The authors reveal the mystery of Chinese banks and how they function
Solar Industries (one of our earlier stockletter picks) has posted average third quarter results. Sales were sluggish because of slower exports and new ammonium nitrate regulations. We had recommended the stock on 19 August 2011 at Rs736.55 for our Antelope and Lion stockletters and exited at Rs964.4, up by 31% in 16 months
We had recommended Solar Industries in our stockletters (this is a subscription-based service) on 19 August 2011. The company reported a sluggish 22% year-on-year (y-o-y) increase in net sales to Rs218.17 crore for the December 2012 quarter when compared to Rs179.25 crore for the corresponding quarter last year. The company’s bottomline rose 42% despite sluggish sales, to Rs16 crore, partly because of its low base. The company cited challenging global environment, which meant exports were under some pressure, and non-availability of vessels to transport and change rules with respect to ammonium nitrate.
Both net sales and operating profit have grown by double-digits in the last five quarters. Net sales of the company grew at 22% which was above its three-quarter y-o-y average growth rate of 21%. Operating profit grew 41% y-o-y when compared to its three-quarter y-o-y average of 44%, still impressive in an otherwise challenging market. This was helped by increase bulk explosive realizations. Having said this, its valuation seems to be slightly expensive, with market capitalisation quoting at 17 times its operating profit while return on net worth is 29%.
The company is involved in two segments: explosives and trading. In the explosives segment, bulk explosives grew 54.7% y-o-y which was helped by 37.6% growth in volumes and 12.5% increase in realisation. Cartridge sales, also part of the explosive segment, grew 10% which was helped by 1.9% volume growth and 7.6% rise in realizations. Revenues from detonators declined 12% y-o-y due to drop in both volumes and realizations, while detonating fuse fell by a whopping 73% most due to lower volumes.
On the other hand, trading sales declined 57% y-o-y due to change in rules, as exporting ammonium nitrate will require special license for not only manufacturing but also conversion, exporting, etc.
During the quarter, the company began work on its explosive plant in Zambia, which has a total capacity of 10,000 metric tones (MT) and expects the 5,000 tonne catridge facility to be completed by June 2013. Further, it also expects revenues from Nigerian plant to start pouring in from 2014.
We had recommended this company at Rs737. However, our formula based on a combination of price and valuation prompted us to suggest an exit, at a 31% gain at Rs 964. The current price is Rs1067.
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A SEBI probe revealed that Chanakya Stock Broking had committed various irregularities like delay in the transfer of securities to the beneficial owner account and created false and backdated records
Market regulator Securities and Exchange Board of India (SEBI) has suspended the certificate of registration of Chanakya Stock Broking Services for one week over alleged violations of broker norms.
“...hereby suspend the certificate of registration of the noticee namely Chanakya Stock Broking Services Pvt Ltd... for a period of one week. This order shall come into force on expiry of twenty one days from the date of this order,” SEBI said in its order on 5th February.
A probe by the regulator revealed that the stock broker had committed various irregularities such as delay in the transfer of securities to the beneficial owner account among others.
The matter had come to light after SEBI received a complaint from one Brig RS Anand (Retd) regarding certain malpractices done by his portfolio manager, PN Vijay Financial Services (PNV).
Following the complaint, the regulator conducted an inspection of the books of account and other records of PNV, in October 2005.
“The Designated Authority has also given a finding that the noticee (Chanakya) has delivered the shares to the client (Brig Anand) from the account of PNV and Shyam Sunder Investment Pvt Ltd in fourteen scrips i.e., accounts other than that of the noticee. I observe that Designated Authority has noted that the instances of such transfer of shares were quite considerable. The noticee in its reply has admitted the transfer from the account of another client. The reason given by the noticee for such transfer was that, it occurred due to the mistake on the part of its employees. Had the instances been very few, one could accept the explanation of the noticee. However, there were several instances of such transfers. Therefore, the same has to be viewed seriously and cannot be condoned. Therefore, I find the noticee guilty of violating the provisions of Clause A(2) of the Code of Conduct for Stock Brokers as specified in schedule II under Regulation 7 of the Brokers Regulations,” Prashant Saran, whole time member, SEBI said in the order.
As part of the probe, SEBI also conducted an inspection of Chanakya Stock Broking with whom PNV was dealing. The inspection period was from 1 June 2004 to 1 September 2005.
SEBI observed that Chanakya Stock Broking had delayed the transfer of securities to the beneficiary account which under the norms are required to be done within one working day after the pay-out date. The said delay was ranging from 82-243 days, SEBI said.
Further, according to SEBI, Chanakya Stock Broking had created false/backdated records in order to cover up certain lapses on its part and that of PNV.