Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Elastomer Industry and Puneet Resins

with 23 comments

Elastomers can be of various types. Thermal, High Performance etc. They can be commodity or specialised which are distinguished by exceptional chemical, mechanical and thermal properties. Dupont, Bayer, Zeon and Polyone are respected names with significant market share in West. PolyOne has annual revenues of 2 Billion $. PolyOne ranks as North America’s largest compounder with a market share estimated at 10-11 percent. Its distribution unit also ranks among North America’s largest.

Excel Polymers was a spin off from PolyOne in 2004 as a non core business. It has very specialised business and Lion One Chemical which bought it from Polyone has made 4X profits on its sale of Excel Polymers to HEXPOL in December 2010. Excel Polymers recorded annual revenues of 350 million $ in latest fiscal.

Excel Polymers isn’t as commodity a business as it appears, i.e. collection of rubber from trees and selling it. Even though it makes intermediate products and not consumer brands, Elastomers require R&D. They make B2B segment rubber products for medical, transportation, space, consumer,  performance additives industry and do command brand name. Similar to making a flavour of ice cream and taste addiction, there is lot of R&D required and IP is valuable for many years.

Products of elastomer industries are not an array of items. They are solutions to the challenges some or the other industry experienced. As new products are built which require new chemical, mechanical or thermal property, elastomer manufacturers have to concoct a new recipe for the solution.

A very long list of PhD chemists working with Excel Polymers affirms the super specialized nature of Elastomer industry. NP margins of Puneet’s principals are upwards of 10% meaning not bottom of the food chain commodity.

But then one could say, sage of Omaha prefers Johnson and Johnson whose brands are inside our minds to Dupont or 3M, majority of whose brands are in minds of just B2B populace. True, former is without a doubt better, since it does not have to innovate decade after decade. But its only truly better for an investor if its available at reasonable price relative to underlying value and growth rate.

In 1990s the industry experienced consolidation and now seems set to sail for above average growth rates of existing leaders. I am still learning more about this industry.

This should give a brief overview of Excel Polymers

http://www.rubberworld.com/RWvideo.asp?vid=excel#Page

Puneet Resins

It has only a handful of its own specialised polymers like Vulconoil and Vinoprene. Bigger companies have dozens of specialised compounds. It has earned most of its revenue from trading activities of products from its principals. They are expanding production line as per BSE announcement in Jan 2011 to cater to increasing demand. The company has yet to prove itself as a learning, lean and continuously improving organisation to achieve scale and respect in this industry.

Positives are :

 Low equity base
 No equity dilution
 No debt
 Promoter increasing stake from open market
 Dividend declared in 2010
 Chance of increasing offerings from Excel through Puneet

Negatives:

Less liquid market for stock
Link to underlying industry cycles such as auto
Culture of scientific research and innovation has to be maintained to lead
Mainly into trading as yet

Written by amitdipsite

February 18, 2011 at 10:24 pm

Posted in Uncategorized

23 Responses

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  1. hi Amit

    there is one more company i came across.. confidence petrolium. They are basically into LPG botteling plant and LPG station. I think the demand of LPG and CNG will increase over a period of time cause petrol prices are becoming very uaffordabel..I would appreciate if you could have a look at this company and give your insight..

    brand update

    February 19, 2011 at 9:55 am

  2. thanks

    jitendra

    February 19, 2011 at 10:01 am

  3. A marketing video for Consulting company featuring Excel Polymers as a Client. It describes transition of Excel from a multi billion $ company to a Private Equity – Lion Chemical Capital enterprise. Buffett is right, they (PE) beautify with cosmetic surgery and sell the bride.

    http://www.lionchemicalcapital.com

    http://www.youtube.com/embed/fPM9DznK4UA

    Amit Arora

    February 19, 2011 at 11:34 pm

  4. Hi Amit

    I found Jolly Board stock 2 years back but never bought waiting for the stock to correct.It has lot of plus points like – Net profit margin of around 40%, 0 debt, scalable business, reputed clients list etc. It was a 25+ bagger in last 5 years. I think 90% promoter holding as a risk as it can be delisted any time. Please tell me your view on this stock.

    Thanks & Regards
    Manjunatha.

    Manjunatha

    February 20, 2011 at 2:45 pm

  5. Hi Manjunatha,

    I also did analysis of Jolly Board around the same time, and did not buy it as its an “Asset Play” on their Mumbai property and rental income. As far as I know their board business was pretty average. The major value seems reflected in prices.

    Regards

    Amit

    Amit Arora

    February 20, 2011 at 8:29 pm

  6. Dear Amit,

    i haveound a stock dividend yield is 10 %
    jupier bioscience limited ..stock come to 20 from 130..why so much down ..co, is paying 2 rs dividend…book value also good..results are also good..plz give ur comment ..can we invest to get 10% return …co. is going for egm as on 28th feb for issue new share at 90 ..

    jitendra

    February 21, 2011 at 10:26 am

  7. hi amit
    is it right time to by cravatex ltd at price 525.0; plz reply

    ajit

    February 21, 2011 at 7:19 pm

  8. Does Cravatex seel lots of stuffs like:

    Sports Equipments:
    Badminton Rackets
    Squash Rackets
    Volleyball
    Tennis Rackets
    Football
    Table tennis

    Fitness Equipments Offered:
    Hand exercisers
    Twisters
    Exercise mats
    Benches
    Rowing machines
    Step Boards
    Home gyms
    Treadmills

    Brands Dealing With:
    Body Soli
    Johnson
    FILS
    Nassau
    Dunlop Sport

    Link is:
    http://in.88db.com/bangalore/Sport/Sports-Accessories/ad-830044/

    Rahul Kumar Paliwal

    February 22, 2011 at 5:48 pm

  9. Brands should be Body Solid and FILA instead of Body Soli and FILS, typo..

    http://www.bodysolid.com

    Dunlop has sports equipment for tennis, golf, squash and badminton

    http://www.dunlopsport.com/us/tennis_home

    Cravatex is distributor in India

    http://www.dunlopsport.com/cn/contact

    Amit Arora

    February 22, 2011 at 6:58 pm

  10. No idea on Confidence Petroleum. Jupiter Biosciences has 300 Cr+ debt, Promoters dumped shares to now just 4%.

    Have they not issued warrants to themselves at par recently ?

    Amit Arora

    February 22, 2011 at 7:00 pm

  11. Actually Dunlop Sports is now part of 2 Billion $ company from UK, and biggest in UK for Sports called Sports Direct International.

    Cravatex may also get opportunity sell Slazenger and many more brands from them in future

    Their own Brands

    http://www.sports-direct-international.com/company-information/brands.aspx

    They sell all brands through their stores

    http://www.sportsdirect.com/

    Amit Arora

    February 22, 2011 at 9:55 pm

  12. hi amit,

    in jupier bio holding 44 % as GDR what means ..is they are promoter

    jitendra

    February 23, 2011 at 5:19 am

  13. I am a new comer to your blog. Many of the companies you have mentioned here are unheard of . How do you get to know about these comments and how do you get financial information

    krishnapriya

    February 27, 2011 at 6:07 am

  14. Hi,

    I don't know which comments are you referring to.

    All listed companies are on this page

    http://bseindia.com/about/list_comp.asp

    Financial statements for each company for the part 5-10 years is also available on BSEIndia website.

    For eg: Puneet Resins is listed in B Group under alphabet P

    Regards

    Amit Arora

    February 27, 2011 at 7:49 am

  15. Hi Amit

    I am reading all of your posts again and again from last few weeks and it is too good. I have not found a Blogger/Equity Analyst on stocks who is 10% as good as you.I think that apart from investing in stocks big money can be made from trading in options.If we have patience Indian Equity markets gives a chance 3-4 times in a year to make big money with limited risk.

    Thanks & Regards
    Manjunatha.

    Manjunatha

    February 28, 2011 at 3:47 pm

  16. Hi Manjunatha,

    Thanks for your comments. I think there are many other smarter people around. If I were seriously very good then I'd also be self realised too, having cosmic consciousness🙂

    In the end current state does not matter much, only direction matters. Getting carried away with metaphysics.

    I got briefly interested in options after reading Nicholas Taleb's work. I concur with your view about options generating multibagger returns with limited risk. Ideally I would like to buy long term options but aren't we limited to buying options worth 90 days in India ?

    Would like to get more educated on that, is there a book you can recommend me ? Which options do you buy ? on index or individual scripts.

    Thanks and regards

    Amit Arora

    February 28, 2011 at 9:47 pm

  17. Hi Amit

    I am still a beginner on stocks and options.
    It is possible to make quick & big money from options if one observes the movement of Nifty, Bank Nifty or Stocks which are sensitive to news.We can go for simple call or put option with small investment of 5000 Rs.I will give you few examples where I missed the big opportunity.

    But I am sure Indian Markets will give more such chances in future.

    July 2010 – Petrol prices are hiked by 6 Rs this month.After this news BPCL moved from 520 to 720.This opportunity is a 100 bagger.

    Nov 2010 – CEO of LIC Housing Finance arrested in Bribery Case. Stock down from 1300 to 890.
    This opportunity is a 200 bagger.

    Nov 2010 – The CBI arrests General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India, Venkoba Gujjal and Deputy General Manager of Punjab National Bank (Delhi).
    Bank of India stock falls from 520 to 420.
    This opportunity is a 50 bagger.

    Dec 2010 – Market Analysts thought December FIIs will book profit in India and enjoy their Christmas and New Year.But Nifty hits 6300.

    Jan 2011 – New Delhi, January 13, 2011: India's food inflation rate eased to 16.91 per cent for the week ended
    January 1, 2011 from 18.32 per cent in the previous week, an official statement said here today, quoting provisional data. The statement showed that the inflation rate for fuel also declined slightly to 11.53 per cent from the previous week's level of 11.63 per cent.
    The dip in the inflation rate comes at a tie when the government is grappling with high food prices and is facing increasing flak from the Opposition and other quarters about its performance on this front. According to the data released today, the prices of onions were up 70.70 per cent from a year ago, vegetables by 70.73 per cent, rice by 1.34 per cent, fruits by 17.71 per cent, milk by 13.20 per cent and eggs, fish and meat by 16.70 per cent.
    However, the prices of wheat were down by 4.87 per cent, pulses by 14.84 per cent, cereals by 0.12 per cent and potatoes by 1.67 per cent.
    Overall, the annual rate of inflation for primary articles, which have a weight of 20.12 per cent in the WPI, with base year 2004-05, stood at 17.58 per cent for the week ended January 1, 2011 as compared to 20.20 per cent for the previous week.Nifty, Banking stocks & Bank Nifty are down. This opportunity is a 50 bagger.

    Feb 2011 – Crude oil futures were headed for its biggest weekly gain in almost two years on concern that the political turmoil that has engulfed Libya may spread to larger oil producing regions in the Middle East.
    BPCL down from 620 to 530.
    Banking stocks are down by more than 15% because of Inflation fears.This opportunity is a 50 bagger.

    Feb 2011 – SBI to merge its subsidiary banks in 12-18 months.
    1.State Bank Of Bikaner and Jaipur.
    2.State Bank Of Mysore.
    3.State Bank of Travancore.
    These stocks up by 30%.
    I have recommended these stocks in my blog in Jan month only for this purpose.

    Feb 2011 – The Central Bureau of Investigation, which is probing the 2G spectrum scandal has summoned Reliance Communications chairman Anil Ambani, Reuters reported citing a television report. The report said he met with the CBI officials on Wednesday.
    Though RCom had denied any role in the 2G scam, which according to the Comptroller and Auditor General (CAG) has caused a potential loss of Rs.1.76 lakh crore to the exchequer, CBI is investigating its stake in Swan Telecom, which reportedly got some undue favour.

    Rcom stock down from 115 to 84.
    This opportunity is a 10 bagger.

    Mar 2011 – Good budget from market point of view.Nifty up by 350 points.
    Petrol prices will by hiked by 2 Rs.
    BPCL up from 530 to 587.
    This opportunity is a 5 bagger.

    Thanks and regards
    Manjunatha.

    Manjunatha

    March 1, 2011 at 3:51 pm

  18. Thanks for the really elaborate answer Manjunatha.

    Just found a link to your blog

    http://indiamultibaggers.blogspot.com

    While it may be difficult to be successful in equity based options like LIC or Reliance. But petrol direction of budget, economy, inflation one could lose some money 1X every month but get 40X sometimes. To hone the skill takes many hours of thinking and being tuned like you said. If this works for someone, great… I believe in buying long term options -eg: insurance on house, car, but don't have temperament or expertise in following short term options yet..

    Thanks again

    Amit Arora

    March 1, 2011 at 7:32 pm

  19. should one treat puneet as a commodity stock ?

    Jatin

    August 1, 2011 at 9:13 am

  20. It should be treated as a cyclical stock in my opinion.

    Regards

    Amit Arora

    August 1, 2011 at 9:15 am

  21. even though its 60% revenues are from trading ?

    Jatin

    August 1, 2011 at 10:12 am

  22. For example: If a company trades Tata/Mahindra automobiles, its a trading company but cyclical industry.

    Commodity typically means not brand power, pricing power like Power Generation, Steel, Coal, etc Even Banking has become commodity so line is thin…

    Amit Arora

    August 1, 2011 at 8:59 pm

  23. Hi amit,
    I cannot find an update of MOU between PRL and excel(hexapol) . last one stated they have extended it till 31 jan 2011.

    Jatin

    August 26, 2011 at 6:30 am


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