Indian Oil Corporation (IOC) is one of our core portfolio holdings. IOC and other oil marketing companies (OMCs) like BPCL and HPCL are in a good spot these days due to:
(a) deregulation of petrol prices which means OMCs can derive benefits from operational efficiencies in both refining and marketing, and they will get cash immediately from sales, rather than waiting for government bonds.
(b) crude oil prices have fallen 15% from their recent highs of $83 per barrel to about $73 per barrel. Lower crude oil prices improve profit margin of IOC, and we can expect improved financial performance if crude prices remain between $70 and $80 for next few quarters.
IOC is the largest OMC in India, and has delivered the best Return on Equity among the OMCs over the last 5 years at about 16% per year on average, and the ROE can now increase to 20%+ due to above reasons. Continue reading →
Posted in Energy, Oil & Gas
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Tagged IOC, OMC
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Reliance Industries (RIL) has come down from Rs 1070 levels to Rs 950 levels in the last 3 weeks, without much resistance. The selling pressure was partly due to FIs offloading their holdings, and short-sellers accelerating the downward push. Many market analysts, who were bullish on RIL just 4 weeks back are now talking about further downside in price. But that does not bother us. These are attractive prices on RIL, which is one of the best quality stocks in India.
As long term investors, Rs 950-960 is a great buying opportunity in this top quality business. We estimate RIL FY11 EPS to be around Rs 70, and at a P/E of 20 (justifiable for a market leader like RIL with top quality assets), the fair value of RIL stock is about Rs 1400, and we are confident this will be achieved in the coming months/quarters. Continue reading →
We believe that our Investment Strategy is the main difference from other investment companies and funds. Before we even come to the company level, we first want to make sure that the industry has, or will have, favorable demand-supply situation in the near future, because then, the risks taken by the company’s leaders have a higher chance to pay-off in due time.
Once we are confident that a particular industry is worth investing because of its growth propsects, then its a question of build vs buy, i.e., whether to build own business in that industry, or to buy a minority shareholding in a good operational company. Continue reading →
Parabolic Drugs is the new pharma stock in our portfolio, and we are happy to become their shareholders. The company recently did an IPO at Rs 75, however we have started buying from the secondary market at current price of Rs 60.
After learning about their growth plans from their IPO document and their management, we feel confident about the growth prospects of Parabolic Drugs. We understand that they have confirmed order book from various international pharma companies to grow sales by about 40% and net profits should also increase in a similar range. Continue reading →
Orbit Corp, a permanent member of our portfolio, has posted a strong consolidated earnings in Q4FY2010, which is largely in line with our estimates. The net profit stood at Rs20 crore in Q4FY210 as compared to Rs1.6 crore in Q4FY2009. However, the revenues grew by only 8.7% year on year (yoy) to Rs86.5 crore, which was below our estimates. The shortfall in the top line growth was offset by a higher than expected operating profit margin (OPM) and a continued write-back in tax due to minimum alternate tax (MAT) credit entitlement. Continue reading →
