Market Update

Dear Readers,

Last week we have seen positive trend in the market after continuous fall of three weeks. Some confidence came back among investors and those who are comparing it with 2008 also become positive after seeing the change in overall market sentiments. Now we can see several positive news in media again, some useful are given below 

India bucks global steel output trend in 2015; prod rises 2.6%

http://www.moneycontrol.com/news/economy/india-bucks-global-steel-output-trend2015-prod-rises-26_5158761.html

India less vulnerable to external shocks; CAD seen at 1.4%: S&P

http://www.moneycontrol.com/news/economy/india-less-vulnerable-to-external-shocks-sp_5158401.html

Global growth strong; expect dovish Fed statement: JP Morgan 

http://www.moneycontrol.com/news/fii-view/global-growth-strong-expect-dovish-fed-statement-jp-morgan_5164301.html

FinMin to organise India Investment Summit on Feb 4-5 

http://www.moneycontrol.com/news/economy/finmin-to-organise-india-investment-summitfeb-4-5_5175281.html

China impact minimal on India; see earnings uptick in FY17: HSBC 

http://www.moneycontrol.com/news/fii-view/china-impact-minimalindia-see-earnings-uptickfy17-hsbc_5186001.html

Mkt close to bottom; pick-up in investments key: Credit Suisse

http://www.moneycontrol.com/news/market-outlook/mkt-close-to-bottom-pick-upinvestments-key-credit-suisse_5185981.html

8% growth possible; Opposition must allow key reforms: FM 

http://www.moneycontrol.com/news/economy/8-growth-possible-opposition-must-allow-key-reforms-fm_5214201.html

Overall Indian economy will remain positive and any market correction should be taken as opportunity to add good stocks.


In the  series of Best Stock Picks next stock will be posted in between 03.02.2016 (Wednesday) to  08.02.2016 (Monday). There will not be any clue to guess the stock.  

Investment Strategy - Quotes

Dear Readers,

Last two weeks of market fall has given good learning and investment opportunity. Diamond and dust belong to same soil but their ability to resist the heat and pressure makes huge difference in their valuation. It was tough testing time for new investors and market fall has shattered not only the price of good stocks but also confidence level of investors. It is time to refresh with experience of legend investor Warren Buffett, who has characteristics like diamond and defeated several similar situations for decades.

Buffett explains, “To be fearful when others are greedy and to be greedy only when others are fearful.”

"The basic ideas of investing are to look at stocks as businesses, use market fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing."

There is no hidden secret of investing except below

 Golden Rules

1. Concentrate your investments in good companies run by strong management.

2. Limit yourself to the number of companies you can truly understand.

3. Pick the very best companies, and put the bulk of your investment there.

4. Think long-term.

5. Volatility happens, carry on with all situations.

"Buy business, not stocks, the businesses that willing to own forever. The business which is simple and easy to understand. All you do is buy shares in a great business for less than the business is intrinsically worth and priced attractively relative to their future prospects, with management of the highest integrity and ability. Then you own those shares forever."

"It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price. 

"I want to be in businesses so good even a dummy can make money."

"Look for the durability of the franchise. The most important thing to me is figuring out how big a moat there is around the business. What I love, of course, is a big castle and a big moat with piranhas and crocodiles."

"In evaluating people, you look for three qualities: integrity, intelligence, and energy. If you don’t have the first, the other two will kill you."

"Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be mis-appraised."

"Success in investing doesn’t correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

"We don’t have to be smarter than the rest, we have to be more disciplined than the rest."

When to Buy

When the stock market forces the price of a good business downward.

When a specific risk temporarily punishes a business.

When investor indifference allows a superior business available at half of its intrinsic value

What to Buy

• Is the business simple and understandable, with a consistent operating history and favorable long-term prospects?

• Is it run by honest and competent managers, who allocate capital rationally, communicate candidly with shareholders, and resist the institutional imperative?

• Are the company’s economics in good shape with profit margins, owners’ earnings, and increased market value that matches retained earnings?

• Is it available at a discount to its intrinsic value?

"Investing is not that complicated. You need to know accounting, the language of business. You need the right mind-set, the right temperament. You should be interested in the process and be in your circle of competence." 

Above quotes of Warren Buffett explains complete philosophy of stock market investment. Only need to evaluate our stand and situation with above. It is never too late to realign now.  

I came to the psychology of misjudgment almost against my will, I rejected it until I realized my attitude was costing me a lot of money. - C. Munger

Free Fall of Chinese Market

Chinese Economy

Chinese stock markets hit lower circuit twice in week and trading was suspended for rest of the day. It has created unrest among other Asian and World markets.  Actually there are several reason for free fall of Chinese economy which are self created by China. Dumping low quality products at lower price around the world has eaten its internal structure like termite. This strategy will not last longer and it will lead into further deep trouble with exhaust of its resources. Most of the manufacturers in China are suffering and become inefficient without any growth. Now world has come to know about the reality of inflated Chines growth data. Recently World Bank has given forecast of China's GDP growth around 6.7 % but several economists suspect that actual growth rate might be much lower than 6 %.

Indian Economy

On the other hand India is growing steadily and strongly above 7% growth. Indian companies have strong sustainable infrastructure and GOI making policies to maintain fair margin and growth. Crude oil prices are major factor for budget deficit in the past. But this time it become most favorable factor for growth of Indian economy. Recovery of crude oil price in near future is not possible by seeing the tensions in the middle - east with involvement of Russia and Iran. North Korea has joined the party by  test explosion of  hydrogen bomb, it has caused serious concerns to South Korea and Japan. India is house of  20% of world population, it means for Indian companies there is huge market available in home and Indian companies having strong presence in south east, middle east and African countries. Nothing to worry until crude is trading below 80$/b. If we analyze the situation of Indian economy in relation with China than there is nothing to worry about it. It is temporary fluctuation similar to last year in August.

Recent market correction has given good opportunity to buy stock like DTIL and Technocraft at much lower level. Technocraft is corrected more due to buyback offer at 270. Hopefully it will start moving up after completion of buyback offer in next month.

Surana Solar & Sunrise Sector - Sunny Days Ahead

Wishing you Cheerful and Prosperous

Happy New Year 2016

SURANA SOLAR LIMITED                                                                 CMP -  23

 Indian Solar power Industry Overview

“Green Energy Revolution” has been rolled out in India by harnessing the abundant and clean energy of the Sun. Solar power sector in India has shown exponential growth in recent years. Solar power generation capacity has gone up from  20 MW  in 2009 to 3740 MW as on 31.03.15.

Past growth is just fraction of what  Union Cabinet has given approval on the 17th of June 2015 to increase the solar power capacity target under the National Solar Mission  to achieve 100 GW by 2022. It has  40 GW Rooftop and 60 GW Grid Connected Solar Power Projects and approximate expected investment of Rs 6500 billion ( $100 billion). It is almost 26 fold growth in solar power generation capacity in seven years (2015-2022). 

It is very much possible because India is among the top five low cost solar power producer and also among top receiver of high bright sunshine total hours per year in the world. India has more than sufficient rooftops and infertile uncultivated land to install PV panels for 100 GW solar energy generation, which is 40% of  current  peak power demand. 

http://pib.nic.in/newsite/PrintRelease.aspx?relid=122567

The government has taken several steps to  create a liberal environment for foreign investment in renewable energy sector.  Some are listed below.

• 100% FDI is permitted under the automatic route for renewable energy generation and distribution projects
• 10-year tax holiday for solar power projects and manufacturing units.
• Full exemption on excise duty is being provided on round cooper wire and tin alloys for use in the manufacture of solar PV ribbon for manufacture of solar PV cells.
• The excise duty on solar water heater and system is restructured from 12% to NIL 
• Exemption from excise duties and concession on import duties on components and equipment required to set up a solar plant.
• Guarantee given for solar power purchase and  obligation for  related states.
• Special incentives for exports from India in renewable energy technology under renewable sector-specific SEZ.
• 30% subsidy on the project cost for off-grid PV solar projects.
•  It conditional to use 30%  'Made in India' PV modules, cells and other related equipment for all projects for above benefits. 
• Setup of 'THE SOLAR ENERGY CORPORATION OF INDIA' to facilitate and monitor the development.

You can find full details in below given links

http://www.makeinindia.com/sector/renewable-energy

http://seci.gov.in/content/

Solar Power Industry Structure 

Solar Power Industry is mainly divided in below three segments.

• Project Developer          

Developers are the owner of project and  responsible form land accusation to final connecting the generating station to the grid.  The entire cost of the project, loan, profit & losses will be borne by the developer. Developer companies are with long term high investment capabilities from India and across the globe. Mostly cash rich big companies are queuing to grab the opportunity.

• Engineering, Procurement and Construction (EPC)     

These companies are providing EPC  services to other solar power developers. These companies will get good business and benefits without any major investment. Quality and execution time is important for these companies to meet the deadline.

• PV System Manufacturing

Indian Solar PV equipment manufacturers  will also get decent business and benefits from the substantial investments in solar power sector. It include manufacturing of PV cell, PV module, PV thin-film, solar lanterns, solar home lighting system, solar pump, solar street light and other SPV products. GOI has made compulsory to use 30% 'Made in India' equipment to give the benefit to the local manufacturer. These companies are with manufacturing capabilities and required technology. Need initial investment to setup of manufacturing plant and  to acquire the technology but no major investment required for those companies who already have these capabilities. 

You can find full detailed report on solar industry in below given link - page #  55 for Surana Solar

https://www.db.com/cr/en/docs/Deutsche-Bank-report-Make-way-for-the-Sun.pdf

Investment Rationale 

1) The Surana Solar Limited has been successfully running the Two Manufacturing units for the Modules at Cherlapally and Fab City (Renewable sector-specific SEZ) in Hyderabad. Recently the Company has completed the expansion of fully automated Silicon Wafers, Solar Photo voltaic module manufacture unit and two Solar Cell  lines from Schott Solar, Germany. With this expansion now total manufacturing capacity raised up to 120 MW per year.  Company is also in the advance stage of finalizing 35 MW thin film manufacturing plant and diversifying into LED bulbs and tubes manufacturing to tap the increasing  demand for LEDs in India with an initial capacity of 1 million units with investment  of Rs 5 crores. It has wide solar product range i.e. PV cell, PV module, PV thin-film, solar lanterns, solar home lighting system, solar pump, solar street light and other SPV products.

2) Surana Solar is one of  the very few top vertical integrated listed companies which are purely engaged in solar system manufacturing and solar power EPC . It has strong balance sheet, low equity base, low manageable debt and continuous dividend paying track record from inception. Surana solar was almost debt free before setting up new plant and expansion of solar cell plant at the cost of 60 crores.  Few other listed companies in solar field are not directly comparable with Surana Solar because of their involvement in project development along with manufacturing and EPC. High investment cost of solar project development has caused stress on their balance sheet and making continuous losses.  Most of the other solar power related companies are having huge debt and very large equity base.

3) Surana Solar was leading the pack of all solar stocks and trading at its normal price range in between Rs 40 -70 (ex split) form last one year  but all of sudden  it was  caught in unnecessary crossfire between two 'RJ' and market regulator in June, It has resulted in heavy stampede selling and steep fall in stock price. In the whole issue there was no role and no relation of company and its promoters. Stock and its old investors have got the hit for nothing but it has created wonderful opportunity for others to enter almost 200% lower than its normal fair value. It is in addition to the extremely bright future ahead for this company and complete solar power sector.
"Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised" WARREN BUFFETT

4) Recent expansion has enabled the company to provide complete one roof cost effective solution to its clients from own manufacturing for full product range of solar product  to the final commissioning of project. The company has an edge over other competitors because it is one of the best low cost manufacturer of PV systems in the country.

5) As per guide lines given by management, company is well qualified to bid up to 100 MW projects.  The company  is bidding very aggressively for various solar EPC projects  with aim to get 1 to 1.5% market share in the whole business. They have already secured around 50 MW orders for current FY.

You can find full detailed interview of Mr. Narendra Surana, chairman of Surana Solar on company update in below given link

http://profit.ndtv.com/videos/news/video-see-huge-growth-opportunity-in-india-surana-solar-370652

Conclusion

Solar energy sector is getting highest focus not only in India but in the whole world. Solar energy CAPEX will take over coal powered energy and grid parity in between 2016 -18. 

This sector has highest growth potential  and making huge turnaround  from this year with long lasting  business visibility. Recently, the Cabinet Committee on Economic Affairs (CCEA) has (Wednesday 30.12.2015) approved scaling up of the budget for implementing Grid Connected Rooftop systems up to 2019-20 under National Solar Mission (NSM) from Rs 600 crore to Rs 5,000 crore.

Surana Solar is well positioned to take the maximum advantage of solar sector boom. It has completed the setup new manufacturing plant and its expansion with latest technology. Company is entitled to get the benefit of 10-year tax holiday on solar product manufacturing in specific SEZ. Further going to expand its business in LED lighting and thin PV film. Company has good reputation and market in India and abroad for its solar product. Company is making  profit and dividend paying from inception, strong balance sheet  and low manageable debt. Company has an added advantage for being located in fast emerging as solar energy hub of India, because government of Andhra Pradesh  has approved the new solar policy in 2015 to encourage the growth of the renewable energy sector and to develop 5000 MW  Solar power by 2019. Telangana also has very aggressive similar  plan to develop solar power. This is the sector where GOI will prove its ability in the world and it will create huge green power infrastructure and employment. 

http://reneweconomy.com.au/2014/indian-state-of-andhra-pradesh-to-add-5000mw-solar-by-2019-2019

Promoters of the company  have well proven successful track record with  their ability and capability  to convert small scale  solar PV module unit  into 100 crore business before demerging it from Bhagyanagar India Ltd in 2011.  With long term vision they have started to set up the new plant and completed the expansion of solar cell plant on time by seeing the huge potential in near future. They have shared the profit regularly with investors.

Surana Solar is grossly undervalued by seeing the huge potential in solar sector and fundamentals of the company.  Investment can be done with long term plan for decent gain in future.