Saturday, January 19, 2013
Capital First Limited
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.