ION EXCHANGE - The water and environment story!!!

The business seems interesting because of the varied businesses related to Water Treatment and Agro etc. Please check the website and dig more. Will be looking more into it. The stock is a good bet for next 1-2 yrs given on the scope of the related business. The current market cap at 180 crores with not a huge debt gives a good entry for the long term.

ABOUT THE COMPANY
They provide total environment solutions – water treatment, liquid waste treatment & recycle, air pollution control, solid & hazardous waste management and generation of energy from waste( speciality of Ion Exchange). They have over four decades experience doing this.

They serve myriad industries as diverse as power, refinery, fertilizer, food & beverage, automotive, pulp & paper, textile, pharmaceutical and electronics.

SOME SNACK ON THE WATER TREATMENT INDUSTRY
According to a recent report by McKinsey, in collaboration with the World Bank affiliate, International Finance Corporation, in the next two decades, global water consumption will increase from the present 4,500 billion cubic meters (bcm) to 6,900 bcm. This will be 40% more than the estimated reliable and sustainable supply today, if no action is taken to conserve water and use it more efficiently.

The situation in India will be dire as water demand will grow annually by 2.8% to reach a whopping 1,500 bcm while supply is projected at only about 744 bcm, that is, just half the demand, according to the report. This increase will be driven by domestic demand for rice, wheat, and sugar for a growing population, and a growing demand for a better diet. As a result, most of Indias river basins could face severe deficit by 2030, with some of the most populous, including the Ganga, the Krishna, and the Indian portion of the Indus facing the biggest absolute gap.

Hence there is a need for an integrated approach of Total Water Management. Ion Exchange is a pioneer in the water management, and also since it is held by ace investor Rakesh Jhunjhunwala in his portfolio.

RESULTS HAVE NOT BEEN SO GREAT SO FAR.
In the last three years, its revenue has only improved from Rs 405 cr., to Rs 433 cr., on standalone basis. On the consolidated front it recorded net sales of Rs 500 cr. Now, what’s been disappointing is the state of margins commanded by the company. They have not been able to move ahead of 2.5% on NPM, while for FY2008-09 they suffered a heavy blow with NPM dropping below 0.5%.

The main concern is the rising cost of raw materials. While the company suffered steep rise in raw material costs in first half of the year, the third and fourth quarter were marked by a slowdown in demand for their products and services.

SOME REVIVAL IN THE LAST FEW QUARTERS
Looking at the results for half year ending Sep’09, then the company has definitely shown revival with the stabilization of raw material cost. It has already made a net profit of Rs 2.9 cr, almost double of what it made for the entire FY2008-09. The Engineering services segment experienced a rebound.

CONCLUSION
The water and environment industry, by its very nature of business is highly sustainable. Increasing water scarcity and fresh water contamination due to untreated municipal sewage and industrial waste will require advanced technologies in water and waste water treatment. Recycle of waste water is becoming mandatory for housing complexes and industries.

When Emotions Move the Markets

YOU may keep a cool head, dispassionately analyzing corporate results, economic data and emerging business trends to pick investments. But that doesn’t mean that everyone else is just as reasonable. If others act irrationally, markets can be distorted and your returns eroded.

Some portfolio managers, adherents of an academic discipline called behavioral finance, say that there is no “if” about it. They contend that investors are driven largely by emotions, the sort so vividly on display in the stock market during the last year.

Those emotions cause investors to misjudge the impact of events in systematic ways, the theory goes. Identifying these patterns and trading against them, the managers say, allows them to enhance performance.

“Humans are emotional individuals, and that gets exaggerated when it comes to taking risks,” said Christopher Blum, chief investment officer of the U.S. Behavioral Finance Group at J.P. Morgan Funds. “There are errors that investors make. We try to exploit anomalies in valuations and momentum” arising from those errors, he added.

- Source (Web)