powerfulpicks research: In an endeavor to choose a winning stock, you not only have to look at the micro economic factors involving the company, you should also analyze the macro economic influences on its performance, especially those that affects its industry or affects an associated industry.
I have chosen this stock only because of strong positive influences at both macro and micro levels. However, 2 important things: buy in very small quantities at these levels and this stock is only for risk takers. Risk averse people please do not touch.
Arun Jyoti Enterprises listed on the Bombay Stock Exchange in the beginning of August. The company operates some Department stores in and around Hyderabad under the brand name of 'TAAZA STORES'. But so far, its major income comes from trading of agricultural inputs like bio pesticides and bio fertilizers. With good monsoons washing South, agricultural activities will be profitable and these profits will be visible in Q2 and Q3 .
The company owns farms and at present sources part of the vegetables from here. It also has some contract farming arrangement with farmers and is looking for further retail expansion and BACKWARD INTEGRATION in cultivation. Simply opening more front end departmental stores/food marts and doing more cultivation on its own, so that the margins are higher. The business model and the concept is promising, although there may be some execution challenges. It is not easy to judge the company on the basis of tracking done in short period, but keep watching further developments.
Company is profitable and posted a turnover of Rs.79 Cr and a net profit of Rs.1.21 Cr with an EPS of Rs.2.40 for FY10. Price is a bit high though (P/E) at present. But they may post an EPS close to 5.2 this year, which will bring the P/E down. Liquidity is low and stock is currently at 104. If you decide to buy, buy on dips, below 100. A medium term target may be 118 (+18%).
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