It is very difficult to find a value stock and once you get even close to the fundamentals of such a stock you are bound to obsess over its financial data.
Vikas WSP, a leading Indian guar gum exporter is a hot value stock under the present economic scenario backed by attractive financials.
Premise
India contributes to world’s 90% production of Guar. Guar gum’s thickening, emulsifying and binding properties find useful applications in food, paper and textile industries. In addition to that, the new found demand surge is due its usage in the oil fracturing industry. About 90% of the Guar gum export is used to
extract oil & shale gas of which US forms a major market.
USA Guar gum imports have grown at a CAGR (proxy to annual growth rate) of 32% over the last 3 years. The primary beneficiary of this “Guar gum rush” is India's foremost guar gum powder manufacturer Vikas WSP with no major competitors in the market.
Numbers
The best way to tackle any economic opinion is to validate with financial numbers. Here is the chart of value drivers for the company. I hope you understand all of them. EBITDA is operating profit which essentially negates all the financial dressing by the company and provides a better picture than net profit/income.
Also, you can find the corresponding table here to satiate your number hunger.
Same story with more characters err side-kicks!
The above data narrates the profitability story of the company and its growth rate. The present state of company is also at healthy levels with `418 million ($8 million) cash. Debt has also come under tolerable limits with almost 45% decrease compared to previous year. Chart for the same is below:
Oh…wait!
Despite all these positive points don’t overlook the gloomy parts of the story. Some analysts and traders believe that Guar gum exports may drop 20% in 2012. This could well be due to high inventory levels of Guar gum by importers abroad fearing irrational price surge and dampened prices of shale oil in the market. This has dampened the upbeat mood of Vikas WSP stock which has gone down 15% from its all time high in 15 days. Is it a market opportunity? I’m asking you!
However, if you look at the stock carefully, it has grown 3X its value a year ago compared to flat benchmark BSE index which dipped around 5% during the same period. (Courtesy : Google Finance)
My Strategy
Keep on accumulating Vikas WSP shares at 55-65 Rupees level and don’t sell any share before it reaches 100 Rupees. Afterwards, sell at subsequent 10% surge in prices and exit the stock completely at somewhere between 150 and 160 Rupees. My target price is 170 Rupees, albeit! (Comment with your mail id, to get my valuation model for coming at the target price.)
For more company info: http://www.vikaswspltd.in/
Yours
A.G.
Vikas WSP, a leading Indian guar gum exporter is a hot value stock under the present economic scenario backed by attractive financials.
Premise
India contributes to world’s 90% production of Guar. Guar gum’s thickening, emulsifying and binding properties find useful applications in food, paper and textile industries. In addition to that, the new found demand surge is due its usage in the oil fracturing industry. About 90% of the Guar gum export is used to
extract oil & shale gas of which US forms a major market.
USA Guar gum imports have grown at a CAGR (proxy to annual growth rate) of 32% over the last 3 years. The primary beneficiary of this “Guar gum rush” is India's foremost guar gum powder manufacturer Vikas WSP with no major competitors in the market.
Numbers
The best way to tackle any economic opinion is to validate with financial numbers. Here is the chart of value drivers for the company. I hope you understand all of them. EBITDA is operating profit which essentially negates all the financial dressing by the company and provides a better picture than net profit/income.
Also, you can find the corresponding table here to satiate your number hunger.
Same story with more characters err side-kicks!
The above data narrates the profitability story of the company and its growth rate. The present state of company is also at healthy levels with `418 million ($8 million) cash. Debt has also come under tolerable limits with almost 45% decrease compared to previous year. Chart for the same is below:
Oh…wait!
Despite all these positive points don’t overlook the gloomy parts of the story. Some analysts and traders believe that Guar gum exports may drop 20% in 2012. This could well be due to high inventory levels of Guar gum by importers abroad fearing irrational price surge and dampened prices of shale oil in the market. This has dampened the upbeat mood of Vikas WSP stock which has gone down 15% from its all time high in 15 days. Is it a market opportunity? I’m asking you!
However, if you look at the stock carefully, it has grown 3X its value a year ago compared to flat benchmark BSE index which dipped around 5% during the same period. (Courtesy : Google Finance)
My Strategy
Keep on accumulating Vikas WSP shares at 55-65 Rupees level and don’t sell any share before it reaches 100 Rupees. Afterwards, sell at subsequent 10% surge in prices and exit the stock completely at somewhere between 150 and 160 Rupees. My target price is 170 Rupees, albeit! (Comment with your mail id, to get my valuation model for coming at the target price.)
For more company info: http://www.vikaswspltd.in/
Yours
A.G.
