Colourful growth

I had written about the potential of Kokuyo Camlin (KC) here in June ’12, just as Kokuyo of Japan has bought out a majority of the Indian promoters stake a year back, making it their majority-owned subsidiary. They have subsequently increased their stake to around 70% currently, while the Indian promoters (the Dandekar family) still hold a 5% stake. It was then trading @38. Kokuyo is a leading company in Japan with over 100 years of experience in stationery and furniture products, design and construction of office and store interiors, mail order business, lifestyle retail and distribution having an annual turnover US$ 3.2 Billion. At that time, Kokuyo had paid Rs.110/share for Camlin based on its brand strength and its distribution reach. However, post the deal, KC struggled for quite some time, getting to grips with their new owners. And they were not helped by the environment in general, and their industry scenario in particular which is still dominated by the unorganized sector. However, in the last year or so, things seem to have settled down for KC and the story is playing out to script. And Kokuyo seems to have broken even as far as their investment was concerned. It remains to be seen how Kokuyo plans to take it to the next level in order for their investment to be really profitable.

From the range of 30-40 and below at which it was languishing then, 3 years back, it has risen nearly 4-fold in this period, giving a compounded annual return of 40% in this 3-year period, a commendable feat indeed.

And promoter group holding has reached the maximum level of 75% now from 64% then, showing the confidence of the Japanese promoters in the company’s prospects. In fact after losses last year, it has come back in the green this year. With the Japanese promoters holding around 70% shares, it could also be a potential candidate for de-listing.

With India’s ever-increasing population and Modigovt’s stress on education for all school children, the demand scenario for KC’s products will continue to be good. The main risk is the undercutting by price-sensitive unorganized sector. But quality will continue to rule at least with the rowing middle-class.

However, even with all the good things likely to happen in the future, it is always prudent to take a part of the money off the table and retain the rest for the longer term to participate in the growth. So people who have entered at really low levels of sub-30s and 40s can surely book some profits and hold the rest for the longer term. And as always, it is always good to buy the share back if it falls significantly in line with the general market or after having run up a bit post some good news.

First among equals

Capital First (CF) is a Warburg Pincus (WP) company with WP holding close to 70% of its stake. And it has a top class management team led by ex-ICICI honcho Mr. Vaidyanathan. The coming together of these 2 top class entities, one bringing its global reach and expertise and the other sound leadership is already doing wonders to this company, and it can only prosper from here. 

I had written about this as a theme for 2015 and it has justified its faith, moving up by close to 22% from 366 in Jan. ’15 to 446 this week, a return of 22% in 6 months. However, I believe that there is more to come yet.

This company missed out on bagging a banking license this year which ultimately went to IDFC. Last four years, they have shown very good growth, beating the expectations and their own guidance and that too not at the cost of quality of assets, one of the things which have hit ICICI Bank badly in the last 2 years. So gross as well as net non-performing assets (NPA) numbers are minimal (net NPA of 0.17%). They appear to be taking a leaf out of the book of Baja Finance, another superb growth story over the last 3-4 years. 

CF has not only defined its strategy well but is also executing it systematically. As a part of this strategy, they 1) moved out of non profitable business like securities and commodity broking, 2) focused on core business of SME financing and 3) ensured best in class asset quality with higher provisioning than regulatory requirement. CF has steadily increased the composition of retail financing from 10% in FY10 to 84% currently, while it has grown its AUMs at 25% CAGR over FY12-FY15.

Also, it hasn’t failed to move into all the right areas at the right time, the latest one being into Housing Finance, thru a subsidiary Capital First Home Finance Pvt. Ltd (CFHFPL). As can be seen, housing finance companies have been on fire on the bourses for the last 2 years with many of them even tripling from their levels then. And with the Modi govt.’s thrust on housing with schemes such as Housing For All, affordable housing etc., this run should continue for a long time. The other major factor that is likely to work in favour of CF is the falling interest rate scenario which will lead to an increase in the demand for loans and disbursements.

An HDFC Sec report points out that Capital First is quoting at ~2.3x FY16E ABV (adjusted book value) and 19.5xFY16E EPS which compares favorable with its larger peers Bajaj Finance (3.4-3.5xFY16E BV and 16-17xFY16E EPS) and Sundaram Finance (3.6-3.7xFY16E BV and 19.5-20xFY16E EPS). Of course, the larger peers deserve the premium because they have higher RoEs and RoAs. However, there is a chance for the gap to narrow under the stewardship of V. Vaidyanathan. In an earlier interview in November 2014, V Vaidyanathan, CMD, CF, asserted that he is confident of achieving 25-30% over the next 2-3 years.

All in all, all the ingredients for a superb growth story are firmly in place.

Maximum growth

Post my comment on Maxwell on 14 Jan ’14, Maxwell has continued its relentless march forward and has gone up by nearly 30% in the last 1 week from around 41 to 53 today. The stock has nearly tripled in less than a year and as things improve, can only go up from here.

I had written about this first in Feb ’12 here and later re-affirmed my faith during Diwali ’12 (here) when it expectedly hadn’t gone anywhere since Feb. However, all the things which I had mentioned in both of my posts still hold good and are slowly starting to fall in place for Maxwell.

Maxwell can be called what is known as an Inner-wear company (a much polished way than otherwise) much in the same category as Page or Loveable Lingerie, though not in the same class as yet. Maxwell owns the inner-wear brand VIP which most Indian would be familiar with.

Back in the old days it had the ad – “What's he got that I don't?” for the VIP franchisee brand. However, that has changed since then with the advent of Page (with its Jockey brand) which transformed the inner-wear market.  An interesting insight I read is that a few years back, there was the trend of low denims which made it a must to have a good inner-wear brand to be visible. And this is exactly what Jockey capitalized on and gave VIP a run for its money, so much so that what VIP was to the public earlier, Jockey became to the market.

To be fair, Maxwell hasn't seen any growth in the last 10 years, with a stagnant topline of 200-225 crore over this period, largely its own doing. And one of these was that it tried to move into the spinning segment which took quite a toll on its resources. Maxwell also had another set of problems over the last few years namely, power problems and labor unrest. But these are now a thing of the past

Now over the last few years, they have charted out a new path with the following strategy:

-       hiving off the resource sapping spinning business

-       focus on branded garments business

-       tie up with international brands

-       moving into new segments such as signature collections

-     also look at product extensions into women’s wear (Eminence), sportswear (Frenchie and Frenchie X) and thermals

As a part of the implementation of this strategy, in June ’11, they sold one of their spinning plants for 39 cr., then in '14 they sold the Navi Mumbai unit for 9 cr., and they have plans to plan to sell their Tamil Nadu unit for 12-15 cr. Also in the sale pipeline is their Gujarat unit. This will reduce their working capital from 80 cr. to 60 cr., a gain of 20 cr. which in turn will reduce the interest outgo.

Analysts expect it to post an EPS of 5.5 for FY 16, giving it a forward PE of about 7.5 while Page and Lovable trade at upwards of 20; of course they are much bigger players and have different strengths but they have been able to make a mark for themselves in this nascent industry.

So the success of Maxwell largely depends upon the execution of their strategy. They have a strong brand VIP but that has got completely overtaken by Jockey in the last few years. So they couldn’t keep a strong brand going in a large market. They are also targeting a market share of 30% for the women’s wear segment from the current 15%, in the next 3 years.

With the above steps executed, they should see a significant margin expansion; margins have already improved to about 10% in the first half of the current year. In the last 1 year itself, from Feb '14, the stock is up more than 200%.With the right steps taken this could well be a multi-bagger in the years to come.

Buffetisms

A recent discussion with a friend triggered this post. While discussing some stock recos, one of the questions he asked was regarding the price targets I expected for the stocks I had recommended to him over next 2-3 years – Aditya Birla Nuvo, L&T and CARE. If you read Warren Buffet’s quotes, you will realize that simple thinking or a simple solution to a problem is often the best solution. And I for one, do try to follow his philosophy, where possible and more importantly applicable.

Let’s just see the stocks I have written about and see which of Buffet’s philosophies went into them:

Buying a stock is about more than just the price

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

For this reason alone, I have avoided Page Industries and Eicher Motors. Given that they have good businesses which have done well over the last few years, but they certainly don’t quote at fair prices. I would rather go for Ashok Leyland or Tata Motors which are much more reasonably priced than Eicher Motors. When u are at the top, the only way u can go is down.

The next few are some of my favorites.

The best time to buy a company is when it's in trouble. 

"The best thing that happens to us is when a great company gets into temporary trouble...We want to buy them when they are at the operating table."

In the last 3-4 years or so, a couple of my recommendations have been Wockhardt and MCX which fit this philosophy to the t. Both are excellent businesses but ran into grave trouble, some of their own making and some not. As I had written in my blog, there was nothing wrong in MCX’ business then (Aug. ’13) and nothing is wrong now. But then, it quoted close to 300 and today it is quoting close to 840. And the cause of this trouble was not the business but the parent company which was in deep trouble over irregularities in its subsidiary NSEL.

Same is the case with Wockhardt. With a seasoned Khorakiwala at the helm, it made some wrong bets on foreign currency derivatives way back in 2008. Saddled with a debt of over Rs. 3700 crore, Wockhardt had gone in for the corporate debt restructuring (CDR) process. Following that, it defaulted on redemption of $110 million (around Rs540 crore then) of bonds in October 2009. To add to its troubles, a group of 3 FCCB holders filed the winding-up petition against Wockhardt in January 2010 which was admitted by Bombay HC. The fact of the matter was that Wockhardt was slammed from 2 sides – one was the INR appreciation (Wockhardt’s business was heavily export-centric, accounting for as much as 80% of its turnover) and the other was the inability to pay back the FCCB amount. This led to a run on its share price which collapsed from above 1000 closer to 100 in no time.

The company made some wise moves to get out of this trouble – it sacrificed a part of its hospital business, the entire nutrition business and animal health business. With this, some amount of sanity was restored. In 2009-10 Wockhardt’s debt equity ratio was at an alarming level of 5.5 which now reduced to just 0.4.  During this period, the share price moved from less than 100 to close to 1500.

Once there was some clarity on how it wanted to move forward, I boarded it at a reasonably good price and made good money. Again, there was nothing fundamentally wrong with its business; it made some wrong moves and more importantly put together plans in place to get out of the mess it found itself in. I still hold it from around 700 levels and expect that it will move much higher from here onwards, though it has appreciated by close to 50% in the last 2 years or so. Of course there may be bouts of ups and downs but then it can’t be a 1-way street can it? I am sure that the able Mr, Khorakiwala would have learnt his lessons and is putting in place a structure to prevent such mishaps, leading the company to more assured and stable growth.

Stocks have always come out of crises.

"Over the long term, the stock market news will be good.”

In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."

The one company which fits the bill above is JSPL.

If you see the price action in the recent times, it seems clear that people have accepted that the damage has been done to the extent that any improvement on the coal auction side would help them come back which is one of the reasons they lost this entire ground. Also the penalty issue which is still hanging fire could start abating if they were to get some sort of a respite which is likely.

At the same time the ordinance for the mining side could improve even the steel business for them. So all in all, they can come back from this much stronger, much like Wockhardt. If you are patient enough with this, returns could be manifold.

Take the next 2 together.

Think long-term

“If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.”

Forever is a good holding period

"When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."

As I have written in my blog, when you invest In equity u should have a minimum holding period of 3-5 years, the longer the better. If u catch a good company, the returns over a longer time-frame can easily be 20% compounded annually. And very few instruments will give u that kind of return in India, now or in the future.

For e.g. take Aditya Birla Nuvo (ABN) which I wrote about in Nov. last year. With a young KM Birla at the helm (he is less than 50, so unless something untoward happens, has a long way to go; and he has running the Birla group splendidly for the last 19 years from the age of 28), ABN can also flourish from hereon. Once it starts hiving off its subsidiaries into separate companies, real value-unlocking will happen

Same with L&T the only diff. being there is no defined promoter family behind L&T, but there is a professional board which will ensure its wellbeing.

 I started buying ABN from ’05 when it was called Indian Rayon and was around 350. Since then, I have bought it at various levels over the years, even at levels of 1000 thus getting an average price of around 700. And I have no intention of selling it off anytime soon, unless I need the money.

Same with L&T – started in ’99 when it was around 200 and kept adding at various levels. Since then, it has given 3 bonus issues, 2 of them 1:1. Can you ask for more?

CARE is a new entrant since it came with an IPO only in 2012 @750. Now it is around 1600. But compared to its peers, it is still not expensive. I have already written about it earlier. This is the only stock among the listed rating peers which as yet hasn’t been grabbed by any rating MNC (CRISIL has S&P, ICRA has Moody’s, and now IDBI wants to get out of CARE to monetize its holding, giving any other MNC exactly the entry it may be looking for). And mind u, being a niche stock, it will never be cheap on the valuation front (not the price). But if u stick to it, returns are likely to be secure and manifold.

Clinical growth

This is one stock I can bet not many (fresh or experienced) would have heard of. Poly Medicure (PM) is a small cap stock which came on my radar way back in 2007, when it was around 170. Since then, it has more than rewarded its shareholders with 2 1:1 bonus issues every 3 years in 2010 and 2013, and is now quoting at around 910. It has given a CAGR of 23% over the last 7 years, and that is without including the bonus issues. You can do the calculations for the rest. Even in the current year, it has returned 162% YTD. The promoters of this relatively unknown company are also the quiet Baid family holding about 48% stake. And none of the major institutions have discovered this yet.

One of the main reasons that attracted me to this scrip then was its miniscule equity capital of 5.5 cr. Post the bonus issues over the years, it still stands at a reasonable 22 cr. And the company has a market-cap of more than 2000 cr. On this tiny base, u can imagine the effect of any jump in profits has on its EPS and hence on the overall valuation. And the other reason for my interest was the company’s business.

Established in 1995, PM is one of the leading producers and exporters of medical disposables in India. The company is mainly into manufacturing and selling of healthcare disposables like Intravenous (IV) Cannula, blood bags, Blood Transfusion (BT) set and various other disposables. These products are widely used for infusion therapy, anesthesia, urology, gastroenterology, blood management, surgery & wound drainage and others. This is a niche business requiring a high degree of engineering and automation in manufacturing processes; need for continuous R&D and innovation; highly skilled workforce and technical knowhow, and long duration to get product approvals. So the entry barriers for new players are significant, and there are hardly any Indian companies that are in this field. A few major MNCs that I am aware of in this field include Siemens and J&J.

The medical disposable/equipment industry plays a crucial role in the healthcare system. Medical disposables have enhanced the ability of physicians to diagnose and treat diseases, improving overall health and quality of life. These technologies have changed the mainstream practice of medicine. These devices include not only diagnostic technology but also analytical techniques, providing physicians with fresh, accurate and rapid information. Also, minimally invasive technologies allow surgeries that are safer, with less pain and trauma, requiring significantly shorter hospital stays and hence are becoming increasingly popular leading to a higher demand for such products. And that is where PM would benefit.

In light of its widespread applications, the medical device market is witnessing explosive growth. As per a research report by Edelweiss, the global market for medical disposables is valued at ~USD 120bn, growing at 4% CAGR. This will continue to accelerate as demographics and market drivers increase their pressure for new and innovative product offerings at affordable pricing. The same report states that the Indian medical disposables market is pegged at USD 0.8bn and growing at a healthy pace of 17% CAGR for last 4 years. The domestic market is highly dominated by imports at 70% of the total demand. Out of the balance 30%, 18% of the medical disposables are produced by organized local players like PM while the remaining 12% is produced by unorganized players. The company exports about 75% of its products currently, so there is still a huge scope for market expansion for established players like PM.

PM exports its products mostly to Europe, Asia and South America and supplies to over 80 countries across the world. Exports contribute 70% of total revenue. Export sales are mostly via distributors. Domestic business is conducted via government tenders or via distributors to private hospitals. Recent management commentary indicates that the company is likely to focus more on Nephrology products (related to kidney ailments) in the coming period. Today, India imports most of the products including the basic ones in nephrology field. So there is a big opportunity for PM to make these products and bring in good, new technologies at affordable pricing.

Now the govt. has also approved FDI in medical devices which would directly benefit PM. Earlier, the medical devices industry was being clubbed with Pharma and hence approvals had to come thru the FIPB route which took anywhere from 6 months to 1 year. Now this barrier has been removed. Also with this new regulation in place, the medical devices segment will get separated from the drugs and pharma business which will help pricing.

PM has 3 operational facilities in the north – 2 in Faridabad near Delhi and 1 in Haridwar. And a 4^th one in Jaipur, in Mahindra SEZ, is yet to be commercially operational.

With the govt’s focus on Make-in-India, along with secular growth prospects for its products, and aided by INR deprecation (as 70% of its products are exported), PM appears to be in a sweet spot at the moment. Latch on to it for healthy returns over the coming years as has been its record.

2015 themes

Here’s wishing everyone a very happy 2015 ahead. 2014 was a blockbuster year in terms of the market returns generated and any and every stock gave returns (good and the bad), making everyone happy. However, it must be remembered that much of this euphoria has been based on what the Modi Sarkar will do in the coming years rather than on any ground realities. This is not to say that the govt. has belied expectations, in fact far from it, they have actually started making positive moves which over a period of time will indeed set things right. However, discounting the future is something that the markets are really fond of doing, and you have the Sensex closing in on 30K mark. So it will be a good strategy now to focus on themes and sectors which will see their prospects improving dramatically due to 2 reasons – govt. moves and the resulting cascade effect these will have.

The key themes to watch out for in 2015 will be:

1. Crude oil prices – These have come down close to half their value not too long back, and the general view is that this will continue for the better part of the next year. So it will be a good strategy to focus on companies that will benefit from this. While OMCs are the obvious choices for this rebound, I personally don’t favor companies whose reins are in the hands of the govt. of the day. There is no framework that a govt. follows, however well-meaning it  might be, and quite a few times, it has to look at populist measures which most often are not rational. While the govt. has done a good thing by utilizing this event to free diesel pricing, there is no saying when this decision can be reversed based on global factors. So if u have to ride the OMCs do so, with proper monitoring. You should be able to jump off with your profits when things start getting shaky. A better option would be to focus on paint companies who are the direct beneficiaries of this event. My picks here would be Berger Paints and Kansai Nerolac. Both will give good returns over the next few years. I am not picking Asian Paints, purely from a returns perspective, its pedigree has never been in doubt. When u are the top, the only way u can go is down, is my favorite maxim :)
2.  Power sector – This is another one sector where govt. has really put its thinking cap on. While the govt. does not have a magic wand to remove all the ills of the sector which have been accumulated over the years, the benefits of these moves are likely to follow sooner than later. In this area, NTPC, the largest and the most efficient power producer should be a direct beneficiary.  Distribution woes and functioning of SEBS, once corrected, would do wonders for this company. Last year, I had mentioned that PTC twins (PTC India and PTC FS) would be huge beneficiaries of the power sector reforms. And how they have zoomed (PTC nearly 40% from about 65 to 95 currently and PTC FS nearly 5 times making it a clean multi-bagger. However, I believe that with the reforms coming thru, these stocks should soar further from current levels, albeit with intermediate ups and downs. But for a long-term investor, which is what this article is meant for, this should not matter at all. Check after 3 years and see where these are.
3. GST Bill – This has been in the works for quite some time now and only now looks to be getting thru. Chidamabaram’s half-hearted attempts at getting it passed notwithstanding, and Jaitley’s the exact opposite, the direct beneficiaries would be the sectors with a high percentage of the market occupied by unorganized participants, as the latter are forced into the tax net and the competitive positioning of organized companies improves. So look for FMCG companies like Pidilite and the paint companies where unorganized segment plays a significant role. Also watch out for logistics companies Allcargo Logistics and Gateway Distriparks as uniform taxation would result in higher distribution of goods across the country and development of hub and spoke model. And the government is unlikely to face stiff resistance from Congress party for the passage of the GST Bill.
4. Banking, Finance & Insurance – With the Modi govt. determined to pass the Insurance bill where the foreign partner will be allowed to hold 49% will be a major booster for the industry. Already Standard Life has announced plans to increase stake in HDFC SL by buying stake from HDFC. More are likely to follow. Here the insurance companies where banks are major partners should benefit greatly. So HDFC and ICICI Bank should do well.
5. Auto sector – If the economy improves, can the auto sector be far behind? My pick here would be Ashok Leyland whose bad days appear to be behind it. Also Tata Motors DVR should be a good bet, purely from a differential valuation perspective, the discount is too large currently; once Tata Motors starts moving, this should follow at a higher speed to narrow the gap.

Having listed the sectors and the scrips within them where money can be made, here are some other specific companies I expect to do well:

Zicom Security Systems

This is the largest e-security provider growing @55% for the last few years. Though this has revenues of about 1200 cr. and profit of 70-80 cr., its market-cap is only 360 cr. At the current price of about

Zicom also caters to individual needs. Now, it has also diversified into mobile solutions for women, children and senior citizens in collaboration with Samsung exclusively on their phones, under the name Ziman. The solution has been designed to help the target audience to quickly reach out for assistance in emergency and distress situations. This seems to be a really great idea in today’s environment and should be a big hit among urban audience. In recent times, it has changed its business mode l from being a product company to a services company where the margins are much better. This has already resulted in an improvement in its bottom-line. Its subsidiaries in UAE and Qatar are also doing very well. Analysts expect an EPS of 35 for the next year. And at that valuation it is still a very attractive buy.

The main promise I see here is based on the Modi sarkar’s focus on smart cities. Zicom is likely to be one of the biggest beneficiaries of these projects. A smart city would definitely need smart security solutions, and on all counts, Zicom fits the bill (check with any of your IT colleagues who provides office-wide security, and chances of Zicom being that company are very high). And the other thing which goes in favor of Zicom is the govt’s recent ‘Make in India’ mantra. So my reasoning is that the first choice in most such cases would be Zicom.

I have always liked companies with a niche focus and this has also reaped dividends – Four Soft, MCX, Acrysil, Astra Micro to name a few, all focused on niche businesses. This is another addition to that list. Unless something goes drastically wrong, this should provide secured returns going forward.

Kalyani Steels

This scrip has been attracting the attention of a lot of analysts lately and with good reason too. From the Baba Kalyani stable (of Bharat Forge fame) wherein they hold about 60%, management pedigree is a foregone conclusion.

It manufactures special carbon alloy steel used in engineering and auto industry, with a fully integrated facility. And it does this in a very cost efficient way too! With iron ore and coke prices at 5-year lows, its basic input costs are coming down. Even in the first half of the current year, which is usually a lean period, it did well with bottom line rising 73%. Second half should be much better with margin expansion due to low raw material cost as mentioned above. It has come down from its highs of around 180 to about 160 now and provides a good entry point.

Capital First

This was a Kishore Biyani company till 2012 when Warburg Pincus (WP), the marquee PE investor, boarded it in June ’12. Pantaloon Retail, the KB flagship, which was struggling under a huge debt burden, sold its 54% stake to WP @162/share for nearly 800 crores, when the company was quoting @137. Then WP increased its stake further to 70% (thru convertible shares etc.) where it stands currently. So WP thought it fit to pay an 18% premium for this firm more than 2 years back, and with the promise of investing more since it now owned the company and could run it in its own way. And the first smart things WP did was to rope in V. Vaidyanathan, then ICICI Bank ED to lead the firm. And look what this pedigreed duo has done. From then on, the price has more than doubled to about 366 at today’s closing in about 2 and half years. This was the largest deal of its kind involving an NBFC. Late in 2012, the company renamed itself to Capital First from Future Capital.

Capital first has a comprehensive product suite to meet multiple financial needs of customers including Consumer and Corporate Lending. It is an NBFC offering personal loan, loan for consumer durables, gold loan, two wheeler loan, and loan against property and distributing various insurance products. CF is present in 40 cities through its 164 branches.

CF’s CAR is a healthy 24%. Due to management’s prudent decision to concentrate on retail lending, its gross NPA is just 0.45 % and net NPA is only 0.08 %, respectable figures by any standard.

In addition to this, recently HDFC Standard Life Insurance Company Ltd infused Rs.50 Cr by taking a 4% stake in this company. This surely is a huge vote of confidence.

With the economy on the mend, interest rates expected to come down next year and a top quality management team, this should go places in the years to come.

Hindustan Zinc

This is a Vedanta group company and the only integrated zinc player in the country. It enjoys a high profit margin among metal players. Last year, its profit was 7000 cr. on a topline of 13000 cr. Unlike the reputation of its promoter, this is an investor friendly, dividend paying company. Zinc market globally is expected to remain tight, so prices of Zinc will be good. HZ is a cash-rich company with cash of 65/share (one of the reasons why Vedanta wants to gain full control and utilize this cash to retire their huge debt). As can be seen from recent announcements, Modi sarkar is keen to divest its minority stake at a premium to the market price of 170.  So a reasonable upside (around 20%) from current levels is a reasonable possibility.

Larsen& Toubro (L&T)

This was my pick last year too and it has indeed justified the faith I had reposed in it. From about 1100 this time last year to nearly 1500 at today’s closing, it has indeed returned close to 40%. However, with the economy on the cusp of improvement, it should continue its rewarding ways. As I had said last year also, this continues to be an Indian economy bellwether with its engineering output directly dependent on the state of the Indian economy. And not to forget that it enjoyed levels of 4000 a few years back (before it announced 1:1 bonus). Keep the faith and add more.

Let’s now pause a bit to see how my picks did last year:

	Price as on
	31-Dec-13	31-Dec-14	Difference	Diff. %
L&T	1070	1495	425	40%
Elantas Beck	558	985	427	77%
PVR	646	700	54	8%
ING Vyasa Bank	612	865	253	41%
Amtek Auto	75	179	104	139%
Amtek India	65	76	11	17%
Sona Koyo	19.5	55	35.5	182%
PTC India	66	94	28	42%
PTC FS	14	70	56	400%
Coal India	290	383	93	32%
Total	3415.5	4902	1486.5	44%

As seen from the above table, auto ancillaries and power companies turned out to be multi-baggers last year. And this trend should continue this year as well, though the returns may not be as huge as last year’s. However, the long term prospects of these companies and the sectors themselves are still bright, the results of which will surely be visible in the coming years, not necessarily next year.

So here’s wishing all investors a very profitable 2015.