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Investment Ideas – 4 Feb 2018

This investment report presents 8 potential investment opportunities in various sectors including finance, chemicals, papers, and manufacturing.

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Investment Ideas – 4 Feb 2018

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  1. Investment Ideas – 4 Feb 2018 Presented by Yogesh Sane

  2. CSL Finance Ltd • Former proprietary trading desk expanding as NBFC in Delhi NCR area funding RE projects. • Started real estate loans in 2013. Now expanding in SME loans (2-25 lakh loans). • 20% Yield on Assets, 12% cost of funds. • Operated from a single office with 8 employees, now has 7 branches, 57 employees. • AUM growing at 40%. • Strong asset quality. 0% NPA. • Conservatively leveraged at 3. • Raised 50 Cr at 390 Rs/share from investors in 2017. • Mcap - 345 Cr. P/b - 2. PE – 13 FY19 EPS.

  3. Valiant Organics Ltd • Part of Aarti Group, Valiant is a manufacturer of chloro phenols used in agro intermediates and pharma industries. • SME IPO Oct 2016, 60 Cr Sales, 10 Cr PAT. • High ROE (36%), High Margin (18% Net) and debt free. • Currently operating at full capacity. • Planning to expand capacity from 4800 MTPA to 21600 MTPA over next 3-5 years. • Company is merging other group companies (Abhilasha, Amarjyot) with itself. Over 200% Dilution. • Abhilasha & Amarjyot are growing at 30%, low debt, and 16% net margin and 35% ROE businesses. • PE –24x TTM earnings. Appears expensive at current valuation, but expected to grow strongly over next 3 to 4 years.

  4. SRG Housing Finance Ltd • HFC operating in Rajasthan, MP and Gujarat. Focus on affordable rural housing. • Home loans (78%), LAP (13%) and developer loans (9%). Maturing LAP and DL is fueling HL growth. • Avg Ticket (HL - 5L, LAP - 16 L, DL – 125L), tenure 2-15 years, LTV 55%. • AUM 125 Cr, 22 Offices, PAT 7 Cr, Book Value 37 Cr. • AUM, NII, PAT growing at 60% for last 4 years. • 21% Yield, 12% cost of funds. 1.3% GNPA, 0.7% NNPA. 13% ROE. Home loan company with MFI like margins. • First SME issue to be migrated to main board in India. • Raised funds via equity and debenture route in 2017. CAR 48%. • Planning to grow AUM 8x (1000 Cr) in 4 years. • MCap 450 Cr, PE - 64, PB - 11.

  5. NGL Fine Chem Ltd • Company is a manufacturer of veterinary APIs. • High gross margins - 62%, High ROE - 28%, Exports – 72% of sales, low debt. • 100 Cr Sales, 14 Cr PAT, 64 Cr Book Value, 242 Cr MCap. • Sales growth muted in last few quarters due to high capacity utilization. • New capacity to be commissioned in Q3 & Q4 of FY 18. • Strong sales growth (60-70%) expected in FY19-21. Some margin growth possible. • Customers are waiting for the new capacity. • Market Cap 242 Cr. 22 times TTM EPS, 16 times FY 19 EPS.

  6. NOCIL Ltd • Manufacturer of rubber chemicals. • 800 Cr Sales, 150 Cr Sales, 3000 Cr MCap. • Fundamentals improved after setting up new plant in Dahej in 2013. • 425 Cr Capex planned funded by internal accruals. (Current Net Block 300 Cr). 2x asset turn from this capex. • Ph 1 – Dec 18, Ph 2 – Jun 19, Ph 3 – Sept 19. • Strong Margins, 52% gross, 17% Net, 25% ROE. • Debt Free. Repaid all debt from previous expansion. Raised dividend 3x. • Exports are growing again. Company is now price competitive wrt China/Korea suppliers. • PE – 23. Business can be cyclical. Supported by Anti-dumping duties.

  7. Ruchira Papers Ltd • Manufacturer of Kraft & Writing and Printing Paper using agri residue as raw materials. • 400 Cr Sales, 32 Cr PAT, low debt, 21% ROE. • Lowest operating cost per ton among major paper companies. • Operating at 100% capacity. Expected to grow 20% in next 2 years. • PE – 10x. Last 1 Yr Returns 23%.

  8. Shalibhadra Finance Ltd • Company makes 2-wheeler loans in rural MH, GJ. Expanding in MP. • AUM 68 Cr, Book Value 28 Cr, Interest Income 15 Cr, Net Profit 5 Cr, ROE 18%. • Average rate 21%, Funding cost 12%, avg ticket size 15k, 75% LTV. • Conservatively leveraged at 3x. • Good track record of dividends. • Credit costs in-line with other asset financiers. • Market Cap 65 Cr. P/B – 2.3x

  9. Associated Alcohol and Breweries Ltd • Largest manufacturer of Extra Neutral Alcohol (RM for for all spirits) using grains route with 3 Cr liters PA capacity. • Located in MP, advantage of local grain sourcing. • Planning to double capacity to 7 Cr liters over next 2 years. Currently operating at full capacity. • Transforming from bulk supplier to low-margin country liquor brands to premium varieties of IMFL. • Building own brands and nationwide distribution network. • Becoming self-sufficient in power requirement. • Supplier to Diego for Smirnoff brand for over a decade. • Sales 300 Cr. PAT 26 Cr, ROE 22%. • Market Cap 650 Cr. PE 26.

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