Lumax Industries

Lumax Industries Ltd. (LIL) is a market leader in domestic automotive lighting industry, with market share close to around 30-35% on standalone
basis. However Lumax group (i.e. SL Lumax, lighting business of Lumax Auto Technologies Ltd and Lumax Industries Ltd) has ~50-55% combined
market share in domestic lighting business. Over the years LIL has presence across leading OEMs like Maruti Suzuki, Honda Cars, HMSI, Hero Moto
Corp, Tata Motors, M&M, Toyota, etc. on the back of its consistency in the product quality. During past 4-5 fiscals, company has focused on cost
reduction and process improvement that has helped it to improve profitability significantly.

Lumax’s products are unaffected by the EV disruption as EVs would require the vehicles to be more energy efficient, which would lead to the faster adoption of LEDs.

Recent quarterly performance of Lumax Industries was encouraging driven by 25.5 percent growth in net revenues on the back of 15 percent volume growth and improvement in realization. Lumax’s EBITDA witnessed a growth of 28.5 percent. It is noteworthy that the company launched new products for HMCL’s xPro and Super Splendor and Passion-Pro models during the quarter. Additionally, it added Morris Garages (MG) Motor India as its customer and received an order to supply tail lamps and headlamps for MG’s SUV.

It is focussing on increasing market share in commercial vehicles, tractors, and 2-wheeler.
1/3rd of the revenues come in from Maruti Suzuki which is also performing very well.
The company has set up a new plant in Gujarat, to cater the needs of Maruti Swift. This brings visibility to it’s volume expansion.
The company caters to 40% of Honda’s 2 wheeler demand. And going forward, they expect it to increase it’s market share as Honda looks to expand it’s product range.

BS-6 would be coming by 2020, which would make it necessary for all vehicles to be Energy Efficient. So auto-makers would have to switch from conventional lighting to LED for head and tail lamps.
Also, the sudden surge of Green Technology and E-Mobility, puts Lumax Industries in a driving seat to increase their market share, as well as business in the coming Fiscal Years.

The company has a partnership with Stanley Electric and Phillips for LED lighting. They will soon be starting phased electronic Localisation in India, which would cut the Import costs and lead to better
Its return matrix is expected to improve led by growth and margin expansion. Equirus expects revenue/EBITDA/net profit to grow at a CAGR of 15/24/27 percent over FY18-20.

EBITDA/net profit margins to improve by 200/250 bps by FY20. This would be driven by the high OPM which LED lighting offers, which stands anywhere between 2x-5x.

In 2014, 95% revenues of the companys revenues came in from conventional lighting and 5% from LED lighting.
Currently 75% come in from conventional lighting and 25% from LED.
By 2020, this figure is expected to reach 50-50.

The company expects to go debt free by March 2018, and they expect to remain cash positive so that they can invest in Future Technologies and R&D.

The promoter holding stands at a massive 73.53%, which shows their confidence in th company going forward.

Noted Investor Ashish Kacholia invested in the script in November 2017 and has been holding good amount of shares since then.

The company has been keeping in mind the best for the share-holders and has been paying Dividend Regularly. The dividend yield has doubled in the past one year.

Healthy demand from the auto sector, Market leadership, marquee clients in its kitty, its focus on developing technologically advanced products and adoption of LED-based products provide an improved earnings visibility for the company and hence looks attractive even at current levels.

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Piramal Enterprises Limited

A blindddd buyy!!

Simple logic behind suggesting Piramal Enterprises (wrt the Future Plans) so very often.

*Financials*

It is said that the Financial Services sector grows at 2.5x the GDP of the country. So if we take India’s GDP @ 7.4(2018E), it should grow at 18.5%.
This is why the valuations are always stretched for the NBFCs.

-Coming to PEL,
They have a loan book of over 34,000cr and net worth of 3500cr.

-Now they’ve raised 7,000cr majorly for their HFC business

-If they take a leverage of about10x-12x, they can increase their loan book to 70,000 to 1,00,000cr in a period of 2/3 years.
This can show terrific profitability to the company.

-Ajay Piramal said that they definitely cannot be the leader in HFC segment, but are looking to be amongst the top players.

-They have stake in Sriram Group which is perhaps the biggest lender in India among small and medium scale retail segment.
There are chances of integrating it with Piramal.

The co has just entered into lending in the Hospitality sector which is turning around and expected to boom.

-They will be looking to acquire Stressed Assets. Already in race for Binani Cements.

*Pharma*

-Their present revenue stands at 4,500cr which they are planning to increase it up to 7,000cr by 2020.

-Expanding capacities, past acquisitions and future acquisitions are going to add value to the co.
-They are planning to enter their old formulations business which Abbott had acquired as their NCC just got completed.

-Present EBITDA margin is in single digit. Looking to increase it to 20-25% by 2020

*Info-Analytics*
-The Data Analytics business is relatively new and was not contributing much to the company uptil now, but is expected to give boost to the earnings soon due to their recent acquisition.

*Mohnish Pabrai, a marquee billionaire investor said in an interview last year that ‘Piramal Enterprise’ is the ‘Berkshire Hathaway’ of India and ‘Ajay Piramal’ is the ‘Warren Buffet’ of India who works to maximize the shareholders gains*

Generic Engineering & Construction

Generic Engineering and Construction
Cmp – 175
13/01/18

-The company was started in 1967 as a small residential construction company and got reverse-listed on the exchange a year back.

Generic has diversified it’s construction portfolio, right from building residential buildings to office buildings to Cold Storages to Hospitals to Factories.

-Their speciality is in building Cold Storages and are hence probably #1 in Mumbai in building Cold Storages.

-Their Client list includes Kolte Patil, BMW, Glenmark, HUL, Kesar Group, Kokilaben Ambani Hospital Trust, AND, Idemitsu,  Panacea Biotech, etc.

-Kokilaben Ambani Trust is planning to build 40 hospitals across Maharashtra and some parts of Gujarat and Madhya Pradesh. Out of which 5/6 have already been sanctioned and the construction is going on or ready. Generic is constructing all of those 5 projects and is confident of getting orders for rest of the hospitals.

-The Company is active in Mumbai right now and are planning to expand in other states in the very near future. They have already started looking for prospects in Gujarat, Where they have an advantage of getting good projects from fellow ‘Patel’s’.

-It’s peers are Capacite Infraprojects, JMC Projects, Ahluwalia among the big names and it competes with BL Kashyap, PSP Projects,etc.

Financials

-The Company had a turnover of 73 crores in FY17. They’ve managed to clock a turnover of 66 crores in the H1FY18, and are looking at a turnover of 130/140cr (up 90% YoY) by the end of the Financial year and are looking to expand it to 200cr next year.

-‎The Company has an order book of 410 cr as of now, which is to be completed in 18-24 months.

-EPC companies mainly face the problem of late payments and generally have heavy debt. For Generic, that is not an issue at all. Majority of their clients have been with them since years and the others are big companies who care more about their factories to be completed and pay them in advance or even more for their work to get completed. The receivables cycle is of 75 days.

– The company has very very less debt (Debt/Equity) <~ 0.2.
A top notch company (pardon me, I Don’t remember the name) which is it’s peer in the field( a big player though), has a turnover of 2000cr whereas it’s debt is 4000cr.

– Coming to it’s P/E, it is trading at 29 according to it’s FY18E. The industry P/E is 43, which is bound to increase considering the way markets are stretching the valuations compared to the earnings. Capacite Infraprojects (which has been one of my favourite script ever since it’s IPO came out) is trading at a P/E of 62 and has a debt/ equity of 0.73 (that too after raising money from IPO.)
This clearly signals that Generic is undervalued as of now and has a lot of room for the share price to appreciate.

Pritika Auto Industries : A Potential Growth Story

PRITIKA AUTO INDUSTRIES
(BSE)
Cmp – 94
M.cap ~130cr
{Notes have been made after visiting the companys plants and meeting the owners of the company}
Brief Description
-Agricultural sector is considered very promising right now and auto-ancillary companies have been running since a year and are expected to continue their run.(Tractor Industry to grow at 11%).Pritika Auto is one company which is going to benefit a lot due to the boom in the agro – sector.
-‎Pritika Auto makes various components for tractors(majority) and trucks.  Their expertise and top components are Axles, Differential cases and Wheel Hubs.
-‎It was a Private Limited Company till June’17 and hase done a reverse merger after that.
-‎Pritika Auto is the largest manufacturer of Machined Casting Axles in India(30% market share)
-‎Their top clients are Mahindra, Swaraj, Eicher, Escorts and Tafe. These 5 companies contribute about 80% to the total revenues of the company.
-‎The company currently has 3 units. The size of their plant in HP is more than 8 acres and they are currently expanding the unit.
Future Scenarios
-‎The company gets huge orders from Mahindra every year due to which they are planning to set up a new plant. Most probably in Maharashtra as that would be near to Mahindra’s plant and would cater to their Demand.
-‎The company already has already done sales of 150cr till November’17 and is expecting it to reach 200cr by the end of FY18. (Sales of FY17 stood at 160cr).
-‎They used to work at Net Profit Margin(NPM) of 4.2% uptil FY17.  And they are expecting it to increase to 6% from this year.
-‎They are soon going to start manufacturing ‘Camshafts’ which would add substantial growth to the order book.
-‎The company had great plans but was facing issues due to lack of funds before a year or two. Recently, they have got huge funding from Nomisma Group, a Dubai based Financial firm due to which they are expanding their business and the prospects look very bright.
-‎The founder Mr. R S Nibber said that after receiving the fund, the company has,in a year done as much as what he was able to do in 25 years.
-‎Mr. Harpreet Singh Nibber, The MD, was very bullish about the company and said that they are keeping various Targets for 2020.
1)Turnover of 360 cr ( 2x FY17)
2)Profit  (2x FY17)
3)50,000 tonnes of Machined castings
4) Increase the Net Profit Margin form 4.2% to 6%
-While the Auto components-industry is growing at 15%, Pritika is aiming a CAGR of more than 25%.
Looking at the growth prospects of the company and considering the fact that Market Cap/Sales(P/S) is below 1(undervalued), the stock is looking good for investment for Medium Term as well as Long Term.

Lead Companies Follow Up – 2

Comparing the Net Profit of NILE with the avg
Lead Price :-

Q1FY17 : 3.06cr (lead price – 117.7)
Q2FY17 : 3.64cr (lead price – 128.4)
Q3FY17 : 8.29 (lead price – 143.67)
Q4FY17 : 11.24cr (lead price – 153.65)

Q1FY18 : 5.25cr (lead price – 142.3)

Q2FY18 : (lead price – 154.3)

My expectation was around 152-153

With the above data, we can expect a jump of ATLEAST around 50% in the Net Profit in Q2FY18 on QoQ basis( depending on the Revenue, which has gone down ever since Q2FY17.)

Also, Lead prices are on a run up and has touched 170 already. So Q3 can also be spectacular. One point to note is, if the Net Profit is not reflected in the Q2 nos, then they will definitely be reflected in Q3, as we’ve seen in the previous Financial Year. So it will be a win-win situation in any case.

Lead traders are suggesting that the price might go down as it is overbought( as of 05/10/17), but I’m not ruling out the chances of it hitting 200Rs in the near future.

With that, NILE can turn out to be a multibagger.
However, revenue is a concern, so it’s better to look at Pondy Oxides and Gravita(waste-to-wealth) too.

Lead Companies Follow Up – 1

Fundamentally speaking..

Buy NILE/Pondy oxides/Gravita.

Lead prices back to 160 from 133 in may.

This will have A very positive impact on Q2 Results.

Lead prices:2016 july,aug,sept:119,125,140 resp.

2017 july,aug 147,160,…. Resp.

This itself suggests how good the QoQ as well as Q2FY17 vs Q2FY18 Results can turn out to be.

Nile has excellent fundamentals.

F.V-10

EPS-94.69.

P/E-6.57

Industry P/E-27.57

M.cap-186.7cr.

Regular dividend paying company…(0.48% yield)

Stock has run up in last one year.

But there is no reason for downside, as lead is and will be highly in demand due to its wide use.

Waterbase Ltd

Long term script
*The WaterBase Limited*
( cmp-109.55rs )
-Same industry as Avanti feeds
-Expecting good results(9th August), as it is the peak time for the industry. Results before Avanti feeds.
-Promoters have increased stake in march 2017.
-Market leader in high quality Shrimp feeds. Soon planning to launch new products.
-Company was widely affected due to Floods in Nov’15, wherein the entire factory was under water and the entire harvest was lost. The sales are recovering slowly from since that point. Promoters increasing their stake shows their confidence in the company.
-Amalgamating with it’s group company, ‘Pinnae Seeds’, which would increase the capacity from 35,000tonnes to 1,10,000 tonnes and help to improve the EBITDA.
-With Godrej Agrovet and Apex Frozen foods getting listed in the near future, i expect the industry to perform well on the stock exchange.