July 25, 2009

Maruti suzuki
I have written about maruti suzuki earlier
here and here. Maruti recently announced great results, atleast on the face of it.

The results are good, though not spectacular. The company has shown an 18% year on year growth in volume and 25% growth in profit. The QoQ growth is -4% , mainly due to the seasonality of the sales. The company has been able to manage the costs well on yoy basis and reduce them from the previous quarter. The main reduction has been on material costs and elimination of the exchange variation losses.

So I should be doing handsprings and cartwheels ..right ? not exactly. I have written earlier on
anchoring and my failure to build a full position in maruti suzuki. So a 200%+ price increase is a simultenaous reason for me to smile and beat myself :)

Bharat electronics
I have writen about BEL earlier
here . BEL recently announced Q1 results and reported 180%+ growth in net profits and a 10 fold increase in profits.

I am happy about the results, but not for the reasons you would expect. Let me explain – My key concern with BEL has been that the company has been booking majority of its sales in Q4 and a result was making almost 60-70% of its profit in the same quarter.

Now the company operates in a project kind of business and hence could be booking revenue based on percentage of completion method during Q4. As a result of the skew, the company had built up high recievables and hence higher working capital.

The company seems to be moving away from the above (need to confirm from the annual report) skew which is good as it would help in improving the cash flow and reduce work capital requirements. So the results are good, not due to the growth, but due to the reduction in the skew in the quarter by quarter revenue.

On an overall basis, the core business of the company is fairly immune from the recession and the company should continue to do well.

CRISIL
I have written about CRISIL earlier
here. CRISIL reported its quartely results and reported a 17% increase in topline and 12% increase in the bottom line. The offshore research business continued to show growth inspite of the chaos in the international markets.

I am pretty happy with the results in view of the macro conditions in which these results were achieved. In addition the company reported a dividend of 25Rs/ share which amounts to a 50% payout. The company management is not hoarding the capital, which is a good thing.

CRISIL is one of the few companies with enormous competitive advantages. I have always wanted to buy this company, but was put off by the steep valuations. During the downturn, I was reading an article on buffett and was struck by a comment – buffett tends to read about companies even if he has no plans to buy the stock. If he likes the company, he mentally files it and waits for the right time when the price is right.

The above comment got me thinking and on going through my notes found my analysis of maruti and CRISIL. After a quick analysis, I decided to pull the trigger.

Moral of the story :) (for me) – be prepared in advance. You never know when opportunity strikes !

7 comments:

Anonymous said...

Hi Rohit,
I found your blog a few days ago. I am really impressed with the quality of the blog. Keep it up. Went through most of the posts.
Need a help from you. I am new to stock market. I am in the process of building a portfolio. While i know about large cap blue chips, i dont know much abt mid/small caps. Is there any url where i can find out all the mid/small cap comapnies listed? Currently i am referring to http://www.bseindia.com/about/abindices/bsemidsmcap.asp. But this has only companies that are part of index. Where would i find all the companies?.

karthik said...

Hi Rohit,

Well said.. "Be prepared"... By the time I finished analysing Maruti, it went from 480 to 1000+ :(... Same thing with Crisil & Concor , I had built a small position but before I could build decent position both stocks have gone beyond my safety margin..

Sachin Purohit said...

Elusive Maruti Suzuki..
@Above..Coincidentally, there are more than one persons who completed their analysis on Maruti and decided to buy it almost the same day and same price. And Maruti eluded all of us together. It just sneaked out of our hands.

Rohit Chauhan said...

Hi anonymous
you can find a bigger list on the icici direct site with the financials too

hi karthik, sachin
it is ok if we are analysing a company and are not sure and the price runs up during that period.
however if we have analysed the company, are confident and do not go beyond analysis or token investment, then there is a bias involved ..it is thumb sucking or maybe anchoring or other biases in play. in my own case i dont want to ignore such occurences ..they need to analysed and avoided

regards
rohit

Vic said...

Thanks Rohit for the update, you made an excellent point " If he likes the company, he mentally files it and waits for the right time when the price is right."

I remember you buying Maruti and CRISIL @ really low prices.

Congrats!! Such incidents also help us to learn.

Vikas

BlueHorizon said...

Hi Rohit,
Recently Warren sold 17% of his stake in Moody's..
Can you tell me what may be the possible reasons?
This business is so recession proof and capital in-expensive. I cant think why Buffet sold this one.

Rohit Chauhan said...

hi vic
we all get lucky ..every dog has his day :)
hi blue horizon
i dont know the reason for it. it could related to some regulatory requirement (holding > 20%) or maybe buffett needed the capital for something cheaper