Multibagger

Hanung Toys & Textiles Ltd

Current price – 150

Target – 400

Timeframe – 2 years

In 1990, Ashok Kumar Bansal, a qualified chartered accountant started Hanung with Rs 25 lakh borrowed from his father. He initiated a technical collaboration with Korea's Hanung Industrial Co. He also adopted the Korean company's name for a simple, practical reason. "India was not associated with quality products then," And now Hanung is India’s largest Manufacturer and Exporter of Soft Toys Decorative Cushions & Children’s Room Furnishings. Apart from these products, Hanung has recently launched a wide range of Home Furnishings in various fabrics, colors and designs.

With an area of 75,000 Sq. Feet and 426 machines, Hanung has a production capacity of 110 Lacs Pcs/Annum. Complete In-House Designing, Production, Finishing and Packing, Container Loading & Dispatch Facilities. Over Eight Thousand Designs, and growing. Clients include all big retailers in US and Europe and domestic market is growing rapidly too.

One of the biggest reasons for Hanung's success is its cost management strategy. It saves on raw material by entering into long-term contracts with suppliers. Its plants are located in tax-free and special economic zones, leading to substantial tax savings.

Entry into the home furnishing sector has augured well and the ratio has been improving towards furnishing from toys and this seems to be the next growth driver for the company. Company has forayed into home furnishing retail under the name “Splash” which If worked out well then can take Hanung by places, Even if this does not then also there is no reason not to invest in this company as we are seeing huge investment in Indian retail coming up and consumption is also growing and all these is enough to catapult hanung to the next level.

Valuations - Considering all these facts this looks like a value stock at current levels of 150 and can become the multibagger in the years to come. At 150 PE comes out to be 3.14 and does have a value. Debt is on bit higher side and that’s the reason of its fall to these levels but to me its an opportunity to buy. Management has been showing great sense of capital management for many years now and I’m sure will sail through this very well.

Concerns – In media there has been reports of promoters being involved in stock price manipulation. That’s the inherent risk associated with every small cap stock, almost every smallcap promoter does that and that’s why you see these at even PE of 3 despite exponential growth in past years.

Thanks. 

One with aggressive management

JK tyre

Current price – 103

Target – 240

Timeframe – 1.5 years

Raw material of tyre is rubber and prices of rubber have gone up by 250% in last 1.5 years and that’s the main reason of bad health of tyre industry despite robust demand. Prices of rubber have been going up because of supply and demand mismatch which would improve sooner or later and prices of rubber are not at sustainable levels. In the near term prices can go up even further but this is the stock which can be averaged fearlessly if stock goes down. This stock might test your patience for some time so you would need to give it at least 1 year to see the true colors.

The Company is making efforts to make the facility in Chennai operational in the current year which was earlier scheduled for commissioning in middle of next year. The plant will have a capacity to produce 2.5 million passenger car tyres and 450,000 units of truck, bus radials every year. Apart from this, company plans to venture into power sector by setting up a 1,360 MW power plant near Jhansi in Madhya Pradesh. Which is bit of a diversification but I feel power is the safest business to diversify into, so I’m not worried on that front too. Some time back stock touched 70 levels and now has crossed 100 and if results of this quarter do not come out well which is very much probable then you may get it at sub hundred levels as well. So I would suggest putting only 35% of your intended money for this stock so rest you can average with if needed.

Thanks.

Treading on the path of recovery --

Well here it comes; I wish I can repeat the history of my first stock selection with my first recommendation except selling it too early.

Vishal Retail

Current price – 31

Target – 90

Timeframe – 2 years

Name must be scary to all who so ever had followed it till now. The main reason for me to recommend this as the management has gone into really safe hands now. It’s all time low being 25rs.its still very near to its bottom, it has already seen worst and all is factored in its price and things are only going to improve from here on.

Vishal retail is perfect example of what can over leveraging can do to a flourishing business and why the feet should be grounded even when you are on the real high. Recently Shriram group and TPG have bought the promoters stake and you can observe the improvements in the nearby Vishal retail stores and you will see that people are coming back to the store. There are no numbers as such to back my recommendation, still lots of debt which buyers already must have planned for. Both the buyers h ave deep pockets and I’m sure can take Vishal retail by places from here. And just to verify about management just go through the performance of Shriram transport finance.

I have to be bit conscious with my recommendations that’s why the target of 90 is also conservative.

Thanks.