AARVEE DENIM / PANACEA BIOTEC / INDIA GELATINE - RESULT UPDATE

Aarvee Denim recommended @ Rs.76 currently trading @ Rs.74.50 reported lower than expected numbers in recent quarter.Since the company could not exploit the current positive situation in denim industry ,recommending to exit from this stock for the time being.

Panacea Biotec reported a turnover of Rs.166 Cr v/s Rs.153 Cr and reduced  net loss from Rs.72 Cr to Rs.62 Cr .This stock recommended @ Rs.108 and currently trading @ Rs.130. The mentioned positive factors are expected to reflect from next quarter onwards .Hold this stock.

India Gelatine recommended @ Rs.66 and CMP Rs.81 reported 180% increase in net profit .Once it  recommended  to book profit above Rs.100 ,those  still holding it HOLD it now and book profit above Rs.100.

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B S LTD ( FORMERLY B S TRANSCOMM) -SELL

This stock initially recommended @ Rs.217 (HERE) and again requested to average @ Rs.146 (HERE). Currently it is trading around Rs.338. Requesting to SELL AND EXIT from this stock.

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LA-OPALA RG- RESULT UPDATES

LA-OPALA RG Ltd

This stock initially recommended around Rs.60 ( Old posting HERE) which is currently trading around Rs.250/- .Today company reported its December quarter result .Sales improved by 80% and bottom line reported a robust growth of more than 130% .Company's performance is far beyond expectation and already recorded  the expected full year EPS in just 9 months itself.Recommending to HOLD the stock ,reasonable upside expected even from current level.

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VIMAL OIL AND FOODS - REPEAT

 

This stock earlier recommended in 2010 and appreciated reasonably over this period.You may ask why this small and relatively unknown company again near at its all time high price especially even  it belongs to a boring industry like –Edible Oil Manufacturing.This time it is due of some interesting developments  in this company .When I recommend it in 2010 ,  even if its name indicates some activities directly  related with food ,it was mainly an Edible oil maker .As you are aware Edible oil is an volume driven industry where profit margins are very thin.After hiking their stake through a preferential issue and an open offer , now the promoters are moving in the right direction.Slowly they are now transforming this company from mere  an edible oil producer to a food company  in true sense .Leveraging on its  good brand image and large marketing network across India  ( except south) which consists  of 50 depots, 1500 distributors and over 5 lakhs retail outlets  company now moving into value added products.

                                           As I mentioned earlier , this company  is a Gujarat based Edible oil maker producing Groundnut ,Mustrad,Sunflower,Cotton Seed, Soya bean ,Rice bran and Corn oil under ‘Vimal’ Brand.Since my readers are already aware about its edible oil business through my earlier posting  ,I am not repeating it here.Let us go through the recent developments .

                                                       First of all ,In last week company decided to subscribe 31,20,000 equity shares of Vimal Dairy ltd – a company owned by the same promoters. By this purchase Vimal Oil will hold 52 % stake in Vimal Dairy and it will be a Subsidiary of the listed entity.Vimal Dairy is one of the largest  private sector dairy in Gujarat  with a milk processing capacity of two lakh litre  milk per day.Company is now planning to hike its capacity from 2 lakh LPD to 5 lakh LPD in near future.Considering the valuations of certain deals materialized in dairy industry in recent past this valuation is reasonable .Along with milk ,company selling many value added products like Cheese,Paneer,Butter ,Flavoured milk and Ice Cream under ‘Vimal’ brand.( Link to Company’s Ice Cream division HERE)

 

In another development ,Vimal is now planning to introduce dairy alternatives to target people who are not in a position to use dairy items due to health issues related with life style diseases. Company  will launch tofu to substitute paneer, soya cheese and rice cheese to replace cheese, margarine to replace butter, soya cheese spreads against cheese spread and soya mozzarella against mozzarella.Out of this margarine is already introduced under the brand ‘Vimal lite’. Market for these type products are now limited in India but growing at good pace. Health conscious life style will increase the penetration of these products going forward and the sales trend we are experiencing in developed countries are extremely positive for these items.

In another forward step ,recently Vimal  decided  to enter in the snacks and frozen food category .Company will launch more than 20 snacks products under ‘Vimal Fresh’ brand in another three months.An investment of with a cost of Rs. 100 Cr is implementing  for this division.Frozen food brands will be launched by 2015.( Read latest update  HERE) .There is lot of opportunities as well as challenges in both these categories.Company already established good network even in remote villages for its milk collection and edible oil selling .This will be an added advantage for its new ventures.

Share holding and Financials.

                                               Company having an equity base of Rs.11.5 Cr .Out of these almost 75% stake is held by promoters and  related parties (including 5% shown in public category) .Not a single share pledged so far .It is interesting to see that even this company having an equity of Rs.11.5 Cr its entire shares are held by just 2000+ share holders .About the financials ,Vimal posted a turnover of Rs.1248 Cr , a net profit of Rs.6 Cr  and an EPS of Rs.5.5in last FY.Even its cash flow is not very robust ,company never skipped dividend for the last 13 years.  

I believe, company is now planning to reduce the quantum of  edible oil business  mainly due to its low margin nature  and mounting sundry debtors  position and decidedt to concentrate in  high margin ( compared with edible oil) value added food products.For this expansion we can  expect some fund raising  in near future . Its  recent decision to take stake in dairy business is a step to increase the quality of its balance sheet for this purpose . Purely on financial parameters, this stock is not suitable for low risk investors.But I think the promoters realised the bad shape of their present business and balance sheet  and started treatment at the right time.These type business acumen and flexibility is very important for the success of any business.I believe ,leveraging on their vast experience and already established infrastructure  and marketing network  Vimal will become a food company in true sense in another few years .Since my above opinion is based only on  some assumptions  and readings from the body language of the promoters ,some of their recent decisions and not on any numbers,I am not recommending this stock for those who are die-hard fans of investment theories ,equations  and ratios  but only for very high risk kind  investors.CMP is Rs.109 /-

Link to Company Website HERE 

Link to latest Annual Report HERE

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PANACEA BIOTEC - UPDATE

In my last Saturday's posting on Panacea Biotec( HERE) ,I have mentioned about the interest of Serum Institute of India in Panacea .Today Serum Institute again bought 3,08,416 shares from open market.

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TCPL PACKAGING - RESULT UPDATE

I have recommended a BUY on TCPL Packaging @ Rs.55 on November 11,2010 ( For old posting click HERE) .Today company declared its December quarter result where its Sales improved from Rs.78 Cr to Rs.95 Cr and net profit more than doubled. At CMP of Rs.71,still recommending to HOLD.

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PANACEA BIOTECH - WORST IS OVER

Panacea Biotec was darling of Investors till 2008 .This is the first  pure biotechnology based pharma company listed in Indian stock exchanges in 1996. Company along with its subsidiary Chiron Panacea  is the second largest vaccine maker in India next to Serum Institute of India. In addition to vaccines  company also present in formulations. In the formulation segment company concentrating in pain management, cardiovascular disorders, diabetes management and organ transplant. Company having a strong R&D with more than 200 scientists and it introduced many ‘firsts’ in India. In the vaccine segment company introduced vaccines for Polio,H1N1 and Hepatetis B and company’s products were best sellers in the past. Its misfortune starts with the banning of its many vaccines by WHO . The combination vaccines EasyFive, Ecovac4 and EnivacHB were de-listed by WHO  due to some quality issues found during their routine inspection. This issue noticed in bulk drugs sourced from one of its subsidiaries  PanERA Biotec for manufacturing final products .Due to this issue company disqualified from supplying these vaccines to UN’s world Health programmes .For the past many years about 40 % of company’s income was from WHO supply and Easyfive was the highest margin product for the company. Due to this setback ,in the past few years company concentrated in other segments to develop their business . Last year company started a new production unit in Baddi ( Himachal Pradesh) exclusively for manufacturing medicines for oncology segment. During September 2012 ,company signed an agreement with US based Osmotica Pharmaceuticals for developing high entry barrier generics and branded formulations for US market. ( Interview of MD on this subject  HERE).During November 2012 Company signed another similar agreement with Kremers Urban Pharmaceuticals Inc (subsidiary of Belgium-based UCB) and launched its first product ‘Tacrolimus Capsule’ in US market. In a strategic diversification into related fields ,Company is going to start a hospital –Panacea New Rise Super Specialty Hospital – in  Gurgaon.This facility is expected to start full fledged operations  during the first half of 2013.

Now company claiming that they have sorted out all quality related issues connected with their vaccine facility . After a long gap of many years, in December 2012 company received a Rs.182 Cr order from Government of India for supplying Oral Polio vaccine. This order will be executed between December 2012 to May 2013 period .In an important development , now it is known that the WHO delegates will again inspect company’s facilities by next month. There is every chance to enlist company again in WHO ‘s qualified suppliers list ,post inspection. If it happens it will be a game changer for the company. Promoters are holding close to 75 % stake in its  Rs.6 Cr equity company and not pledged a single share so far. It is an interesting point to note that ,ever since its share price started its down trend in October 2008 ,India’s largest vaccine maker and Panacea’s arch-rival  Cyrus Poonawalla led Serum Institute of India acquiring Panacea’s shares from open market . Serum Institute’s stake in Panacea Biotech  increased from less than 4% in 2008 to the highest level of 13.39 % in latest September quarter.They started accumulation even at a price range of Rs.220+.I believe ,this is clear indication that even the main competitor who know the industry very well is fully  confident about the come back of  this company in near future .I think worst will be over for the company by this December quarter result . Since its floating stock is very low ,there is every chance for sharp appreciation once it back on track.It is a high risk high profit kind situation ,hence suggesting only for those with high risk appetite.Stock listed both in NSE and BSE and trading around Rs.108/-


 Link to Company website HERE

Link to latest annual report HERE

Disc : I have vested interest in PBL 

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