Model Portfolio

Model Portfolio

Model Portfolio December 2018

Dated: 10.12.2018

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CIN NO. – U6719DL2014PTC268647

SEBI REGISTRATION NO. – INP000006022

 

  1. INTERNATIONAL PAPER APPM LTD (IP) CMP – Rs. 425

IP is one of the largest integrated paper and pulp producer in India. Global giant IP (USA) acquired APPM in 2011. China’s ban on waste paper amidst eco concerns to benefit IP. The global shortage of wood pulp has resulted in increasing prices of paper. Low per capital consumptions – growing population means a growing demand for paper in future. Compelling P/E ratio of 12. PAT up 168% in FY18.

2. FORCE MOTORS LTD. CMP – Rs. 1617          

An automobile company has a presence in speciality, commercial and agri vehicles. Force Motors is fully vertically integrated, making its own engines, chassis, gearboxes, axles, bodies etc. Acquired MAN TRUCK Factory to expand its presence in CV. New JV with Rolls Royce to generate expected annual revenue of 1000cr from 2019. Is working on EV. Is the sole supplier of powertrain components for Mercedes and BMW since a long period of time. Lowest in Industry P/E ratio of 14, is almost DEBT Free.

3. BALKRISHNA INDUSTRIES LTD (BKT) CMP – Rs. 879

BKT is leading manufacturer of Off-Highway tyres. These tires are mainly meant for agricultural, industrial and construction, earthmover etc. It enjoys ~5% market share in a ~$15 billion global market and is targeting 7-8% share in the next 3-5 years.

BIL is planning a huge capex of over the next two to three years, including

  • 700 crore for setting up a tyre plant with the capacity of 20,000 MT in US;
  • 500 crore in Waluj that will replace existing plant with a new state-of-the-art facilities
  • 500 crore is towards setting up a new line of 5,000 MT for layers of all steel radial OTR tyres & additional mixing line in Bhuj.
  • Backward integration capex of 425 crores for setting up carbon black plant of 140,000 MT in two phases. Backward integration project will result in the control of supply chain & will expand margin by 100-150 bps.

The revenue for Q2 increased by 18.9% YOY.

4. TATA CHEMICAL Limited CMP – Rs. 660

Part of TATA group. Three products categories, including living essentials, industry essentials and farm essentials. Inorganic chemicals (Soda ash & salt) contribute almost 70% in revenue.

Tata Sampann launched in 2015, (ex-salt) business is expected to turn 2x in FY19. A target of overall consumer business at INR50b in next 4-5 years. Tata Sampann products command 10-15% price premium in the market. TCL plans to launch 4-5 new product platforms under this umbrella in Fy19.

PAT for FY2018 increased by 39%YOY. The company is almost DEBT free. TCL is available at PE of 14 whereas Nestle, HUL, Britannia are available at 40+ PE ratio.

5. AARTI DRUGS LIMITED CMP – Rs. 556

Offers  active  pharmaceutical  ingredients  (APIs)  (87%%  of  revenue)  and  Speciality  chemicals  & formulation (13%), is the market leader in 9 out of top 10 APIs manufactured. ADL caters to all major domestic pharma companies and works on import substitution. Only 5 out of 10 products manufactured by ADL are produced in China – immune to dumping. ADL is the largest producer of Ciprooxacin in India and exports 40% to emerging markets. Company is available at P/E of 18.5 and has promising future.

6. BALAJI AMINES LIMITED (BAL) CMP – Rs. 435

BAL one of the manufacturers of Aliphatic Amines, their derivatives, speciality chemicals and Pharma Excipient, that nd application in pharma and pesticide industries, it also has a hotel.

BAL is the largest manufacturer of Methyl amines in India and has gained ~70% global market share in DMA HCL. BLA aims at expanding capacities – Sizeable import substitution opportunity. Solapur project 300 crores is likely to add Rs 450 crores (~51% of its FY18 Sales) to its top-line by FY23E. Likely to put up facilities for Mono Iso-propyl Amine, Iso Propyl Alcohol, and additional Methyl Amines & Ethyl Amines capacity under the Mega project in Solapur. BLAs subsidiary, Balaji Specialty chemicals have started to build capacity for putting up plants for Ethylene Diamine and Piperazine (agro-chemical intermediates).

7. ASTEC LIFESCIENCES LIMITED CMP – Rs. 515

Subsidiary of Godrej Agrovet. Strong parentage of Astec helped to create synergy. Producer of agrochemical products like Triazole  fungicide  products.  Backward and lateral integrated,  saving in expenses.

Astec to merge with Godrej Agrovet. Approximately 8% gain in swap ration on current market price.

Godrej Agrovet is a growing company with immense potential from the industries it serves.

8. CMI FPE Ltd            CMP – Rs. 860

CMI FPE is the subsidiary of CMI GROUP, Belgium based company. The company gets benets from its parent company like order, input procurement and etc., is engaged in the manufacturing of cold rolling and Processing equipment, installation of cold rolling mills, galvanizing lines, color coating lines and others. Since the takeover by CMI GROUP, the plants and operation have been revamped and now the impact is visible.

The revenue of the company grew by 100% in FY2018. Q2FY19 revenue increased by 33% YOY, EPS at 21.

Recently won big order from TATA steel for Kalinagar plant. Advances from the customer have increased reecting increasing order book.

We are expecting 15-20% return over the next  6-9 months in this portfolio on equal weight in each shares above.

 

DISCLAIMER

The user assumes the entire risk of any use made of this information.

Each recipient of this report should make such investigation as it is necessary to arrive at

independent decision and should consult his or her own advisor to calculate merit and demerit of the risk of the securities.

There can be no assurance that future results or events will be consistent with this information. GPPL shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.

GPPL, GPPL’s analysts, management or its clients may have exposure in these stocks.

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