I am currently in the process of looking for new ideas and have shortlisted a few. I have done some preliminary analysis and these ideas have made through the initial filters. However, these ideas need deeper analysis to make a final buy decision. I am discussing one such idea in this post – Amara raja batteries
Amara raja Batteries
The company is the no.2 batteries manufacturer in india and supplier to the industrial, automotive and telecom sectors. The company also has a strong presence in the after market with the amaron product range.
The company has grown its topline at 25%+ per annum and its net profit 20% per annum. This growth has not been a smooth upward trend. The company had a drop in profitability during the 2003 to 2005 time period. The company has managed to pay off most of the debt it acquired for adding capacity and now has a debt equity ratio of around 0.1
The company has maintained a return on capital in excess of 20% in the last 5 years, however the period from 2000-2005 was a period of poor returns due to lower margins and requires more investigation on the causes of the poor performance. The asset turns of the company has improved steadily from 2000 onwards.
The company has been expanding its retail distribution and is also expanding its relationship with various OEMs. The company is focusing on expanding its relationship with 2 wheeler OEMs now.
The company has done well over the years and provided good returns to the shareholders. The company has provided almost 36% annual return over the last 10 years, excluding dividends. This return has come partly through PE expansion during the period (from 4 to around 10 now) and the rest through an eightfold increase in the net profits.
In summary, the company is atleast worthy of a more detailed analysis.
IT companies
I have exited all my holdings in the IT industry. I have had positions in Infosys, patni and NIIT tech at various points of time. I have exited these companies mainly for valuation reasons. I personally feel that the risk reward for IT companies is not attractive at currently valuations.
If the prices were to drop to 2008 levels (when midcaps were selling for 2-3 times earnings), I will not hestitate in creating new positions again.
11 comments:
dear rohit, how about ur position in htmtglobal. i am also waiting with interest about how u play with this stock
Hi Rohit,
Can you post when you do a detail analysis on amar raja batteries. The company looks like a value buy with low p/e, low debt/equity good cash flow. Let us know your thoughts.
Rohit
Have you looked at Sasken & Nucleus. Large cash balances. FCF generation is impressive. Sasken is doing a buyback at 260.
Regards
Sajan
hi rohit,
how abt balmer lawrie? it had touched 500 (52 week low....are you tracking it still... still believe its undervalued
regards
rathin
hi rohit,
SERIOUSLY EMPIRE INDUSTRIES IS 1 CONFUSING STOCK ( EVEN AYUSH SEEMS STUMPED ON THIS 1)
anyways i understand nbfcs can be difficult to understand as well as risky .
however i believe there are a few stocks worthy of investigation-
ceejay finance-.44 book value , low p/e and extremely strong balance sheet (i think it has 21 percent tier 1 capital , also i guess patel is on board), gud div yield
sumedha finance-7 percent div,3 p/e,awsum roe and roce. in short gr8 numbers 4 the last 5 yrs. also new promoters have come on board this year. interesting discussion on theequitydesk . com
brescon finance- almost same as above above, low p/e ,b/v, awsum roe and roce
tcfc finance- 8 percent div, cmp-23,b/v-65, trading quite below nav
( alas! couldnt get the time to calcul8 the nav). one caveat though - has positions in the commodity market , which SEEM to be a small part overall
btw, all the co.s mentioned above have promoter stakes above or around 50 percent
EAGER TO HEAR UR THOUGHTS
Hi anon
with htmt ...there is nothing i am doing. the company is reporting decent results and i have over time built a full position
rgds
rohit
Hi ck
will do so
hi sajan
sorry not looked at sasken or nucleus ..will have a look when i get a chance. in general i am not looking at IT companies unless they are dirt cheap or have some unique biz model
rgds
rohit
hi rathin
yes i still holder balmer lawrie. one of my large holdings. company continues to chug along ...not bad not great. above average decent performance.
company has given me decent returns from dividend and capital gains..so i have nothing to complain
rgds
rohit
rayhaan
will look at empire industries ...never looked at it earlier
rgds
rohit
Hi Rohit - 1) you have mentioned that currently OIL India shares almost 33% of the fuel subsidy with the rest being borne by the downstream company. But what about ongc which bears a large portion of subsidy as well?
2)How do you rate ongc compared to oil india as an investment?
regards
Hi anon
ONGC although a bigger company and has better scale, shares the same risk. So i have not gone into ONGC for the same reasons
rgds
rohit
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