General aspects for newbies:-
1)What is stock market to you?
Ans)Stock market is a place which gives you lucrative ownership of companies.By owning a single stock you are actually becoming the owner of a company.Its liable to share everything with yourself.
2)What is the kind of returns that can be generated?How its comparable to bank FD returns?
ans)I personally look for 26-30% yearly gains on a compounding basis.A 26% compounder increases your fund by 10 times(1 lakh invested becomes 10 lakhs) in 10 years.A 30% CAGR boosts your portfolio by nearly 14 times(1 lakh invested becomes 13.8 lakhs) over a period of decade.Bank FD's would just double your money(1 lakh invested becomes 2.15 lakhs) over the same period.Add up some dividend top ups which if further invested,makes the figure look much more interesting.
3)Its easy to earn this days as everything is moving up isn't it?I buy xyz and double my money in a week.
Ans)It was always easy to earn actually but only over the longer term.So how much you actually made from the time you joined markets?What was the CAGR?Everything looks green from the other side.A lot of crap stocks are moving coz of vested interests.Once the wind stops,they gonna go down like anything.Invest in a disciplined way in stocks which you understand,that too with proper portfolio allocation.Even the greatest mathematician,Sir Isaac Newton lost nearly 30crs(on today's figure) and mentioned – "I can calculate the motion of heavenly bodies, but not the madness of people".
4)How does one construct a portfolio which can provide 25-30% CAGR returns year after year?When to exit is something which confuses me a great.Please help.
Ans)Buy my recommended companies and allocate not more than 5% in each of them.A basket of 15-20 stocks is enough to get your desired returns.Why to exit actually if the growth is there?I see a lot of guys exiting my older recommended stocks like symphony and avanti feeds to buy the new ones.This is one of your biggest mistakes.The secret to win from markets is to have the best ones and sit tight with them till their growth is intact.You just don't need to buy the new ones as you already posses the best money making companies.I myself hardly bought any recent recommendations as am fully invested on the older ones which ensured an amazing overall portfolio return so far.
5)Then do we exit once the target gets achieved?Also have seen you recommending companies only after they have doubled/tripled/became 5x.If those were provided earlier,we could have made so much more.
Ans)What is a target?Its just based on historical figures showing what its worth over a period of time.Frankly speaking there's no target folks.Just hold with trailing stop as long as the growth of the company persists.Minimizing losses and maximizing profits is what you should strive for.A company which moves up and consolidates higher gives me the required clarity.There's so much to speak about,say from opportunity costs to MF's or FII's interest.A higher PE means investors confidence whereas a low PE company simply signifies lack in confidence.Buy at low and sell at high ain't in vogue.It should be buy high to sell much higher.A higher valuation also boosts the confidence and productivity of the promoters/management as they are biggest gainer of the rising stock valuation.
Some more words:You need to pay wealth tax if the value of personal assets you own exceeds 30 lakhs.Nah,don't be concerned.Stocks, which are one of the best assets ain't even considered as an asset in our country.My association with you guys last from a quarter to some years.Its not the money which satisfies me(30% of the paid readers are given free membership coz of their sheer passion and love for the subject.They all wanted to pay though)but only when I see the members trying to learn and doing the required due diligence before zeroing on a stock,that's such a wow feeling.So earn and try to learn too.Happy investing folks.
Note:Premier explosive too was recommended to members at 206rs just few weeks ago.Here's the research note of it.Company quoting around 230 rs now.Readers its time for you to act on it now.
Stock idea:-
Scripscan:Premier Explosives Ltd(PEL)
Bse code:526247
Cmp:206rs
Target:300rs
Return percentage:47%
Duration:9-12 months
Quote:Keshav's research helped me to complete 50% of the note.Rest of the inputs got penned down by your's truly.
Promoter: Dr. Amar Nath Gupta (ANG) is the CMD of PEL. He is a first generation entrepreneur.He is a Gold Medallist from Mining Geological and Metallurgical Institute of India. He is a Member of Society of Explosives Engineers, U.S.A. and was Chairman of Explosives Development Council constituted by Government of India and Chairman of Explosives Manufacturers Association of India.Dr. ANG believes in profitable growth. The company could have achieved sales of around Rs.300 - 400Cr. had it been ready to sacrifice margins at the altar of sales growth. The company only considers projects where it expects to recoup its investment in 4 years.
History:Premier Explosives Ltd. was incorporated in 1980 and started off with manufacturing Slurry Explosives and during the 90’s started manufacturing the complete range of explosives & accessories like detonators, bulk explosives, detonating cords and blasting accessories. The company diversified into Mushroom Farming in 1997. In FY07, the company ventured into Space & Defence. The co. divested its Mushroom Division in FY08 for a consideration of around 20Cr. Since then the company is focussing & expanding into the Space & Defence sectors.
Company:The Indian Explosives Industry is amongst the top 5 in the world. Around 70% of the entire output of the industry is consumed by the coal mining industry which primarily consists of Coal India Ltd. & its subsidiaries. The Indian explosives industry is fragmented with around 45 units and around 10 major manufacturers Premier Explosives is the 6th largest manufacturer of explosives with around 5% market share.PEL caters to all mining sectors like Iron Ore, Limestone, etc..PEL is the only private sector entity manufacturing solid propellants & other specialized products for the defence sector.
Some more info: Amongst many firsts, PEL is the first company in the world to produce safer and greener NHN (Nickel Hydrazine Nitrate) detonators on commercial scale replacing ASA (Lead Azide, Lead Styphnate and Aluminum Powder) detonators.PEL is operating and maintaining a State-of-Art Chemical Manufacturing facility of Indian Space Research Organisation (ISRO) at Sriharikota and Solid Fuel Complex of Advanced Systems Laboratory at Jagdalpur.PEL's R&D facility is recognised by the Council for Scientific and Industrial Research (CSIR),Government of India, as an established research centre. It is also recognised as a research base for Ph.D. work by Gulbarga University, Karnataka. Further,PEL has collaboration with IIT, Madras and Gulbarga University for research in high energy materials.For FY14, PEL achieved a turnover of INR 145crs and profit after tax of INR 9.2crs
Presently, PEL has 4 main divisions:-
1)Commercial Explosives
2)Detonators & Accessories
3)Special Products Division – Solid Propellants
4)Service Contracts – ‘Operation & Maintenance’ Contracts.
Commercial Explosives: The Company is manufacturing a diverse range of commercial explosives for mining and infrastructure requirements at its 6 manufacturing units.The company is a dominant player in its segment.The explosive industry is fragmented while the main customer is a monolithic (Coal India).Others include the likes of Singareni Collieries,Neyveli Lignite,NMDC,Karnataka Emta Coal Mines and the Cement companies.The other listed players from this space are Keltech Energies Ltd. & Solar Industries India Ltd.The ‘Industrial Explosive’ division of PEL did sales of Rs.67crs vs 48crs.Production of explosives increased to 20,703 tonnes from previous year's 16,367 tonnes.The company should be able to maintain 15% operating margins as the management refuses to bid for those tenders where a threshold margin of 15% is not assured.With signals of revival of global economy and expected industry-friendly policies, Indian explosives industry is expected to post 8% CAGR over the next few years on robust growth plans of user industries like mining and infrastructure .
DETONATORS:After adoption of NHN technology last year subsequent to the accident, during the current year Detonator plant produced 53.27 million pieces which is 17% higher than 45.44 millions produced during previous year(sales value of 33crs vs 29crs).Demand for detonators, which are sold through trade channels,continue to be weak.Revival in detonator demand is expected in Q3FY15.The company is confident of raising the production further in 2014-15.
SERVICES DIVISION :O&M –Premier has been operating and maintaining the solid propellant production facilities of prestigious agencies, namely ISRO’s satellite launching station, SHAR at Sriharikota, Andhra Pradesh and Solid Fuel Complex (SFC) at Jagdalpur in Chhattisgarh.At SHAR, the company has deployed 330 of its staff under the 10 year contract for O&M services which commenced in 2007.The company also has O&M contract at SPROB. At this facility about 60 of the company’s staff are deployed.More than margins,O&M is a significant technology transfer as PEL is learning to run complex facilities and than setting up such units on its own. Such contacts are called GOCO (Government Owned, Company Operated). These contacts have annual price escalation clause which leads to steady increase in revenues.The segment contributed 15crs of revenues in the fiscal fy13-14.
SPECIAL PRODUCTS DIVISION:Premier has been manufacturing solid propellants from 2003.Since then Premier has been adding facilities to manufacture solid propellants at Peddakandukuru in Nalgonda district of Telangana. The company has been catering to the needs of tactical missiles like Astra, Akash, LRSAM and rockets like Pinaka.PEL is the only private sector entity in India manufacturing solid propellants & other specialized products for the defence sector.Solid Propellant manufacturing is a Sunrise Industry in India.Premier produces Explosive Bolts, Pyro Actuators,Smoke Markers, Cable Cutters and many other products including Blazer Plates for the Indian defence services.Premier also is the only private entity producing oleoresin based tear gas grenades used for mob control by law enforcement departments. The company had developed this product in collaboration with Defence Research Development Establishment (DRDE), Gwalior..The defense related business of the company has grown more than five folds(from 5.2crs to 26.7cr) in the period of fy10-fy14.Defence Off sets is a big opportunity for PEL.The management believes that the defence & space business will exceed the Bulk Explosive & Detonator business within the next 5 years(as of now defense contributes 20%).
Concerns:The company wrote off investments worth around Rs.13Cr. during FY09 & FY10. These investments were made in FY07 in JV’s in Turkey & Georgia. The management claims that’s the foreign partner duped it. It is possible that the management duped the shareholders as this a very convenient way of siphoning off funds by Indian promoters. After all who is going to Georgia to check out the details.PEL is fighting a case against its Turkish partner & is expecting a write back.This 'writing off' investment aspect kept me away from the counter for long.It was after a long interaction with few of the big investors which finally made me recommend it.The recent entrance of reputed investors like Dolly Khanna and Vijay Kedia further convinced me.
Other aspects:Got debt equity ratio of less than .2%.Boasts of 10 year average ROE of over 20%.Promoter has hiked its stake to 48% from below 40% in the last few years.Paid a dividend of 2.5 bucks which with higher profits should see a decent hike.Company never diluted its equity in the last 17 years until very recently when it did a tiny preferential issue to promoters.Cash flow has been positive over the last 6 years.Check out the presentations to know more about the company.
http://www.pelgel.com/Q4FY14_Presentation_PEL.pdf
http://www.pelgel.com/Q1FY15_Presentation_PEL.pdf
Conclusion:The proportion of revenue from Defence products and Services(low competition-high margin) is expected to rise vis-a-vis proportion of revenues from Explosives(high competition-low margin), over the next three years.The company has guided a topline of 200crs for the present fiscal, 2014-15.PAT should be around 13crs.Next year the company may deliver revenues and PAT of 260crs and 18crs respectively.The company at present prices quotes at a PE of 14 times its forward earnings.The other listed entity-Solar Industries quotes at 30 times its fy15 forward earnings.Putting the same multiple of 14 for fy15-16 earnings of 21.5rs,to arrive at a price target of 300 bucks.
BTW:For different stock market related services,rush a mail at my mail id [email protected] to know more about it.
Note: The above is not a research report but assimilation of information available on public domain and it should not be treated as a research report.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”
Disclosure: It is safe to assume that I might have galaxi in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments.
1)What is stock market to you?
Ans)Stock market is a place which gives you lucrative ownership of companies.By owning a single stock you are actually becoming the owner of a company.Its liable to share everything with yourself.
2)What is the kind of returns that can be generated?How its comparable to bank FD returns?
ans)I personally look for 26-30% yearly gains on a compounding basis.A 26% compounder increases your fund by 10 times(1 lakh invested becomes 10 lakhs) in 10 years.A 30% CAGR boosts your portfolio by nearly 14 times(1 lakh invested becomes 13.8 lakhs) over a period of decade.Bank FD's would just double your money(1 lakh invested becomes 2.15 lakhs) over the same period.Add up some dividend top ups which if further invested,makes the figure look much more interesting.
3)Its easy to earn this days as everything is moving up isn't it?I buy xyz and double my money in a week.
Ans)It was always easy to earn actually but only over the longer term.So how much you actually made from the time you joined markets?What was the CAGR?Everything looks green from the other side.A lot of crap stocks are moving coz of vested interests.Once the wind stops,they gonna go down like anything.Invest in a disciplined way in stocks which you understand,that too with proper portfolio allocation.Even the greatest mathematician,Sir Isaac Newton lost nearly 30crs(on today's figure) and mentioned – "I can calculate the motion of heavenly bodies, but not the madness of people".
4)How does one construct a portfolio which can provide 25-30% CAGR returns year after year?When to exit is something which confuses me a great.Please help.
Ans)Buy my recommended companies and allocate not more than 5% in each of them.A basket of 15-20 stocks is enough to get your desired returns.Why to exit actually if the growth is there?I see a lot of guys exiting my older recommended stocks like symphony and avanti feeds to buy the new ones.This is one of your biggest mistakes.The secret to win from markets is to have the best ones and sit tight with them till their growth is intact.You just don't need to buy the new ones as you already posses the best money making companies.I myself hardly bought any recent recommendations as am fully invested on the older ones which ensured an amazing overall portfolio return so far.
5)Then do we exit once the target gets achieved?Also have seen you recommending companies only after they have doubled/tripled/became 5x.If those were provided earlier,we could have made so much more.
Ans)What is a target?Its just based on historical figures showing what its worth over a period of time.Frankly speaking there's no target folks.Just hold with trailing stop as long as the growth of the company persists.Minimizing losses and maximizing profits is what you should strive for.A company which moves up and consolidates higher gives me the required clarity.There's so much to speak about,say from opportunity costs to MF's or FII's interest.A higher PE means investors confidence whereas a low PE company simply signifies lack in confidence.Buy at low and sell at high ain't in vogue.It should be buy high to sell much higher.A higher valuation also boosts the confidence and productivity of the promoters/management as they are biggest gainer of the rising stock valuation.
Some more words:You need to pay wealth tax if the value of personal assets you own exceeds 30 lakhs.Nah,don't be concerned.Stocks, which are one of the best assets ain't even considered as an asset in our country.My association with you guys last from a quarter to some years.Its not the money which satisfies me(30% of the paid readers are given free membership coz of their sheer passion and love for the subject.They all wanted to pay though)but only when I see the members trying to learn and doing the required due diligence before zeroing on a stock,that's such a wow feeling.So earn and try to learn too.Happy investing folks.
Note:Premier explosive too was recommended to members at 206rs just few weeks ago.Here's the research note of it.Company quoting around 230 rs now.Readers its time for you to act on it now.
Stock idea:-
Scripscan:Premier Explosives Ltd(PEL)
Bse code:526247
Cmp:206rs
Target:300rs
Return percentage:47%
Duration:9-12 months
Quote:Keshav's research helped me to complete 50% of the note.Rest of the inputs got penned down by your's truly.
Promoter: Dr. Amar Nath Gupta (ANG) is the CMD of PEL. He is a first generation entrepreneur.He is a Gold Medallist from Mining Geological and Metallurgical Institute of India. He is a Member of Society of Explosives Engineers, U.S.A. and was Chairman of Explosives Development Council constituted by Government of India and Chairman of Explosives Manufacturers Association of India.Dr. ANG believes in profitable growth. The company could have achieved sales of around Rs.300 - 400Cr. had it been ready to sacrifice margins at the altar of sales growth. The company only considers projects where it expects to recoup its investment in 4 years.
History:Premier Explosives Ltd. was incorporated in 1980 and started off with manufacturing Slurry Explosives and during the 90’s started manufacturing the complete range of explosives & accessories like detonators, bulk explosives, detonating cords and blasting accessories. The company diversified into Mushroom Farming in 1997. In FY07, the company ventured into Space & Defence. The co. divested its Mushroom Division in FY08 for a consideration of around 20Cr. Since then the company is focussing & expanding into the Space & Defence sectors.
Company:The Indian Explosives Industry is amongst the top 5 in the world. Around 70% of the entire output of the industry is consumed by the coal mining industry which primarily consists of Coal India Ltd. & its subsidiaries. The Indian explosives industry is fragmented with around 45 units and around 10 major manufacturers Premier Explosives is the 6th largest manufacturer of explosives with around 5% market share.PEL caters to all mining sectors like Iron Ore, Limestone, etc..PEL is the only private sector entity manufacturing solid propellants & other specialized products for the defence sector.
Some more info: Amongst many firsts, PEL is the first company in the world to produce safer and greener NHN (Nickel Hydrazine Nitrate) detonators on commercial scale replacing ASA (Lead Azide, Lead Styphnate and Aluminum Powder) detonators.PEL is operating and maintaining a State-of-Art Chemical Manufacturing facility of Indian Space Research Organisation (ISRO) at Sriharikota and Solid Fuel Complex of Advanced Systems Laboratory at Jagdalpur.PEL's R&D facility is recognised by the Council for Scientific and Industrial Research (CSIR),Government of India, as an established research centre. It is also recognised as a research base for Ph.D. work by Gulbarga University, Karnataka. Further,PEL has collaboration with IIT, Madras and Gulbarga University for research in high energy materials.For FY14, PEL achieved a turnover of INR 145crs and profit after tax of INR 9.2crs
Presently, PEL has 4 main divisions:-
1)Commercial Explosives
2)Detonators & Accessories
3)Special Products Division – Solid Propellants
4)Service Contracts – ‘Operation & Maintenance’ Contracts.
Commercial Explosives: The Company is manufacturing a diverse range of commercial explosives for mining and infrastructure requirements at its 6 manufacturing units.The company is a dominant player in its segment.The explosive industry is fragmented while the main customer is a monolithic (Coal India).Others include the likes of Singareni Collieries,Neyveli Lignite,NMDC,Karnataka Emta Coal Mines and the Cement companies.The other listed players from this space are Keltech Energies Ltd. & Solar Industries India Ltd.The ‘Industrial Explosive’ division of PEL did sales of Rs.67crs vs 48crs.Production of explosives increased to 20,703 tonnes from previous year's 16,367 tonnes.The company should be able to maintain 15% operating margins as the management refuses to bid for those tenders where a threshold margin of 15% is not assured.With signals of revival of global economy and expected industry-friendly policies, Indian explosives industry is expected to post 8% CAGR over the next few years on robust growth plans of user industries like mining and infrastructure .
DETONATORS:After adoption of NHN technology last year subsequent to the accident, during the current year Detonator plant produced 53.27 million pieces which is 17% higher than 45.44 millions produced during previous year(sales value of 33crs vs 29crs).Demand for detonators, which are sold through trade channels,continue to be weak.Revival in detonator demand is expected in Q3FY15.The company is confident of raising the production further in 2014-15.
SERVICES DIVISION :O&M –Premier has been operating and maintaining the solid propellant production facilities of prestigious agencies, namely ISRO’s satellite launching station, SHAR at Sriharikota, Andhra Pradesh and Solid Fuel Complex (SFC) at Jagdalpur in Chhattisgarh.At SHAR, the company has deployed 330 of its staff under the 10 year contract for O&M services which commenced in 2007.The company also has O&M contract at SPROB. At this facility about 60 of the company’s staff are deployed.More than margins,O&M is a significant technology transfer as PEL is learning to run complex facilities and than setting up such units on its own. Such contacts are called GOCO (Government Owned, Company Operated). These contacts have annual price escalation clause which leads to steady increase in revenues.The segment contributed 15crs of revenues in the fiscal fy13-14.
SPECIAL PRODUCTS DIVISION:Premier has been manufacturing solid propellants from 2003.Since then Premier has been adding facilities to manufacture solid propellants at Peddakandukuru in Nalgonda district of Telangana. The company has been catering to the needs of tactical missiles like Astra, Akash, LRSAM and rockets like Pinaka.PEL is the only private sector entity in India manufacturing solid propellants & other specialized products for the defence sector.Solid Propellant manufacturing is a Sunrise Industry in India.Premier produces Explosive Bolts, Pyro Actuators,Smoke Markers, Cable Cutters and many other products including Blazer Plates for the Indian defence services.Premier also is the only private entity producing oleoresin based tear gas grenades used for mob control by law enforcement departments. The company had developed this product in collaboration with Defence Research Development Establishment (DRDE), Gwalior..The defense related business of the company has grown more than five folds(from 5.2crs to 26.7cr) in the period of fy10-fy14.Defence Off sets is a big opportunity for PEL.The management believes that the defence & space business will exceed the Bulk Explosive & Detonator business within the next 5 years(as of now defense contributes 20%).
Concerns:The company wrote off investments worth around Rs.13Cr. during FY09 & FY10. These investments were made in FY07 in JV’s in Turkey & Georgia. The management claims that’s the foreign partner duped it. It is possible that the management duped the shareholders as this a very convenient way of siphoning off funds by Indian promoters. After all who is going to Georgia to check out the details.PEL is fighting a case against its Turkish partner & is expecting a write back.This 'writing off' investment aspect kept me away from the counter for long.It was after a long interaction with few of the big investors which finally made me recommend it.The recent entrance of reputed investors like Dolly Khanna and Vijay Kedia further convinced me.
Other aspects:Got debt equity ratio of less than .2%.Boasts of 10 year average ROE of over 20%.Promoter has hiked its stake to 48% from below 40% in the last few years.Paid a dividend of 2.5 bucks which with higher profits should see a decent hike.Company never diluted its equity in the last 17 years until very recently when it did a tiny preferential issue to promoters.Cash flow has been positive over the last 6 years.Check out the presentations to know more about the company.
http://www.pelgel.com/Q4FY14_Presentation_PEL.pdf
http://www.pelgel.com/Q1FY15_Presentation_PEL.pdf
Conclusion:The proportion of revenue from Defence products and Services(low competition-high margin) is expected to rise vis-a-vis proportion of revenues from Explosives(high competition-low margin), over the next three years.The company has guided a topline of 200crs for the present fiscal, 2014-15.PAT should be around 13crs.Next year the company may deliver revenues and PAT of 260crs and 18crs respectively.The company at present prices quotes at a PE of 14 times its forward earnings.The other listed entity-Solar Industries quotes at 30 times its fy15 forward earnings.Putting the same multiple of 14 for fy15-16 earnings of 21.5rs,to arrive at a price target of 300 bucks.
BTW:For different stock market related services,rush a mail at my mail id [email protected] to know more about it.
Note: The above is not a research report but assimilation of information available on public domain and it should not be treated as a research report.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”
Disclosure: It is safe to assume that I might have galaxi in my portfolio and hence my point of view can be biased.Readers should consult registered consultants before making any investments.
