APM INDUSTRIES LTD – Cash Rich Yarn Company

Disclaimer: This Blog, its owner, creator & contributor is neither a research analyst nor an Investment Adviser and expressing opinion only based on information available on various websites on internet. He is not responsible for any loss arising out of any information, post or opinion appearing on this blog. Investors are advised to do own due diligence and/or consult financial consultant before acting on any such information.

Company Profile

APM Industries Ltd (BSE Code 523537) was incorporated in 1973, belonging to the Rajgarhia group. Other listed companies under common control are Orient Abrasives Limited and Orient Refractories Limited.

The company is engaged in the manufacturing of synthetic blended yarn. State-of-the-art technologically advanced factory of the company is located in 30 Acres land at Bhiwadi (Rajasthan), about 80 Kilometers from Delhi.

The company is a techno-savvy and quality conscious. Complying with stringent quality test at all levels; be testing of Raw Materials to the Finished goods products, is done cautiously an in-house Quality Control Laboratory. The company has state of the art R & D Department wherein various new products developed.

In 1993 the company had 20000 spindles which are now increased to 50336 spindles that produces 18000 Metric tonnes of Yarn annually. The Company has installed a power plant of 2.5 MW capacity during the year 1999-2000 to reduce dependence on grid supply.

Financial performance:

Particulars	Comparative Figures (Rs. In crores)
FY	2010-11	2011-12	2012-13	2013-14	2014-15	9 month Dec, 16	2015-16 Estimated
Sales	242.94	258.85	291.09	307.47	313.36	213.35	290
Net Profit	13.82	12.61	22.06	21.42	18.85	15.32	21
Borrowing	62.42	34.55	26.52	12.72	10.79	10.89	10
Finance Cost	5.93	5.14	3.20	2.62	1.87	1.11	1
Investment in Tax free Bonds/ Mutual Funds	1.76	1.90	8.08	12.58	32.57	36.57	45
Income on Investments	0.69	0.97	1.42	2.98	2.64	3.41	5
Capital	4.32	4.32	4.32	4.32	4.32	4.32	4.32
Reserves and Surplus	121.31	131.41	148.45	163.79	174.51	185.94	196.57
Dividend	30%	30%	80%	100%	135%	75% (Interim)	200% (Total)
Promoter Holding	62.62%	62.81%	62.61%	61.61%	61.64%	63.65%	63.65%

Reasons for chose APM Industries Ltd.

1.     Raw material prices of APM depend on crude prices. We have seen drastic fall in crude prices resulted lower prices of raw material. Now crude price is stabilize and various experts are saying that it will be stable around same level for next two years, due to supply of Iran crude will come in the world market. This will be beneficial for the company.

2.     Due to lower raw material cost selling prices of finished goods (yarns) also decreased. Despite of lower selling prices company is able to maintain sales around Rs.300 Crores. There is no fall in demand and company is running its full capacity. Good Quality Yarns produced by the company are in demand of various leading textile manufactures.

3.     Due to erosion in value of stock, the company has written off Rs.10 Crores stock value in first nine months of FY 2015-16. Now crude prices are bottomed out and company will not face such situation in coming quarters.

4.     Till December 2015, profit was Rs.15.32 crores and in view of previous two quarter results total Net Profit for FY 2015-16 will be around Rs.21 Crores. Despite fall in selling prices and write off of Rs.10 Crores stock value company is able to maintain profit levels. In FY 2016-17 Net Profit may be 50% higher than FY 2015-16.

5.     These days, we are hearing much noise about loan defaults by the various companies resulted sharp jump of NPA and mess in Banking Sector. It has also resulted more than 90% fall in share prices of the some defaulter companies, a big loss to small investors who have not timely exited from these companies.

APM management is extremely reliable, efficient with low overheads. Company is reducing the debt every year and it has reduced debts from Rs.62.42 crores in March 2011 to Rs.10.89 crores in December 2015.

6.     From FY 2010-11, company is generating surplus cash and invested it in Tax free Bonds and various Debt mutual funds. In March 2011 such investment was Rs.1.76 crores which increased to Rs.36.57 crores in December 2015. Income on Investment is also increased from Rs.0.69 crores to Rs.3.41 crores. From FY 2015-16, Income on Investment will cross the amount of equity capital Rs.4.32 crores.

7.     In December 2015, against investment of Rs.36.57 Crores, total debts were Rs.10.89 crores only. Therefore, the company is virtually debt free.

8.     Promoters are investors friendly and long track record of dividend payment. The company has increased dividend from 30% in FY 2010-11 to (50+85) 135% in FY 2014-15. In FY 2015-16 has already declared interim dividend 75% against previous year’s 50%. Now company’s board meeting is scheduled on 11^th March 2016 for second interim dividend. Looking in view of 50% increase in first interim dividend company may also increase second interim dividend 50%. Therefore, second interim dividend would be around 125%, and total dividend 200% in FY 2015-16.

9.     Dividend yield comes 7% tax free, based on expected 200% dividend in FY 2015-16 and current share price Rs.57. It is more than one year Fixed Deposit taxable interest. Looking EPS of Rs.10, it is trading at PE ratio 5.7X. In view of such strong fundamental company it should trade around 12X- 14X. During recent market fall it has shown strong resistance around Rs.50.

10.  Recently, company has announced to enter in NBFC business through incorporating a subsidiary company. Company would realise better returns on surplus cash invested in Tax free bonds and mutual funds. Promoters are already having experience of running another NBFC company under common control - Rajgarhia Leasing & Financial Services (P) Limited.

11.  Senior blogger http://value-picks.blogspot.in/2010/08/apm-industries-buy.html (who had advised various multi baggers) advised APM Industries Ltd on 22^nd August 2010. Another person http://www.arunthestocksguru.com/2013/01/apm-industries-ltdbuysellgrowth.html has also advised APM Industries Ltd on 8^th January 2013.

From then, there are various quality improvement in the company’s financials, dividend payout etc already discussed above.

                

VTM LTD - Board meeting for interim dividend

Board meeting of VTM LTD is scheduled on 07^th March 2016 to consider interim dividend. As earlier posted, company is almost debt free and having around Rs.50 crores cash surplus invested in various mutual funds. We may expect decent interim dividend by the company.

Happy Investing.

VIDHI DYESTUFFS MANUFACTURING LTD - Today listed on NSE

From today Vidhi Dyestuffs Manufacturing Ltd listed on NSE. Company has posted decent Q3 results and declared 20% interim dividend in February 2016. In FY 2015-16, company has declared three interim dividends of 20% each after every quarter results. We may expect total dividend of 80% in FY 2015-16 against 50% declared in FY 2014-15.

Happy Investing.

TEN IMPORTANT POINTS ABOUT INVESTING

My messages are for fundamental value investors only. All else, traders, must stay away. My time frames and reasons to buy is not match to traders, and even my profit expectations from an investment will be higher.

1.     It’s very difficult to find multi-baggers. It’s extremely difficult to find five multi-baggers at a time. It’s impossible to find ten multi-baggers at a time.

2.   Do not focus on chasing gains in every opportunity the market offers. Instead of chasing opportunities, be extremely choosy in selecting stocks and make a portfolio with target to double in a year.

    That could turn Rs.1 Lac into Rs.10 Crores in 10 years.

After 1 year	After 2 years	After 3 years	After 4 years	After 5 years	After 6 years	After 7 years	After 8 years	After 9 year	After 10 year
2 Lacs	4 Lacs	8 Lacs	16 Lacs	32 Lacs	64 Lacs	1.28 Crores	2.56 Crores	5.12 Crores	10.24 Crores

3.     Select a stock that can be held for at least a year because there is a clearly identifiable story behind it, that may go say 3 times in a year because the EPS will rise, accompanied by some PE expansion from a low PE-base, so that with some degree of errors also, the stock should go up twice in a 12 month period. 

4.     Not many such stocks would exist, especially with good or even reasonable track record. At least, not many such are clearly visible that can be held for 12 months and at the same time providing 3X-4X returns within that time. Therefore, whenever one is seen, stick to it, and give it time to unfold over that 12 month period. If necessary, stick to just 2 to 5 stocks - instead of chasing 1-3 month trades in 15-20 stocks.

5.     This method of concentrated portfolio and seeing it grow also saves one from Operators` suck-ins, because, many stocks indeed doubles but not necessarily for the right reasons and not really from cheap valuations. When it is almost impossible to accurately judge the future profits, provide excessive importance to present valuations and past track records – because there are no guesses in there.

6.     The key to making money in stocks is known as "Buy Right, Sit Tight". Money is made by sitting, not trading. It takes time to make money. Nobody can catch all the fluctuations.

7.     If one truly knows what the price will be "daily / weekly / monthly basis", he is either God or is an Operator. The rest, at best, would make an "excellent guess" why and how a business may perform and, therefore, how its stock price should behave "over time".

8.    Valuations will change based on actual business performance. Therefore, quarterly results must be taken as the proof of the correctness of that "guess", although just one bad quarter, in between, almost always will not be the correct indicator of a guess going wrong and vice versa.

9.    Investment is like “watching grass grow” - patiently. In that context, SMSs, questions about short term price movements, time-to-time advice seeking etc. is irrelevant. Stock price changes over medium to long term depend on how much extra profit will be made. Therefore, instead of the stock price and targets, focus on why Net Profits will increase. 

10.  Diversification is for HNIs / FIIs / Mutual Funds, who have to spread their crores of rupees in that manner because they cannot put that much money in 4-5 stocks. The Market Cap of the stocks will just not be able to absorb that kind of money during buy and during sell. Therefore, all the opinions in news, analyses, and articles written by these institutions always reflect about diversification.

Disclaimer: I am not a research analyst. Please take your own decision after reading the results, annual reports, other informations available about the company.

Wish a Happy and Prosperous New Year 2016 to all blog viewers.

This blog is dedicated to Small Investors, who often lose their hard earned money on stocks bought on TIPS received from friends, brokers, SMS from operators. These Small Investors do not understand to analyse the Balance Sheet, Company Business.

This blog has received 30,000^th hit today on start of New Year 2016. A Big thank you to all blog viewers for overhelming support.

Performance of stocks suggested on this blog is as under:

Sr. No.	Name of Stock	Suggested on	Suggested Price Rs.	Touched High after suggested on	High Price Rs.	Price on Today Rs.	About Stock Idea
1	Nitin Spinners	07.09.14	26.50	06.08.15	107.25	77.00	HIT
2	Vidhi Dyestuffs	18.05.15	19.00	07.12.15	80.25	76.00	HIT
3	VTM Ltd	07.12.15	24.00	01.01.16	43.35	43.00	HIT

One Stock Karnataka Bank was suggested on 12.07.15 at Rs.150.00 not done well due to negative market sentiments about Banking Sector stocks. However, it is available at Rs.124.00 with tax free dividend yield of 4% equal to Saving Bank interest rate offered by various banks. I believe that when market sentiments will improve about Banking Sector stocks, it will recover fast.