Investing In Value And Multibagger Stocks

Sejal Architectural Glass Ltd (Rs 24 Buy)

Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.

SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.

With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).

Investment Rationale:

Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.

Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.

First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.

Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.

Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.

Sah Petroleums Ltd

Background:
Sah Petroleums Limited is a manufacturer of industrial lubricants in India and manufacturing wide range of industrial and automotive lubricants, specialties and process oils etc., under the brand name of "IPOL". The company started in 1973 as a private limited company and became listed in 2004. The company has its plants located at Vasai near Mumbai and at Daman. The plants at Vasai and Daman are equipped with High-Tech blending facilities, quality control labs and automatic filling and packing stations. The company also has one of the largest in-house storage farms in the private sector in India for storing oil sourced from all over the world.

Besides, the company has an all India sales and service network with offices / depots / CFAs located in Mumbai, Pune, Vadodara, Indore, Jabalpur, Jaipur, Delhi, Ghaziabad, Faridabad, Kaithal, Chandigarh, Patiala, Kolkata, Jamshedpur, Hyderabad, Bangalore and Chennai.

Financials:
The latest financials of the company are given as under:-



Conclusion:
Sah Petroleums has a current Equity Capital of Rs.16 crores comprising of 3.2 crore Equity Shares of Rs.5 each. The current promoters of the company hold 1.74 crore shares comprising 54.47% of the equity while the Non-Promoter shareholding is 45.53%.

The Board of Sah Petroleums in their Board Meeting on October 17, 2008 has resolved to issue 1.2 Crore Equity Shares of the company to NAF India Holdings Pvt. Ltd. at a price of Rs 26.65 per equity share on preferential basis, which comprises. This is roughly 27.27% of the diluted equity of the company. Since this investment constitutes acquisition of more than 15% Equity of the company, the transaction will necessitate a public announcement in compliance with the takeover regulations of SEBI.

The acquirers alongwith persons acting in concert have made a Public Announcement for acquiring 88 Lakh shares, comprising 20% of the diluted equity at a price of Rs 48.50 per share. In all probability, the current promoters of the company would not be allowed to participate in the open offer. The current public shareholding is roughly 1.46 crore shares. Assuming all non promoter shareholders opt for the open offer and tender their shares, the acceptance ratio would be 60%, which means any shareholder tendering 100 shares in the open offer, will have 60 shares accepted by the acquirer at a price of Rs.48.50 per share. In reality, the acceptance ratio can be higher.

The stock of Sah Petroleums offer an attractive arbitrage with significant upside from the current levels, in these uncertain times.The caution here is that the time schedule for the open offer (December 4, 2008 as date of opening of offer) may get delayed, as has been seen in numerous other cases of open offer, due to delays in approvals & compliances.

"IF you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them." -- Peter Lynch.

Easier said than done? You can make it 'easier done than said'!

Here's how:

1. Keep your eyes and ears open.
A simple way to identify potential multi-baggers is to look around for emerging sectors and new trends and invest in the leading companies participating in these trends.

For instance, some of the mega sectors (organized retail, media, telecommunications, real estate etc.) helped to create wealth for many investors who participated in those sectors in the early phase of discovery. Let’s take the example of two mega sectors - telecommunications and organized retail. If you had invested in Bharti Enterprises during their IPO in 2002 or in Pantaloon Retail when you saw their first 'Big Bazaar' store, you would have grown your investment by 18 times in Bharti and by 65 times in Pantaloon!

2. Go out, explore and see 'what's in'
Peter Lynch used to spend some weekend time for going to malls and shopping with his daughters. According to him, this was a great place to spot new stock stories and do some real market / business research. He’s found amazing stock ideas by simple observations like the favourite toy store with kids, the restaurant people frequent the most, fashion trends with teens etc. Once he would get these answers, he would research the underlying companies and find out if they were attractive investment opportunities.

Also Read:
Rakesh Jhunjhunwala - Investment Principles Insights
Warren Buffett's Priceless Words
Top secrets of Warren Buffett's Success

This might seem like a far too easy but difficult to implement strategy but trust me, it can work. See what products are in demand, what things get picked up from shelves in super markets the fastest and so on. It might give you good insights on stock picking.

You can beat fund managers!
Did you know that almost 85 per cent of professional fund managers fail to beat the benchmark index at most times. Normally, fund managers have many restrictions in the kind of companies they can invest in terms of market capitalization, liquidity etc. Mostly, companies that are a part of emerging sectors are small caps or mid caps and hence, outside the radar of most fund houses.
You can do better than them by using your common sense and basic research skills. Also, investing early in the company's cycle offers you the most attractive entry price for the stock by default.

Since India is catching up with the developed world, it is one of the best markets to discover new (stock) success stories. Maybe, the next bull run will be lead by companies in healthcare, niche infrastructure, hospitality, specialty retail, entertainment, security solutions, tourism etc.

So, the next time you step outside your home, don't forget to see which is the most popular car on the road. And by the way, what brand of toothpaste do you use? This is important, since the next multibagger might be right in your home!

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MOSER BAER INDIA LIMITED (MBIL) is a global technology company with presence in over 82 countries, and services through six marketing offices in India, the US and Europe. Incorporated in 1983, today it is India's largest and the world's 2nd largest Optical Storage Media (OSM) manufacturer and enjoys strong tie-ups with all major global technology brands.

It is also India's largest home entertainment Company. It releases video content in the DVD and VCD formats using proprietary and patented technology that ensures the highest quality standards at affordable prices. It is also the first storage media Company in the world to make commercial shipments of HD (high density) DVDs. Moser Baer has also established itself as a major player in the USB drives and memory cards. Its foray into PC peripherals in the form of ODDs (Optical Disk Drives) will further help it strengthen its position in the industry. Currently the IT vertical industry (PCs and Notebooks) is pegged at Rs 20000 Crores and the PC Peripheral industry is worth Rs 12000 Crores. Moser Baer with its entry into the ODD Market in the form of Combo Drives and DVD Writers plans to capture 20% market share of present Indian market size of five lakh units per month. Recently, the company has transformed itself from a single business into a multi-technology organisation, diversifying into exciting areas of Solar Energy, Home Entertainment and IT Peripherals & Consumer Electronics.

Investment Rationale
FY 2008 AND Q1 FY 2009 PERFORMANCE OVERVIEW: The Consolidated Net Sales of the Company increased from Rs. 1984.04 Cr to Rs 2070.01 Cr during FY 2008, an increase of 4.33% YoY. The Consolidated Core EBITDA stood at Rs. 223.96 Cr in FY 2008 as against Rs. 433.83 Cr during FY 2007, down 48.34% YoY. The Consolidated Net Loss for the year stood at Rs 431.85 Cr against Rs 60.88 Cr in FY 2007, an increase of 609% YoY. The Standalone Net Sales stood at Rs. 1892.59 Cr. during FY 2008 as against Rs. 1981.91 during FY 2007, down 4.5% YoY. The Standalone Core EBITDA stood at Rs. 302.37 Cr. during 2008 as against Rs. 460.25 Cr. during 2007, down 34.3% YoY. The Standalone Net Loss of the Company is Rs. 310.52 Cr. for FY 2008 as against Rs. 32.18 Cr. during 2007.

The Standalone Net Sales of the Company increased to Rs. 478.93 Cr in Q1 FY 2009 as against Rs. 469.30 Cr during Q1 FY 2008, a growth of 2.05% YoY. The Standalone EBITDA for the quarter stood at Rs. 53.46 Cr. as against the Standalone EBITDA for the same quarter last year of 152.08 Cr down by 64.85%. The Standalone Net loss for the same period increased to Rs. 103.98 Cr as against Rs. 71.72 Cr in the last quarter of 2007-08 an increase of 45%. The net loss includes a loss of Rs. 28.27 Cr on account of the adverse movement of foreign exchange.

INNOVATIVE PRODUCTS TO CATER GROWTH: Moser Baer recently acclaimed fame of being the first non-Japanese Company to innovate its own OSM blu-ray disc technology. The demand for these blue laser based formats is expected to exceed over 12 Crore discs by 2009 from less than a crore units at present. The concept works on blue laser, which used to read and write this type of disc. Because of its shorter wavelength (405 nm), substantially more data can be stored than on the DVD or CD formats (which uses 650 nm and 780 nm wavelength respectively). A dual layer Blu-ray Disc can store upto 50 GB; almost six times the capacity of a double dual layer DVD. The company has an advantage of being "first-to-market" and is well positioned to capture a significant share of this emerging opportunity. The intellectually strong position in the development of this next generation product provides a significant competitive edge.

HUGE MARKET SIZE; POISED TO GROW EVEN FURTHER: The size of the blank optical media market in India is over one billion discs per annum. CDR (Compact Disc-Recordable) is the predominant format accounting for about 80% of the OSM market in India. DVDR (Digital Video Disc-Recordable) has grown exponentially over the last year. The overall Indian market for OSM is growing at 15% with DVD growing at a pace faster than the industry (it grew at around 100% YoY in FY 2008 and is expected to continue growing at even higher rates in future).

EMBEDDED VALUE IN SUBSIDIARIES: Moser Baer Photovoltaic Limited, a WOS of Moser Baer India, is in the business of photovoltaic (PV) cells and modules. MBPV is expected to emerge as a technology-driven PV equipment manufacturer in the world by implementing a capacity of 500 MW by FY 2010; through a mix of multiple technologies including crystalline silicon, concentration and thin films. The manufacturing facilities are housed in a SEZ dedicated for renewable energy at Greater Noida. MBPV is in the process of setting up India's largest grid connected solar farm in Rajasthan with an investment of around Rs 100 Crore. Driven by recent significant technological advancements, it is estimated that the solar market will have a 43% CAGR over FY 2008 - 2012 and is poised to achieve grid parity in the short to medium term.

Current demand projections translate to a value of US$ 50-70 billion by 2010. Another subsidiary, PV Technologies India Limited (PVTIL) has successfully completed deposition trials for Gen 8.5 a-Si (Amorphous Silicon) thin film modules at its new 40 MW facility in Greater Noida in FY 2008 and thus achieved a global landmark. The company is setting up a thin film PV plant near Chennai with a proposed 500MW annualised capacity. The Chennai and the Greater Noida plants will be manufacturing Gen 8.5 thin film panels measuring 5.72 square metres. The utility of using thin films includes savings of material, monolithic device design, use of inexpensive substrates, and manufacturing processes that need low temperature and are possible over large areas. Photo Voltaic Technologies India recently signed a MoU with a global equipment supplier to secure supply of critical equipment for an additional 565 MW phased expansion of its Thin Film photovoltaic modules manufacturing capacity, which together with the current project capacity of 40 MW will take the total manufacturing capacity to over 600 MW by 2010.

INTEGRATING OPERATIONS THROUGH ACQUISITIONS: Moser Baer's acquisition of an 81% stake in OM&T B.V., a highly specialized technology Company based in The Netherlands, has started bearing fruits in terms of exploiting cutting edge technologies in both the optical and solar photovoltaic (PV) segments. This acquisition is a major milestone for Moser Baer as it will facilitate strategic implementation and ensure the presence in both the optical and solar photovoltaic (PV) segments. This acquisition will complement the existing research being done at R&D facility based in India and help the company to further consolidate its leadership position. According to the agreement, all innovations by OM&T will be transferred to Moser Baer. The Joint venture will also focus on development of photovoltaic technologies to support Company's existing PV business.

GOVERNMENT ASSISTANCE: Indian government would provide financial assistance amounting to Rs.12 (30 cents) per kWh in case of solar photovoltaic and Rs.10 per kWh in case of solar thermal power fed to the electricity grid. The scheme will be run by the Indian Renewable Energy Development Agency (IREDA), and solar farm developers will be able to access the subsidy by selling their energy to state-run utilities under the new tariff. The incentives are scheduled to run for 10 years and will be paid in addition to any subsidies offered by state governments. Some of the Indian states have also announced independent programmes to support large size solar PV installations. However, the ministry has imposed a limit for the incentives of 50 megawatts in total, a cap of 10 megawatts (MW) within any one state and a maximum of five megawatts per developer.

Conclusion
The company is incurring losses since last three quarters on high operating expenses due to foray in new business areas. However, we believe that solar division will add significantly to the top-line of the company. Recently, the company sold 6.5% of its Photovoltaic Divison in a private equity deal to a group of foreign and domestic investors for Rs 411 crore, valuing the division at Rs 6,350 crore. This is significantly higher than the total market capitalization of the company i.e. Rs 1620 crore. The stock currently trades at Rs. 96.25. We expect that the stock could be a multi-bagger. We recommend a BUY on the stock with a time horizon of 24 months and a price target of Rs. 173, offering a return potential of 80% from the current levels.

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JAIN IRRIGATION Systems (JISL) is one of the leading agri-business companies in India, with a wide presence in irrigation systems and food processing. JISL is likely to emerge as one of the key beneficiaries of the government’s thrust on boosting agricultural output and productivity in the country. Being integrated with agriculture, JISL’s growth is unlikely to be hit due to the current market turmoil. JISL’s expansion plans, diversified business model and improving efficiencies make it a good long-term bet for investors.

BUSINESS: Incorporated in 1986, JISL is today India’s largest irrigation systems manufacturer with a plastic processing capacity of 255,000 tonnes per annum (tpa). It is also India’s largest producer of mango pulp and dehydrated onions with a total capacity of little over 2 lakh tonnes. The company’s product range includes micro irrigation systems consisting of drip and sprinkler irrigation systems; piping systems comprising PVC and polyethylene pipe products; plastic sheets consisting of PVC and polycarbonate sheets; agroprocessed products consisting of dehydrated onion and processed fruit purees and concentrates. The company is also a producer of other products such as agricultural tissue culture, solar water heaters and solar lighting systems.

In the recent past, the company made a series of acquisitions in the domestic and international markets. It recently acquired Thomas Machine of Switzerland, which manufactures PVC pipes. Today, the company has 21 manufacturing plants and is present in 110 countries through its network of over 3,000 distributors.

GROWTH FACTORS: Only 3 million hectares of irrigated area is under micro irrigation compared to a total irrigated area of 69 million hectares. The government’s emphasis on increasing micro irrigation bodes well for JISL, the largest provider of micro irrigation services in the country.

JISL has embarked upon a major expansion plan with an investment of more than Rs 600 crore spread over the next three years. As per a memorandum of understanding (MoU) with the Maharashtra government, the company will invest Rs 550 crore to set up two mega projects to expand its agro and related products businesses. The company is currently expanding its Jalgaon plant to expand its micro irrigation equipment, PVC pipes and food production by 20-30% by end FY09. FINANCIALS:The company’s net sales have witnessed a compound annual growth (CAGR) of 51% since FY04 to reach Rs 2,215 crore for the year-ended March ’08, on a consolidated basis. Its net profit has grown at a faster pace of 56% to touch Rs 134 crore in FY08. Its standalone topline grew at 45% in Q1 FY09 to Rs 474 crore. The net profit was just 5% up at Rs 29.6 crore, mainly due to a forex loss of Rs 22 crore in accordance with Accounting Standard 11.

JISL’s consolidated operating margins have risen consistently over the past three years to touch 15.1 % in FY08. Further, its return on capital employed (RoCE) has also improved to 8.7% in ’08 from 3.2% in ’04.

The company had an order book of more than Rs 600 crore as on September ’08, representing around 27% of its FY08 consolidated net sales. Its consolidated operating cash flows turned negative in FY08, as JISL went on stocking raw materials in the last two quarters, when the prices were low. The company’s debt to equity ratio has come down to 1.5 in FY08 after staying above 2 in the preceding two years.

VALUATIONS: Since the company’s business is integrated with agriculture, it is unlikely to face much pressure from the current turmoil in the global financial markets. We believe JISL’s net profit will grow 35% during FY09 to Rs 182 crore, led by the rising irrigation initiatives in India.

The company’s pipes business will also derive strong growth from natural gas and telecommunication industries. At the current market price of Rs 262, the scrip trades at 13.5 times its standalone net profit for trailing 12 months ending June ’08 and is around 10.4 times the estimated forward earnings for FY09.

South Indian Bank has its presence in 23 states with 500 branches and 26 extension counters and 225 ATM Networks. The bank, during FY 08 had opened 25 new branches, upgraded 8-extension counter, and opened 50 ATMs. The bank holds licence to open 15 new branches and plans to open 30 branches in the year FY 09.

The bank, as at 31-03-08, had total deposits of Rs 15,156 crores while advances were at Rs 10,754 crores with total business of the bank being placed at Rs 25,910 crores. Capital Adequacy ratio of the bank as at 31-03-08 was at 13.80% while net NPAs were at 0.33%. Gross NPAs of the bank, as at 31-03-08 were at Rs 188.48 crores against Rs 321.21 crores as at 31-03-7. During FY 08, the bank had recovered NPAs of Rs 172.31 crores against the target of Rs 130 crores.

During FY 08, the total income of the bank was placed at Rs 1,434 crores with profit after tax of Rs 151.62 crores, resulting in an EPS of Rs 18.77 while book-value per share as at 31-03-08 was placed at Rs 128.43.

During FY 08, the bank had issued 2 crores equity shares at Rs 163 per share (premium of Rs 153 per share) to Qualified Institutional Investors. Due to this issue, paid-up equity of the bank increased to Rs 90.41 crores while net worth improved of Rs 1,161 crores.

For quarter ending June 08, the bank had a total income of Rs 406 crores with profit after tax of Rs 38.62 crores, resulting in an EPS of Rs 4.27 for the quarter. FY09 is likely to have an income in excess of Rs 1,800 crore with estimated PAT of Rs 175 crores, which should translate into an EPS of Rs 19.50. Expected book-value on 31-03-09 of the bank would be over Rs 140.

The bank had proposed to issue bonus in the ratio of 1 share for every 4 shares held and the record date for the same has been fixed at 17-10-08 and share would go ex-bonus from 16-10-08. The present market price of the stock at Rs 106 is cum-bonus.

The bank has total investments of Rs 4,572 crores as at 31-03-08, of which government securities are of Rs 3,590 crores while Rs 982 crores are in Debentures, shares and other investments.

The bank has strong presence in NRIs and as 31-03-08, the bank had total NRI Deposit of Rs 3,085 crores being 20.35% of the total deposit of the bank.

The present equity of the bank is at Rs 90.41 crores with face-value of Rs 10 each. FIIs are holding 43% while 12% are held by banks, insurance companies, FIs, and MFS and 45% is held by the general public. Prominent shareholders of the bank are Federal Bank (4.94%) IFC, Washington (4.80%) Goldman Sachs (3.93%) LIC (1.77%) Union Bank (1.06%) and SBI 1.02%.

Even Bank is holding 4.99% stake of Dhanlakshmi Bank, which implies an intention to acquire the bank, if feasible, at an appropriate time.

Share now ruling at Rs 98.60, had its 52 week high low of Rs 285 and Rs 87 and is now ruling at a PE of less than 6 on historic and expected earnings. Even it is available at cum-bonus and price to book-value of 0.80 : 1. All this shows great scope of appreciation in the investments in the time to come. The present market capitalization of the bank is close to Rs 950 crores, translating per branch valuation of less than Rs 2 crores.

The share qualifies a good buy at Rs 98.60, which has potential to rise to Rs 140 in the next 12 months with minimum downside.
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About the company
Praj Industries has been one of the fancied stock in the recent rally not only among the traders as well as among the investors too. The stock was volatile and spurt on news coming one after another.The company is engaged in Ethanol distillery projects as well as in brewery projects.

Shareholding Pattern : " Its Different "
JM Financial Mutual Fund bought about 5.80 lakh shares of Praj Industries, increasing its stake to 5.25%. Tata Capital holds 7.33%, Rakesh Jhunjhunwala has a 7.3% stake and Vinod Khosla holds 6.15%. Morgan Stanley holds 2.77%. Makes one wonder what is so special about the company?

About The financials
The financial performance of the company for the first quarter ended 30th June 2008 has not been as good as expected. Infact its bottomlines took a hit. YoY, its topline showed a 12% growth at Rs.154.76 crore. Though it has managed to contain its operating expenses, OPM slipped from 28.27% to 20.57% and NPM from 20.47% to 15.99%. Ethanol distillery projects contributed over 85% to the topline, whereas the brewery projects made up for the rest. But forex losses during the quarter dented its earnings.

Positive News In the counter
1. The ability of the company to drive down cost as a result of value engineering exercises undertaken as well as the product mix has helped boost contain the margins at these levels. Praj’s current order-book is pegged at about Rs 950 crore of which 48% is from exports and the rest domestic. Being a net exporter, the current depreciation of rupee would go in favour of the company.

2. Increasing acceptance of ethanol-blended petrol and bio-fuels.

3. With fuel bills touching the sky, biofuels is the way into the future and Praj is ready to capitalize on this. It is setting up its first plant in Louisiana, based on sugarcane juice and if this biofuel gets accepted, Praj would have the whole of North America as a market. In EU, it has a JV - BioCnergy Europa B. V., with Aker Solutions. It has also got orders from European sugar majors such as British Sugar, Suedzucker and Danisco. Its JV in Brazil is expected to help tap opportunities there too but this may take a longer while as not much progress has been made on this JV.


Negative News In the counter
1. Suspection of Govt postponing the October deadline for making it mandatory for another 10% ethanol blending.

About the Stock
Though the prospects for the future is good and likely to be promising , one can have some minor stake in the company . Though attractive levels are expected in drastic falls for investors to invest in.