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Friday, 22 June, 2007

Three A's (AAA)

First the three A's are for Adhunik Metallics, Alps Industries, and Abhishek Industries. Moja introduced us to the first 2 A's and the third one is just another company from the textile sector.

2 of the three are from the textile sector which is a "sitting duck" as someone may like to quote. Actually Arvind Mills could also have been covered here but will save that for some other time. Moving on we came across Abhishek Industries while trying to look for something new. The company has been posting a PAT for around 40 crores for the last 4 years and at the present market cap of 340 crores is not an expensive buy. But none the less as Sudhir says he does not like the managment and the share price though not high will be better still if it goes somewhere below 15. Again why the textile sector is in such a shape currently we do not know and will love pointers on the same. Is it the capacity utilisation of some of these textile firms or ...

The other 2 were stories given by Moja and though moja gave the adhunik story at 36 - 37 the price has risen since and oscillated as well. Both these stocks are discussed here on behalf of Moja who on repeated requests has not produced an article for the same. Adhunik looks to be in a promising industry where the tailwinds seem to be with the company for sometime to come. The company is definitely on a growth track but we will not like to take the discounted value for the growth into the valuation for the stock. With the kind of results posted for FY 2006 -07 the company was worth a dekho at 36 but at current level (well, price changes everything) ... :-)

As for Alps industries this is the fav of the three, something which is trading at a huge discount to the book value of Rs. 147. Does this book value really represents the liquidation value, we have not done the calculations. But surely as per the numbers go this one looks the most comfortable but again is a company in the market cap of 100 - 200 crores and we are already saturated with companies with similar market values. Though one of the important criteria in picking a stock should be the marketability of the scrip, and this scrip satisfies those criteria unlike some of the others in similar M Cap range.

All in all not too much numbers presented here for the three companies but this is more for getting some views on the same especially for the ones belonging to the textile industry.

We have interest in one of these scripts, moja and freinds have interest in another and the third one is Just for ...

7 comments:

Opinionated said...

As for textile companies, most of them are bleeding because of the rise in rupee. Textile business already is highly competitive, and since China has not allowed its currency to gain much, while the Indian rupee has appreciated by around 10% this year itself, margins of these companies are likely to be badly hit (I know this cause i get lots of calls from these guys, who literally sound depressed!!!).
All the numbers that you have been loooking at are from the time when rupee was depreciating, so they may be misleading and we might see their profits getting hit from this FY itself.
I havent done the numbers, so it might be a case that the market is over reacting to bad news, but still i'd like to stay away from textiles.

Anonymous said...

one more point on textile that in USA housing slowing bif time

Anonymous said...

Abhishek industries tested its low of 17.10 which is a good buy level for people like me who generally fall for such things ruppee is a concern but Abhishek ind is a cyclical stock for me where i always buy this at lows some point of the year it shows me 23 to 24 and some time 26 so I exit around 23. Any way your blog is worth reading and i enjoy what you write. Keep the good work going

Regards,
Yash

my perspectives...my choices...my reasons...my... said...

i agree with opinionated's argument..there is close to $50bn which is waiting to flow in the realty and construction space...which is stuck with the FIPB sector...RBI cant hold the exchange rate for long ...when the proposed inflows tantamount to quarter of the reserves...it is already planning to hike the CRR by another .5% this time..i will not be surprised if the ruppee breaks the psychological level of 40 and touches 38...but then prof bakshi always says that value can be found in deeply out of favour sectors like for eg sugar on which he has mentioned in his ppt also ..so one can labour to find potential cheap stocks for long term appreciation

my perspectives...my choices...my reasons...my... said...

apart from an interesting entry i found on adhunik...
let me tell you an equation 1 ton of steel roughly requires 3 tons of coke which is imported from overseas...on which steel companies like TISCO are benefitting due to ruppee rise ..steel prices have actually fallen a bit on concerns of china dumping that might take place...

secondly captive coal mines itself lead to a 30-40% saving in coal procurement cost so the company should benefit on operationalising the entire coal mines ...similarly with ore mines..

another angle can be captive power plants which can sell power in open mkt at attractive rates upto 49% ...however 18MW is too low to bothered ...take eg of Navabharat on whihc i wrote report they mfg ferro alloys(used in steel) ...the mfg unit can be shut off and power sold off in open mkt in case of adverse ferro allloy prices ...derisking the commodity cycle ....

please find the entry on adhunik below....





Adhunik Metaliks-Iron Ore Mines Hold the Key
From a Special Steel producer Adhunik Metaliks is rapidly turning into a fully integrated steel producer, with both Iron Ore and Coal mines under its belt. The Talcher iron ore mines in Orissa are believed to carry reserves of 18 MT, and are getting valuable by the day as commodities continue to climb up the super-cycle.

Adhunik Metaliks Ltd (AML) has completed Phase II of its expansion plan in June 2007, with the exception of the18 MW captive power plant, which should be completed by December 2007.

Captive Iron ore mines have become semi-operational

AML had secured a 18 mn tonne reserve iron ore mine at Kulumb in Orissa’s Talcher district in June 2006. The company had submitted a mining plan to the state government for approval alongside a detailed feasibility report.

The company’s geological team which undertook exploration work claims to have commenced supplies of captive ore from the mines to the plant in June 2007.

Adhunik Metaliks is also pursuing the coal block for which it has been identified as a joint allottee. However, substantial progress on this front may happen over the next 18-24 months.

Ramp-up of phase I capacities

AML had completed phase I of its integrated steel project in September 2005.The Phase II which effectively doubles melting, sponge iron, washeries, rolling and continuous casting facilties has also become operational. Current capacity utilisation levels are closer to 70 per cent.

my perspectives...my choices...my reasons...my... said...

Also, if it is producing stainless steel or carbon steel..one needs to see the impact of cost increase from increase
in costs of ferro chrome(used in stainless steel), ferro manganese ( used in carbon steel) as these ferro inputs are enjoying peak realisations right now

also is 70% a good capacity utlisation level for steel plants or is it because of the ramp up stage ?

QUALITY STOCKS BELOW FIVE DOLLARS said...

AAA sounds on target to me.