Camphor & Allied Products - must have stock

Since 1961, Camphor & Allied Products Ltd. ( CAPL) has been a pioneer in the field of Terpene Chemistry in India. It established the first Synthetic Camphor plant with technology from Dupont, USA.

CAPL is India's largest manufacturers of variety of terpene chemicals and other speciality aroma chemicals. Our vast product range includes Synthetic Camphor, Terpineols, Pine Oils, Resins, Astrolide, and several other chemicals finding applications in vast array of industries ranging from Flavours & Fragrances, Pharmaceuticals, Soaps & Cosmetics, Rubber & Tyre, Paints & Varnishes and many more. 

Camphor and Allied Product is a niche play in Indian Specialty Chemical Segment. It is the largest exporter of specialty aroma chemicals from India . Its product range includes fragrance chemicals such as amberone, pharmaceutical products like  camphor and terpineols, aromatic chemicals like  citwanene, and  industrial chemicals such as alpha pinene.This company taken over by one of India’s largest fragrance manufacturer Oriental Aromatics Limited in 2008 at a price of Rs.167 per share.Using the modern technology of Dupont ,USA  CAPL is the largest manufacturer and pioneer in Turpine Chemistry in India. Company’s  products are mainly  exported to Europe, UK and US for use in flavours, fragrances, pharmaceuticals, soaps, cosmetics, tyres, paints , varnishes...etc.

Not only the status of India’s largest aroma chemicals manufacturer but its new relation with  AganAroma & Fine Chemicals    which is a subsidiary of Makhteshim Agan Group -an affiliate ofChemChina - ( Chem China is  the largest Chinese chemical company ) creating interest in CAPL . As per the agreement with Agan  ,high margin products produced at company’s new plant located at Vadodara will be marketed by Agan worldwide . Agan will also provide technology expertise to camphor. Company claiming this  is the world’s most advanced plant for manufacturing high margin Musk and related products.Last year company started commercial production from this facility and the recent results of the company speaking for itself.

CAPL  is  in a  niche segment backed with strong support of a world leader but  a less researched company  by market participants. We expect with major tieups with world leaders company is likely to fetch eyes of big investors and with improved numbers company is likely to trade at higher PE. Hence we recommend to buy this stock with the price target of 480.

Gujarat Ambuja Exports - worth having in portfolio

Company Profile - 

Gujarat Ambuja Exports Limited is engaged in manufacturing and exports of agro based products. The Company’s product profile includes solvent extraction comprising of oil seed processing, edible oil refining, cotton yarn spinning, maize based starch and its derivatives, wheat processing, cattle feed and power generation through wind mills, bio gas and thermal power plants..The Company operates in four segments:

• Agro Processing
• Cotton Yarn
• Maize processing and
• Windmill.

The Agro Processing segment consists of solvent extraction of edible oilseed, edible oil refining, de oiled cakes, wheat processing and cattle feed manufacturing.

Financials

Yearly Results

	FY10	FY11	FY12	FY13
Sales	1408.56	1949.43	2114.09	3004.62
Operating Profit	111.35	153.89	105.76	194.57
Profit Before Tax	77.05	115.55	60.52	145.64
Net profit	60.02	94.10	49.70	113.35
EPS	4.34	6.80	3.59	8.19

Gjarat Ambuja Exports Limited’s business model generates low margins but high turnover. Even then, the company’s margins are improving gradually over the years- currently stands around 6%. Total Revenues in current fiscal year is expected to increase 30%. Due to windmill power generation and improvement of capacity utilization company is able to improve on margin front which is likely to improve further.

Promotor’s have recently increased their stake to 71.96%

With consitent player and improvement, the stock looks attractive for long term players. Investor with steady returns can invest in the stock for the target of 84.

CCL Products - a strong buy

Company Profile - 

CCL Products (India), or CCL, is among the world’s leading and India’s largest  processor and exporter of instant coffee with exports to more than 67 countries. It has 10% global market share in instant coffee exports, if one excludes Nestle’s captive consumption. CCL is one of the very few companies globally that have successfully scaled up this business and increased its capacity 10 times since inception in 1995, and that too without equity dilution. With the ramp-up at its Vietnam plant, positive triggers will start pouring in which makes it a lucrative investment even after recent run up.

Why to Buy?

Newly commissioned plant in Vietnam to drive growth
CCL commissioned its greenfield 10,000tn project in April 2013 for manufacturing instant coffee in Vietnam at a total investment of US$40mn (including working capital). Commercial production from the plant started in 2HFY14. Vietnam plant to achieve 55%/75% capacity utilisation rates in FY15E/FY16E, respectively, resulting in consolidated volume growth of 28.2%/11.4% in FY15E/FY16E. 

Working capital cycle improves 
Working capital requirement for CCL’s Indian plant stood at 36.1%/29.0% in FY13/FY14, respectively. Higher working capital at the Indian plant is mainly on account of higher inventory at 128/115 days in FY13/FY14, respectively, as a significant portion of green coffee beans is imported. Working capital cycle for its Vietnam plant is expected to be at least six weeks lower compared to the Indian plant, as the transit time for raw materials and finished goods is likely to be significantly lower compared to the Indian plant. The company can source green coffee in 24 hours for its Vietnam plant, while in India it takes two months for raw material transit and import clearance. With faster ramp-up of its Vietnam facility likely from FY15, we expect consolidated working capital requirement to reduce from 39.7%/32.4% in FY13/FY14 to 27.7%/26% in FY16E/FY17E, respectively. 

Debt-free balance sheet likely by FY17
Currently, CCL has debt of Rs2,921mn with the D/E ratio at 0.83x. Out of Rs2,921mn debt, Rs1,180mn is of Indian operations while the balance Rs1,741mn is of overseas operations, mainly pertaining to the Vietnam plant. We expect CCL to generate a healthy free cash flow of Rs3,405mn over FY14-FY17E, which is likely to be utilised to repay the entire debt and also improve dividend payout. 

Business model isolated from volatility in coffee bean prices
CCL remains unaffected by fluctuations in green coffee bean prices or coffee prices as it places orders for green coffee only on receiving an order for instant coffee and makes back-to-back arrangements for green coffee beans. In other words, CCL operates on fixed margins without carrying the risk of coffee price volatility. In India, CCL procures green coffee beans by importing them (75%) from global markets (Vietnam, Indonesia, African countries) as well as from the domestic market (25%), primarily from Chikmagalur in Karnataka.

With positive future outlook of the stock, we expect stock is likely to sustain growth momentum and stock price is likely to reflect the same. Hence, we recommend the stock for the target price of 130.

orient beverages - buy

Company Profile :-

The name that epitomizes mineral water today was first introduced in  Mumbai in the early 60's. In 1965 Signor Felice Bisleri an Italian by origin, came up with the idea of selling bottled water in India. His company Bisleri Ltd. offered mineral water in two variants -bubbly and still. In 1969 Parle bought over Bisleri (India) Ltd. and started bottling Mineral water in glass bottles under the brand name 'Bisleri'. In due course Parle switched over to PVC non-returnable bottles and finally advanced to PET containers.

Bisleri has undergone significant expansion in their operations. The company has witnessed an exponential growth with their turnover multiplying more than twenty times in a short span of 10 years. The average growth rate over this period has been around 40% with Bisleri enjoying more than 60% of the market share in the organized mineral water segment.Currently Bisleri has 11 franchisees , and ORIENT BEVARAGES is
also one of them .

Since for a businessman, the profits can never be enough, hence promoters have even entered into lucrative real estate business with substantial margins.

Why to Buy?

1. Strong Brand name - Since company is one of franchise of Bisleri brand with major market share and mineral water is always in demand in our country, it can provide substantial growth in future.

2. The company is entering soft drinks business along with Bisleri Inc. Hence, going forward company can diversify it's product portfolio which can help it to acquire more brand value and further market share. 

3. A new plant of similar capacity has started production since May 14. The demand was always great but with doubling of capacities, the growth will go in a different trajectory altogether.

4. Promoters have recently released all their pledge shares which is an early sign of positive business growth. Company paid its maiden dividend this year. This is good indication of the confidence the management has for future profit growth.

Since, its a small cap company with market cap of 14 Crs. only, majority of business growth is dependent on how promoters can shape up the company in future. With medium risk appetite investor can look into this company with the target of 90.

Sterling tools - medium to long term bet

Company Profile :-

Sterling Tools (STL), originally incorporated as a private limited company became a public limited company in October 1994. STL is engaged in the manufacture of high tensile (HT) fasteners mainly for automobiles and the reengineering industry at its plants situated at Faridabad (Haryana).

Why to Buy - 

1. Auto sector performance is improving and so is sterling tools performance will improve -

STL supplies to diverse segments like two-and four-wheeler passenger transport,goods transport, tractors and farm equipment. Over the years, its clientele hasexpanded to include most of the major automobile OEMs like Eicher, Escorts, Bajaj Auto, Maruti Suzuki, Hero Honda and Tata Motors. CV segment constitutes 29% ofs ales followed by farm equipment 22%; passenger cars 18% and replacement market 12%. The rest is accounted by engineering segment and exports.

2. One of the leading provider of fasteners in India and long growth story -

While mild steel fasteners are produced by the unorganized sector and used in general applications, high-tensile (HT) fasteners require a relatively superior technology and hence are chiefly manufactured by the organized sector. STL known in the industry for its indigenous development of requisite technical skill for 30 years has wide product range, which includes over 2000 types of fasteners. Today, it is among the leading OEM suppliers in India serving the needs of leading automotive companies in India, Europe and USA.

3. JV and export business has potential -

STL, in December 2009 entered into a 50:50 JV with Netherlands-based Borstlap Masters in Fasteners Group B.V, (FABORY). The JV aims to capitalize on the fast growing demand for non-automotive fasteners in the emerging markets in South Asia. The JV will be incorporated in due course and plans to trade under “Sterling FABORY.” FABORY has more than 110 branches and is present across 16 countries. It is a leading global distributor, technical service provider and supply chain and vendor management provider of fasteners, tools, and industrial supplies. Management is confident to do break even for JV in Financial year of 2015- 2016

Risks -

1. Heavily dependent on auto sector-

If any government policy change which hamper auto sector growth, can make adverse effect on fastener company sterling tools.

2. Top line is not growing - 

From last few quarters company has posted flat topline which is little worrisome factor.

View on stock -

Promoter holding of 70 %, Decline in finance cost, Good dividend payout, increase in bottom line despite flat top line last year, increased Auto numbers in recent months. Decent management are positive factors of the company which attracted us to dive into this company. At CMP of 320 company is trading at 13 PE of FY14. We recommend to buy the stock on dips around 280-290 range for investment of medium to longer term.