGL has reported vast improvement in Q1 of current year. As against loss of 3.95 crores in Q4 of previous year, TGL has achieved NP of 1.12 crores in Q1 of current year.  TGL is importing some equipment from China. This equipment will be ready installed by October 2015 and operational from November 2015. It will help reduce fuel consumption considerably and TGL will make substancial savings on fuel consumption. Hence, TGL can report big improvement in profit margins from Q4 of current year

TGL CAN REPORT EPS of Rs 6 for FY16 and Rs 9 for FY17.

Current market cap of TGL is only 19 crores and scrip quoting at Rs 15/ (against expected CASH IN HAND of Rs 30 per share)  is a steal, dirt cheap. Scrip is lying low because it is in T group with 5% circuit filter. Small quantity of promoter holding is in physical form . If promoters can demat these physical shares,scrip will come out of T group. Then scrip can make sharp gains. Worst is over TGL. Upon receipt of full considation of land sale, Scrip should be re-rated. Investment in TGL at current levels has very low downside (worst case scenario). Stock price can double (under normal market circumstances) in next 3-4 months  and can be Rs 80 in 24 months

How the Mighty Fell in 2014-15 -- A sample study.

METALS*

1) JSPL: From Rs.350 (it was Rs.800 in 2010) to Rs.57
2) NMDC: From Rs.200 (it was Rs.550 in 2010) to Rs.90
3) Tata Steel: From Rs.600 to Rs.200.
4) Hindalco: From Rs.200 to Rs.73.50.

*BANKS*

1) SBI: From Rs.305 to Rs.224
2) ICICI: From Rs.393 to Rs.254.
3) Bank of Baroda: From Rs.229 to Rs.137.
4) PNB: From Rs.231 to Rs.124.

*REALTY*

1) HDIL: From Rs.143 to Rs.54.
2) DLF: From Rs.250 (it was Rs.400 in Jan. 2011) to Rs.93.
3) Unitech: From Rs.40 (it was Rs.100 in Jan.2011) to Rs.5.40

*Notes*:

1) The prices are as of 4/9/2015..

          2) The above sectors are cyclic and fall sharply than they rise.
          3) The bottom is still no where in sight & the worst is probably yet to come.
          4) The stocks are representative and leaders in their sector.
          5) The most interesting or intriguing part is that, while the Sensex & Nifty scaled new heights in 2014-15  the representative stocks were consistently falling
particularly from January 2015.