Hello everyone,
Today, I am going to discuss my new value pick stock(micro cap) which I have bought recently and will buy more depends of fundamental reasoning. The name of company is Bluechip Tex Industries Ltd . The followings are reasons for investing in this Stock.
Consistent Growth : The top line has grown from 48 (FY12) odd crores to 140 (FY16) crores while profit from 0.20 crores to 2.41 in last 5 years. This growth has been achieved without any equity dilution. It is on small base, but still amazing growth.
Good Fundamentals : If one analysis numbers of Bluechip Tex Industries Ltd then one must impress with good ratios like high Return On Capital Employed , high Return On Net Worth and good Inventory and Debtors ratios . All ratios are very good except Debt-Equity Ratio which is around 1.18 . Textile industry is considered as a capital intensive industry, by industry standard it is a comfortable ratio for Blue Chip Tex Industries Ltd.
Quality of Profit : It has very good quality of profit. It has increased dividend from 7.5% to 15% in last five years. Blue Chip Tex Industries Ltd is very consistent in its dividend increment. It generates very good, consistent operating cash flow and even free cash is too good. Because of this company didn't need any equity dilution in last 5 years and has comfortable situation to pay debts. The company has debt of 8.84 while it has cash of 2.35 crores and last year profit was 2.41 crores. So, debt is currently not a big concern for Blue Chip Tex Industries Ltd. It looks good on other criteria of my checklist of quality of profit.
Negative Points :
Investors Pedigree : Do you know who are big investors invested in Blue Chip Tex Industries Ltd? Any guess? Ok, I will give a description of him first, then you can guess easily.
He has been a full time investor and adviser since the late seventies. His experience of over 30 years identifying various business patterns, and readily provides us a brief history of a company's promoter and actions. His optimism, fresh-progressive-thinking and techniques are his biggest assets. He prefers small and micro cap companies with a niche business model and a huge margin of safety in them. He has won several awards and has also served as the President of Rotary Club of Lucknow Baradari (2003-04).
Not yet ????
He is also the father of India's one of the best micro cap stock picker.
Yes , I hope you have guessed it correct now . He is none other than Mr. Satya Prakash Mittal father of Mr Ayush Mittal (http://dalal-street.in , http://www.screener.in ).
Some of the picks we got from Mittal family (http://dalal-street.in) in the past were .
Now let's do an exercise , find date of first discussion of above mentioned stocks and current price , try to find out return considering corporate action like bonus , split ( for simplicity ignore dividend ) .
I need a volunteer to do this exercise? Any one interested? Please send to my email Id value2wealth.india@gmail.com. I will update this article with these data if I receive from someone.
I guess most of them will be 10x , some of them will be more than 5x . If anything is just 3x then I will say below par by his own reputation . I strongly claim no other Indian investor can come close to his reputation of strike rate in small caps . He has very little failure rate .
Last year , I was aware PRATYUSH MITTAL (brother of Ayush) had holding in Bluechip Tex Industries Ltd but some how I was not having full conviction. I bought some quantity and forgot it .
But this week while going through annual report I noticed a new big micro cap investor Amit Arora (http://multibaggersindia.blogspot.com/) also entered into it. It increased my conviction tremendously in Blue chip Tex Industries Ltd.
Margin Of Safety : Blue Chip Tex Industries Ltd is trading at a PE of just 7. Textile industry stocks trade on a low PE due to missing pricing power, high debt, captive intensive nature. However, if some stocks have better characteristics, then those trade on better PE ratio. Bakshi sir's pick Ambika Cotton Mills Ltd is trading at a PE of 11, Mayur Uniquoters Ltd (pick of Rohit Chauhan (valueinvestorindia.blogspot.com), Sorry Ayush I had got this pick from Rohit first :)), Kitex Garments Ltd still trades on 20 PE, Premco Global Ltd on PE of 17.
Even though Blue Chip Tex Industries Ltd is a micro cap with a market cap of just 17 crores but still has a good chance of PE expansion. There are primarily the following reasons for it.
1. Good ROE , ROCE and free cash flow .
2. I am an idiot and don't hold any weigtage, but if there are two legend investors Mr. Satya Prakash Mittal and Amit sir, are holding, It will demand some premium than same type of peers, like Sarla Performance Fibers Ltd (PE of 10).
3. Expansions will lead to higher PE . Last year the Company had completed its expansion programme and presently having own 5 Draw Texturing ,Machines and 3 Air Texturising Machines from earlier 1 Draw Texturising Machine and 3 Air Texturised Machines . The Company also hired Machineries to meet the demand last year .The Company is searching suitable Industrial land in Dadra & Nagar Haveli for future expansion.
Conclusion : Yes, It is missing some of the required qualities which I search in multibagger. But it has enough qualities to give good returns to me from this level. The whole theme is based on what the company did in the last 5 years will continue to in the next 4-5 years. It will become multibagger in 4-5 years if able to increase NPM.I am hoping NPM will be increase, but I don't have answers to any questions like how? If NPM don't increases then also it will give decent returns based on just growth and little PE expansion.I don't have hesitation to put 2-3% of my portfolio in it .
Today, I am going to discuss my new value pick stock(micro cap) which I have bought recently and will buy more depends of fundamental reasoning. The name of company is Bluechip Tex Industries Ltd . The followings are reasons for investing in this Stock.
Consistent Growth : The top line has grown from 48 (FY12) odd crores to 140 (FY16) crores while profit from 0.20 crores to 2.41 in last 5 years. This growth has been achieved without any equity dilution. It is on small base, but still amazing growth.
Good Fundamentals : If one analysis numbers of Bluechip Tex Industries Ltd then one must impress with good ratios like high Return On Capital Employed , high Return On Net Worth and good Inventory and Debtors ratios . All ratios are very good except Debt-Equity Ratio which is around 1.18 . Textile industry is considered as a capital intensive industry, by industry standard it is a comfortable ratio for Blue Chip Tex Industries Ltd.
Quality of Profit : It has very good quality of profit. It has increased dividend from 7.5% to 15% in last five years. Blue Chip Tex Industries Ltd is very consistent in its dividend increment. It generates very good, consistent operating cash flow and even free cash is too good. Because of this company didn't need any equity dilution in last 5 years and has comfortable situation to pay debts. The company has debt of 8.84 while it has cash of 2.35 crores and last year profit was 2.41 crores. So, debt is currently not a big concern for Blue Chip Tex Industries Ltd. It looks good on other criteria of my checklist of quality of profit.
Negative Points :
- Qualities which experts like Ian Cassel look into micro cap multibaggers are not present like "Market leader and dominates the small but growing market", "Asset light business model","Scalable Business model","Low debt or debt free". Well, some of the qualities are present are High ROE,"Small equity base and equity dilution","Little institutional ownership", Undervalued, Margin Of Safety. Quality Run by "intelligent fanatic" is very much subjective, but apple to apple comparison they are on the right path from last 5 years if continue to do similar growth, then apple to apple comparison it will be yes from my side on this quality if they also merge Beekaylon Synthetics Pvt Ltd and reduce related part transactions. I know I am an idiot and nobody will take my "yes" seriously :) .I am value investor , yes not pure value investor , yet I am a fundamental investor, but some how , I have little impact of Jesse Livermore on me as well. That kick is missing is this stock.
- 30% promoters holding is a pledge, but that is not a big risk because it is at least 3 year old and should be at very low price, around Rs 20. Promoters have pledged this to raise debt for the company. So, no issue of intention.
- Dependency on parent Beekaylon Synthetics Pvt Ltd and high related party transactions.
- The company doesn't enjoy moat or pricing power and it has very low NPM. Even though there is scope for increase in NPM but if it decreases, then we may have to bear losses.
Investors Pedigree : Do you know who are big investors invested in Blue Chip Tex Industries Ltd? Any guess? Ok, I will give a description of him first, then you can guess easily.
He has been a full time investor and adviser since the late seventies. His experience of over 30 years identifying various business patterns, and readily provides us a brief history of a company's promoter and actions. His optimism, fresh-progressive-thinking and techniques are his biggest assets. He prefers small and micro cap companies with a niche business model and a huge margin of safety in them. He has won several awards and has also served as the President of Rotary Club of Lucknow Baradari (2003-04).
Not yet ????
He is also the father of India's one of the best micro cap stock picker.
Yes , I hope you have guessed it correct now . He is none other than Mr. Satya Prakash Mittal father of Mr Ayush Mittal (http://dalal-street.in , http://www.screener.in ).
Some of the picks we got from Mittal family (http://dalal-street.in) in the past were .
- Shilpa Medicare
- Kitex Garments
- Avanti Feeds
- Astral Poly
- Ajanta Pharma
- Anuh Pharma
- GRP
- Oriental Carbon
- Alembic Pharma
- Acrysil
- Can Fin Homes
- Kovai Medical Centre & Hospital
- Lumax Auto Technologies
- Caplin Point
- Poddar Pigments
- Atul Auto
- Apcotex
Now let's do an exercise , find date of first discussion of above mentioned stocks and current price , try to find out return considering corporate action like bonus , split ( for simplicity ignore dividend ) .
I need a volunteer to do this exercise? Any one interested? Please send to my email Id value2wealth.india@gmail.com. I will update this article with these data if I receive from someone.
I guess most of them will be 10x , some of them will be more than 5x . If anything is just 3x then I will say below par by his own reputation . I strongly claim no other Indian investor can come close to his reputation of strike rate in small caps . He has very little failure rate .
Last year , I was aware PRATYUSH MITTAL (brother of Ayush) had holding in Bluechip Tex Industries Ltd but some how I was not having full conviction. I bought some quantity and forgot it .
But this week while going through annual report I noticed a new big micro cap investor Amit Arora (http://multibaggersindia.blogspot.com/) also entered into it. It increased my conviction tremendously in Blue chip Tex Industries Ltd.
Margin Of Safety : Blue Chip Tex Industries Ltd is trading at a PE of just 7. Textile industry stocks trade on a low PE due to missing pricing power, high debt, captive intensive nature. However, if some stocks have better characteristics, then those trade on better PE ratio. Bakshi sir's pick Ambika Cotton Mills Ltd is trading at a PE of 11, Mayur Uniquoters Ltd (pick of Rohit Chauhan (valueinvestorindia.blogspot.com), Sorry Ayush I had got this pick from Rohit first :)), Kitex Garments Ltd still trades on 20 PE, Premco Global Ltd on PE of 17.
Even though Blue Chip Tex Industries Ltd is a micro cap with a market cap of just 17 crores but still has a good chance of PE expansion. There are primarily the following reasons for it.
1. Good ROE , ROCE and free cash flow .
2. I am an idiot and don't hold any weigtage, but if there are two legend investors Mr. Satya Prakash Mittal and Amit sir, are holding, It will demand some premium than same type of peers, like Sarla Performance Fibers Ltd (PE of 10).
3. Expansions will lead to higher PE . Last year the Company had completed its expansion programme and presently having own 5 Draw Texturing ,Machines and 3 Air Texturising Machines from earlier 1 Draw Texturising Machine and 3 Air Texturised Machines . The Company also hired Machineries to meet the demand last year .The Company is searching suitable Industrial land in Dadra & Nagar Haveli for future expansion.
Conclusion : Yes, It is missing some of the required qualities which I search in multibagger. But it has enough qualities to give good returns to me from this level. The whole theme is based on what the company did in the last 5 years will continue to in the next 4-5 years. It will become multibagger in 4-5 years if able to increase NPM.I am hoping NPM will be increase, but I don't have answers to any questions like how? If NPM don't increases then also it will give decent returns based on just growth and little PE expansion.I don't have hesitation to put 2-3% of my portfolio in it .
Disclaimer : Please treat this post as starting point of your research and not conclusion to invest in any discussed stock. As always , please take the advice of a SEBI qualified financial adviser which I am not .
SideNote/MustRead : I am not sure how much you can learn from Idiot like me but you will defiantly learn lot from expert like Anil Kumar Tulsiram . Please read his transcript of talk delivered at Flame Alumni Meetl https://contrarianvalueedge.wordpress.com/2016/07/09/transcript-of-my-talk-delivered-at-flame-alumni-meet/
Useful Tool : Like http://www.screener.in , I have found another useful site http://www.bajaar.me/ which give details of big non promoter investors transactions and holding details. You can search it based on investors name like by searching "Porinju V Veliyathi" you will get the following details . Right now , It is free beta version . Don't forget to give me 10% of profit if you are able find some interesting stock through it :) .
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SideNote/MustRead : I am not sure how much you can learn from Idiot like me but you will defiantly learn lot from expert like Anil Kumar Tulsiram . Please read his transcript of talk delivered at Flame Alumni Meetl https://contrarianvalueedge.wordpress.com/2016/07/09/transcript-of-my-talk-delivered-at-flame-alumni-meet/
Useful Tool : Like http://www.screener.in , I have found another useful site http://www.bajaar.me/ which give details of big non promoter investors transactions and holding details. You can search it based on investors name like by searching "Porinju V Veliyathi" you will get the following details . Right now , It is free beta version . Don't forget to give me 10% of profit if you are able find some interesting stock through it :) .
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