Happy New Year 2019

Dear Blog Members,

Deepawali Greetings

Dear Readers,

May this Festival of Lights Bring Endless Happiness, Good Health, More Wealth, Peace , Love, Fame and Prosperity To You and Your Family

 

May all your dreams come true 

Wishing you a Very Happy Diwali

Happy Ganesh Chaturthi

Dear Readers 

May God bless you and your family with peace and happiness

Happy Ganesh Chaturthi

Bharat Gears Limited - Geared for Life

CMP = 189

Bharat Gears Limited (BGL) is incorporated in 1971. BGL is one of the world leaders in gears technology and  largest gear manufacturer in India. Company is operating with three business divisions  Gears, Automotive components and Furnaces.

BGL is internationally reputed for its cutting edge technology, established quality processes, and capabilities developed over the years. BGL has three modern manufacturing facilities located at Mumbra near Mumbai, Faridabad near Delhi and Lonand near Pune. 

All three plants are certified with quality standard ISO/ TS 16949, In addition, the Faridabad and Lonand plants are certified under ISO/14001 and OHSAS 18001 by BVC.

Gear Manufacturing 

Bharat Gears Limited manufactures and supplies automotive gears and parts to original equipment manufacturers of agricultural machinery, commercial vehicles, construction and mining equipment in India. It offers automotive products  for tractors, commercial vehicles, buses, utility vehicles and off-highway vehicles. The products includes bevel, straight bevel, ring gears, pinions, transmission gears, propeller shafts, differential gears, and complete automotive transmissions, gearbox sub-assemblies and differential assemblies.

Company supplying 80% of its gears to OEM’s and  selling the rest in replacement market and out of the total sales about 90% is coming from Gear segment.

BGL entered into the technical collaboration with ZF Friedrichshafen, AG, Germany  for manufacturing Gearboxes

Furnaces

Taking advantage of the core competency in heat treatment technology, BGL started constructing furnaces in 1978, initially for captive use than later it started commercial production of batch and continuous heat treating furnaces.

BGL entered into the technical collaboration with  AFC-Holcroft, Michigan, U.S.A. for manufacturing Furnaces. The technology and experience in furnace building coupled with expertise in commissioning, operation and process control give an edge in covering all aspects of heat-treating equipment to meet the customer's requirements to maintain in service under Indian conditions.

BGL Automotive Components

The automotive components division of BGL designs, manufacture, tests, and supply wide range of auto-components like Automotive Clutch and components, Turbochargers and components, Driveline Products, Axle Shafts , Fly Wheel Assemblies & Rings, Propeller Shaft components , U-J Cross , Steering Components, Differential Cages, Steel Wheel Rims among many others.

Customers

BGL's customer list includes almost all the players in the automobile industry in the tractors, trucks and buses and utility vehicle segments. The main  OEMs  customers in the tractor and commercial vehicle (CV) industry and include Tata Motors, Mahindra & Mahindra, Ashok Leyland, TAFE, Escorts, VST Tillers & Tractors, John Deere, New Holland Tractors, Carraro India, JCB among others. For several of the players, BGL is the single source supplier for gears.

BGL is a major global supplier of automotive gears and heat treatment furnaces. The company exports its products primarily to the United States, Europe, Mexico and Asia. For export market,  BGL's clients include Carraro Spa Italy, JDCW-USA, TMA-USA, DANA Corp.-USA and Tech Development.

Investment Rationale

With the strong growth momentum in economy, automobile sector witnessed higher demand from all the segments. Indian economic growth projected around 7 - 8 % in the near future, pick-up in the auto and auto ancillary industry is imminent in both domestically as well as internationally. According to IBEF, automobile industry accounts for 7.1% of the country’s Gross Domestic Product (GDP). With clients spread across India as well as European, American, Mexican and Asian markets, BGL is well positioned to cater to this opportunity

https://www.ibef.org/download/Auto-Components-Report-Jun-2018.pdf

https://www.strategyand.pwc.com/media/file/Strategyand-India-Automotive-Market-2020.pdf

Agriculture is the backbone of the economy and government is taking several measures to increase the income of farmers, It is by improving agricultural infrastructure, farm equipment, expansion of crop insurance coverage and improvement in land productivity via soil health cards. Tractor applications are now extending to other farming activities such as cultivation, seeding, inter-cultivation, weeding and spraying. Increased multi-cropping and commercial usage of tractors is propelling tractor demand.

The Tractor industry in India is considered as a barometer of the rural economy. It accounts for about one-third of the global production of tractors and it is growing at good pace above 10% per year. It gives huge growth potential for BGL. 

http://www.autopunditz.com/autopedia/tractor-sales-statistics-india/

The Government is relentlessly focused on building world-class infrastructure of transport networks comprising roads, highways, bridges, ports, airports etc. The Indian construction equipment industry holds immense potential due to the large demographic base and the infrastructure gap within the country.  This is expected to create a huge demand for construction equipment, the manufacture of which is expected to grow both in volume as well as in value terms. It translates into greater demand for BGL products because construction equipment manufacturers form a significant portion of BGL clients. 

BGL lowered the cost of production by use of effective tooling and production method. Further, with close monitoring of inventory levels, it minimised blockage of cash. Company has worked towards improving productivity by ensuring that all facilities remained state-of-the art, through an upgradation of  technology by adding new gear cutting, grinding machines. BGL also undertook a considerable level of retrofitting and reconditioning of old conventional machines to bring them up to date without addition of any major cost. 

BGL is dedicated to maintaining the highest quality products, the best customer service, and the safest operating conditions in the industry.

Conclusion

Bharat Gear is well established name in automobile industry with wide range of products and customer base. We can expect that company will maintain its current momentum in future and  all above mentioned factors are very positive for this small cap company. It  is very good investment opportunity at cmp 189 for both short  term and long term ( 1 year to 4 years ). It can be bought + / - 10% from cmp with 10-20 % of portfolio allocation.

Happy Krishna Janmashtami

Dear Readers,

 May God bless you a very prosperous life and your all dreams come true

Wishing You Very Happy Krishna Janmashtami

Update on Next Stock


It will be posted on 07 September 2018 (Friday  after market hours).

TPL Plastech Ltd

CMP = 288

TPL Plastech Ltd (TPL) was incorporated in 1992 and its manufacturing operations commenced in 1995 at Silvassa plant. TPL offers a wide range of industrial rigid polymer packaging products like  drums and containers for various packaging requirements for almost every industrial sectors. Later on it started manufacturing infrastructure related products like HDPE pipes and  DWC pipes. TPL has six manufacturing plants, whose production capacities are 18,000 tons of drums and  10,000 tons of HDPE pipes.

TPL Plastech is the second largest manufacturer of bulk packaging drums in India with capacity to produce 1.8 million barrels per annum. Its promoter Time Technoplast is the largest producer of bulk industrial packaging in the world and it commands 75% market share in Indian market along with TPL Plastech.


TPL is the first manufacturers in bulk packaging to get an ISO certification for its unit at Silvassa as early as 1998.  Company products are complying with U/N Certified Quality Standards IS 6312.

These  barrels and  containers are used for packaging of various products like chemicals, paints, pigments, inks, pharmaceutical intermediates,  industrial coatings, agricultural, intermediates, construction chemicals, additives, lube oils, food and beverage etc.

In 2017, the company began the production of DWC pipes at Gadarpur unit. 87% of the turnover comes from the sales of drums and  13% sales  contributioms come from pipes division. The Company's PE pipes are used in applications, such as portable water services or distribution lines, sewerage and drainage, cable ducting, natural gas distribution, irrigation, waste disposal, industrial application and offshore pipeline installation. High Density Polyethylene (HDPE). Pipes processing ranging from 100 - 600 mm diameter at Pantnagar (Uttarakhand) to serve the northern region.

TPL plastech PE Pipes are capable of handling semi-solid & gaseous effluents and has unmatched resistance to corrosive chemicals. They are lighter, easy to handle & install compared to heavier metallic or concrete pipes. PE Pipes are 100% leak proof therefore they are preferred over galvanized, ductile iron, cement pipes for applications such as portable water services or distribution lines, sewerage & drainage, cable ducting, natural gas distribution, irrigation, waste disposal, industrial application & offshore pipeline installation.

TPL Plastech PE Pipes are made with quality assurance system and strict adherence to IS: 4984, IS: 14333, IS: 14151, ISO: 4427, DIN 8074 design and testing code to match the quality of our products and services.

Having established first unit in Silvassa way back in the year 1995 later commissioned units at Jammu (J & K), Gadarpur (Uttaranchal), Kutch (Gujarat) , Ratlam (Madhya Pradesh) and last but not least Vizag (A.P.)  to cater to major clients in Western, Northern, Central & South India. 

Growing steadily, TPL has became the 2nd largest manufacturer of drums in India, especially Bulk Packaging. TPL has a huge client base catering to more than 225 customers from different sector of industry.

Investment Rationale

Time Technoplast Ltd. (TTL) acquired 75% equity stake in its next competitor TPL Plastech in 2006. Post acquisition TPL became a Time Group company, enabling access to latest technology platform for polymer processing and product development. It has enabled this small company to grow exponentially after acquisition in 2006 with following progress details.

• Addition of jerry cans with 20 - 120 ltr capacity (2008)
• Started production facility in Jammu (2010)
• Started production facility in Pantnagar (Uttarakhand) (2010)
• Started production facility in Bhuj (Gujarat) (2012)
• Got listed on NSE (2015)
• Started production facility in Ratlam (M.P.) (2015)
• Started Production of DWC Pipes in Gadarpur (2017)
• Started production facility at Vizag (A.P.) 2018

* Total Income growth 10 Year (Post Acquisition by TTL ) CAGR 15.58%

* EBITDA growth 10 Year (Post Acquisition by TTL ) CAGR 17.44%

* PAT  growth 10 Year (Post Acquisition by TTL ) CAGR 20.07%

The Company has started manufacturing of high pressure HDPE pipes and DWC pipes for meeting growing requirements in the infrastructure business segment comprising of water supply management, irrigation, sewerage & drainage systems, effluent / sewerage treatment plants, destination, offshore & industrial piping, telecom & power cable ducting etc, confirming to National & International standards at Gadarpur, (Uttarakhand).

The demand for polymer drums, HDPE and DWC pipes are increasing steadily and the company has increased capacities to sufficient levels. Last year company has expanded its manufacturing capacity at existing locations in industrial packaging and DWC Pipes by 30%, sales revenue and profit will gradually increase in future without addition of major capex in next 2 years.

Over the years polymer drums are substituting metal drums in industrial applications such as packaging of chemicals. They have several advantages over conventional mild steel drums because of their better resistance to chemicals, lesser weight and are more cost effective.The industrial packaging market in India is growing at a rate of 15-20% per annum. Shift in industrial packaging from steel drums to polymer drums augers well for growth of TPL Plastech because it dominate along with its parent Time Technoplast in the Indian industrial packaging segment with more than 75% market share.

HDPE and DWC pipes  are fast replacing conventional pipes like ductile iron, mild steel and cast iron pipes in water supply, irrigation, sewage & effluent treatment, desalination plants etc. This is mainly due to their properties like anti-corrosive, leak proof, light weight, cost effective, low service cost and longer life. Even HDPE material is sturdier, more abrasive-friendly and has higher resistance to wear & tear and heat compared to PVC.

Demand for HDPE and DWC pipes will remain strong in irrigation, infra and construction sectors due to launch of several government  project like Swachh Bharat Mission, 100 Smart Cities and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) aim to further expand the sewerage network and treatment capacity. The government is taking a number of steps to improve the country’s sewage treatment infrastructure.

Plastics plays a major role in water management and scores over alternate competitive materials. The Indian plastics pipes market is forecasted to grow at 10.4% CAGR up to 2021. The domestic per capita consumption of polymers at 9 kg is one of the lowest compared to the global average of 25 kg, it gives enough head room for rapid growth.

TPL enjoys strong operational and product support from its parent. It gives easy access to latest technology, raw material sourcing, integrating and upgrading its operations for cost reduction and alternate supplier to customers.

Conclusion

TPL Plastech is well established name in the bulk packaging and new business segment  of HDPE and DWC pipes is also expected to grow at rate of 15-20% per annum for next 4 -5 years. After acquisition by TTL in 2006 company has expanded its foot print across the major industrial hubs of country with addition of 5 new manufacturing plants at different locations. All above factors are very positive for this small cap company. 

Recent market correction was very severe on several small cap stocks even with very strong fundamental, TPL corrected more than 70% without any change in fundamental of the company. Today Sensex and Nifty closing at record  high and TPL Plastech closed 8% up at Rs 288,  it  is very good investment opportunity at cmp for both short  term and long term ( 1 year to 4 years ). It can be bought + / - 10% from cmp with 10-20 % of portfolio allocation.

Update on market correction and next stock

Dear Blog Members,

We have seen very severe correction in small and mid cap stocks in last two months. It has taken really very tough test of our patience. Several blog members were very nervous and asking about 20 -30% correction in total portfolio or 30 -40%  correction specific stocks which has triggered 30% stop loss as mentioned in our previous post  on  May 6, 2018 

Review of Investment Strategy

https://dolly-bestpicks.blogspot.com/2018/05/review-of-investment-strategy.html

In fact we have gone with 30% stop loss strategy to protect our principal investment in case of extreme correction but none of the past 3 calendar year portfolios have breached the given limit. Recent 2018 suggested stocks like Nitin Spinners, Ganesh Housing and Sintex Plastic corrected more than 30% from suggested price. It is not only our blog suggested stocks but complete small and mid cap sector corrected beyond expectation. We are in much better shape if we look at the below statistic of  4000 small and mid cap listed stocks 

Around 800 stocks corrected more than 70%

Around 1500 stocks corrected more than 50%

Around 1500 stocks corrected more than 40%

Around 150 stocks corrected in between 20 - 40%

Around 50% of BSE 500 index stocks had corrected in excess of 50%.

Even though yesterday Sensex closed at all-time highs 37336 points but thousands of stocks are still trading at very low price. It is one of the best long-term value buying opportunity available in last 5 years. 

Next stock will be posted on 03 August 2018 (Friday  after market hours).

So far Q1 results and economic data are very encouraging that our economy is growing at good pace. Sooner or later our stocks are going to make very strong recovery. Need to stay invested with full confidence in yourself, in stock market and in our economy. 

Review of Investment Strategy

Dear Blog Members,

We have gone through and seen lot of changes in economy and in stock market during past 3 years. We have seen rise of Nifty / Sensex from 7000 / 23000 points to 11000 / 36000 respectively. Our portfolios for last 3 years have also given good return 308% for 2015,  126% for 2016 and 48% for 2017.

https://dolly-bestpicks.blogspot.com/2018/01/happy-new-year-2018.html

We have also seen very rough market conditions when Nifty / Sensex fell continuously for more than 1000 / 3000 points respectively, it has happened in Aug - Sept 2015,  Jan - Feb 2106, Sept - Nov 2016 and Feb -March 2018. There was no any major market correction in 2017 and due to this reason our new blog members are very nervous during recent market correction.

Up till now total 29 stocks were suggested on the blog and two stocks  had given us the opportunity to review our investment decision and future strategy. Surana Solar was due to change in government policy and Omkar Speciality Chemicals is due management issue.

I have not given open sell call for any stock because it will initiate stampede selling and it will result in continuous lower circuits. Generally I used to give very clear indication under reply to the comments so that regular blog readers can able to take the action accordingly on time with minimum or without any financial loss. In the past few months we have seen lot of readers keep on posting repeated comments without reading the past replies on Omkar Speciality and Lasa. It has created negative sentiment and stock has corrected severely. For example below comments and replies are clear enough to understand our action.

9 Feb, 2018 CMP  -  Omkar 45 and Lasa 148 = 193

12 Feb, 2018 CMP  -  Omkar 45 and Lasa 155 = 200

24 April, 2018 CMP  -  Omkar 23 and Lasa 90 = 113

It has given good learning to us and we are going with few changes in our investment strategy. It will give very clear guide line on required action on time without any confusion to our blog members. Our prime aim is to protect and minimize the  risk on our investment with fair possibility of decent gain.

Below points are basic investment guide-lines for our all blog members

1) Investment in stock market is subjected to significant risk so investors must be aware of it.  I always try to suggest the stocks with strong product base and good future growth possibilities, at the price level where chances of further correction is very less. Generally every investor expect stock price correction before buying  the stock but don't want any correction after purchase. The real fact is that no one knows the bottom of market so chance of further correction cannot be ruled out. Even though I have replied to several comments on Omkar but  we cannot expect  that every blog member will able to book the profit on time and exit on time in case of such issue. In the past we have not used stop - loss for our long investment but above situation of Omkar has given us good reason to use it to limit loss even on long-term investment.

We will use stop-loss 30% from suggested price. For example if suggested price of any stock is Rs 100 and in case if it correct below Rs 70 then need to book loss without any confusion or doubt. 

2) Normal buying range will remain same + / - 10% from suggested price. For example if suggested price of any stock is Rs 100 than buy it between 110 - 90.

3) Prefer allocation 10 - 20% for each stock and book partial profit at 100% return. Keep the remaining free of cost shares for long term and reinvest principal amount again. 

4) In normal condition, need to stick with investment decision for 3 years. It means that if any stock unable to give at least 100% return in 3 years than we have to sell it and reinvest it again in some other stocks. In case stock has given above 100% return than we can hold free of cost shares for further gain and reinvest principal amount again.  Now it is applicable on 2015 suggested stocks but all these stocks were able to give 100% return. 

5) Our expectation from every suggested stock is 300 % in 3 - 5 years. But in case of non-performing stocks we must take action in 3 years as mentioned under point 4.

6) In any case we must be able to reinvest our principal amount again in 3 years. It is not advisable to buy any non-moving stock after 3 years even though it is trading with in buying range. It means that any stock suggestion is valid only for 3 years or it got re-suggested again with modified target.

7) If you have taken the decision to become successful investor than always be happy and never regret on any decision but learn from every right or wrong decision. 

Ganesh Housing Corporation Limited - Your Smiles are our Real Estate

CMP - 134

Ganesh Housing Corporation (GHCL) incorporated in 1991,  it is engaged in the business of construction and real estate development. 'Ganesh Housing' is a strong brand and established itself as one of the largest and prominent real estate developers in Gujarat. Traditionally GHCL has purely focussed  on the development of residential projects but later diversified into the commercial, retail and township format of the industry.

GHCL has built a strong presence in and around Ahmedabad with a focus on the mid and higher income segment of the market. It has developed and sold over 22.47 million sq.ft. of real estate space, with another 2.55 million sq.ft. currently under development. GHCL has one of the largest developable land bank in the city, with more than 50 million sq.ft. of space, containing a possible development area of 100 million sq.ft. 

https://www.youtube.com/user/GaneshHousingCorp/videos

Ganesh Housing was the first construction company to get an ISO 9001:2000 certification for its construction methodology and quality work in Gujarat, and among very few reputed national real estate companies.

GHCL has received ISO 9001-2008, ISO 14001 : 2004 & OHSAS 18001 : 2007 certification for its quality, environment and safety management.

Residential Business

GHCL’s residential projects consist of multi-storied apartment complexes and integrated townships which have a blend of residential and commercial space. 

Malabar County

Maple Tree Garden Homes

Commercial Business

Ahmedabad is the commercial hub of the state and one of the major industrial locations of the country. Company has developed the space based on the concept of individual corporate houses.

Maple Trade Centre

Investment Rationale

Macro-economic Factors 

India has emerged as one of the world’s fastest growing major economies. The overall macro-economic scenario in the country is very positive with low inflation, reduced key interest rates, low commodity prices, rising foreign investments and improved global confidence in the region. Different structural reforms and government initiatives have led to revival of growth across all the sectors. A combination of all these factors is likely to boost the construction sector in the country. 

Real estate sector in India is expected to reach a market size of US$ 180 billion by 2020. More than 70 per cent of India’s GDP will be contributed by the urban areas by 2020 and FDI in the sector is estimated to grow to US$ 25 billion by FY22

Rapid urbanisation is good for the sector and it is creating ever growing demand. Demand for residential properties has surged due to increased urbanisation and rising household income. India is among the top 10 price appreciating housing markets internationally.  About 10 million people migrate to cities every year and 35 % of the population is in young age bracket (15-35 years). Growing economy driving demand for commercial and retail space. With all this, the housing sector is expected to boom and its share in GDP expected to rise from 6.3% in 2013 to 11% by 2020. 

For further details need to refer below recent report on real estate sector.

https://www.ibef.org/download/Real-Estate-March-2018.pdf

Government Initiatives

The government of India came up with two major projects that are likely to enhance the real estate demand in the country. The first being creation of 100 smart cities and second is ‘Housing for all’ project. Government of India’s 'Housing for All' initiative is expected to bring US$ 1.3 trillion investments in the housing sector by 2025. Under this scheme, 60 million houses are to be built which include 40 million in rural areas and 20 million in urban area by 2022.

Real Estate Bill was passed  to establish a real estate regulatory authority (RERA) for regulating and promoting the sector. The government has already taken several below steps to boost the real estate sector 

• Real Estate Regulatory Act • Benami Transactions Act • Boost to affordable housing construction • Interest subsidy to home buyers • Change in arbitration norms • Service tax exemption • Dividend Distribution Tax (DDT) exemption • Goods and Services Tax • Demonetisation • PR for foreign investors

The introduction of RERA has enabled the greater transparency and ensures that the interests of all interested parties and in particular the consumer, are protected. It ensures a consistent metric of measurement and puts in place requisite timelines. The builder also has to provide an affidavit declaring that the land has clear title and is free from any encumbrances. All these initiatives if implemented well will go a great way towards enhancing the credibility of the segment.

Future Prospectus of Company 

GHCL has the largest developable land bank in strategic locations of Ahmedabad and it has an in-house research and development team to ensure deployment of the latest technology in construction. Huge low- cost land bank gives fair visibility of very good growth potential of business for next 8 -10 years. Low-cost land of this company gives it one of the best operating profit margin in housing sector and it is big cost saving advantage to the company over other competitors.

GHCL is known for quality developments with good track record. It is a pioneer in using earthquake resistant structures in Gujarat. Ganesh Housing was also at the forefront of bringing the SEZ (Special Economic Zone) format to Gujarat.  It has several firsts to its credit like first earthquake-resistant housing project, smart homes with digital security, solar passive buildings, wi-fi enabled project etc.

All on going projects of Ganesh Housing are RERA approved. Ganesh Housing home buyer are qualified to get the subsidy under Pradhan Mantri Awas Yojana (PMAY) 

http://www.ganeshhousing.com/wp-content/uploads/media-release/maple-tree/2017/06_GHCL_Double-Spread-for-GIHED%20Catelogue.jpg

http://www.ganeshhousing.com/wp-content/uploads/media-release/maple-tree/2017/07_Maple%20RERA_DB_25x16.pdf

The company’s land bank is concentrated around the city of Ahmedabad. Ahmedabad is evolving opportunity for housing sector. It is the fifth largest city in India and the seventh largest metropolitan area. Forbes magazine ranked Ahmedabad as the third fastest growing city of the decade. It is emerged as an important economic and industrial hub in India. Development of Sabarmati River Front is completed in the recent past and it is well known for best infrastructure and transport.

http://worldpopulationreview.com/world-cities/ahmedabad-population/

http://www.sabarmatiriverfront.com/

GHCL has completed several projects with Government of Gujarat for development of townships,  IT park, Pharma and Biotech Park  (SEZ) and there is possibility to get similar projects in future.

Conclusion

The outlook for the Indian economy is very positive. Several initiatives are taken by the government to boost the housing sector growth in the coming years. Housing shortage is a major concern in India due to the rapid pace of urbanization and real estate market of Ahmedabad offers tremendous potential in given situation. Ganesh Housing is best placed take the advantage of upcoming huge growth in the housing sector.  

Ganesh Housing stock at cmp Rs 134 is one of the best investment opportunity in housing and real estate sector for both short  term and long term ( 1 year to 4 years ). It can be bought + / - 10% from cmp with 10 -20% of portfolio allocation.