New Year Greetings

May God's grace shine on you and your family. Wishing you all good health, joy, peace, love and great success.

My heartiest new year wishes for you and your family that all your dreams and wishes come true.

Diwali Greetings - Deepak Fertilizers and Petrochemicals

Dear Blog Members,

May the divine light of Diwali bring lot of joy, peace and prosperity to you and your family

Last 18 months were very tough for investors. We have also limited our activity but now time has come to move ahead with market by leaving all the negative behind.  

Deepak Fertilisers & Petrochemicals Corporation Ltd (DFPCL)

Corporate film

https://youtu.be/HBr2R7U4Wt8

https://youtu.be/iK_T8t__fU0

DFPCL is multi-product Indian conglomerate with four business verticals —industrial chemicals, agribusiness, specialty chemical and value added real estate.  Over the period of last four decades it has established a prime position in manufacturing of ammonia, isopropyl alcohol, methanol, nitric acid, low-density prilled ammonium nitrate, specialty fertilisers, farming diagnostics and solutions, nitro-phosphate fertilizers in its state-of-the-art plants operating with world class technology.

The value added real estate is India's 1st revolutionary concept retail destination for Home Interiors & Design. DFPCL is having market leadership position in Speciality Fertilisers, Technical Ammonium Nitrate (TAN) and Isopropyl Alcohol (IPA).

The Company has manufacturing facilities in Taloja – Maharashtra, Srikakulam – A.P., Panipat – Haryana and Dahej – Gujarat. The Company has adopted some of the global state-of-the-art technologies that enable it to manufacture and supply high quality products that meet global standards.

Products / Services and Application

Investment Rationale

DFPCL has developed a unique business model where synergies and diversities can be mutually inherent, allowing the Company to build its financial strength, generate free cash flow and invest in growth, both in India and globally.

DFPCL has expanded its portfolio in the agri-business segment and moved from bulk fertilisers to specialties /customised products. Company is developing customized products for specific crop and soil. 

It has gained the reputation of being the total nutrient management services provider to the Indian farmers through its unique initiative - Mahadhan Saarthi. it helps the farmers by providing farming solutions including diagnostic and advisory services. It also allows farmers to market their produce in domestic and international markets. This initiative by the company ensures higher yields and profitability to the farmer. Government's continuous thrust on rural & infrastructure development along with an ambitious goal to double farmers' income by 2022 will augur well for the company. 

DFPCL is one of India’s largest and most reputed manufacturers of Nitro Phosphate fertilisers and speciality fertilisers like Sulphur Bentonite. It has gained the reputation of being the sole manufacturer of 24:24:0 in India and amongst market leaders for water solubles, specialty fertilisers and Bentonite Sulphur.

In Chemicals, the Company is moving up the value chain from bulk chemical commodities to developing industry specific product grades. The company is the sole producer of IPA in the domestic market and caters to 85-90% of the market demand through its manufacturing capacity as well as imports. DFPCL is also the leading manufacturer of concentrated nitric acid (CNA) in the domestic market. It is one of the very few companies in the world with US FDA / Pharmacopoeia certification for these products, making it the supplier of choice for the Indian pharmaceutical industry.

DFPCL is having a strong and direct relationship with over 500 Industrial customers in India and globally. Further, DFPCL is having strong distribution network of over 80 channel partners across India and it exports its products to over 50 countries globally.

DFPCL has diversified business product portfolio comprising of fertilisers and industrial chemicals and the strong market position held in the industrial chemicals business with leadership in ammonium nitrate (TAN), nitric acid and IPA. It gives high financial flexibility in case of slump in any one business vertical.

DFPCL is one of the largest producers of Technical Ammonium Nitrate (TAN) in the world and the only producer of explosive grade low density prilled AN in India and is on its path towards becoming a global player. Company has successfully entered into Mining Services and Consultation to expand the value chain.

DFPCL is better placed among its competitors and enjoys the advantage of largest single-location manufacturer of Dilute Nitric Acid (DNA). The company has the advantage of its strong customer relationships and its domestic geographical presence and this provides the superiority among its peers.

DFPCL has laid its own 43 km gas pipeline from the coastal fall point Uran to its plant located at Taloja.

It has built India’s first true Lifestyle Centre, Creaticity - a family destination with offerings ranges from home, fashion, lifestyle, food and entertainment. 

DFPCL has hired global consulting firm McKinsey & Company in September 2016 for corporate rejig. Since than it has started transforming itself from  commodity to specialties and value added customised products. 

The company has ability to change its product mix in response to changes in market conditions. It is a reflection of its operating flexibility which partially mitigates the risks associated with cyclicality. It has helped DFPCL to maintain stability in its operating profits despite considerable changes in its operating environment.

DFPCL is going through major  expansion, company has excellent track record to complete the key projects in stipulated timeline. In the recent past, it has already completed and  stabilize the commercial production of nitric acid plant at new plant in Dahej Gujarat and  NPK (Nitrogen, Phosphorous, Potassium) complex fertilisers facility at Taloja which would result in healthy increase in revenues and profits in coming quarters.  

Promoters C K Mehta / S C Mehta are having very vast experience in chemical industry and proven successful track record. The management keep the control and evaluating the strength of balance sheet regularly. Most of capex is funded through debt and equity along with some strategic investors. The current capex is backed by International Finance Corporation (IFC)

Conclusion

DFPCL has dominant market position in all business verticals. Nitro -chem industry is growing at a steady pace which augurs well for the company with a clear emerging demand supply gap in the market. Domestic demand outlook for most of the company products will remain strong and it will be driven from agri, industrial, mining and infrastructure sector. Company is on strong footing for long-term sustainable growth and leadership in chemicals business.

In recent market correction it corrected more than 70% without any change in fundamental of the company. It is very good investment opportunity at cmp Rs 102 for both mid  term and long term ( 2 year to 5 years ). It can be bought + / - 10% from cmp with 10-20 % of portfolio allocation.

Race for Life

Dear Blog Members,

I was not able to respond on your comments from last four weeks. Further market reacted negatively on recent budget. We have seen most of the retail investors are deeply concerned about their heavy loss since last one year. 

Negative sentiment is prevailing at every corner of the market because index move up with very few heavyweight stocks and there is no participation for 99% of the listed stocks. It is the same case for  99% of the investors, all are in heavy loss irrespective of big or small. The market trend will reverse definitely but it may test the patience upto extreme limit. In such situation you have to stay calm and composed, keep your strength and confidence intact till last lap, until you win the race.

Sunflag Iron and Steel Company Ltd - Special in Steel

Sunflag Iron and Steel Company Ltd is a flagship company of Sunflag group. Initially company was started for producing normal mild steel and spring steel rolled products since than company has been continuously upgrading its manufacturing facilities and products, presently it has transformed itself into high grade special alloy steel manufacturer.

CMP     47

The state of the art integrated steel plant is set up by Mannesmann Demag and Krupp Industrietechnik Germany, located near Nagpur, at Bhandara, Maharashtra. The plant has a capacity to produce 500,000 tonnes per annum of very high quality special steel using liquid pig iron and sponge iron as basic inputs. The company has technical collaboration with Daido Steel Co Japan. The company has captive coal, manganese and ore iron mines.  The steel plant is equipped with 30 MW captive power plant based on thermal and waste heat recovery.

Specialty steel is made by combining steel with different alloying elements to improve various mechanical and chemical properties such as resistance to heat, abrasions, rust etc. The automobile, defence and industrial machinery sectors are the primary users of specialty steel. The common grades include silico manganese, chrome and vanadium steel.

Sunflag Iron and Steel Business Film 

https://www.youtube.com/watch?v=5gWskCU8liA

Presently, the company produces wide variety of steels, tailor made to specific requirements of customers in various grades and profiles covering all categories like  carbon steels, alloy steels, free  & semi free cutting steels, micro-alloyed steels, stainless Steels, spring Steels, valve Steels, bearing Steels, cold  heading quality steels, tool steels, etc.

Sunflag mainly caters to the demand of the automobile, railways, defence, power, and engineering sectors. The steel used for manufacturing various components like crank shafts, springs, suspension mechanism, transmissions parts, axle beams, connecting rods, bolts, nuts, shafts, keys, critical machine components, steering components, axles, gears, and high resistance screws.

The manufacturing facilities of Sunflag Iron include sinter plant, mini blast furnace, direct reduction plant, electric arc furnace, ladle heating furnace, vacuum degassing unit, blooming mill, alloy steel mill and garret coiler amongst others.

The company is giving prime focus to maintain high quality product standards. The manufacturing and quality management systems has been standardized and certified under ISO 9001, TS 16949, ISO 14001, OHSAS 18001, AD-2000-Merkblatt WO certified & ISO/IEC 17025 approved testing laboratories by NABL. The Sunflag steel is produced using 100% Iron ore as a basic raw material input and no scrap steel is sourced from outside.

Clients

The company has established itself as a major producer and reliable supplier of alloy and special steels in Indian and overseas markets. The company is having robust market position in the auto-grade micro-alloy steel business. Apart from catering to the domestic steel requirements, Sunflag Steel also exports to South East, Middle East, European countries, United States etc.

Joint Ventures (JV) and Technical Collaboration

In order to meet the market demands for new grades /applications, to improve existing processes and products and to support the customers in their efforts for localization of their steel requirements, Sunflag Iron & Steel Co. Ltd. has entered into technical collaboration with Daido Steel Co. Japan, it is one of the largest manufacturers of specialty steel in the world.

In fact Daido Steel Co. Japan has chosen the Sunflag Iron and Steel Company because it is the first company which meet their 4 phase investment and expansion criteria around the world. The Sunflag has technical collaboration with Daido Steel Co.  Japan since 2010. After successful completion of five years of technical collaboration with Sunflag, Diado Steel Japan has made decision for equity participation in 2014 and hold 10% stake in Sunflag as strategic partner.

Daido Steel has further expanded their ties 2015 by forming Daido DMS India Pvt Ltd.  A Joint Venture (JV) Company between Sunflag, Daido Steel Co and Daido Die and Mold Steel Solutions Co. Japan to manufacture, import, export and distribution in die, mould steel , tool steel and other metallic materials, processed products and mould parts.

For further detail refer page number 4, 7, 25 and 26 in below presentation of Daido Steel Co. Japan.

https://www.daido.co.jp/en/ir/presentation/2017mid.pdf

There is significant financial improvement since last 3 - 4 years  supported by development of new grades  of specialty steel and continuous improvements in existing business process of Sunflag.

 Ramesh Sunwire Private Limited

Sunflag has formed joint venture company with Stumpp Schuele & Somappa Springs Pvt Ltd. The main object of the said JV Company is manufacturing high quality of alloy steel wire for automobile and auto component industries both in domestic and export markets. The new plant will start contributing revenue from this year. Stumpp Schuele & Somappa Springs has about 30-35% market share in the domestic springs industry, and supplies about 4,000 varieties of springs.

 Coal, Iron Ore and Manganese Ore Mines

The Company is having operational captive Coal and Manganese mines at Belgaon Chandrapur and Bhandara in Maharashtra

Belgaon Coal Mine  is having  383.56 hectare area  at  Chandrapur, Maharashtra. This underground Coal mine is having estimated reserves of 8 millions tons (MT) with extractable balance of about 6.23 millions tons (MT)

Navegaon Manganese Mine is having  15.90 hectare area  at Bhandara, Maharashtra. It is open cast mine with reserves of about 30,000 tons

Navegaon Manganese Mine 2 is having  48.78 hectare area  at Bhandara, Maharashtra. Application for conversion of Prospecting Licence into Mining Lease is under process

Warpani Manganese Ore Block is having  1419.65 hectare area at  Nagpur, Maharashtra. Application for conversion of Prospecting Licence into Mining Lease over an area of 460 Ha is under process

Bande Iron Ore block is having 236.75 hectare area at Gadchiroli, Maharashtra. Application for conversion of Prospecting Licence into Mining Lease over an area of 205.75 Ha is under process

Kodalibad Iron and Manganese Ore Mine  is having 120.00 hectare area at Singhbhum, Jharkhand. Iron and Manganese Ore mining Lease is yet to be executed

Investment Rationale

Sunflag has large capacity manufacturing steel plant with latest technology from Mannesmann Demag and Krupp Industrietechnik Germany,  all required raw material  from captive coal, manganese and ore iron mines near to the plant,  allocation of large mining block for long term future use, captive power plant, cash rich strong balance sheet, visionary & experienced promoter and well-known successful partners make Sunflag a very asset rich company and ideal for investment.

The technical collaboration and partnership with Japanese steel maker Daido has enable Sunflag to get the direct access to latest technology for producing high quality specialty steel without any additional cost. 

Sunflag get easy access with trust to Daido's global relationship with leading automobile manufacturers such as Honda, Suzuki, Toyota in India. It has helped Sunflag to build and maintain its strong market position in automotive-grade micro-alloy steel business with wide product mix and established clientele base.

Alloy and special steel market are one of the fastest growing markets in India steered by the accelerated growth in automobile, infrastructure, defence and engineering  sector. Sunflag has large scale of operations with stable revenue outlook.

To meet the increasing demand and to keep-up with expanding special steels market, Sunflag is consistently developing new grades of steel and doing incremental investments for adding up new production capacities. 

Sunflag is one of the few companies in steel sector which are net debt-free. It has ended the last financial year with net profit of Rs. 128 crores and this year ( FY 2018 -19) it is expected to give even better results than last year.  The company is having enough cash in the balance sheet and healthy cash flow from current operation is giving scope for higher capacity expansion to meet the growing demand of special steel.

The company is already expanding its existing steel melt shop to produce high quality clean steel. This will enable the company to diversify its products.

Company improving capacity utilization with controlled working capital and cost savings by improving the operating efficiencies.

Even in the past its promoters has shown their excellent ability and vision to expand the steel business with keeping well control on debt metrics and working capital requirement. It is the critical area where most of the major Indian steel companies have failed and still struggling.

For further detail refer page number 1 and 18 to 24 for old report on steel sector in below pdf presentation

Note - Below 2015 report is given just for your reference. Since 2014 Sunflag has reduced its long term debt around 200 crores and increased its cash reserve above 600 crores due to its exceptional performance in steel sector.

https://www.motilaloswal.com/site/INST_RESEARCH/Sector%20update/METALS-STEEL-20150827-MOSL-SU-PG026635762971622391709.pdf

Auto industry is expected grow more than 7% and most of the world famous automobile companies are setting-up their manufacturing units in India. The cost of imported auto components is very high in India due to higher import duty. In current scenario these companies have to manufacture all critical components locally, it gives very good growth opportunity to special steel manufacturers to supply quality steel for these critical components.

Conclusion

Sunflag is very strong fundamental, asset rich, fast growing company in special steel segment. Sunflag mainly serving to the automobile, railways, defence, power and engineering sectors which are backbone of economy and growth possibilities are huge.

Market correction has given ideal investment chance to buy it 50% below from yearly peak. Sunflag Iron and Steel stock at cmp Rs 47 is one of the best investment opportunity in steel sector. It can be bought + / - 10% from cmp with 10 -20% of portfolio allocation.

Key learnings from 2018 and Next stock update

Dear Readers,

It was really very tough time for the all investors and financial institutes from last one year. Specifically it was very severe for new investors who have started investment in the first half of 2018. Even though our most of the portfolios shrunk 20 to 50% but it has given the best learning experience.  Extreme adverse market conditions of 2018 has forced thousands of new investor to quit forever, I congratulate to all those investors who sail successfully through this turbulent storm. It is your patience and strong will power which has separated you from the crowd to make you successful investor for the rest of your life.

The key learning points

In equity market there is always a risk but it is very less for long-term investment and very high for short-term investment. It is advisable to plan you investment  for long-term at least for 3 -4 years.

Always invest with your own money which is not required to fulfil your urgent need at least for 2 to 3 years.  It is also not advisable to invest in equity market with borrowed money or money taken on interest or loan.

Need to stick with investment decision at least for 2 to 3 years unless there is major change in fundamental of any stock. Habit of holding the stock for longer period will lead bigger gains and bigger self confidence. Same time frequent shuffling  of stocks due to price correction related to market fluctuation will lead to low self confidence and high nervousness will result in further loss.

It is not advisable to average any stock due to fear of loss or to make up the loss. We have seen once any sector or stock start correcting then it can fall much more below than our expectation.  So it will block free cash and it will end up with bigger loss. Same time you can increase your allocation in any winning stock according to the availability of funds irrespective of rise or fall in the stock price. 

Both terms look like same but state of mind and emotions are different, first one is originated after looking at the loss linked with fear and second one  is originated from self-confidence and taken as opportunity for buying aggressively.  For example in the month of February 2019 Deepak nitrate corrected below suggested price but no one interested to buy it even after knowing that  phenol plant has already started but we received several comments for buying Surana solar & Omkar specialty.

In the month of May 2018 we have gone for 30% stop loss in case stock price fall due to adverse market conditions  or sudden change in fundamental of any stock. Specially it is good for new investors due to their limited risk taking ability in the initial phase of their investment carrier.

During initial phase of building a portfolio 10 to 20% allocation in each stock is ok and same time need to book the partial profit near hundred percent and keep the free of cost share for long-term. It will help to expand the portfolio gradually from profit and mitigate the risk.

It is not necessarily to buy every stock but need to invest according to the individual investment capacity / availability of fund and formation of individual portfolio, generally better to keep diversified portfolio with maximum exposure up to 20% per sector.

Our economic and market earning growth is on right path, it is time to get ready to be the part of major market bull run for next 4 -5 years.  Several investment opportunities are available at very good price.

We will go for next  stock in the coming weekend and it will be posted on this blog and our new site way2moneymarket.com on 20th April 2019.

Update for G+ Blog Members

Dear Readers 

As you are aware that Google+  is shutting down from April 2, 2019.  We have created new site to communicate with our G+ blog members effectively.

Welcome to you on your new blog site. It is just created, we will customize it according to our requirement in coming days.


https://way2moneymarket.com/



Note - Our this blog (dolly-bestpicks.blogspot.com) will run as usual and above communication of website  shutdown is related only for G+ website of google.  

Happy Holi Greeting

Dear Readers,