Fundamental Analysis Archives

Arvind Fashions Ltd

9th March 2019 by stocksbaazigar

Arvind Fashions Ltd Listed Arvind Ltd, India’s leading textile company got demerged on 26th November 2018 into Arvind Ltd (demerged entity), Anup Engineering and Arvind Fashions Ltd. On the 27th November, Arvind Ltd share was trading at 311 Rs per share. On 28th Nov after ex-date, the stock opened at 91 Rs per share and since then we are seeing a gradual decrease in the share price of Arvind Ltd. as most of the debts are now with this parent company. On the other hand, Investors who wanted to get benefited by the corporate action are highly disappointed to see a listing of Arvind Fashions Ltd at the half of the estimated price. Listing fiasco of Arvind Fashions Ltd Analysts suggested that Arvind Fashions Ltd should list between Rs 1200 to 1400 per share. But on 8th March 2019, it listed on Rs. 591.75 per share. For every five shares of Arvind Ltd. investors got 1 share of Arvind Fashions Ltd. formerly known as Arvind lifestyles ltd. So ideally, the base price should have been (311*5) around 1500. Instead, it was taken as 311.5, a share price before the demerger date. Anup Engineering listed at the proper price but Arvind Fashions Ltd disappointed the Investors. The stock closed on the upper circuit of 621.3 by 10 a.m. on listing day i.e. 8th March 2019. Investors are aware of this listing fiasco. Some expert thinks that Price Discovery mechanism happens only once and therefore on Monday 11th March, stock prices won’t get adjusted to 1200+ range. But there are few exceptions who believes that Stock Exchanges will re-adjust the price so that Investors won’t feel cheated. It is important to understand that stock has demerged into 3 different companies now and not in 2. Hence, it may not be a listing fiasco, as some of the Investors are claiming. One thing is confirmed that Arvind Fashions Ltd share will move upwards from here circuit to circuit till it reaches its True price/ Intrinsic price. What should Investors do now? Retail Investors who aren’t aware of this may sell the stocks in a loss in a day or two after listing. It is an opportunity for others to take Fresh positions in the Arvind Fashions Ltd shares. The trick to buy stocks which opens at the upper circuit is very simple. On the trading day (T-day) you have to place an order at 4.99% from the closing price of (T-1) previous trading day during Pre-open session i.e. 9:00 a.m. to 9:07 a.m. to take a chance. If you are lucky, you will get an entry in the stock. But one has to be very careful about newly listed stocks as they are very volatile and can show irregular fluctuations in the share price. History of Arvind Ltd Arvind Fashions Ltd is the fastest growing company of Lalbhai Group. Arvind Ltd (founded as Arvind Mills) is India’s largest Denim Maker established by Padma Bhushan Kasturbhai Lalbhai in Gujarat during British Raj. This group has diversified businesses in different sectors wiz. Textiles, Chemicals, Retail, Engineering, Real estate, Beauty Products etc. Arvind Ltd. took great benefit of Swadeshi Movement during the Independence struggle and became one of the largest Khadi, Dhoti, Saree maker in India. Kasturbhai started with one textile company inherited from his Father in 1917 and then went ahead to buy 12 more textile mills from his competitors (mostly relatives) till 1931. His involvement in freedom struggle and friendship with Gandhiji helped him gain good political and social stand in the Society which indirectly helped his Lalbhai Group. Kasturbhai believed in giving back to Society. Ahmedabad University, IIM Ahmadabad etc. are standing on the lands donated by the Trust of Kasturbhai Lalbhai. There was a phase in Kasturbhai’ s life when Arvind Ltd was under tremendous debt and faced allegations of tax evasion and misappropriation in accounts. He got a clean chit after few years but lost his energy and his health during the legal battle. He retired from business in 1977. In January 1980, he died at the age of 85 in Ahemadabad. Second Innings of Arvind Ltd. The second Inning of Arvind Ltd was started by a new Generation of Lalbhai family. India’s first ever home-grown denim brand Flying Machine was born in 1980. In years to come, Arvind Ltd became the fourth largest manufacturer of Denim Clothes in the World. In 1993, Arvind Ltd introduced International brand ‘Arrow’ to India by opening their flagship stores. By 1995 they introduced Mass Market concept to India through their MegaMart. The year 1995 was a landmark year in the company history thanks to the launching of Ruf n Tuf jeans which was an instant hit in the 90s. Akshay Kumar was the brand ambassador of Ruf n Tuf brand. Arvind Ltd brought brand Excalibur and Wrangler to India in 1997 and 1999 respectively (which are now part of ‘Unlimited’). The association with Globally branded apparells kept increasing in New Millenium too. Arvind Ltd brought Tommy Hilfiger (2004), GANT sportswear (2006), Cherokee (2007), US Polo Association (2009), Nautica, Elle (2012), Ed Hardy, Hanes Innerwear (2013), Calvin Klein (2014), The children’s place, GAP (2015) etc. to India through exclusive licencing and joint ventures. Arvind Ltd. brought Shoe brands like Arrow, USPA, Flying Machine (2015) and Aeropostale (2017) to India. It also launched its own Men’s wear brands like Creyate (2014) and True Blue (2016) in this decade. In the 2016 company entered Online retailing through its e-commerce website nnnow.com On the 8th March 2019, the demerged entities of Arvind Ltd wiz Arvind Fashions Ltd and Anup Engineering listed on the stock exchanges. Shareholder of Arvind Ltd were allotted One share of Anup Engineering (formerly Anveshan Heavy Engineering) for every 27 shares of Arvind Ltd while One share of Arvind Fashions Ltd for every 5 shares of Arvind Ltd.

Fundamental Analysis

4th March 2019 by stocksbaazigar

Stock Analysis: Stock Analysis is the evaluation of a particular trading instrument, an investment sector, or market as a whole. Stock Analysis attempts to determine the future activity of an instrument, sector or market. Stock Analysis is a method for investors and traders to make buying and selling decisions. By studying, evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions. Fundamental Analysis and Technical Analysis are the most important types of Stock Analysis Definition of Fundamental Analysis Fundamental Analysis is a method of evaluating a security in an attempt to assess its intrinsic value, by examining related economic, financial, and other qualitative and quantitative factors. Fundamental Analysis is a stock valuation methodology that uses financial and economic analysis to predict the movement of stock prices. It is a holistic approach to study a business. It attempts to study everything that can affect the security’s value, including macroeconomic factors (like overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies). Objectives of Fundamental Analysis The main objective of fundamental analysis is to determine the ‘intrinsic value’ of a stock. Intrinsic value or True value is the calculated value of a company, where the market price of the stock tends to revert. Therefore it is also known as ‘Price target’. To project the business performance. To make a right Buying/Selling decision. Quality and Quantitative Analysis Fundamental Analysis involves Qualitative Analysis & Quantitative Analysis of a Business. Qualitative is related to quality of a company’s management, it’s brand recognition, patents or proprietary technology. Etc. Quantitative is anything which is measurable. Quantitative data of financial statements, revenue, profit, assets, ratios etc. Two approaches of Fundamental Analysis There are two approaches the fundamental analysis Top-down approach Bottom-up approach In the Top-down approach Macroeconomics of the Market is studies first. Followed by Industry/ Sector analysis is done in which the company under analysis . The analysis of Company is done in the end. The bottom-up approach is exactly the reverse of the Top-down approach. Top-down approach in fundamental analysis. Typical Analysis of the stock has three steps 1) Macroeconomic environment analysis Initially the firm’s macroeconomic environment is analyzed to project the future employment, inflation, income regulation, taxes etc. The macro analysis is done not only for the domestic market but also for the international markets that affects the firm’s operations. 2) Industry Analysis Industry/ Sector analysis in the next step Top-down approach of Fundamental analysis after Macroeconomics of the environment is analyzed properly Every sector/industry has a different level of sensitivity towards the changes in the macroeconomics aspects. 3) Company Analysis Only after a thorough analysis of the macroeconomic environment and the industry in which the company is operating, analysts proceed with Company Analysis. A SWOT analysis of a company, financial health determination etc, estimation of growth, management performance etc. is carried out using different tools.

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

29th January 20191st December 2018 by stocksbaazigar

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

HEG and Graphite India

31st March 201831st March 2018 by stocksbaazigar

HEG, Goa Carbon and Graphite India – Top 3 Gainers of FY 2017-18 FY 2017-18 has been the year of complete roller-coaster ride for Market Participants. We saw Nifty rising from 9200 level to 11200 and then falling sharply to 9950 again in the same financial year. In this volatile market whoever entered at right time and booked profits at peak, earned good returns. While those who didn’t took their profits home are sitting on huge losses. Some of the stocks have reached the level of year 2013 – mostly public sector companies like Public Sector Banks. Investors will have to wait for two years now to get profitable exit from these stocks. Market will definitely become nervous before Loksabha Elections in India. We might see Nifty levels of 9500 to 9300 before these elections. F & O data suggests that Upside is capped for Nifty at 10500. Therefore, it becomes very important to be highly selective about your bets in this choppy market. Before starting new financial year, I decided to have a good look at the Top Gainers and Top Losers of the Financial Year 2017-2018. The top three Gainers are related to Electric Arc Furnaces wiz Graphite Electrodes exporters HEG and Graphite India and Catalyst Coke Manufacturer Goa Carbon. So let’s discuss about Graphite related 2 stocks in this post. First let us see how they performed in FY 2017-18? Performance of HEG, Goa Carbon and Graphite India in 1 yr. 2. What is the reason of these extra-ordinary returns? Graphite stocks have become Multibagger stocks this year – thanks to transformation happening in Iron & Steel industry. The metal industry is becoming environment-friendly in last few months thanks to global pressure. Traditional Induction Furnaces used in steel and ferro-alloys manufacturing industries are now getting replaced by environment friendly Electric Arc Furnaces. Graphite Electrodes are used in these electric arc furnaces. This has increased demand of Graphite Electrodes in Markets like India and China. China, alone has shut down Induction capacity worth 175 metric tonnes in this year. Secondly, Graphite Manufacturers who weren’t practicing Environment-friendly manufacturing methods/practices were also cracked down by China. This is one more reason why China has become net importer of Graphite electrodes. China has recovered from slowdown of commodity markets of 2015 and started increasing the production of Steel and other Ferro-alloys again. This has increased the exports revenue of Indian Graphite Manufacturers which are using their 75 % of total capacity to reach the demands. 3. Let’s see fundamentals of HEG, Goa Carbon and Graphite India in the financial year 2017-18 to understand the picture better. From the table above, you can clearly see how the Income from Operations of the Electrodes manufacturing has increased in these companies and how it is affecting their quarterly results positively. It is expected that in the coming year company like HEG will utilize it’s 85% of capacity which will also increase it’s Profits further. So clearly, every dip in the Share Price is being utilized by Investors to accumulate these stocks. 4. Can the demand in Graphite sustain? This is the most important question one must ask before investing in these companies. The production of Graphite Electrodes will depend on their demand in Steel and Ferro-alloys industry. The slowdown in commodity market followed by cycle change in the metal sector has brought great consolidation in this market. It is expected that due to shortage of steel scrap and steel, demand for blast furnaces and electric arc furnaces will keep increasing in the FY 2018-19 too. Graphite Electrodes demand in China is around 666kT while potential demand outside china could be around 770 kT. Global Supply of Graphite was merely 789 kT in the FY 2017-18. From this demand-supply imbalance you can clearly say that Graphite companies will perform really well in the new Financial year 2018-19 too. Investors should definitely keep ‘Graphite Electrodes’ related companies on their radar. Fundamentally these companies look really good. [Disclaimer: Kindly note that Goa Carbon’s performance depends on Coke Trends. Hence, I have preferred to analyse only HEG and Graphite India in this post. Please consult your Financial Advisor before taking any investment decisions. Stocksbaazigar is not responsible for any of your losses/risks. This is an educational post and not a recommendation or advise. I have discussed only fundamental aspects here. Investments should be done only after doing both Fundamental and Technical analysis of stocks.]