December 2018 - Stocksbaazigar
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Month: December 2018

Wealth Creator Stocks of 2018

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      Wealth Creator Stocks of Calendar year 2018     Last Calender year 2017 was really good for the Indian Share Market thanks to GST and other major economic reforms Government took after Economy recovered from the effect of the biggest fiasco of Demonetization in 2016. Analysts predicted that it will be very difficult to earn good returns in the calendar year 2018 and unfortunately their prediction is turning out to be correct. This year many indices gave single digit to negative returns. The market recovered when the tension between the USA and North Korea resolved for some period but it could not sustain at the top thanks to the USA-China trade war. In 2018, we saw Crude oil prices and Rupee mostly affected the sentiments of Investors. From 3rd of Oct, fortunately, things are in favor of Market and Nifty is showing great rally since then. The Assembly Elections Results of 5 states in December are already factored in in the Nifty level and right now we are witnessing a Santa-Rally. Before FIIs book their profits and go for their Christmas vacation, let us discuss how Indian Markets performed in the Calendar year 2018. This year some Bluechip stocks really performed well.  Let’s see which Nifty 50 stocks gave really good returns in the Calendar year of 2018 in the following table. This year Private sector banks like Kotak Bank, ICICI Bank and Axis Banks gave good returns to investors. The IL & FS Crisis affected NBFCs and HFCs really badly. Money from these sectors shifted to Private Sector banking stocks. That’s why Nifty Bank index could give 7% returns even in such a bad year. Financial Sector stocks like Bajaj Financial Services (22.39%) and Bajaj Finance (48.90%) too performed really well. The year 2018 was really good for IT sector stocks thanks to depreciation of Rupee for most of the year. Stocks like NIIT Technology (80.88%), MindTree (45.14%) and Tech Mahindra (40.95%) gave tremendous returns. The implementation of GST definitely helped some FMCG stocks which gave double-digit returns to their investors. Dabur (31.90%), UBL (33.58%), Marico (27.31%), Colpal (24.07%), GSKCons (22.63%) etc. stocks helped Nifty FMCG give 17.12% returns in 2018. Thanks to HUL (38.78%) which lead this pack. HUL-GSK deal announcement will definitely take HUL further up at new 52-w High level. Some Pharma sector stocks wiz. DivisLab (44.51%), Glenmark Pharma (26.92%) and Biocon (22.92%) managed to recover the Nifty Pharma index from the year lows. This index gave -4.24% return in last 365 days. NSE Auto Index traded in red for most of the year 2018. It gave 18% negative returns in 2018. Still, stocks like ExideIndustry managed to give 27.31% positive returns thanks to the decrease in raw material prices. US-China Trade war affected Nifty Metal sector really bad in 2018.  This index gave -13.65% return in 1 year. Surprisingly JSW Steel (22.19%) made to top 10 performers list of Nifty 50 stock this year. Apart from these stocks, there are many such stocks who created wealth for the Investors. wiz. V-Mart Retail, HEG, Vinati Organics Ltd, L & T Infotech, L & T tech Serve, VIP Industries, Bata, Jubilant Food etc. After the heavy selling of 40-60% in Midcaps and SmallCaps in last year, we can clearly see that Investors prefered to Invest in Large Cap and BlueChip stocks to avoid risk. We saw more buying in highly liquid stocks and front-runners in Market who are always favourites of leading Analysts.  Let’s see how these Wealth Creators of Calendar year 2018 performs till 31st March 2019. If you have followed my Facebook Live videos you will realize that I gave positional calls in most of these stocks at very correct levels wiz. HUL @ 1200 Axis Bank @ 460 Kotak Mahindra Bank @ 1050 Jubiliant Foods @ 900 LT @ 1100 and so on. (Disclaimer: Please note, this post is for educational purpose only. Stocksbaazigar does not take any responsibility of profits/losses of the reader. Please consult your financial Advisor before taking any Investment decision. Mr Deepak Doddamani is NSE’s Certified Investment Analysis Professional and NSE’s Certified Marketing Professional Level -4, but he isn’t SEBI registered Financial Advisor.)

HUL-GSK Deal explained

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      HUL-GSK Deal explained by Stocksbaazigar Let’s discuss some important points of HUL-GSK Deal before discussing what to do in HUL shares?  Hindustan Unilever Ltd. acquired GlaxoSmithKline Consumer healthcare at a share swap ratio of 4.39:1, valuing the all-stock merger at Rs. 31,700 Cr. Bank of America Merrill Lynch was the sole Advisor of HUL for this deal while GSK was adviced by Morgan Stanley & Co. International Plc and Green Hill & Co. International LLP. Following the issue of new HUL shares, Unilever’s holding in HUL will drop from  67.2% to 61.9%. GSK Plc. will become the second largest shareholder in merged entity with 5.7% stake. It can offload this stake to any Investors and HUL does not have exclusive rights to buy these shares. For HUL India Foods and Refreshment contribute 18% of the revenue, whereas the proportion for the parent Unilever is 41.7% After the merger, the combined revenue of HUL’s Foods and Refreshment revenue will cross Rs.10,000 Cr.   After completion of the deal, HUL will become India’s largest Food company listed on Indian Stocks Market.  Boost, Maltova and Viva brands will be owned by HUL. However, Horlicks brand which is currently owned by GSK Plc. is acquired by parent company Unilever. HUL will pay for its royalty in India. Horlicks is Market Leader in Malt-based Beverages with 43% Market share in India followed by Bourvita of Mondelez International which has Market Share of around 13%. HUL will get distribution rights of  Oral Health Care and OTC products of GSKCH like Sensodyne, Crocin, and Eno for five years. This deal in the health and wellness category is very strategic and transformative as there will be great synergy in topline and costs after the merger. HUL reaches 8.2 Million outlets. It will help GSK’s brand reaching three-fold of the current distribution. HUL’s Margin in food business will get enhanced by 900 basis points to 27% from the current 18% of sales with sustainable profitable growth. HUL will increase it’s margin by 8 to 10% in medium terms after this Merger. What to do in shares of HUL after the announcement of the deal now? From last three months Nestle, HUL and Private Equity were eying for this Merger. But Market knew that only HUL had the Muscles to Pull the deal as it offered all-stocks deal whereas others offered Cash or combination of Cash-Shares deal. HUL gave good valuations to GSK, which is evident from the Swap-ratio finalized in the deal.   GSK share should move up after this news while HUL share should correct. This seems Win-Win deal but if you will study it closely, you will realize that GSK got a slight advantage in it. Distribution Muscles of HUL will help GSK brand products penetrate the Indian Market more effectively. HUL definitely has long-term benefits of this deal as explained in the discussion. But on short-term we might see some profit booking in the stock as it has already priced-in this HUL-GSK deal in Stock Price of HUL. HUL reached to 1800+ from 1500+ in just 3 months. HUL is a bluechip stock which has given consistent returns to its shareholders. Analysts have given thumbs up to this deal and have increased its 1-year target from 1800 to 2010-2050 now. (Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is NSE’s Certified Investment Analysis Professional and NSE’s Marketing Professional Level – 4. He is not SEBI Registered Advisor. Stocksbaazigar is not responsible for any of your Gains/Losses. Please consult your Financial Advisor before taking any investment related decisions. Thank you) Video explanation on HUL-GSK deal:

Corporate Governance Issues in Sun Pharma explained

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Corporate Governance Issues in Sun Pharma explained by Stocksbaazigar              In past, IT  & Pharma stocks always acted as ‘Defensive sectors’ in falling Market. But in the last few years, we saw that IT sector stocks showed good synergy about rising and falling patterns but Pharma sector stocks had no specific direction, all credit to USFDA. Investors had to be very stock-specific and approach individual stocks differently in this basket.         In 2015 when Founder and MD of Sun Pharmaceutical Industries Ltd. Mr. Dilip Sanghvi became the richest person of India for a very short time, the stock of Sun Pharma traded above Rs 1000 per share price for a while. But then the ‘Halol’ night-mare started haunting the investors. Halol plant of Sun Pharma contributed 8-10% of the total revenue to the company. The delay in the resolution of regulatory issues raised by USFDA at Halol plant affected the approval of new drugs coming from the facility, which delayed its pick-up in US markets. Dilip Sanghvi is known as a visionary leader who successfully acquired sick companies and converted them into profitable ones. Sun Pharma acquired companies Caraco, Taro, Ranbaxy, Dusa, Insite Vision and URL etc aggressively. These all acquisitions had strategic reasons and made Sun Pharma 5th largest company of the world in Speciality business. But Ranbaxy deal came with Insider Trading allegations and Taro deal came with price erosion in their product portfolio.  Promoter’s interest in investing in unrelated businesses like Oil & Gas, Solar, Wind energy etc. unrelated businesses also affected Investor’s confidence in Sun Pharma stock post-2015. In the month of June, when Gujarat facility received its first approval in Cancer drug after the gap of 4 years, Sun Pharma share rallied to give it’s 52 Week high of 678.80. After 2 months, Sun Pharma again came under the scanner of US Food and Drugs Administration (USFDA) which issued 6 observations related to deficient procedures at Sun Pharma’s manufacturing facility of Halol. Sun Pharma shares corrected from the top and tried to take some support at 600 price level. Unfortunately, bad quarterly results pushed Sun Pharma further down to the price level of 485. On 29th November 2019 SEBI decided to re-open the Insider trading case against Sun Pharma after a 150 pages letter from a Whistleblower  (perhaps an ex-employee). From 495 to 402 stock fell by almost 23% in just one week.  After some clarification by Mr Dilip Sanghvi himself and an Investor’s conference call share of Sun Pharma rose up to 425 levels but only to hold 400 level support intact. The overhang of Corporate Governance Issue will keep this stock volatile for some more time. Institutional Investors have already exited the stock, that’s why company reduced to 1/5th of it’s Market cap after Macquire’s report of 29th November on ‘Corporate Governance Issues’ in Sun Pharma Industries Ltd. It means only retail investors are stuck in this company and stock will move up again only after Management of Sun Pharma answers all the un-answered/avoided questions by Big Investors.   Clarifications on the allegations: Let’s discuss the important questions raised by Australian brokerage firm Macquarie on Sun Pharma in its note and what Mr Dilip Sanghvi clarified about it in his conference call 1) Inadequate disclosures related to promoter’s brother-in-law Sudhir  Valia in the company Clarification:  Sanghvi said Sudhir Valia doesn’t have anything to do with Operations of Sun Pharma. He only gave financial and strategic advice. 2) About Re-opening of ‘insider trading case’ by SEBI Clarification: Shanghavi said that company is not aware of that as SEBI didn’t inform them anything about a complaint of Whistleblower and re-opening of Insider Trading Case. 3) About guarantees  which were given to real estate firm Surakhsha reality whose founding member is Sudhir Valia Clarification:  Management said it didn’t give any loan or bank loan guarantee to Suraksha realty 4) Questionable selection of London-based firm Jermyn Capital for managing $ 275 million FCCBS issued during 2004-2007. A note says Indian arm of Jermyn Capital has links with Ketan Parekh and Dharmesh Doshi, banned traders who rigged stocks prices and caused Share Market Crash of 2002 Clarification: Mr Shanghvi said J P Morgan was lead Manager and Jermyn Capital only co-managed it 5) About Insider Trading in Sun Pharma during Ranbaxy acquisition Clarification: No Insider traded in Sun Pharma before Ranbaxy Acquisition. The decision of acquisition of Ranbaxy was taken in a meeting conducted on Sunday. Being trading Holiday decision was not shared with SEBI on the same day. 6) Macquarie notes that some of Dilip Sanghvi’s stocks investments in a personal capacity as Natco Pharma also had bulk deals done by Orange Mauritius. Orange is FII sub-account of First International Group which has links with Dharmesh Doshi and Jermyn Capital Clarification: Minority stake in Natco Pharma by Dilip Sanghvi was already disclosed by him 7) Some of Sun Pharma’s subsidiaries are audited by Valia and Timbadia, whose one of partners was allegedly involved in a Stock rigging scam leading to freezing of his accounts. Clarification: This matter is 20 years old. The Subsidiaries in question are non-material for the company and account only for 0.6% of the consolidated revenue of the company. None of the partners of this audit firm or the firm itself was a party to this investigation. 8) About forceful acquisitions Clarification: Management clarified that Sun Pharma never arm-twisted any entity for its acquisition. Taro Pharma’s acquisition was done after a favourable court ruling. 9) Sun Pharma’s domestic formulations business being routed through a related party, Aditya Medisales Ltd (AML) Clarification:  Domestic formulation business transactions with AML exists from past many years. It became a related party in FY18. This arrangement was done for tax-purpose and can be re-looked if Investors demand. 10) Why did Sun Pharma lend to four Individuals without Security? Clarification: This too is a 20+-year-old event which involved money of few lakh rupees only and the loans are fully recovered. The loans were given as per business policies and guidance of applicable laws … Read more

Is it right time to buy G.M. Breweries?

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  About G.M.Breweries Ltd: G.M Breweries is one of the Multibagger stock of this decade. It gave multi-bagger returns to investors who spotted it in 2010 when it was trading in two digits only.  The 52-week high price of G.M. Breweries is 1057.95 and 52-Week low price is 491. This company is one of the best fundamentally strong small-cap company in the beverages and distilleries segment. The company was incorporated in December 1981 by Mr. Jimmy William Almeida. His aim was to create a quality country liquor brand available at cheaper prices for a cost-sensitive segment. It went public in 1993 when Almeida decided to share his wealth among stakeholders. GMBL  featured in Forbes 200 companies list. As per the website of G.M. Breweries, GMBL is engaged in activities of manufacturing and marketing of alcoholic beverages; such as Country liquor (CL) and Indian Made Foreign Liquor (IMFL). The GMBL company has state of the art fully automatic bottling plant in Virar, Palghar district of Maharashtra State, India.  It has a capacity of 13.76 Cr liter per annum. Around 49% of the capacity is being utilized to manufacture 50,000 cases a day. GMBL is a pioneer of introducing country liquor in PET bottles and also introducing 180 ml liter bottles in CL market. It boasts of 70% of Market share in Country Liquor in Mumbai, Navi Mumbai, and Thane areas while 25% market share in entire Maharashtra where it faces fierce competition with an unorganized player in CL category. G.M.Breweries has 4 main products in CL categories wiz. G.M. Santra, G.M Doctor, G.M. Limbu Punch, and G.M. Dilbahar Saunf. Apart from these it also markets its products brandy, rum and whiskey under brand names like Pioneer Doctor Brandy, Pioneer Special Doctor Brandy, Hot Shot Rum and Reporter Choice Whisky. But the most leading and prestigious blend of GMBL remains G.M. Santra which is made from premium distilled molasses based rectified spirit of Multi Pressure Vaccum Distillation Plant. G.M. Santra is no.1 Country Liquor brand in Maharashtra from last 12 years thanks to its Orange Blended organoleptic taste and aroma. Gas Chromatography is used to ensure the consistency of blend.  Clarity of liquor is due to fine filtration from 0.4-micron resin bonded cellulose cartridge filtration system. Basic Fundamental Analysis of G.M. Breweries: As  per the table data above recorded on 1st Dec 2018 1) You can see P/E of GMBL is very low compared to Industry P/E.  It is undervalued 2) The company gave 30% dividend  (Rs 3 per share) which makes it good investment stock too. As per the table data above 1) Revenue of G.M. Breweries is consistently increasing and so as the Net Profit (except the dip in 2017)or thanks to the increase in changes in inventory of FG, WIP, and Stock in trade. 2) While Sales in 2017 saw hike due to the ban on Poisonous Liquor in Maharashtra which may have increased demand for CL. Shareholding Pattern Promoter holds 74.43%, FIIs 2.38%, FIIs 0.3%  FIIs have increased their holding gradually. Total debt/ Equity ratio is 0 for 3 consecutive years. The company is  Debt free and Cash rich. Average ROCE is 26%  and Average ROE is 24% Company’s Net Worth has increased over the year and it has not yet its capacity fully. It means if it starts Double Shift company can easily increase its Production remaining Profitable and it can easily penetrate in other states too. This company has got enough experience now and it can definitely go for some Corporate Action now. It can enter in Foreign Markets like other Asian Countries first where CL type cost-sensitive segments can be targeted. G.M. Breweries had land in Wada, Thane too which can be used for expansion purpose in future. Is it right time to Buy G.M.Breweries? CMP of GMBL on 1st Dec 2018 is 670 on NSE. The stock is close to its important support of 665. It can reach 1000 again in the year 2019 if Maharashtra Government doesn’t include a decision to Ban Liquor in Maharashtra in its Manifesto. Govt is yet to decide GST level for Liquor segment. If it brings CL in a lower bracket, our target will be easily achieved. We are all aware of ‘Election time malpractices’ by Political parties in India, liquor consumption always increases during this period. Before 2019 Loksabha Election I see tremendous demand in CL category of liquor. GMBL will be the prime beneficiary. Also in the Winter, December is the month of highest consumption of liquor in India thanks to chilling cold and Christmas-New year vacations. To Summarize, G.M. Breweries is actually well-placed right now. The risk to Reward ratio is favorable in GMBL and one can definitely invest in it from the short-term view of 850 (most conservative target). (Disclaimer:  Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered Advisor. He is NSE’s Certified Investment Analysis Professional and NSE’s Marketing Professional Level – 4. Please consult your Financial Advisor before taking any investment related decisions. Stocksbaazigar is not. responsible for any of your Gains/Losses. Thank you.) Video explanation on G.M.Breweries

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