We would like to share with you an interesting investment opportunity from the Building solutions space for the Alpha stock recommendation for the month of Oct’11.
Note: Please make sure that you buy the stock only in the specified range and follow the Portfolio allocation and Profit booking strategy diligently (Refer Page #5 for the same).
At Katalyst Wealth, we don’t rule out a possibility of a downside of 10-15% (we can’t predict and therefore never attempt to catch bottoms) and would therefore suggest only serious long term investors to consider investing in the stock.
For detailed investment strategy, refer the attached report.
Everest Industries Ltd (NSE Code – EVERESTIND)
Everest Industries Ltd (EIL) was founded in 1934 and is one of India’s fastest growing building solutions company. EIL has an exhaustive product portfolio of Ceilings, Walls, Flooring, Cladding, Doors, Roofing and Pre-Engineered Steel Buildings for the Industrial, Commercial and Residential sectors.
Everest Industries – Content Index
Everest Industries – An Introduction
- Complete Building Solutions company
- Investment Snapshot
- Rise from the ashes
- Key Investment Highlights
Everest Industries – Business & Industry Overview
- Revenue Streams
- Margins to stabilize around 6% NPM by FY 2014
- Building Products Division
- Capacity Build up and utilization
- Volume Driven business
- Roofing Industry overview
- Boards and Panels industry overview
- Asbestos and misconceptions
- Strong order book
- Lack of Pricing Power
- Industry overview
Everest Industries Ltd – Financials
Everest Industries – Key Investment Highlights?
Improving demand scenario: The government is targeting a sustained economic growth of over 8% this year. This growth would include a 4% growth in the agricultural sector, 10.30% in industrial, 11% in construction and 9.60% in the services sector. EIL operates in these key sectors and will benefit from the anticipated thrust by the government. The demand for EIL Building Products is strong in rural, commercial and industrial sectors.
Demand for pre-engineered buildings (PEB) and ready-to-use building products is growing swiftly for faster construction and efficient project management. Manufacturing industries like automobile, power, textiles, engineering goods and services like logistics, warehousing and infrastructure are large users of PEBs and their rapid growth has a positive impact on Everest Industries Ltd. Improved economic scenario and revival in industrial activities shows great potential for PEB industry in India.
Government Initiatives: Increased expenditure on rural and infrastructure development with an aim to provide adequate shelter to the rural poor, the Government of India, has introduced programs like Indira Awas Yojna, Golden Jubilee Rural Housing Finance Scheme, Pradhan Mantri Adarsh Gram Yojna, Productive Housing in Rural Area and Rural Housing Fund etc, are rapidly expanding the demand for building products. Government thrust on developing backward areas will lead to an increase in construction of schools, housing and hospitals which is the positive note for the Everest Industries Ltd in the rural roofing sector………(more details in the report)
Note: For detailed analysis on the company, refer the attached report.
B-47, 1st Floor, Dayanand Colony, Lajpat Nagar – IV, New Delhi – 110024 Ph.: 011-41730606, Mob: +91-9818866676
Suppose that every day, ten men go out for beer and the bill for all ten comes to Rs 100. If they paid their bill the way we pay our taxes, it would go something like this:
- The first four men (the poorest) would pay nothing.
- The fifth would pay Rs 1.
- The sixth would pay Rs 3.
- The seventh would pay Rs 7.
- The eighth would pay Rs 12.
- The ninth would pay Rs 18.
- The tenth man (the richest) would pay Rs 59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
He said, “Since you are all such good customers, I’m going to reduce the cost of your daily beer by Rs 20. Drinks for the ten now cost just Rs 80.”
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men — the paying customers?
How could they divide the Rs 20 windfall so that everyone would get his “fair share”? They realized that Rs 20 divided by six is Rs 3.33. But if they subtracted that from every body’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay!
- The fifth man, like the first four, now paid nothing (100% savings).
- The sixth now paid $2 instead of $3 (33% savings).
- The seventh now pay $5 instead of $7 (28%savings).
- The eighth now paid $9 instead of $12 (25% savings).
- The ninth now paid $14 instead of $18 (22% savings).
- The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
“I only got a rupee out of the Rs 20,” declared the sixth man. He pointed to the tenth man, “but he got Rs 10!”
“Yeah, that’s right,’ exclaimed the fifth man. “I only saved a rupee, too. It’s unfair that he got ten times more than I!”
“That’s true!!”shouted the seventh man. “Why should he get Rs 10 back when I got only Rs 2 ? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine men surrounded the tenth (the richest) and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, ladies and gentlemen is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible
We would like to share with you an interesting investment opportunity from the Kitchen ware industry for the Alpha stock recommendation for the month of Sep’11.
Note: At Katalyst Wealth, we don’t rule out a possibility of a downside of 10-15% (we can’t predict and therefore never attempt to catch bottoms) and would therefore suggest only serious long term investors to consider investing in the stock.
Download report here: Acrysil Ltd (Scrip Code – 524091) – Katalyst Wealth’s Alpha Reco for Sep’11
Acrysil Ltd (BSE Code – 524091)
Acrysil Ltd is a leading manufacturer and exporter of Composite Quartz & Granite Kitchen Sinks from India with Technical Know-how from Schock & Co., Germany.
The company began in a small way with about 2800 sinks annually, along with thermoplastic co-extruded profiles for the domestic auto industry and is now sitting on a production capacity of 2,20,000 kitchen sinks annually.
Acrysil is the only company in all of Asia – and one of just four companies worldwide – manufacturing composite quartz sinks. They are the India’s largest sink manufacturer in the non-steel category and the company has set the goal to be the No. 1 manufacturer across all categories, in terms of branded volume.
Acrysil – At the right place at the right time?
In its initial days i.e. early 1990s, it was a challenging task for the company to penetrate into niche high income households and premium institutions in India. CARYSIL sinks being relatively costly in comparison to sinks from the unorganized segment, ACRYSIL couldn’t find its place in the price sensitive India market.
With domestic response being somewhat slow to take off, Acrysil began its focus on exports of quartz sinks in 1993. 2001-02 was the year that Acrysil first looked at India as a potential growth market for quartz sinks, ready for the introduction of carefully chosen models. This proved to be an accurate insight: in just a decade, domestic sales have multiplied from Rs 108.32 Lakhs in 2001-02 to Rs 868 Lakhs in 2010-11.
We believe there could not be a better time for the company to focus more intensely on growth in domestic market, because along with the growth of disposable incomes in the middle-class, there is more than proportionate growth in its very highest strata. In all major cities in India, one can see the flourishing of premium shopping. There’s a boom in ultra-select housing developments and gated communities and one can see the growing market for goods that were once considered the ultimate in luxury, affordable only by a select few.
In other words, there is now a substantial domestic market for high-end premium products like Carysil Quartz and Stainless steel sinks – designed for the higher income strata. In India, people and establishments with the means are willing to pay considerably higher for genuine value.
We are convinced that quartz and premium Stainless steel sinks are destined to be the material for upscale kitchens and no company better than Acrysil is at the cusp of capitalizing on the same.
Ph.: 0120-4109766, Mob: +91-9818866676
During our casual research on variuos stocks (recommended or not recommended), we sometimes end up finding interesting details either about the company, its shareholders or the industry.
Recently we were looking at the shareholding pattern of Cera Sanitaryware – Alpha Stock recommendation for Jan’11 (Refer the report HERE) and came across a few investors holding more than 1% stake in the company.
Amongst the above Mr. Vijay Kedia and Mr. Sajan Pasari have been holding the shares of the company since long. While Mr. Sajan Pasari is one of the Board of Directors of the company, we couldn’t find any relation between Mr. Vijay Kedia and Cera Sanitaryware.
On carrying out further research, we found an interesting article dating back to 14th Mar’08 in DNA regarding Mr. Kedia.
Here are a few important details regarding Mr. Kedia:
- Vijay Kedia is estimated to have built up a fortune of Rs 100 crore (as at 2008).
- Vijay Kishanlal Kedia left his family’s stock-broking business in Kolkata in 1990 and came to Mumbai to strike it out on his own.
- Working as a sub-broker with BSE member Bharat C Bagri, Kedia learnt the ropes of India’s capital markets and in the trading ring at the BSE, he met someone whom he today looks up to as a friend, idol, guru and mentor: big bull Rakesh Jhunjhunwala.
- He confesses that whenever he makes an investment, he takes advice from Rakesh.
- He likes investing in Mid-caps for the reason that they are usually available at much cheaper valuations, and if it’s a good company, they tend to rise much faster.
- Kedia invests only for himself, and does not take positions on clients’ behalf.
- As an investor, he tries to copy Rakesh. He confesses that he’s just 1% of him in knowledge, wealth and the contacts, but takes inspiration from him and regularly visits Jhunjhunwala’s office, house or his favourite haunt at Geoffrey’s on Mumbai’s Marine Drive, to seek advice.
For complete details refer the following link Vijay Kedia – DNA article Mar\’08
Ekansh Mittal [firstname.lastname@example.org]
Here are some important updates on our previous Alpha Recommendations.
- Cera Sanitaryware – A well known investor has invested in the stock.
- Acrysil – Sales of approximately *** per month in Delhi-NCR and alliance with a well known construction company.
The complete details are available in the attached report. Refer the below link.
B-47, 1st Floor, Dayanand Colony, Lajpat Nagar – IV, New Delhi – 110024 Ph.: 011-41730606, Mob: +91-9818866676
Scarcity of raw materials and soaring prices for commodities, the financial crisis and the increasing intensity of natural catastrophes have created a paradigm shift that requires a fresh analysis of how the corporation relates to the global supply chain.
In a stalled or shrinking market, a 10% cost reduction in supply chain efficiency can easily produce more return with less effort than a 10% increase in the sales. The table below represents an average industry (manufacturing) standard profit and loss statement that compares the relative benefit of a 10% reduction in purchasing cost to a 10% increase in sales assuming there is no cost increase in operations and SG&A.
Much can be done to reap the benefits of reduction in purchasing by following a simple principle – listen and involve the supplier in the strategy. Sounds simple, but in practice this requires a change in mindset at the end of the company’s management.
From internal innovation to “open” innovation
Most CEOs put a top priority on responding to customers. In the new post-crisis environment, listening to suppliers can be just as important. Customer satisfaction remains a priority, but insight and innovation can also come from the supply side.
In 2002, the Dutch firm Royal Numico, a leading producer of baby food, tackled a highly competitive, shrinking market by turning to one of its suppliers, Babynov, a former yogurt company, headed by Roger Beguinot, a French entrepreneur. Beguinot had developed an ingenious plastic packaging concept that let mothers save time by preparing easy-to-serve baby food at ambient room temperature. Beguinot realized that mothers, pressed by hectic schedules, would feel guilty at spending less time with their infants, and would consequently be ready to pay extra for a premium brand as compensation. The product innovation enabled Numico to increase its profits dramatically, despite a declining birthrate. Numico’s emphasis on innovation led French competitor Danone to buy the company in 2007 for €12.3 billion — roughly 22 times Numico’s earnings.
Procter & Gamble, one of America’s longest surviving corporations, literally redefined itself from a manufacturing company to a corporation focused on “creating and building brands.” By 2003, P&G, which had previously manufactured detergents, beauty aids and a variety of products with its own proprietary equipment, had moved towards becoming an aggregator of products made by a wide range of suppliers, and it was outsourcing a growing percentage of its manufacturing.
As part of P&G’s changing corporate identity, CEO A.G.Lafley adopted a “connect and develop” strategy which called for acquiring more than 50% of its innovation from outside the company. Lafley had realized that efforts to rely on in-house R&D was stretching the resources too thin, distracting from core operations. Innovation, P&G concluded, was the key to providing sufficient value to offset the higher prices of P&G’s premium products.
Apple, a corporate leader in innovation and a company that is notorious for insisting on its own proprietary hardware, also found that some of its best ideas by paying attention to outside suppliers. In 2001, its senior vice president for hardware engineering at the time, Jon Rubinstein, made a routine tour of Toshiba’s computer hard-disk manufacturing facility. Toshiba had just developed a tiny 1.8” hard drive. Toshiba’s engineers complained that they didn’t really know what to do with their creation. As it turned out, Apple did. The drive was the missing component needed to make the iPod possible. It changed the music business forever and the company along with it.
Re-thinking the supply chain
Traditionally companies tried to squeeze the lowest price possible out of suppliers.
- They instead should be embraced. More can be gained by turning the supplier into a partner in innovation than by forcing cost-cutting on materials and labor.
- An even more enlightened approach is to invest in R&D through the supplier.
The potential for increased profit outweighs the risk that a competitor will gain access to the idea through the supplier. The supplier with the best technology is in a better position to help the corporation compete effectively. Knowing how to develop a collaborative relationship is the fastest and easiest approach to improving the bottom line. This is a dramatic change of thinking from business in the past and thus requires the input at the highest level of the corporation’s management team.
From our reading of the various journals and newsletters, we come across different stock ideas. The same acts as a good starting point for carrying out in-depth research on good stocks idea. Off-late we came across Bliss GVS Pharma as a stock recommendation in various journals and also on the leading business daily i.e. The Economic Times.
The company is renowned for manufacturing and marketing a unique product ‘Today’ which is a Vaginal Contraceptive, a female contraceptive aimed at furthering planned parenthood.
We carried out some primary research at our end and this is to inform you that we would like to caution (all invested or contemplating investing) all against investing in Bliss GVS Pharma.
The numbers look dicey to us and through this post we would even suggest all readers to mandatorily check the cash flows of the company, rather than just devoting complete attention on the reported earnings. After all, Cash is the ultimate king for any business.
On the face of it, the sales and earnings growth looks good. Since the company operates in Pharma space with negligible debt, one is bound to get interested about the stock. However, as highlighted above the tax outgo seems abysmally low and warrants a check. We consider taxes paid as an important metric. Let’s check the same and other important operational details with Cash Flow statement of the company.
Cash Flow statement
While the earnings statement of the company brings out a very rosy picture, the cash flows statement is portraying a completely different story and the same should bring on guard any prudent investor.
Some simple calculations tell us that while during the last 6 years the cumulative Profit after tax reported by the company is Rs 159 crore, the cumulative Cash flows from operations for the same period stand at Rs 48.65 crore.
Well, that’s a hell of a lot of difference. Occasional blip in cash flows is understandable, however such a huge difference is definitely alarming. Then what’s causing such a huge difference in reported earnings and the actual cash flows? Seems like a case of high working capital requirement. Balance sheet shall help us throw some light on the same.
As can be observed above the Sundry debtors of the company is abnormally high, and rather growing at a rate higher than the net sales of the company. The same points towards very aggressive accounting practices of the company. At the same time, the company does not enjoy the same credit facility from its creditors with current liabilities remaining more or less same over the last 5 years.
We believe that the company could either be pushing very hard for it’s products or could even be cooking it’s books. In any case, the same does not send out a very good signal for the existing shareholders and the ones who are contemplating buying the stock of the company.
Ekansh Mittal [email@example.com]