Panther 10 October 2016.pdf.pdf

Moneylife

STOCK LETTER

Panther

Small-cap/low price stock

Monday, 10 October 2016 Volume 3, Issue 25 MARKET WATCH

Sensex, Nifty losing bullish momentum

W

e had mentioned in last week’s closing report that Nifty, Sensex might rally if weekly lows hold. The major indices of the Indian stock markets rallied strongly only on Monday. On the remaining days of the week, the indices failed to continue on the upward trajectory. It appeared that the momentum of the initial rally had been lost through the week.

Positive global cues lifted the Indian equity markets on Monday. Reduction in a key lending rate, coupled with short covering and value buying, pushed up the Indian equity markets on Tuesday. The key indices which opened on a higher note following positive cues from Asian markets, held on to their gains after the Reserve Bank of India (RBI) announced a 25 basis points cut in one of its key lending rates. Negative

Market Valuation Nifty Overvalued - above 22x; Fairly valued - 17x to 20x; Undervalued - below17x The current Nifty PE is 23.49

8,950 7,660

PE 22x

6,370

17x

5,080 3,790 2,500 Jan-08

May-12

Oct-16

This valuation chart is purely for information purposes. Even if the market is mildly overvalued, stocks of companies that growing and reasonably valued still goes up (unlike the NAV of average equity fund). Please note that two of our stock selection parameters, are reasonable valuation and earnings growth.

Money Flows DII Net Inflow

FII Net Inflow 3,425

1,635

(Rs crore)

2,510

1,130

1,595

625

680

120

-235

-385

-1,150 10 Aug-16

7 Sep-16

7 Oct-16

-890 11 Aug-16

(Rs crore)

8 Sep-16

7 Oct-16

The Nifty rose 1% this week. FIIs were net buyers bringing in Rs1,031.40 crore and DIIs were net buyers bringing in Rs278.28 crore.

global indices, Indices Change coupled with BSE Sensex 1% profit booking and lower Nifty 1% than expected macro-data, dragged the Indian equity markets on Wednesday. Negative global markets, coupled with lower crude oil prices and a weak rupee, dented the equity markets on Thursday. Negative global indices and profit booking pulled the Indian equity markets lower on Friday. Stock: A number of stocks were buzzing last week. Srikalahasthi Pipes jumped by 12% during the week and GMDC surged by 15%. Avanti Feeds too rose by 7%. Aksharchem (India) surged by 18%, hitting its 52-week high of Rs558.40 at the BSE on 7 October. National Fittings hit its 52week high of Rs254.60 on 5 October at the BSE and rose by 5%. Maithan Alloys was the laggard declining by 3%. Arman Financial Services’ promoter holding declined to 27.65% as on 30 September 2016 from 28.10% on 30 June 2016. The stock rose by 3% during the week. Changes: We are exiting Hindustan Media Ventures for 3 reasons 1. Low revenue growth. 2. Despite having positive free cash flows in FY15-16, its short-term borrowings rose to Rs172 crore as on 31 March 2016 from Rs98 crore as on 31 March 2015. 3. We want to raise cash for investing in other stocks.

Disclaimer: The Stockletters are part of multiple services offered by Moneylife Advisory Services which is a SEBI registered investor advisor (Registration No: INA000003429). The stockletters are for information purposes only and none of the stock information, data and company information presented constitutes a legally binding recommendation or a solicitation of any offer to buy or sell any securities. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgment as of the date of the report and are subject to change without notice. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalised recommendation to you. Individual stocks presented may not be suitable for you. Please read the terms and conditions before subscribing.

Moneylife

STOCK LETTER

Panther

Small-cap/low price stock

Monday, 10 October 2016 Volume 3, Issue 25

Company

Business

Comments

Atul Auto

Auto

Focused presence in a growth segment, as 3-wheeler sales continues to boom

Avanti Feeds

Farm & Farm Inputs

Excellent growth over the next two years.

Sun Pharma Adv Research

Pharma

Could be a jackpot thanks to the commitment of the management of Sun Pharma

Maithan Alloys

Steel Products

Manufacturers and exporters of niche value-added manganese alloys. Attractive valuation and reasonable RoE (14%).

Ratnamani Metals & Tubes

Steel Products

Value added manufactures of Tubes & Pipes in Stainless Steel/Exotic material and also Carbon Steel Pipes. RoE of 24%

Gujarat Mineral Devp Corp

Energy

GMDC can sell lignite to anyone in the market, and expects its revenues and profits to go up 25% in the next 12 months. Its RoCE is 14% and PE is a low 5.73 at the time of adding

Srikalahasthi Pipes

Steel Products

One of India’s largest ductile iron pipes manufacturer, commanding around 15% market share.In South & West India its market share is around 75%. RoE is at 42%

Aksharchem (India)

Chemicals

Intermediate dye manufacturer and exporter; export constituting 82% of its total revenue as of FY13-14. Attractive valuation and high RoE (44%).

Ultramarine & Pigments

Chemicals

High margins from ITeS & BPO activities through its associate Lapiz Digital Services. High RoCE. Interesting expansion plans in Gujarat. Only film sulphonator in south India

Arman Financial Services

Financial Services

Gujarat-based MFI with qualified promoters. Clear focus on small ticket size loans of around Rs15,000 in rural and semi-rural areas.

Jamna Auto

Auto Components

Market leader in leaf spring segment with experienced management. Expected to benefit from continued recovery in MHCV segment.

National Fittings

Steel Products

Manufacturer of piping components with healthy RoCE and robust free cash flows.

Orient Refractories

Industrial Intermediates

MNC with great prospect, low valuation and high return on capital

Moneylife

STOCK LETTER

Panther

Small-cap/low price stock Monday, 10 October 2016 Volume 3, Issue 25

Financial* Av. Sales

Av. OP

Valuation** MC/ Sales

MC/OP

Entered

Return# RoE

Date

Price

Current Price

Annualised return (includes dividend)

since entry@

Earlier Recommendations That Can Still be Bought 1. Atul Auto

124.81

17.00

2.87

30.62

29%

25 Apr 14

192

486

49%

2. Avanti Feeds

554.97

60.73

0.84

8.29

42%

25 Apr 14

124

561

95%

3. Sun Pharma Advanced

36.55

—

91.59

—

—

25 Apr 14

151

319

36%

4. Maithan Alloys

281.24

31.71

0.74

6.02

23%

05-Mar-15

90

259

97%

5. Ratnamani Metals & Tubes

410.44

69.05

1.97

11.00

14%

30-Apr-15

689

570

-11%

6. Gujarat Mineral Devp Corp

277.11

92.19

2.44

5.54

9%

20-Nov-15

83

97

20%

7. Srikalahasthi Pipes

284.97

70.02

1.13

3.97

39%

24-Dec-15

274

318

18%

8. Aksharchem (India)

49.43

9.77

1.69

6.08

32%

23-Jan-15

225

549

70%

9.Ultramarine & Pigments

55.30

9.76

2.23

11.05

26%

19-Feb-16

107

172

64%

10. Arman Financial Services

10.87

3.35

2.98

8.48

19%

27-May-16

219

265

21%

11. Jamna Auto

318.19

41.88

1.30

8.23

36%

03-Jun-16

163

218

36%

12. National Fittings

13.15

2.91

3.77

15.49

43%

12-Aug-16

170

246

45%

13. Orient Refractories

118.02

22.21

2.61

13.06

30%

25 Apr 14

61

114

31%

21%

09-Oct-15

274

298

14.

Will be added later

15.

Will be added later

Exit 1. Hindustan Media Ventures

Profit/(loss) 231.59

54.91

2.28

9.60

9%

* 5 quarter average (Rs crore) ** Based on latest quarter (annualised), MC- Market Cap #Return on Equity (based on net profit of previous 4 quarters), @ - stocks less than one year have absolute return

Operating Profit - profit generated in the normal course of business (for companies other than bank and NBFCs); arrived at after deducting operating expenses (excluding depreciation and interest) from sales. For Banks and NBFCs, operating profit is arrived at after deducting operating expenses (excluding depreciation) from total income and net revenue respectively. Valuation - ratio of market capitalisation to sales or operating profit. Low ratio is better. Market capitalisation - recently traded price multiplied by number of shares outstanding. RoE is return on equity which is net profit divided by networth. Entered at price is the price at which we had added the stock to our stockletter. Current price is the price as on the last trading date of the week. Performance is the return between the entered at price and current price.

All this while our portfolio was fully invested. We have introduced ‘cash call.’ This means that we will tell you how much of your investment is supposed to be in stocks and how much cash to hold. In Panther we had 16 stocks (15 stocks in active list and 1 stock on hold). In last two weeks we have recommended selling of MPS and Manali Petrochemicals. This week we are recommending an exit from Hindustan Media Ventures. Like the sale proceeds from MPS and Manali Petrochemicals, that of Hindustan Media Ventures is supposed to be in cash and invested in a new stock recommended in future. Henceforth the maximum number of stocks in the Panther portfolio will be 16. How to Use the Stockletter

1. At any point, we intend to maintain a maximum of 16 shares in the Panther stockletter. If we go beyond, we will explain why 2. Our suggestion is to invest an equal amount in each stock we recommend. For this, you can use the tool - https://m.savers.moneylife.in/panthersip.html 3. A new subscriber may take a position in any of the two kinds of recommendations a. When a completely new stock is added b. When a stock is listed in the section “Earlier Recommendations That Can Still be Bought” 4. Exits will be mentioned in the table as and when they arise

Happy investing!