Jiya Eco-Products Ltd.
In this post we would like to Explore the Multibagger Potential of the company. This is based on a blog reader request.
Jiya Eco is into a unique business of manufacturing of Pellets and Briquettes. The company operates in Bhavnagar, Gujarat. The offered products are manufactured from agriculture and forest waste, which are the cost effective, high yielding and sustainable bio fuel alternative. Modern algae processing techniques are implementing the production of our products. Further, Pellets manufactured from agriculture and forest waste have a huge demand in the marketplace owing to their zero smoke & fly ash emission, easy handling, uniform in diameter, high fuel efficiency, and more.
The product Briquettes is a substitute of solid fuels like coal, charcoal, firewood etc. It is used in Pharmaceuticals, Textiles units etc. The product Pellets are used as Fuels for Electric Power Plant Homes and a Substitute of Fuels like Diesel, Kerosene, LPG etc.
In short, the company provides Alternative Bio-Fuel to the Customers which are Cost Efficient & Eco-friendly. This is a unique business with lot of opportunity in the sector.
Company is showing almost 100% growth in Sales & Profits compared with previous year. The EPS growth is clocking around 200%.
Solid Expansion Plans. The new Pellet manufacturing unit in Gandhidham will be commissioned in next 2 years which will be be Doubling the current capacity. Company is undergoing Greenfield & Brownfield Expansions. Company has multi-year Lease of Land providing easy access to raw material & lower transit cost. The company is currently expanding outside of Gujarat to Rajasthan and Madhya Pradesh.
Forward Integration of Burner Manufacturing business ensures growing demand for current Pellet business.
Company have boost from NTPC, Government Initiatives to support Bio-fuels etc. Since this is a Unique model of business, Jiya Eco is the only company in this sector.
Company has good Revenue & Net Profit Growth.
Other positive factors are:
- High ROE.
- High ROCE.
- Managed D/E at 0.4.
- Increasing Net Worth & Reserves.
- Trailing Numbers are good.
Reduction in Promoter Holdings of 30% in last 3 years. Huge Promoter Holding Sale in last 1 year. link. There is an Allegation that Warrants are converted to Shares too.
No Dividend Payouts. Although the company may be reinvesting the profits in the business which is considered good. Tax advantages of 5 years seems to be maxed out.
Sales are mostly into Credit. Debtor Days increased 100% in past 1 year. This may induce Working Capital problems. Cash Flow is flat/negative.
Low Liquidity Stocks can become a Manipulation Instrument. Hence allocate 50% less money if investing, then increase progressively for next 6 months.
Debt is moderately high. Increasing Borrowings.
SME category risk of price crashes during bear times.
Warren Buffet, Value & Growth Checklist
Following are the Checklist parameters:
|History of Consistently Increasing Sales, Earnings & Cash Flow||Yes.|
|Durable Competitive Advantage||Yes. (no visible competitors)|
|Future Growth Drivers / Sectoral Growth||Yes. (unique sector)|
|Conservative Debt (long term debt < 3 Net Profit)||Moderate. Cash Flow issues are there.|
|Debt Equity Ratio, Current Ratio||Moderate. Increasing Borrowings a Concern.|
|Return on Equity must be Above Average||Yes.|
|Low CAPEX required to maintain current operations||Not.|
|Inventory Turnover Ratio, Debtor Days, ROCE||Increasing. Concern.|
|Management is holding / buying the stock||No. Promoters have High Selling in past 3 years.|
|Price is Under Valued (< intrinsic value)||Considering the EPS Growth it is Super Under Valued|
|Stock Price is consolidating (now)||No. It had a fall & now spiked back.|
|Stock Price is growing in past years along with EPS growth||Yes.|
|Consolidated PE, PB Ratio, PEG Ratio||PE 7 (moderate)
PB 4 (high)
PEG 0.05 (very low)
|Cash Flow Positive, Net Profit % greater than 8%||Cash Flow: Negative
(expansion plans induced cash crunch)
Net Profit: Okay
|Paying Dividends, Tax||No.|
|EPS Growth Rate||100% above|
|Jump in Trailing Result EPS||Yes|
|Jump in Quarterly Result EPS||Yes|
|Expected Gain in 5 Years||500-1000%+
(If promoter concerns are resolved & more investors are attracted including MFs)
|Price Movement Graph, 52 Week High & Low||High: 78
|Volume Analysis||2 Lakh|
|Power of Brand||Moderate|
|Corporate Governance, Reputation of Leaders||No frauds reported. But few concerns on Warrants issues at Peak price exists.|
|Fraud reported||Same as above.|
Based on the above analysis I would like to say that the Jiya Eco possess Multibagger properties & considering the concerns it is categorized as High Risk High Returns stock. If invested do tight monitoring on the company news & events.
|Disclaimer Futurecaps is an independent equity research team. Use of the information herein is at Investor’s own risk. This is not an offer to sell or solicitation to buy any securities and Futurecaps will not be liable for any losses incurred for the investment based on the advice. The Investor is advised to do due diligence in the scrip mentioned. None of Futurecaps Advisors hold 1% above Holdings of this company.|
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