I had made a mention of KRBL early this week. I got two comments .. one, an anonymous user (read: free stock tips loader) in his/her classical brevity wrote : 'where is the text?'
The other, Amit posted the following report from ICICI Direct (here)
The Pankaj Pandey (the analyst tracking KRBL) report was an excellent overview of the industry, fundamentals and financials that KRBL rides. My reasons for picking KRBL were based on Grahamian principles (to a decent extent) :
a) NCAV .. KRBL enjoys an NCAV of Rs. 30.5, which would have been a no-no in Ben Graham's blue book of stock picking rules but still is much better than other companies.
b) The more interesting and valid justification of the stock came from the debt recapitalisation method which puts KRBL's safe borrowing capacity at 370 crs. And while KRBL's m-cap is only 257 crs, you have a brilliant margin of safety of over 100 crs with KRBL
c) PE is definitely a killer ... my 1 yr fwd PE for KRBL was a miserly 3.9
I bought about 200 yesterday and another 150 today
Thursday, December 13, 2007
KRBL
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7 comments:
you got my name wrong!!!.By the way a friend of mine is a fan of KRBL and holds nearly 50000 shares , which he trade regularly. he says that management is buying shares( insider buy) which makes this stock even more attractive.but i think the dollar has kept this stock price depressed
shankar
i have not done a detailed analysis, but on the face of it
- negative free cash flow in the business. the company is growing, but the growth is being funded by profits. the company is taking on debt to fund the wcap. will have dig deeper to decide if it is good or bad ?
- ROE and other parameters are good. but debt is fairly high. you may want to calculate PE considering debt too
regards
rohit
Thank you moneystocks ... it's always good to know who I'm interacting with :-)
Hi Rohit,
Thank you for your inputs. Honestly, I haven't looked into the FCF of the company. The NCAV + PE + debt recap model has been giving me some excellent picks over the last few months (paralysed by success :-))
I understand that the debt-equity ratio of KRBL is high (almost 20 on results of FY '07). Along we dont knw the debt levels every month, the interest cost is a good 55 crs .. a expensive. If we ignore the 2 bad quarters, the operating profit is about 150 crs. 55/150 is 33% ... OK, though not very very convincing.
Rohit, you know where the problem is : the bloddy company is under-capitalised. They need to infuse more capital in the company either through private placement or by bringing in a rights issue. As long as they are taking in debt, they are doing me a favour .. and as per my calculations, they have now reached the exact limit of debt lenders will be comfortable lending to them. Any more, and the cost of debt will increase.
Prima facie, the company looks extremely cheap for a shareholder.
OK, one final comment - PE is always calculated considering debt. PE is (market price per share) divided by (profit per share after tax, int, dep). So interest charges (cost of servicing debt) have been accounted.
Pls do review KRBl
hai shankar, i am not the anonymous user . i am the one who posted the ICICI write up.Since u had mentioned it as Amit,i wrote the previous comment.Remember i had sent a mail to your gmail account in october commending your stock selections.Keep going!!!.One stock i am buying is GIPCL.any idea about this one?
Hi Shankar,
Good to see stock analysis again...
we have been following KRBL for almost a year now...was a great buy at 65-70 bucks...my target for the stock is 140 - 150 level...
would really depend on Q3 results.. their Q4 and Q1 results were disastrous because of dollar impact and some bad/ unlucky mgmt decisions..q2 results were more of a pleasent surprise.. lets see how q3 goes...
Cheers
Vishal
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