Ajmera Realty & Infra India Ltd. CMP: 222

Ajmera Realty & Infra India Ltd (BSE: 513349, Ajmera)

CMP: 222

Real estate property sector outlook:

·      India’s property market sales are expected to grow at a 14% compound annual rate from 2016-20 and 18% from 2020-25.

·      The confluence of factors, including a projected sharp increase in the country's per capita income, further urbanization and a firmer federal hand on regulations, could push annual property market sales, which were $105 billion in 2015, to $462 billion by 2025, according to the Morgan Stanley report

·      There are many sectors, which can benefit directly or indirectly from this growth like: Real estate, Housing finance companies, Cement industry, Paints, Plywood etc.

The most important point is to select that company which has following qualities in the sector:

·      Capex or construction is finished and are ready for sale

·      Manageable debt (Important criteria for real estate company)

·      Good land banks at prime locations

·      Brand value and should have a mix of both Luxury and affordable homes

After considering all the above points I picked the company Ajmera Realty & Infra India Ltd

Ajmera analysis:

·      New generation lead by Dhaval Ajmera (MBA in finance from Cardiff University) has taken the firm into an elite brand without increasing the debt

·      Company can deliver 50%+ CAGR in sales and 60%+ CAGR in Profits from FY17-FY20 as per the management

·      Stock is available below its intrinsic value which provides safety, Dividend paying and is trading around 12 PE (and has historic PE of 20+) and is also cheap compared to its peers

·      Company posted a 54% rise in PAT yoy and 20.6% rise in pat qoq with increasing sales and reducing finance costs, company aims to be debt free in next 2 years

·      Trade receivables stand at 130+ crore at end of FY17 vs. 46 crore at end of FY16

·      Promoters hold a good 62.52% and have been buying from open market

·      Many projects are near completion whose numbers should start reflecting in 2-3 quarters

·      Company has recently won the Brand award at the World Greatest Brand’s Summit 2016-17 held at Dubai.

Some important statements taken from the FY16 Annual report:

Technical view point:

Stock has formed a cup and handle breakout in the monthly charts

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

REPRO INDIA LTD: A Star in the making

The title is not said by me, but these were the words from Vijay Kedia sir.

Repro India is in the Printing & Stationery sector. The current market capitalisation stands at Rs 489.58 crore.

The company management includes Vinod Vohra - Chairman, Sanjeev Vohra - Managing Director, Mukesh Dhruve - Executive Director, Rajeev Vohra - Executive Director, Pramod Khera - Executive Director, Ullal R Bhat - Non Executive Director, Jamshed J Irani - Non Executive Director, P Krishnamurthy - Non Executive Director, Dushyant Mehta - Non Executive Director, Alyque Padamsee - Non Executive Director, Mahalakshmi Ramadorai - Non Executive Director, Bhumika Batra - Addnl.Non Exe.Independent Director. 


It is listed on the BSE with a BSE Code of 532687 and the NSE with an NSE Code of REPRO.


Its Registered office is at 11th Floor, Sun Paradise Business Plaza, B wing, Senapati Bapat Marg,,Lower Parel. Mumbai,Maharashtra - 400013.


Their Registrars are Link Intime India Pvt. Ltd.

Below are various points which I've found in forum.valuepick.com, I don't deserve any credits for this

Repro is the largest "print-on-demand" company. Its subsidary, Lightning Source, is the biggest print-on-demand company in the world. Their self-publishing company Lullu.com is also the biggest and they use lightning source too.

1. Amazon also is in print on demand segment and even they could not compete against Ingram. Their self publishing company createspace is their play on print on demand. Publishers never went with Amazon because of the backstabbing they got when Amazon started decreasing the publishers royalty.
2. Ingram has a massive portfolio and it will just keep on increasing as publishers find them honest and economically viable. Self publishing trends also will help them.
3. Publishers find Ingram critical to their business model. Because of print on demand economics. A traditional publisher had to go to a printer and print thousands of books. The more books you print lower your fixed cost. Then these books will go to a distributor and he will sell it. If he can't, he sends back to publisher.
4. Traditional publisher has massive working capital need. Also, if the distributor defaults he is quickly into loss
5. With print on demand, the publisher has no inventory. Although the fixed cost is same for per product, the gains are much more if you compare it with cost of working capital and inventories
6. And that's why most publishers are shifting or will have to shift to print on demand
7. This trend would not have been possible if it wasn't for ecommerce. That was the inflection point for Ingram back in 2004.
8. When a customer orders a book on amazon, Ingram gets that order on its system. It prints there and then and ships it to end customer. So Ingram only prints a book when it has an order from a customer.
9. Going ahead, negative working capital shall emerge as the biggest moat for repro as it is for Ingram.
10. For Ingram too, this tie up is due to compulsion. printing machines are costly so this is a high captital intensive business. Also, understanding the demographics and Indian environment this would have been very difficult. They have more than million books. They just have to convince the publisher and agree on a royalty arrangement for India market.
11. Once repro, Ingram and the foreign publisher agree on royalty sharing agreement, repro just has to put the EPub files on its system which makes it available on Amazon and flipkart
12. That's it. Whenever a customer orders, repro factory will print it and deliver in three days time to end customer. According to their concall they are working on one third of capacity and don't need to spend on capacity expansion.
13. Listing of these massive titles should take one years time in my opinion.
14. Rest of the business, exports, rapples, etc are just bad capital allocation decisions which management should reverse once print on demand takes off.
15. My company is a customer of repro and we have seen massive impact on our India sales. To be honest, for an mnc like ours, without repro, this would not have been possible. We also work with lightning source in America and European market. So this agreement with Ingram gave us more confidence on their ability to deliver.
16. Without Indian ecommerce growth, growth in print on demand would not have been possible as brick and mortar stores like crosswords lack such ability. They need physical books to display on their stores unlike Amazon which just has to write description of the book and a cover page. Repro is the best play on Indian ecommerce in my opinion rather than an expensive Infibeam stock which burns cash
17. Amazon pays twice a week to repro so there is instant money on the sale. And repro pays the publisher weekly and sometimes monthly. So there is no credit period like traditional publishing.
18. The growth in ebooks can be a threat. Although repro does have distribution rights, the major money is in their printing business. Our firm is into trade publishing and for the last ten years there has been no decrease in the sale of print books in American and European markets. Actually for the industry, ebooks sales have decreased in the last one year.
19. With high device cost ebooks will find it difficult to penetrate in the Indian market. And there is a strong regional publishing market which will take even more time for this shift if at all the shift comes.
20. Valuations aside, print on demand business, which management calls as one book business, is where the growth lies.
21. Tie up with Ingram is similar to what investor must have seen with lubrizol- astral or pokarna-brettonwood tie up

Below is the video for the analysis made by Vijay Kedia and the analysis on Repro starts from 8:05

My analysis:

1) As per Vijay Kedia and Nelson's report Online book sales in 2020 should be around 17500 crore and Repro being the leader in the online book market by that time it should at least have a market share of 20% is what I believe, so sales of 3500 crore in 2020

2) As per Repro's management commentary and Nelson's report Online book sales in 2020 should be 7000-10000 crore, let us take it as 8000 crores and Repro's share around 20%, so sales of 1600 crore in 2020

3) As it is a light asset model and high margin business let us take in the worst case it makes a net profit margin of 15% (I believe it should be 20+), considering 1600 crores and 15% margin we come to PAT around 240 crores for 2020

4) In the worst case if we give a valuation to Repro around 1.5x sales, it would come to 2400 crore (1600 into 1.5) or 10x PAT (10 into 240) *Worst case*

Last quarter result:

Last quarter we can see that the company has finally made some turnaround with lower finance costs and better operations which I believe will continue growing Arithmetically or Geometrically or even Exponentially.

NOTE : THE ABOVE IS NOT A RESEARCH REPORT NOR A RECOMMENDATION  BUT INFORMATION AS AVAILABLE ON PUBLIC DOMAIN. 

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: Repro is my core portfolio stock, so my views may be biased

KATWA UDYOG LTD. CMP: 186.25

Katwa Udyog is in the Cement - Mini sector. The current market capitalisation stands at Rs 95.44 crore.

The company management includes H D Katwa - Chairman Emeritus, Venkatesh H Katwa - Chairman, Vilas H Katwa - Managing Director & CEO, Deepak Katwa - Executive Director & CFO, Narmada H Katwa - Non Executive Director, Nisha Maganur - Ind. Non-Executive Director, Satish Kalpavriksha - Ind. Non-Executive Director, Prajakta K Kulkarni - Ind. Non-Executive Director. 

It is listed on the BSE with a BSE Code of 530977.

Its Registered office is at 215/2, Jyothi Towers, 6th Cross,,Nazar Camp, Karbhar Galli, Belagavi,Karnataka - 590005.

Their Registrars are Canbank Computer Services Ltd.

1) Company has a sales growth of 23.24% for last 10 years and profit growth of 30.29% for last years, promoters hold a good 67.8% and dividend paying

2) Debt to equity has been continuously reducing for last 10 years

3) Company has completed expansion which will be adding to the top line

4) Below is the screenshot of its Q4 result (previous quarter), we can see that without the exceptional item (5.2 crore) and other expenses (4.7 crore) which are one off, if we don't consider them as these are one time cases, the profit would be around 9-10 crores. If we believe the company delivers similar performance in coming quarters then the profit would be around 40 crores for FY18, even if we take the profit as 30 crores in the worst case it would command a market cap of 15 times profit = 450 crores. 

5) Considering the increased demand in south for cement, recent expansion of the company and also increased prices of cement. Katwa udyog should be kept in one's watch list

NOTE : THE ABOVE IS NOT A RESEARCH REPORT NOR A RECOMMENDATION  BUT INFORMATION AS AVAILABLE ON PUBLIC DOMAIN. 

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

WEBSOL ENERGY SYSTEM LTD CMP: 125.7

Websol Energy is in the Miscellaneous sector. The current market capitalisation stands at Rs 276.20 crore.

The company management includes S L Agarwal - Managing Director & CEO, S Jhunjhunwala - Whole Time Director & Compliance Officer, D Sethia - Independent Director, P Kaushik - Independent Director. 

1) Sales of the company increase from 77.87 to 95.44 and Net profit from 5.2 to 73.05 crore (had an other income of 74.17 crore). FY17 EPS stands at 33.23

2) Company trading at only 3.34 PE

3)Non current liabilities reduced from 271 crore to 96 crore and current liabilities from 453 to 320 crore

4) Company has increased it's production capacity from 100 to 200 MW

5) Allotment Of 783,777 Equity Shares Of Rs. 10/- Each Of Websol Energy System Limited To The Foreign Currency Convertible Bond Holder Upon Exercise Of Their Option To Convert Into Equity Shares Of The Company.

GST rate for solar panels will be 5% as against 18% specified earlier and government focus on power generation through solar energy could make a disruption in the future and benefit the company immensely.

NOTE : THE ABOVE IS NOT A RESEARCH REPORT NOR A RECOMMENDATION  BUT INFORMATION AS AVAILABLE ON PUBLIC DOMAIN. 

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”