Monday, May 7, 2012

Cochin Minerals and Rutile - Maintain Buy

Cochin Minerals and Rutile - CMP /LTP 246 + 10%. Upper Circuit and at an all time high.
Had first initiated Buy coverage on 7-Feb-2012 when price was at 148 with target of 300 .Post here
i.e up +66%  in 3 months
Q4 FY12 ending in March 2012 Results out. Blowout results !!
Maintain Buy with target upgrade to 500 i.e 2x upside.Details & Rationale below
Q4 FY12 vs Q4 FY11 YoY
  • Revenues up +2.5x ( 75 cr vs 30 cr)
  • EBITDA up +16x ( 42.6 cr vs 2.7 cr)
  • EBITDA Margin at 57% vs 9%
  • PAT up +32x ( 27 cr vs 0.8 cr)
Sequential QoQ  Q4 FY12 vs Q3 FY12  ( i.e vs 3 months ago)
  • Revenues up +3%
  • EBITDA up +43%
  • EBITDA Margin at 57% vs 41%
  • PAT up +42%
Full Year FY12 vs FY11
  • Revenues up +1.8x  ( 239 cr vs  132 cr)
  • EBITDA up +7x ( 91 cr vs 13 cr )
  • EBITDA Margin at 38% vs 10%
  • PAT up +12x ( 57 cr vs 5 cr)
Results highlights
  • Declared dividend of 12 per share. i.e 5% yield
  • Balance sheet not attached but it was Debt free on Net basis in Sep`11 only so est. FY12 Net Cash of +20 crores
  • Est. FY12 RoE of 127%
Performance
  • YTD +139%
  • 1 Year +382%
  • ~3 year +917% ( up 10x since Mar`09 low of 24)
Chart below ( click to zoom)
Target rationale

At cmp of 245 , market cap of  192 crore. or PE of 3x ,EV/EBITDA of 2x, PSR of 0.7x.
This firm at no direct listed comparable.
Rutile macro still going strong. Read my previous post on Rutile macro and global peers.
For Cyclical commodity in a stong uptrend such as this,very difficult to predict when the cycle will turn i.e hard to predict earnings but I believe super cycle trends like these last bit longer as best way to play this is
  1. Ride the uptrend with a trailing stop loss 25% to 30% instead of an absolute target
  2. Regularly Track the Rutile macro & global peers closely for signs of reversal.
  3. Also probability of acquisition should also be factored in.Large paint players such as Asian Paints could always acquire such a crucial input supplier.
Disclosure - I dont hold any shares in Cochin Minerals & Rutile.

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