Wednesday, 22 November 2017

'Transport and Logistics' Sector Update

On 20 Nov 2017 Government has granted infrastructure status to the  Logistics sector with below given update. It is commendable step taken by government to accelerate the growth of Transport and Logistics sector. TCI and Gati are direct beneficiary  of this  initiative, need to hold both stocks for further gain.  




Logistics Sector granted Infrastructure Status 



The Logistics Sector has been granted Infrastructure status.The need for integrated Logistics sector development has been felt for quite some time in view of the fact that the logistics cost in India is very high compared to developed countries. High logistics cost reduces the competitiveness of Indian goods both in domestic as well as export market. Development of logistics would give a boost to both domestic and external demand thereby encouraging manufacturing and 'job creation'. This will in turn be instrumental in improving country's GDP.


The inclusion of “Logistics Sector” in the Harmonized Master List of Infrastructure Sub-sectors was considered in the 14th Institutional Mechanism (IM) Meeting held on 10th November, 2017. It was recommended by the Institutional Mechanism and subsequently approved by the Union Finance Minister, Shri Arun Jaitley. “Logistics Infrastructure” is included by insertion of a new item in the renamed category of ‘Transport and Logistics’, with a footnote stating that "Logistics Infrastructure” means and includes Multi-modal Logistics Park comprising Inland Container Depot (ICD) with minimum investment of Rs. 50 crore and minimum area of 10 acre, Cold Chain Facility with minimum investment of Rs.15 crore and minimum area of 20,000 sq. ft, and/or Warehousing Facility with investment of minimum Rs. 25 crore and minimum area of 1 lakh sq ft.


It will enable the Logistics Sector to avail infrastructure lending at easier terms with enhanced limits, access to larger amounts of funds as External Commercial Borrowings (ECB), access to longer tenor funds from insurance companies and pension funds and be eligible to borrow from India Infrastructure Financing Company Limited (IIFCL). 




Friday, 28 July 2017

Orient Paper & Industries - Switch to Smart



CMP = 96


Orient Paper & Industries Ltd (OPIL) is flagship company of CK Birla Group  and incorporated in 1939. The company has two divisions, the paper and consumer electrical division. The paper division produces a wide range of tissue, writing, printing, and speciality papers, paper products and boards. It is the largest  producers and exporters of tissue papers from  India.






The consumer electrical division is the largest manufacturer and exporter of fans from India with more than 60% share in exports and a dominating presence in more than 35 international markets. 'Orient Electric' is one of the leading consumer electrical brands in India with a diverse portfolio of fans, lighting, home appliances and switchgears.  The company has strong R&D capabilities, which enable it  to develop and  innovate new products that meet the needs and expectations of modern consumers.  OPIL has five manufacturing units located at Amlai (Madhya Pradesh), Guwahati (Assam), Kolkata (West Bengal), Faridabad (Haryana) and Noida (Uttar Pradesh).



https://www.orientelectric.com/media/videos

https://www.youtube.com/watch?v=KxgnPl6eWiI



Paper Division






The paper unit at Amlai Madhya Pradesh is engaged in the manufacturing of tissue papers, writing and printing papers, photocopier papers etc. It  is  having a capacity of 1,00,000 tonnes p.a. (printing and writing paper 45000 tpa and tissue paper 55,000 tpa) An eco-friendly enterprise, Orient Paper and Industries undertakes reforestation and other restorative measures. The manufacturing unit is ISO 14001 certified and has received several awards for environmental excellence. It is one of the few companies to have received the ECO mark license from the Government of India. It is also certified for FSC-COC which is compliance of all norms related to raw materials in paper production. Orient paper and paper products are exported to several countries across the world.



http://orientlinks.com/products/



Electric Division





"Orient" brand extended to  wide range of consumer electric products and launched its lighting, home appliances and switchgears product range few years back. Company has decided to rebrand its operation as it aims to become a provider of smart home solutions. Orient Electric is committed to creating great customer experiences by exceeding global benchmarks in quality and best practices. Its entire range is in line with its brand promise of ‘switch to smart’ meaning that each product is technologically advanced, aesthetically pleasing and energy efficient.  It is today the third largest manufacturer of LED lamps in India and is also the first Indian lighting brand to have been awarded BEE star rating for lamps. In the Home Appliances category, Orient Electric offers a wide range of products including water heaters, air coolers and small kitchen appliances. In Switchgears category, it offers MCBs enabled with the revolutionary SDB (Snap Disc Bi-Metal) technology which provides threefold advantage – precise tripping, better repeatability and longer life.


Fans



Company has increased its share of the  domestic fans market and maintained its leadership  position in  the export with 60% market share in total exports of fans from India. Orient has consolidated its position in the premium fans segment with the launch of  Aero Quiet fans. Commissioned a new manufacturing facility at Guwahati, which will help in expanding market reach. In-house R&D unit at Faridabad plant received the prestigious DSIR  certification




Company has  launched the high end fans incorporated with BLDC (brushless direct current motor) technology fans which the company claims that the fans would consume 50 per cent less energy, provide high speed even in low voltages.



https://www.orientelectric.com/img/footmedia/brochure/FAN.pdf
https://www.orientelectric.com/fan

https://www.youtube.com/watch?v=iv4Pl63yMO0

https://www.youtube.com/watch?v=eUOco2A_q-E


Lighting







Orient is the first company to get BEE star rating for its LED bulbs. Orient has consolidated its position in the LED bulb segment with market share of 11% which places it at the no. 3 position in India. Company has started manufacturing LED street lights with scope of good growth in the tender business. Company has made successful in entry into Street lighting segment with execution of 20000 streetlights across 4 states in India.

Orient has strengthened its R&D department for LED lighting with most of the major testing being done in-house now. Further investment has been committed for Goniometer equipment. This will add to the capabilities in design and testing of Street lighting and other professional luminaires which are the major areas of growth in future.


https://www.orientelectric.com/lighting

https://www.orientelectric.com/img/footmedia/brochure/LIGHTING.pdf


Home appliances







Orient has significantly enhanced its product portfolio in terms of premiumness and quality. Also enhanced the distribution of the width of the range. Company has created a brand pull in its home appliances division as well leveraging the success of its 'Orient' brand. Launched new models of air coolers, water heaters, electric irons and wet grinders in about 100 cities with prime focus on 60 Cities. Company run 159 Authorized Service Centers spread across the country.






https://www.orientelectric.com/home-appliances

https://www.orientelectric.com/home-appliances/air-cooler

https://www.orientelectric.com/img/footmedia/brochure/Appliances.pdf


Switchgears







Switchgears are very important safety components for homes as well as commercial spaces. Orient Electric offers a high quality range of MCBs and successfully established itself in new sub - segment. Orient switchgears are with differentiated technology and built for extra safety


https://www.orientelectric.com/switch-gear

https://www.orientelectric.com/img/footmedia/brochure/SWITCHGEAR.pdf



Marketing and distribution



Orient has an enviable distribution network of 100,000 retailers and 3,500 dealers and distributors in India. It is advantage for company while launching any new products like switchgear, air cooler, water heater etc  which can be sold leveraging the existing network.


‘Smart Shop’ Franchise







‘Smart Shop’ serve as exclusive and franchised one-stop shop  which offers complete range of Orient Electric products under one roof. The spacious store serves as a one-stop shop where consumers will be able to see, touch, feel and purchase various products of Orient Electric including Fans, Lighting, Home Appliances and Switchgear.


https://www.orientelectric.com/franchise/overview

https://www.orientelectric.com/franchise/photo-gallery-list/3

https://www.orientelectric.com/media/events-&-exhibitions



Orient Electric E-shop




Strengthened e-commerce presence by selling products through Orient’s own e-commerce portal as well as through other leading online marketplaces.



http://www.orientelectriceshop.com/



Investment Rationale



Orient Paper and Industries Ltd is going to demerge its electrical appliances division to unlock significant value for the shareholders of the company. 

The vertical demerger is to facilitate both paper and consumer electric businesses to focus on their core competencies and to pursue their independent strategies.

It will enable a dedicated management to focus and accelerate the growth of the consumer electric business. 

The nature of risk and competition involved is completely distinct, so it become necessary to make separate teams of professionals to manage the two divisions.

This separation will enable the access to varied sources of funds for the rapid growth of both businesses.


http://www.bseindia.com/xml-data/corpfiling/AttachHis/77f431e6-e5ac-4eb0-87e9-fb6f467fd27d.pdf


Demerger was proposed in September 2016 which is very near to completion within few months.


http://www.bseindia.com/xml-data/corpfiling/AttachHis/11FECFBC_BABF_4132_BAFD_E6D5236E93C8_134008.pdf








Orient Electric has become established player in lighting, switchgear and home appliances products such as air cooler, water heater, induction cooker, mixer juicer grinder, blender and kettle under the brand name of 'Orient' in last few years. It makes the company direct competitor of Havells India,  Crompton Greaves Consumer Electrical and Symphony. Demerger of Orient Electric will unlock decent value for investors if we analyse and compare these companies with Orient Electric.


Orient Electric business performance for  2016 -17 in all its product segments.

  • Orient Fan registered 11% growth in the domestic market, growing faster than the industry average 5 -6%.
  • Orient’s lighting trade business grew by 12%, higher than the industry average  growth of  5%.
  • Orient Home Appliances has registered a 35% revenues  growth against  the industry averaged growth of 5% in FY 2016-17
  • Orient Switchgears has achieved a total 19% revenue growth over last year.


Manufacturing capacity has improved with the opening of new plant at Guwahati to cover low penetrated north -east region.

Aggressive stance is being taken to open “Orient Smart Shops” in all major cities to improve customer experience with the brand. In the long run it will turn the traditional business model of the company into  asset light franchise business model.

Orient Electric is getting a good opportunity for strengthening its presence because with implementation of GST there is gradual reduction in market share of the unorganized sector, it will reflect in results of  coming quarters.

Introduce disruptive innovation in fans covering unaddressed segments, it resulted significant gain in market share of premium fans segment. Company has launched of several premium models of fans and coolers to shift the focus toward fast growing high margin business. 

Improve market share in the consumer lighting  segment and increase brand recall.

Participate aggressively in the street lighting   business.

Aggressive positioning and acquisition of market  share in air-coolers and small appliances segment


Increase e-commerce retailing and presence in  modern organised retail








Company has taken several steps in past few years to ensure the turnaround of paper division. It is mainly as a result of cost reduction and efficiency improvements.

Focus shifting towards high margin tissue paper business, Orient has 85,000 TPA of paper capacity split as  60,000 TPA of writing and printing paper and 25,000 TPA of Tissue paper. Tissue paper demand in India continues to register double digit growth with an equally strong export market. Orient is doubling its capacity in tissue plant to 55,000 TPA and reducing the production of low margin writing and printing paper to 45000 TPA.  Tissue paper expansion project have started commercial production with effect from 1st May 2017. This will double  the tissue paper capacity and further consolidate the  position as  the largest  producers and exporters of tissue papers from  India. This will also contribute to increasing volumes and profitability of the paper business in coming quarters.


http://orientpaperindia.com/beta/resources/fck_upload/EC20Tissue203dt17thOct16.pdf


Company has been able to resolve problem of power shortage by setting up a captive power plant of 55MW capacity and obtained additional coal linkage sufficient to  meet the total coal requirement.

Increased pulpwood plantation covering 2026  hectare and planned to increase by 50%. to achieve enhanced raw material security and tie up with local farmers for sourcing supply of pulpwood.

The water shortage issue has also been addressed by constructing another reservoir to increase our water storage capacity by a further 130 million gallons, which enhances our total  storage capacity to 720 million gallons to overcome this problem of water shortages.


Amlai plant has reduced the water consumption by nearly 40% and achieved zero liquid discharge


Other significant assets held by the company it will remain with Orient Paper after demerger.

  • Orient  paper  has  a  land  parcel  of 800  acres  at Brajarajnagar,  Odisha,  
  • Orient Paper & Industries Ltd  hold 1,545,140 shares of Century Textiles and Industries under public shareholding is worth  of Rs 185 crores
  • Orient Paper & Industries Ltd hold  906,360 shares of HIL under promoter shareholding is worth  of Rs 100 crores


Conclusion


'Orient' is very strong and well established brand in electrical consumer products in India.  Lighting, consumer durable segment will be the direct beneficiary of the rise in disposable income from pay hikes,  housing for all,  implementation of GST for organised players. Home appliances have a very low penetration in rural part of India with improvement in power availability, increase in disposable income and shift in focus on branded category products is giving good growth visibility for longer period. The company is continuously improving its product quality and introducing  a new lifestyle-based product range which are having very good growth potential.

The stock is trading since last 4 -5 months in range of Rs 80 - 96. It has not participated in any rally due to demerger  process pending with NCLT. Now it is in the last stage of demerger process so it is right time to enter before announcement of record date. Orient Paper & Industries at cmp 96 is giving very good investment opportunity for short term as well as for long term. It can be bought +/- 10% from cmp with allocation upto 20%.

Monday, 22 May 2017

Value Pick - The Mandhana Retail Ventures Ltd - Being Human-CMP 194

Image result for being human poster salman khan
The Mandhana Retail Ventures Ltd
  Listed on both NSE: TMRVL & BSE: 540210
Currently trading around 194.75 with a market cap of around 440 crores.
Promoters hold 42.95% stake.
It has a Total Debt of around 19 crores.

The Mandhana Retail Ventures Ltd (TMRVL) is the demerged branded clothing business of Mandhana Industries. TMRVL is in the business of design, manufacture, retail, distribute: men, women, kids clothing & accessories as the Global Licensee of the brand Being Human till atleast 2020.

Being Human Clothing needs no introduction, The fashion brand under the Being Human NGO run by one of India's biggest superstar Salman Khan. The NGO with its philanthropic activities hasevolved wonderfully over the years. Its fashion venture Being Human Clothing has also done great. 

Today TMRVL operates: 60 EBO (Exclusive Brand Outlets) stores of Being Human across India and 5 EBOs overseas in Nepal, West Asia, France, Mauritius. The company as per reported data as on Oct end 2016 had 650 Point of Sales in Total for Being Human by EBOs, MBOs, Franchisees and Online partnerships.

The company now wants to focus on Tier II, Tier III cities by opening 100 new Being Human stores in the next two-three years as well as focus on going global as per news reports.

As per recent Media Reports quoting the management. The company besides Being Human is keen to get into similar business partnerships with other celebrities not only with Bollywood Starts but also the Indian Sports Fraternity by releasing their labels and paying them royalties.

Lets now take a look at financials and valuations of the company :-

As you can see TMRVL is undervalued compared to two of its peers,  TMRVL is available at a P/E of 14x with Market Cap to sales of 1.85 while Indian Terrain trades at a P/E of 31x and KKCL trades at a P/E of 25x.

Both Indian Terrain and TMRVL have similar percentage of promoter stake pledged. So that should not be a major driving force in the rating mismatch.

At valuations of 30x TMRVL should trade at 417. That is a potential upside of 111% against current price of 197.

TMRVL enjoys the advantage of indirect and direct marketing and endorsement by Salman Khan as he sports the Being Human Clothing all the time at Public Appearances as well as in his movies. The key negative here would be the dependence on one brand Being Human and the Brand's dependence on one man Salman Khan.
However, The company's plan to tie up with other celebrities can negate this risk and dependence on Being Human Brand.
Plus: Salman Khan's friendships get him a lot of Models (other bollywood celebs) for this brand,  If Salman can get someone like SRK to also endorse the brand its going to get a lot of hype.

As per latest Shareholding Pattern filing for quarter ended March 17- Rakesh Jhunjhunwala holds 12.74% stake and Ramesh Damani holds 1.03% stake. Recently, ChrysCapital acquired 3% stake at Rs 200 per share.

Technically on the charts: If we plot the daily line chart we have a sort of falling wedge breakout in TMRVL which activates on closing above 200.


All in All, I feel this is a good under valued opportunity available in the market as the stock has not run up at all. With Salman's Tubelight releasing this Eid on 23rd June it can be another trigger for the stock. Tubelight has a Cameo of Shah Rukh Khan and both the superstars are going to be seen together on the silver screen after 10 years.