Q2 RESULTS UPDATE - WATERBASE

WATERBASE

Company has posted excellent results for Q2. Revenue growth 21% and PAT 48% YoY. It is in line with our expectation. Management has given complete details about company proceedings along with Q2 results. Expansion of dealer network in Gujarat, Tamil Nadu, West Bangal and shrimp farming others states is in progress, company has restarted the export to EU and US. Hatchery project and merger of PFL with Waterbase is moving as per schedule.

Why the stock has fallen today?

Several short term traders / investors were caught on wrong foot because they have taken position for quick gain by misinterpreting the merger of PFL in Q2 and hoping that revenue will reflect in this quarter.  

There is no any negative concern about the company, it is growing very aggressively as per plan.

It become another opportunity for long term investors to buy or add at lower level.


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Kothari Petrochemicals - Changing with Time

COMPANY                                                                 CMP -18

Kothari Petrochemicals is the largest producer of premium quality Polyisobutene (PIB) in India.There are only two other manufacturers of PIB in the Country. Since inception in 1990, the company has enjoyed a strong market position in India with a rapidly growing 'KVIS' brand across the globe that represents quality, customer responsiveness, dependability and a commitment to the environment. In 2008, Kothari Petrochemicals commissioned a second plant in Manali that doubled the production capacity to 22,000 MT per annum in order to supply Polybutene worldwide. Company has offices in Chennai, Manali, Mumbai and Belgium, and supply to customers in 20 countries around the world. Company has grown as a trusted supplier to many large lubricant manufacturing companies, such as Exxon Mobil, Infineum, Chevron, BP, Castrol and Lubrizol.

Company has bought the rights to use the patented Cosden Technology, USA.  With continuous innovation and technology improvements it has consistently maintained high quality to meet the changing demand of new products across the globe. Its product find market in developed countries which are dominated by chemical giants like BASF, INEOS, Infineum, Lubrizol and TPC but these companies are buying the products from Kothari Petrochemicals due to high quality and competitive price. Company posses required certification like ISO 9001, ISO 14001 and REACH.

Management

Nina B Kothari is daughter of legend industrialist Dhirubhai Ambani, founder of Reliance Industries and sister of Mukesh and Anil Ambani.  During Reliance division in 2005 both sister Nina Kothari and Dipti Salgaocar has received 5% stake each in the Reliance empire, mother Kokilaben herself, Mukesh and Anil Ambani has get 30% each. Nina has been appointed Chairperson of Kothari Petrochemicals Ltd and all other 25 companies of HC Kothari group, with effect from April 8, 2015. Her husband and eminent industrialist B H Kothari, who was the Chairman and Managing Director of these companies, passed away due to prolonged cancer on February 22, 2015. She survive with her son Arjun and daughter Nayantara (married to Shamit Bhartia of Hindustan Times & Jubilant Group). Arjun B Kothari  has been appointed as a Managing Director, Key Managerial Person and an Additional Director of these companies, with effect from April 8, 2015. 

Nina Kothari is born and brought up in business environment. She has monitored struggle and growth of Reliance business empire on daily basis. Even after marriage she is active in business and hold directorship of several group companies. She has also launched "Javagreen", a nationwide chain of coffee and food cafes. Earlier most of the business decision were taken by B H Kothari but complete family was disturbed due his serious sickness and several decision were on hold. After death of her beloved husband all responsibility came on her shoulder to run the HC Kothari group.

Her speech on 10 Aug 2015 the AGM of the company in Chennai has given surprise to the share holders and proof of her talent that she is fully determined and focused to take this company to next level. Within few months she has taken several decision to expand and further increase the profitability of the company as given below (details in company web -Chairperson’s Speech).

• Company has reduced its risk of raw material supply by entering into an agreement with M/s. Haldia Petrochemicals Limited, Kolkata for sourcing raw material on a long term basis with a transparent pricing mechanism.

• Company is in process to enter agreement with Chennai Petroleum Corporation Ltd for supply of additional quantity of raw materials and to reduce the dependence on other suppliers. It will further reduce the input cost considerably. 

• She has taken efforts towards shifting the product line from conventional PIB to high reactive HR PIB.

• Recently company has increased the production capacity to 24,000 TPA with minor modification in existing plant.

PRODUCT APPLICATION

KVIS is the trade name of polybutene produced by Kothari Petrochemicals. KVIS is a linear polymer of isobutylene of different molecular weights, and possesses excellent resistance to oxidative and thermal degradation. Polybutene is chemically inert, virtually non-toxic and non-phytotoxic  hydrophobic and impermeable to water vapour or gas. All these unique characteristics and its compatibility with a wide range of organic materials augment the performance properties of a wide range of products in various industries, and have made it one of the most sought after product in the world. 

LUBRICANT AND FUEL ADDITIVE

KVIS find very vast application in lubricant and fuel industries because it demonstrate very low deposit formation. Unlike typical lubricants, KVIS polybutenes depolymerize cleanly when heated above 250 degrees Celsius.

KVIS is used as additive in two stroke engine oil  and it is well proven cost effective alternative for lowering emissions in two-stroke engines. It activate cleaner burning - reduced corrosion and scoring and elimination of engine deposits.

POLYMER & RUBBER MODIFICATION

KVIS polybutene is often used in polymer modification processes.  Polypropylene random and impact co-polymers modified with polybutenes can have higher melt flow rates, greater elongation, flexibility, tear resistance and improved impact strengths. It is used in several rubber and plastic product industries like Tire, Asphalt, Electric cables, Explosives, Flex tubes, PPEs, plastic sheets etc,

KVIS polybutene is the ideal for linear low density polyethylene (LLDPE). Polybutene offers excellent cling properties to the film when added to LLDPE. The major areas of application for LLDPE are pallet stretch wrap and bale silage wrap.

ADHESIVES & SEALANT

KVIS polybutenes are vital ingredients in many pressure-sensitive adhesives (PSAs) and hot-melt adhesives (HMAs). These emulsions also offer enhanced adhesion and temperature stability while lowering adhesive costs. 

Polybutenes decrease the melt index and increases the cold temperature flexibility. Examples include packaging, disposable soft goods, carpet, shoes, furniture, book binding, carton sealing, labels, adhesive tapes  and product assembly.

PAINTS, INKS & COATINGS

KVIS polybutenes are a viable alternative to acrylic bases, since it improve water resistance, excellent adhesion,  surface finishing and result in lower manufacturing costs.

Application in wall putty, waterproofing for porous substances, such as wood or concrete, hot-applied thermoplastic road marking paints, masonry paints, spray paints, paper coatings etc. KVIC polybutene improves processing and print image quality. It ensures uniform flow of ink in gel / ball point pens.


COSMETIC & PERSONAL CARE

KVIS polybutenes are pure, clear and practically non-toxic polymers. It increase the thickness of the lipid (oil) portion of cosmetics and personal care products. It functions as a thickening and film-forming agent and does not penetrate skin due to its large molecular size. Personal care products like lip-gloss and roll-on deodorants are formulated with polybutene.

It finds various application in skin, hair or nails care products  like lip-gloss and roll-on deodorants are formulated with polybutene.


GROWTH & MARKET DEMAND


Few year back company has invested to setup the wholly owned subsidiary companies in Singapore and Hong Kong (Kothari Petrochemicals Pte. Ltd., Singapore and Kothari Petrochemicals HK Ltd., Honk Kong) to capture the growing market of its product in Asia Pacific region.

CONCLUSION

Company has wonderful product, well established brand with wide application in different industries. Company has expanded its reach to all corner of the world. Its product will remain continuous in future demand. 

Even at current price, stock is highly undervalued by seeing the strong fundamental, promoters' capabilities, future growth and demand of the product.

Stock statistic : Price - 18.55, Market Cap - 100 Cr. , P/E ratio - 8.4,  Dividend Yield - 5.9 % 
   
In last blog I have mentioned about direct beneficiary companies of falling crude oil prices, it is very visible in last 3 - 4  quarter results of this company, NPM  and OPM has improved significantly  after fall in crude oil last year.

Investors can buy it and hold for multiple return.

Collapse of Crude Oil has triggered Rise of Indian Economy

Our blog readers have posted several comments on low price Oil and Steel stocks. This post will help to provide necessary update on current situation.

CRUDE OIL

Crude oil prices have been falling since  last year. This is because production grew faster than projections and demand deteriorated faster than expected, resulting in an excess of oil for sale in the world. In April 2015 Iran signed an agreement to end its nuclear program and let in international inspectors to prove its commitment. After confirmation of Iran's compliance,  sanctions were removed and bring Iranian oil to international markets. Currently Iran is  producing  3 million barrels per day. Iran's intention to further ramp up the oil production has fallen like thunderbolt on growth of OPEC countries. Oil prices will continue to be subdued because OPEC is not cutting down production and alternative sources of energy are adding to the supply. The Russia added fuel to fire by refusing to bend to market forces and so have made up the shortfall in their budget caused by falling oil prices by pumping out more oil. The Russian need for income means they are unlikely to make a tactical cut in oil output. Increased production adds to the downward pressure on crude oil prices.  The fall in crude oil prices is a blessing for the Indian economy as it would reduce India's current account deficit, aid infrastructure development, help in saving precious Forex reserves and also benefit manufacturers as their input cost will go down. Recent fall in Chinese growth projections and the end of sanctions against Iran have given the reason to downgrade the projections of crude oil prices. The oil price is not going to rise in near future.

Indian manufacturing sectors will have a very positive impact due to falling oil prices directly as well as indirectly for automobiles, plastic, petrochemicals,  paints, tire, fmcg, lubricant , synthetic yarns, aviation etc. Oil drilling and exploration companies will get impacted negatively. Overall, the collapse of the oil prices and Chinese slow down will have positive out come for the Indian economy.

COTTON

Cotton prices also have crashed since last year. China's cotton and textile industry is on the decline as its competitiveness is hurt by decreasing labour availability , old manufacturing  machines and process  increasing production costs. Global market share of China for cotton demand is decreasing at 1% per year, while India will increase its share at same rate 1% year and this trend will continue for next 4 -5 years. Indian Prime Minister Narendra Modi has pledged to boost manufacturing in the country and launched the 'Make In India' campaign by improving the business environment and favorable business policies and rising investment in textile sector, a young demographic profile and competitiveness as a low cost production base will support growth in the textile sector, in turn boosting the exports in medium term.

Biggest beneficiary of lower cotton prices and decline of Chinese textiles industry will be Indian garment industry. Specifically high quality garment manufacturing companies will have better margin in internal market as well as in export. 

STEEL

Surplus steel production from China has led to a crash in steel prices. China is now selling its excess steel to other countries at very cheep rate. It has put tremendous pressure on Indian steel industry and other global metal producers. It has impacted negatively on mining and steel companies in India.

End user companies and those converting  steel into final products are getting maximum benefit of low cost steel because they are not passing the benefit to consumer in same ratio. It will also help infrastructure  companies as well as Indian government in mid term.

In the  series of Best Stock Picks next stock will be posted on 16.10.2015. It is low price, very strong fundamental stock and it will get immense benefit from fall of above commodity prices.

We received several comments regarding low price stocks. Several blog reader holding penny stocks without any fundamental and poor growth prospectus. They can swap it with this stock for decent gain.

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