Sometime back worked on Steel Strips Wheels Limited in question answer format while looking at attractive valuations. This time we will work on What are the things to be looked in while evaluating a multi-bagger stock with an example.


Previously recommended a  multibagger post on Prima Plastics  saying it as sure shot multi-bagger when it is trading at 28 rs, now the same moved to 120 levels.


Introduction :

Before digging the company details, Let me start with an interesting introduction.

1.    Mathematical Calculation
       20 + 20 + 20 + 20 + 20 = 100


2.    Equity Investment calculation
       Promoter Integrity + Domain Experience + Product Monopoly + Capacity expansion +         Good Financial ratios = Multi-bagger

I am 100% sure that to prove the mathematical calculation no one need my explanation, Where as to understand the “Equity Investment Calculation”, one may need to go through the below story.

 
Stock Idea : 

VIVID GLOBAL INDUSTRIES LTD (VGIL) formerly known as Vivid Chemicals Ltd is a manufacturers of several Dye Intermediates, Acids and its derivatives.


The promoter group under Mr. Sudhir M.Mody, has three decades experience in the field of Dyes & Dye-Intermediates. Promoter group holds 48% stake in VGIL and recently allotted themselves 3.5 Lakh shares @15rs. Though it is a small company, it is regularly paying 50ps dividend from the last 3 years.

 

VIVID GLOBAL INDUSTRIES LIMITED (VGIL) has its manufacturing unit located at Vapi (Gujarat) in India.


VGIL product portfolio includes Dye Intermediates such as PHJ, NMJ, DIJ, MXOSA & Tobias Acids, SM2P and also a wide range of Reactive, Acid and Direct Dye Intermediates. These products used in applications from paints, adhesives and construction to the textile and paper industries.


VGIL client list include international majors Archroma, Sumitomo, BASF and several others. Similarly VGIL exports products to Thailand, Spain, Brazil, Bangladesh, Switzerland and various other countries. Exports contribute nearly 50% in company’s annual sales.


Reasons for Bullishness
Currently the existing VAPI plant is running with 100% capacity by producing 400MT/Year, to boost the sales further VGIL constructed one more manufacturing unit at Tarapur and this plant is going to commence operations from March 2016. This Tarapur unit is going to manufacture Dye Intermediates with capacity of 1200 MT/year Vs Vapi plant capacity of 400MT. This will provide more than 300% growth to sales starting from the year 20016-17.

Monopoly:  By commissioning this Tarapur plant, VGIL becomes the only manufacturer of several Dye Intermediates.  This monopoly factor will create a favorable product pricing power for VIVID Global domestically and improve the foot print in International market. This will lead further growth of the company in terms of turnover and also increase in the profitability.


Check List

Question Answer Remarks
How is the promoter Integrity

Promoters hold 49% stake with recent allotment & they have 3 decades of experience Good
Regular Dividend player Yes, Div yield is nearly 5. Good
How is their client list An exports based company with international majors Sumitomo, Archroma, BASF etc. Good
Expansion New plant is going to commissioned in MidMarch-2016. Good
Monopoly New Plant at Tarapur is going produce severalIntermediates which no one else is producing in India. Good
How is return ratio’s  ROC, ROCE etc. Return ratio’s are fantastic with both are near 30% for the last 3 years. Good


Note: This stock is currently trading in PCA(Periodic-call-auction) segment, where trade cycle will happen as follows.

Order Placement : 9.30 to 10, 10.30 to 11, 11.30 to 12, 12.30 to 1, 1.30 to 2, 2.30 to 3

Trade Matching & Order Execution : 10.15, 11.15, 12.15, 1.15, 2.15, 3.15

Conclusion: Currently VGIL’s market capitalization is only 8 crores & stock price trading at 8.5rs, with good dividend yield, Honest & Experienced promoters at helm, Strong Clientele, Product monopoly with capacity expansion….Considering these factors surely it will reward shareholders in next 1 year itself.

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