July 11, 2007

Torrent cables – A good opportunity?

I saw the following post on torrent cables on ranjit kumar’s blog. In addition, I found this analysis on amit’s blog.

The fundamentals look enticing

- RONW – 30%+
- No debt
- A 25%+ growth in topline and bottomline
- Operates in the power cable industry which seems to be doing well and is a growth industry.
- Lower valuation than all its competitors


However I am concerned about the following

- Inventory and debtors has increased in the last few years (debtor days is at 60 from almost 20-25 a few years) back. As a result the company has a very low free cash flow. Most of the cash flow has been used up by the incremental working capital
- Cannot get the annual report for the company. As a result I have no idea on how the company is planning to reduce inventory and debtors.
- The company was in BIFR from 1999-2002 (not sure on dates). Why did the company land up in BIFR and why will it not land up in a similar position in the future?

Comments welcome on the above analysis (which is very superficial as of now)

PS: An apology to all who requested me for prof bakshi’s interview. He has however posted the interview on his
website. I would strongly recommend reading the interview (I have done it twice and really learnt from it)

3 comments:

Alok said...

Torrent cables is a turnaround story. It became a BIFR when cable industry was down and out in early 2000. (even Cable Corp the largest at that time was loss making)

The positives are a good management, conservative financing, positive industry outlook.

however, the stock has more than doubled in last 1-1.5 years(i bought at 80 Rs).It could react negatively in a falling market.
Also there do not seem to be any capacity addtions to my knowledge.
But definitely a good long term buy looking at financials.

Alok

Rohit Chauhan said...

Hi alok
i had a look at the financial and but for a few issues found the financials to be fine.
however i believe the turnaround was complete quite sometime back and is priced into the stock.
also the wcap increases and lack of cash flow is a problem and unless it is temporary, could be masking some problems

Anonymous said...

Yes, I checked out the Price Earnings Ratio, seems good, but I like an another company KEI industries, their revenue growth has been tremendous, but their operating margins has been dwindling, but I guess it's a good one to be invested in.