Crude and Cotton yarn commodities remains our sector pick for 2013 in Indian Equity. Lot of our friends missed first and start of rally in export oriented pharma companies in 2012. Currently, export oriented pharma companies are in correction mode but we remain super bullish on export oriented pharma stocks at least for next 3 years. Similarly, We remain bullish on Agriculture and Consumer related stocks for next 2 years.So, our current portfolio consists majorly of these sectors. Not to mention we buy companies where promoter reputation is of top quality.
When we talk about consumerism we should also check NBFCs engaged in consumer related financing. NBFC is different from normal Banks in the sense that they lend largely to Retail against normal Banks lending largely to Industrial side (term loans) for larger amount and tenure. This is the reason NBFC sector catch market fancy along with consumer stocks.
Recently, Capital First Limited (previously Future Capital Holding) saw change of promoters wherein we saw the most reputed PE firm Warburg Pincus becoming new promoter (68.93% stake) in company in place of Kishore Biyani's Future group. Company is in to Retail and Wholesale lending where India provides large opportunity This stock can become most blue chip stock over next 3 years when consumerism booms further. Lets check last 6 Q results.
If we check latest consolidated Q2 FY13 result we see Total Income went up by 12.19% to 190.50 Cr. OP going down by 16.92% to 68.31 Cr. Provisions and other expenses increased by 61.33% and we see one time EO income at 22.36 Cr. EPS is down 35.93% at 2.80. Book Value as at 30-Sep-2012 is 140.
Above results doesn't look great and may be Q3 FY13 could show similar trend but we should note that new promoter who came in Q2 FY13 has implemented conservative accounting norms for recognizing Income which is why numbers don't look great even when underlying business momentum remains strong. Once base effect starts ticking we will see improvement in results and set a stage for re-rating of this stock with top quality promoter currently available (CMP 196) at just 1.4 times BV against most NBFCs quoting at 3-4 times BV. One can check Dec 2012's company presentation for more details.
Note: We personally/our firm do NOT hold any share in CFL but continue to track them and may buy at some point. Our clients hold the stock as on day of writing and clients may Buy/Sell/Trade in this stock in future.
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1 comment:
Please ignore my previous post. It messed up little bit.
Please refer to below comments
Jigs,
I also do believe that, by investing into top quality management companies one get handsome return. The sector/industry needs to be aligned with market.
What is your take on Shriram Transport Finance Company ?
Below is brief synopsis.
Shriram Transport Finance Company (STFC) is the country's largest asset financing NBFC (non-banking finance company) with a 25% market share in pre-owned truck financing and around 7% market share in new truck financing. The Commercial Vehicle (CV) financing market in India is estimated to be more than Rs 1 trillion with vehicles more than five years old accounting for half of it. This niche corner of financing pre-owned vehicles is where STFC has made its mark and rightly so. Used vehicles account for almost 70% of the total CV sales in the country. Small road transport operators, typically who own less than five trucks, largely control the freight movement on road. And everyday more people join this network of entrepreneurs. Usually their first purchase is a used truck, on account of its more affordable price point. On an average, a CV is resold three times during its operational lifecycle of approx. 12 years.
Trucks are the lifeblood of the Indian economy. Especially on account of a lack of connectivity of major ports and railways. Used trucks account for a large bulk of Commercial Vehicle sales in the country and they are largely bought by small truck operators with poor collaterals and a lack of credit history. Owing to its 30+ year presence in this space, STFC has proved its mettle in managing such borrowers through its extensive branch network and collection efficiency. Plus, 80% of the STFC's portfolio is exposed to the relatively de-risked cash and carry segment. This is involved in the transport of essential items such as dairy, grains, vegetables etc. Thus, even in the case of an economic slowdown, these customers cannot go out of business.
What makes this financer unique for investors is that most of its loans go into generating revenues for the borrower rather than for personal consumption. That combined superb track record of lending margins and asset quality make it a player to reckon with.
Besides this, the company also has a subsidiary in the high potential Construction Equipment space. This industry is expected to grow six times to US$ 22.7 bn by 2020 from total revenues of US$ 3.3 bn in 2010, mainly driven by the government's thrust on infrastructure projects across the county. Apart from financing, another subsidiary, Shriram Automalls India, provides a ready platform for buying and selling pre-owned CVs through hubs across India.
Your comments are appreciated,
Thank you
Prashant
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