ORIENT CERAMICS & INDUSTRIES LTD - BUY !

Business : I have been tracking this upcoming giant for some time – a tile manufacturer and walls & floor decorator – ORIENT CERAMICS & INDUSTRIES LTD. OCIL since its inception in 1977 has been at the forefront of innovation in home décor ever since and is the pioneer in the manufacturing of Ultra Vitrified Tiles in India. Under the expert guidance of Mr. M K Daga, the foremost ceramic tile technologist in India, the company has grown strength to strength and has expanded in terms of size, scale, network, product portfolio and revenues. It got listed on the BSE in 1993 and on the National Stock Exchange (NSE) in 2007. For the first time, an Indian company has hired a European Designer to unleash next generation innovative tile suits. OCIL manufactures one of the widest range of Non-Vitrified, Vitrified, Ultra Vitrified and 3rd Fired Decorative Tiles for walls, floors & facades. Starting with an initial installed capacity of 4,000 TPA in 1977, the company’s production capacity has grown multifold and stands at 220000 TPA today.

Financials : For FY2009-10, the company posted revenues of 269.75 crores (up 13% from FY09) and PAT of 11.46 crores (up 80% from FY09) with annualized EPS of 10.88 (up 80% from FY09). The company continues its fairy tale declaring outstanding results for Q1FY2011 – net Profit of 5.31 crores (whopping 249% growth over Q1FY2010) and an EPS of 5.04 (250% zoom over Q1FY2010). Looking at prolific success of its newly launched decor ranges – Europa and Stiler – the company is heading for an annualized EPS of around 18+ in this FY itself. At current price of 85 Rs – this stock is seriously undervalued and available at a PE of around 5. The stock is a sure shot buy and one can expect a huge upside in time to come. The downside looks limited.  

Positives – The company has an outstanding SHP which increased from 70% to 74% now in last 8 years – speaks volumes of promoters confidence in the company.

-      OCIL clientele in the real estate development space includes biggies like DLF, Unitech, Parsvnath, Shobha Developers, Rahejas, L & T, Rites, CPWD, MES, AAI and several medium scale builders.

-      Orient products have been extensively used in the construction of the prestigious Rashtrapati Bhawan in addition to beautifying structures like India Habitat Centre (New Delhi), Delhi High Court, Kolkata Airport, DMRC Stations among others.

-      Orient Tiles client base is not only found in India, but are also spread across Europe, South East Asia, Middle East and the SAARC countries.

Negatives – None.

Conclusion : Start accumulating ORIENT CERAMICS & INDUSTRIES LTD at current price and on dips and I can foresee an EPS of 18 or more this FY. Hold the stock for 2-3 yrs timeline for 250-300% gains. This stock is a MUST in your portfolio and could be held even for long term.

TT Limited - A Giant in the Making - BUY Now !

Business : Jockey (Page Industries) and VIP (VIP Industries) are known to all! But today I bring you another dark horse in this garment vertical – TT Limited. A 60 year old flagship company of T.T. Group, TT Ltd. is a self contained textile producer and garment manufacturer. TT Brand is a popular innerwear brand in Northern India and a household name for various consumer products as well as Industrial products in India and in more than 30 countries of the world. The Company has recovered smartly from deep recession of 2008-09 and registered a turnover of 353 crores (45% higher than FY2008-09) and a net profit of 10.47 crores for FY2009-10 with an annualized EPS of 4.87. Continuing on the exponential growth track, the company recorded highest ever profit for its June2010 Q - a topline of 113.99 crores (75% growth over June09 Q) and a bottom-line of 4.33 crores (1700% growth over June09 Q). Therefore, with an exponential growth drive and a June Q EPS of 2.02 ,one can easily forecast current FY annualized EPS to be 8 or more. At a price of around 38 /- currently, the stock is available damn cheap at PE of less than 5 and is a MUST BUY !!


Expansion Spree: The Company is expecting to grow its garments business by 100% this FY and other business segments like yarn and fabric at normal 20%. Overall for FY 2011, the Company is projecting a growth of 40% in turnover and profits. The Company launched 51 new products under its innerwear and casual wear segment in March and is aggressively growing its dealer network. Further a 100% increase in advertisement budget has been made to increase the brand equity of its household brand TT. The firm has chalked out a Rs 300 crores expansion plan for over the next 2-3 years. Apart from textiles, the Company plans to increase its presence in the “Clean Energy” segment by expanding its wind power capacity. However the biggest focus of company would be on its garments business under the brand of TT. Further a 100% increase in advertisement budget has been made to increase brand equity of its brand TT. The Company has also made a foray in value added organic products. It has got certification from Control Union, Europe and is exporting organic yarn in a big way. Further it has currently introduced range of organic innerwear - GREEN VESTS & BRIEFS for the first time in India. It also now plans to diversify its knitwear markets to Middle East and Africa where product requirements are similar to India.
Positives : The company has very strong SHP with promoter stake constantly rising from 35% to 53% in last 8 years. I don’t need to say more on the promoter’s trust and confidence in the company.
- In last 2 years company has not increased its paid up equity share capital.
- TT is a "Only cotton" Company and produces its own in-house Cotton yarn and fabrics.
Negatives – I can’t think of any except a healthy competition from Jockey & VIP brands.


Remark : Start accumulating TT Limited between 36-40 range and I can see sure shot FY11 earnings of 8 EPS. That suggests a target of around 80- 100 in another 10 months time. The way this company is expanding its not far when we have another VIP in the making and the stock could be held for 2-3 years timeline for a 3-4 bagger returns. It’s a stock to buy and hold for long term.

SIMRAN FARMS - Buy Now !!

Business : Simran Farms is an Indore based company engaged in Poultry vertical. The company is growing thick and fast as we see March 2010 turnover is more than 136 crores. On an equity base of just 3.8 Crore company the firm has posted an EPS of Rs.9/- There are not many listed players in Poultry segment other than the known Venkys India and Srinivasa Hatcheries. If we analyze company’s recent performance, an EPS of 7.35 in FY09 has grown leap & bounds to an EPS of 9.19 in FY2010. Icing on the cake, latest June 2010 quarter EPS of 5 makes me feel confident of FY11 earnings of nothing less than 16 EPS. Currently hovering around 54-58 Rs range, this stock is available at a PE ratio less than 4 and is dirt cheap by all means - a MUST buy !!

Positives : Since listing in 2002, Simran farms have a very strong SHP (share holding pattern) with promoter stake around 36%. I foresee increase in promoter’s stake in time to come considering company’s prolific growth.
- In last 2-3 years company has not increased its equity share capital and has no plans in near future too.
Negatives – Company does not have a website but I guess the day is not far when the company will officially launch its website. It does hinder some transparency from company management side but its earnings growth speaks volumes.
- Please note that Poultry stocks are cyclic in nature because every 3-4 years, one or the other kind of chicken flu arises & that’s the time to get out of poultry stocks!!

Remark : Start buying SIMRAN FARMS between 50-60 range and I can see sure shot FY11 earnings of 16 EPS. That suggests a target of around 140- 160 in another 8-10 months. Depending upon future performance which looks promising this stock could be held for 2-3 years timeline for a 3-4 bagger returns. I strongly believe that Simran can turn out to be next Venkys India in the making.