5 growth stocks 24-04-16

5 Growth Stocks

JK Tyre & Industries Ltd

-Valuations Attractive

JK Tyre & Industries Ltd – Investment Snapshot (as on Apr 24, 2016)

Recommendation :- BUY

Maximum Portfolio Allocation :- 5%

Investment Phases & Buying Strategy

Time Frame:- 12 to 36 months

1st Phase (Now) of Accumulation :- 50%

Current Accumulation Range :- 85-90 Rs

JK Tyre & Industries is a mid-cap tyre company which is leading

player in the TBR segment. The company has got strong presence

with about 125 distributors in India apart from presence in

about 100 countries. The company will benefit from lower

rubber prices which will drive its profitability.

Core Investment Thesis : JK Tyre & Industries is primarily engaged in the manufacture of

tyres and is a market leader in the TBR segment.The stock at the

CMP of 85.00/- is trading at 4.23x its FY15 EPS. The stock currently

offers a dividend yield of 1.78% and is trading at attractive

valuations.

Current Market Price – Rs. 85.00

Book Value – 48.12

Bloomberg / Reuters Code -JKI. IN/

JKIN.NS

BSE / NSE Code –530007/ JKTYRE

Market Cap (INR CR) – 1917

P/BV - 1.77

Face Value – Rs.2

52 Week High / Low – 133.50/76.10

Pro oter’s Holdi g – 52.34%

Other Holdings -47.66%

Company Overview

•JKIL is part of JK organisation is an Automotive Tyre, tube and flaps manufacturing company and is the

leader in Radial tyre in India and manufactures passenger car tyres, commercial tyres, farm tyres and off the

road tyres.

•JKIL has 6 domestic plants, 3 of them are located in Mysore, 1 in Banmore, 1 in Kankroli and 1 in Chennai .

•JKIL acquired the Mexican tyre major Tornel in 2008 along with their 3 Mexican plants, the company now

has 9 plants with an installed capacity of 20.6 mn tyres p.a. in truck/ bus radials, passenger car radials and

bias tyres segment.

•JKIL products are sold from over 125 distributors in over 100 countries spread across 6 continents and is the

only tyre company to launch a 24*7 on road tyre assistance initiative called Fix-a-tyre in Chennai.

Product Portfolio

TBR Segment - Market Leader

Raw Materials

Global Footprint

Financials-P&L

Financials-Balance Sheet

Inox Wind Ltd(IWL) -Capex & Order Book to drive Growth

Inox Wind Ltd - Investment Snapshot (as on Apr 24, 2016)






Inox Wind is our typical Multibagger stock, which is a Good

Investment due to the enormous growth opportunities in sector

primarily due to increase in government focus on renewable

energy space which will result in increase in order book. The

business model is robust with good pricing power which will

deliver superior returns in the long run. This is a good

investment from a three year perspective.

Core Investment Thesis : The company is in the wind energy space which has been

growing at a fast clip due to improvement in demand post

restoration of Accelerated Depreciation and Generation based

incentives.

Current Market Price – Rs. 270.00

Current Dividend Yield – Nil

Bloomberg / Reuters Code –INXW. IN/

INWN.NS

BSE / NSE Code – 539083/INOXWIND

Market Cap (Rs. Cr) – 5980

P/E - 13.69

Face Value – Rs. 10

52 Week High / Low – Rs. 482.50 /

Rs.215.00

Pro oter’s Holdi g - 85.62%

FII - 3.36%

DII - 4.82%

Other Holdings - 6.20%

Company Snapshot

•IWL belongs to Inox group companies and is a fully integrated player in wind energy market with the state-

of-art manufacturing plants near Ahmedabad (Gujarat) for blades and tabular towers; at Una (Himachal

Pradesh) for Hubs and nacelles.

•IWL is one of the largest manufacturers of Wind Turbine Generator (WTG) in India. IWL supplies the key

components of WTG along with associated and auxillary components and offer wind farm projects on a

turnkey basis across India through their wholly owned subsidiaries - Inox Wind Infrastructure Services Ltd

(IWISL) and Maruti Shakti Energy India Ltd (MSEIL).

•IWL has the projects across different states like Rajasthan, Maharashtra and Andhra Pradesh and have an

aggregate power project capacity of 5000MW.

•IWL expansion is setting up a new plant at Barwani (Madhya Pradesh) for manufacturing of rotors and

towers.

Order Book Update

Robust Order Book

•As of Sep 2015, IWL’s order book stood at 1202MW comprising of 841MW for the supply and erection of

WTGs and the balance 360MW for the supply of WTG’s.

•IWL’s order book includes 70% of executed binding contracts and balance 30% are on Letter of Intent or

MOU basis.

•IWL’s order books can be geographically classified as 38% in Rajasthan, 39% in Gujarat and 1% in Andhra

Pradesh and the company is looking to expand their operations in Andhra Pradesh and Tamilnadu having

huge wind energy potential to be installed.

•IWL has access to project sites of Rajasthan, Maharashtra and Gujarat which keep them in a position for an

installation of an aggregate of 5000MW and makes them available with infrastructure to provide turnkey

solutions.

Proven Technology

•IWL has a comprehensive product portfolio and can manufacture turbines up to 2MW apart from a range of

turbine models which allows it to supply various types of WTG’s that can suit the needs of its customers in

terms of both cost and wind conditions at a proposed WTG site.

•IWL launched the 93m blade turbines and has installed 1242MW of turbines. It has introduced 100m blade

turbines which are specifically designed for low-end sites.

•IWL 93m blade turbines help generate better output at a low wind speed sites. IWL has also entered in to a

licensing agreement with windnovation Engineering solutions of Germany to manufacture rotor blades of

113M which enables IWL to save on production cost and its height ensures better wind capture.

•IWL’s 93m blade turbines offer more Efficient Power Curves, Improved Up-times and Reduced O&M , Ideal

for low wind pockets, Higher Energy Yield & Improved Realizations etc which will help the company to

increase its market share.

.

Limited Competition

•There is limited competition within Indian WTG suppliers with the top 4‐5 players holding almost 88% of the

market. Key players operating in the industry are Inox Wind, Suzlon Energy, Gamesa, GE, and ReGen

Powertech.

• One of the key factors limiting competition is the unique nature of the Indian WTG market, where the WTG

supplier also needs to have access to land, arrange for the related infrastructure (evacuation facilities, road

infrastructure), and arrange for the power off-take with the discom. This limits competition from overseas

players especially Chinese & Koreans who do not have the wherewithal to arrange all this.

5 Year Financial Performance

Balance Sheet

S H Kelkar Ltd(SHKL) -Favourable demand scenario to drive Growth

S H Kelkar Ltd - Investment Snapshot (as on Apr 24, 2016)





Current Accumulation Range :- 240-250Rs

S H Kelkar is our typical Multibagger stock, which is the

largest domestic fragrance manufacturer with ~ 20.5% market

share in the Indian fragrance industry and exports to over 52

countries .The company has over 4,100 customers which

include leading national and MNC FMCG companies, blenders

and producers of fragrances and flavors.This is a good

investment from a three year perspective.

Core Investment Thesis : The company is in the fragrance and flavour industry which has

been growing at double digits. The company is the third largest

player in the fragrance industry with about 21% market share.

Though valuations are slightly stretched in the near term it

gives good visibility given its proxy play as a FMCG player.

Current Market Price – Rs. 244

Current Dividend Yield – NA

Bloomberg / Reuters Code –SHKL. IN/

NA

BSE / NSE Code – 539450/SHK


P/E - 44.36


52 Week High / Low – Rs. 259.90 /

Rs.180.00


FII - 6.02%

DII - 3.74%


Company Snapshot

•SHKL is the largest domestic fragrance producer commanding ~ 20.5% market share in the Indian fragrance

industry with over 9,700 fragrances, fragrance ingredients and flavors created, manufactured and supplied

as on FY15.

•SHKL has a long standing reputation developed over its 90 year history as a supplier of quality fragrances for

use by FMCG companies in personal and home care products, food and beverage industries with exports to

over 52 countries.

•SHKL is also an emerging flavor producer in India with exports of its flavor products reaching 15 countries.

SHK has a large and diverse mix of over 4,100 customers which include leading national and MNC FMCG

companies, blenders as well as producers of fragrances and flavors.

•SHKL sells its brands The SHK, Keva and Cobra brands and their products enjoy substantial brand equity in

India.

Third largest Fragrance Player

•SHKL is the 3rd largest fragrance company in India by revenue, with a market share of ~ 20.5%. Its

competitors are mainly MNCs such as Givaudan SA, Firmenich, International Flavors and Fragrances Inc. and

Symrise SA which collectively hold a 57.0% market share of the global fragrance and flavor industry.

•In FY15 SHKL developed over 502 new fragrance and flavor compounds which have been sold commercially.

Its research team developed 12 molecules over the last 3 years, out of which it has filed patent applications

for 3.

•SHKL combines its innovation efforts with a strong quality control system which enables traceability and

repeatability for each batch of its products. This has led to a contribution of ~ 14.3% of revenues in FY15

from product launches of the last 3 financial years.

•With a solid business model, an 8,000 wide fragrance product range and strong sales & marketing capability

apart from its robust sales team of 95 people from 9 centers in India and overseas, SHKL would be able to

sustain its market share in the ~ Rs. 20 bn Indian fragrance industry.

Market Share

Marquee Clientele

•SHKL’s fragrance business has a diversified customer base of over 3,700 customers consisting of leading

national and MNC FMCG companies, blenders as well as producers of fragrances.

•SHKL’s distinct advantage it enjoys is low customer concentration. Out of the net revenue from operations

of ~ Rs. 8.4 bn in FY15 revenue from SHKs largest customer was ~ Rs. 240 Mn.

•Revenues from exports form a significant part of SHKL’s top-line. Its revenues are majorly driven by FMCG

and fragrance consumption in emerging markets comprising of Asia, Middle East and North Africa.

•With a growing FMCG sector in India and other emerging markets, favorable demographics in place as well

as customer diversity both in terms of low client concentration and significant exports SHKL is an effective

FMCG proxy.

Capex & Debt

•SHKL has 4 fragrance manufacturing facilities, 3 in India and 1 in The Netherlands and its manufacturing

facilities in India are working at a 35-45% capacity.

•SHKL has already completed its capex cycle for the next 3-5 years and is looking to achieve economies of

scale with increased demand and production.

•SHKL repayment of significant long term debt post issue combined with an absence of material capex plans

would ensure that financial risk is contained over the medium term, further cementing the case of SHKL as

an effective FMCG proxy.

SHKL’s Flavour Busi ess

•SHKL has a small 2% share in the Indian flavor industry which is dominated by global leaders. SHKL will be

able to take advantage of excess capacity apart from the industry growing at a stable CAGR of 10.4% over

the last 4 years.

•SHKL’s established brand equity with its fragrance and flavor products and a growing clientele of its flavor

products currently over 400,SHKL is expected to increase its market share in an expanding industry thereby

further augmenting its growth.

•SHKL is also an emerging player in the flavor industry with its exports business reaching over 15 countries.

With a diverse portfolio of 1,100 flavor products, this business has over 400 customers including

manufacturers of beverages, confectionary, dairy products, bakery products, pharmaceuticals, oral hygiene,

etc.

Indocount Industries(ICIL) -Export play on Home Textiles

Indocount Industries Ltd– Investment Snapshot (as on Apr 24, 2016)






Indocount Industries is our special report stock, which is a high

growth stock which is a Good Investment under current Market

conditions. It has a presence in a space which offers enormous

potential and is also trading at reasonable valuations which will

deliver superior returns in the long run.

Core Investment Thesis :

The company is an Export play in the textile space and has

established its reputation which has been its strength. The

company has robust clientele with leading brands doing business

through them. The company is also likely to benefit from

capacity expansion which will drive its growth.

Current Market Price – Rs.1040

Current Dividend Yield – NA

Bloomberg / Reuters Code –ICNT. IN/

ICNT.NS

BSE / NSE Code – 521016/ ICIL

Market Cap (In Rs. Cr) - 4107

Total Equity Shares [Mn]– 41.98


52 Week High / Low – Rs. 1254.00/

Rs.385.00

Pro oter’s Holdi g – 58.95%

FII - 6.98%

Mutual Funds - 1.76%


Home Textiles & Spinning-Major Contributors

Reveues (Rs.Mn)

•The company was organized into three business-operating segments i.e Home Textiles, Yarn and Consumer

Durables. Initially, the company manufactured only yarn.

• The company has a total of 80016 spindles producing around 14000 tons of combed cotton yarn per

annum.

•In 2007, the company forayed into the high-margin home textiles business and is 3rd largest exporter of Bed

Linen from India and the 4th largest Bed Sheet exporter to USA .

•In the bed linen segment, which is a complete export oriented product. The company started with a

capacity of 36mn metres in FY07 and has gradually increased its capacity to 45 mn metres in FY14. In FY15

the company expanded the capacity further to 68 mn metres.

Bed Linen Expansion-Growth Driver

Product Mix

•Indo Count has a strong position in bed linen exports by offering high product quality and meeting delivery

deadlines.

• Indo Count boasts marquee clientele of global retailers including Wal-Mart, Bed Bath & Beyond, Target,

Macy’s, JC Penney, Debenhams House of Fraser, British Home Stores and John Lewis .

•With the capacity expansion at 68M meters the capacity of bed sheet has increased from 12 Mn bed sheet

per annum to 17 Mn bed sheet per anum .

•Indo Count has around 6 months of orders at any point of time and the incremental demand will result in

full utilization of the expanded capacity in the next 2-3 years.

CDR Exit - Major Positive

•In FY08 due to global recessionary conditions and the consequent cash flow constraints, the company had

approached its lenders to restructure its debts under the Corporate Debt Restructuring (CDR) System and

exited it in Q4FY15.

• In July 2008, the company was admitted into the CDR cell and Rs.300 Cr has been spent on restructuring

the co pa y’s debts .

•With an improved demand scenario and ramp up of underutilized capacity, the company was able to exit

CDR by FY15 which is four years ahead of the scheduled exit. .

•Indo Count was recorded debt-to-equity ratio of ~0.69x in FY15. The Total debt as on FY15 is at Rs.343 Cr

which includes long term debt of Rs.67 Cr and the working capital debt of Rs.276 Cr .

Bed Linen - Strong Competitive Position

•The global apparel market is estimated to be US$ 1.15 Trillion which is approximately 1.8% of the world

GDP.

• About 75% of the market is concentrated in EU-27,USA,China and Japan followed by Brazil, India, Russia,

Canada and Australia.

•Within the top markets there is major distinction between developed countries and the emerging ones in

terms of per capita spend on apparel.

•The lowest per capita spend on these markets is India (US$37) which is only 4% of the highest one i.e

Australia(US$1131) .

Balance Sheet

PI Industries Ltd(PIIL) -In licensing initiatives to drive growth

PI Industries Ltd - Investment Snapshot (as on Apr 24, 2016)






PI Industries has strong order book amounting to USD600m, the

CSM business has robust revenue visibility-book-to-bill of 3.1x.

The company is also foraying into new segments like

pharmaceuticals and electronics chemicals which will be the

next key growth drivers.This is a good investment from a three

year perspective.

Core Investment Thesis : The company boasts of a unique business model, a strong R&D-

led custom synthesis business built over the last two decades,

and an equally compelling domestic agro-chemicals business

largely built by in-licensing arrangements with major global agro-

chemicals innovators.

Current Market Price – Rs.643

Current Dividend Yield – 0.39%

Bloomberg / Reuters Code –PI. IN/

PIIL.NS

BSE / NSE Code – 523642/PIIND


P/E - 31.58


52 Week High / Low – Rs. 758.90 /

Rs.497.55



Company Snapshot

•PIIL is one of the leading players in the agrochemical custom synthesis exports space. The Company

addresses issues like process research, analytical development, scale-up and large-scale manufacturing

needs of agrochemical giants and leading global innovators.

•PIIL plays an important role in building a pipeline of novel molecules to combat new and emergent threats

to cropping.

•PIIL has gained recognition as a reliable partner by virtue of its track-record in CSM business and for its

initial stage itself, the company maintains the prime relationship status throughout the commercial lifecycle

of the product.

Key Products

Business Segments

•Domestic Agri Inputs which constitutes about 41% of revenues offers plant protection products, and

specialty plant nutrient products and solutions. PIIL has a strong rural reach and brand equity, with millions

of Indian farmers duly backed by a robust pipeline of products for sustained growth in the sector.

•Custom Synthesis & Manufacturing (CSM) (59% of revenues) for contract research and production of agro-

chemicals, intermediates and other niche fine chemicals for global innovators. The business, backed with a

strong R&D support, works to develop and commercialize products based on newly discovered chemistries

with reputed MNC innovators.

CSM Business

•CSM business involves a high level of trust, especially for companies like PI who are involved in the

development of early stage molecule.

•Longstanding relationships with global agro-chemical innovators is a testament to PIIL’s trust and reliability,

which are major entry barriers for any new entrant.

•PIIL has reached this level over a period of 20 years and it will take a long gestation period for a new entrant

to acquire knowledge, create strong R&D capabilities, infrastructure and built trust.

In-Licensing Business model

•PIIL works on a unique model of in-licensing new molecules from global innovators and nurturing the same

into strong brand propositions in the Indian agro-chemical market; these are high-performance, high

potential, early-stage products over which PIIL enjoys exclusive marketing rights.

•PIIL key brands include NOMINEE GOLD, OSHEEN, KEEFUN, BIOVITA, KITAZIN, FORATOX, FOSMITE and

ROKET. Depending upon the agreement with the global innovator, PI either imports the technical or bulk

formulations or chooses to manufacture either of the two at its owned factories in India.

•In-licensing products enjoy exclusivity and market leadership and with ~60% of domestic agro-chemical

revenues coming from in-licensing, PIIL enjoys best-in-class margins in this segment over peers.

P&L - Rs. Cr

Balance Sheet - Rs. Cr

THANK YOU

5 growth stocks 24-04-16

Economy & Finance

Transcript of 5 growth stocks 24-04-16