Fundamental zone: Stock Ideas

Fundamental  Stock Ideas

Q1 FY'15 Result Updates - Cera Sanitaryware, Granules India, Dewan Housing And Can Fin Homes

1) Cera Sanitaryware:

Lesser competition, when compared with increasing demand of sanitarywares, enables a company like Cera Sanitaryware, who has been continuously improving their product mix with quality, to grow at a faster pace, when compared to its peers.

The sales growth of 28% in the first quarter itself, assures us, that 30% growth in FY'15, seems to be a cake walk for the company. The biggest challenge, the company faced last year was maintaining the margins, because of higher input cost. But this year, the company looks to address this issue with plenty of innovations and improving operating efficiency. The net profit in the first quarter showed a healthy 22% growth yoy, which is not a bad start.

In my opinion, this is one business, which is expected to grow at fast pace over next 10 years, as India will look to become more & more developed nation. Even at such high valuations, I expect the stock to perform well over next few years.

One can use (hold / buy on dips) strategy on the counter for long term.

Link For FY'14 Annual Report:

http://www.bseindia.com/bseplus/AnnualReport/532443/5324430314.pdf

2) Granules India:

The company declared FY'14 as the year, which proved to be the turnaround year for their company, as they successfully started production at expanded capacity. The utilization went on increasing as the company received client approvals. Hence for the full year FY'14, the company was able to grow at a very healthy pace of about 45% when compared with FY'13. As now, we are already one year after the utilization of expanded capacity,  we cannot expect the same pace of growth in sales. But as the company promised, we can at least expect a healthy growth as far as net profit is concerned, as the company is continuously improving the operational efficiency, which will eventually lead to better margins in future.

Among all these, we had acquisition of Auctus Pharma, which is also expected to grow at a strong pace, and deliever close to 120 Cr of topline for the full year.

With the help of that acqusition, the company was able to show a growth of 36% yoy, as far as sales is concerned. The net profit, as expect grew strongly at 54% yoy (in spite of 2 Cr loss from Auctus). The standalone sales grew by 21%, which was not bad either, considering the second year, after expansion.

In spite of a tremendously rally, in past quarter, the company is still trading cheap, and I think an EPS of 50 is easily achievable in FY'15. So, even considering a modest P/E of 20, we can look at a price of 1000 on the counter, if company is able to address the debt issues well, in long term.

Recommending a hold on the counter.

Result Discussion By Management Link (From Research Bytes):

http://www.datafilehost.com/d/2c7b652c

3) Dewan Housing Finance Ltd:

Good set of numbers posted by the company in times when other bigger housing finance companies have faced challenges to show growth of more than 20%. The company was able to grow at 27% in sales and 22% in net profit, which is very decent. The loan book of the company grew by 22%.

Seems like the company will continue to grow at 20% or so for next 2-3 years, as the demand in tier 2 and tier 3 cities will continue to rise.

The company is now trading around 5000 Cr market cap, which seems perfect as far as the company's valuations are concerned.

One can keep the stock in long term core portfolio. Not sure of its multibagger potential from these levels as it is already trading at 2.5 times its recommended price here:

http://fundamentalstockideas.blogspot.in/2013/06/few-more-multibaggers-for-long-term.html

Management Interview After Q1 Results:

http://www.moneycontrol.com/news/results-boardroom/see-dewan-housing-nim-steady-at-28-29-kapil-wadhawan_1136151.html

4) Can Fin Homes:

Sales growth on sequential had been tremendous over past 2 years, and once again, they haven't disappointed. But the difference this time, was that the reward for being so consistent was already given to that company in terms of high jump in stock price in past 6 months. The change however, this time, was that the company suffered in terms of net profit due to deferred tax liability of about 1.91 Cr, which was nil in FY'13. Otherwise, in terms of EBITDA, the performance was very good.

The company grew in sales by a staggering 39%, and a modest 15% or so, in terms of net profit due to above reason.

The company should continue to do well, but they might feel a bit of pressure due to higher expenses, on account of more new branch openings. Valuation wise, not sure, if there is more steam left, because, the recent jump has already put the stock closer to 1000 Cr of market cap. But, in terms of growth, I think there is plenty more to achieve for the company.

Recommending a minor profit booking if required, or else, one can hold it strongly, if ready to stay invested for long term.