Many analysts recommend stocks based on its fundamentals and technicals.
That is taking a limited view because what ultimately prevails over all indicators is the business model.
A company can be in a loss and it’s technical and fundamental data can be poor, but if it is in a disruptive or a futuristic business, savvy investors will spot it and place their bets on it as the hoi polloi go on selling.
You have Rain Commodities, HEG, Amazon, and many other stocks as prime examples of stocks with solid business models which languished because the typical investor did not see any value in them.
One stock with an absolutely fantastic business model and average earnings is DeNora India.
DeNora is an Italian MNC and the best thing about DeNora India is now in full control of its MNC parent. The second best thing is that the Indian arm can now fully tap into all the businesses of its Italian parent.
Now here is what DeNora is presently doing:
DeNora Products in India
The company makes the following products for the electrochemical industry:
- Cathode & Anode for Chlor-Alkali Industry
- Electrochlorinators
- Cathodic Protection Systems
Two prime applications are water purification (for various industries) and desalination.
Water is the new gold. Population is increasing, water table is shrinking and water bodies are going dry, which is why we are seeing such a hue and cry about saving water. Even PM Modi went shopping for desalination technologies when on his trip to Israel.
Guess what, DeNora’s parent is also in desalination plants and the Indian arm already has started working in that direction.
Moreover the company also has launched a solar-based water purification system for far flung rural communities a move that goes well with the government’s initiative.
DeNora Services in India
55% of DeNora India’s turnover comes from services, and these high tech consultancy services in the fields of Titanium metal anodes/cathodes and electrochlorinators.
Immediate Prospects
As I said before, the best thing about DeNora India is that now it is directly controlled by its parent, and because of that it can set up the following businesses, all of which are emerging businesses:
- The company owns technologies that improve fruit and vegetable cultivations and animal breeding. The company also provides technologies and products that help increase the shelf life of foods and ensure that food processing is done hygienically. Think about the food processing summit going on presently and about the business it can bring to India. On animal breeding technologies, think Godrej Agrovet.
- Corrosion protection and pipeline reinforcement technologies and brands. This is again huge given the vast scope of gas and water pipelines that are yet to be laid in India.
- Water and wastewater treatment services to the oil and gas sector. The gas sector, given the thrust on clean fuels, is about to see a mega bullish phase with foreign companies competing with Indian giants. DeNora stands to benefit. Secondly, the company can extend its wastewater treatment technologies into other industries, in fact, this company is a competitor to Ion Exchange.
- One method of recovering the hottest metals, nickel and cobalt, is to extract the minerals from wastewater. Guess what, DeNora has the technologies and products in place. The company’s Titanium DSA Anodes help recover the minerals + refine precious metals (gold, silver), recover copper from bleed streams and valuable metals from industrial wastewater.
- The company also makes products that help clean and sanitise critical facilities such as hospitals and laboratories, among other regular uses.
- The parent company already owns technologies in the renewable batteries sector, which is extremely hot these days. The R&D R&D focus is on:
- pure flow batteries (hydrogen / bromine, and other redox couples),
- hybrid flow batteries (zinc / bromine)
- metal / air batteries.
- The company also is ready with treatment of water and wastewater for municipalities. As you know, municipal water is the pits and the right government can change things around in no time — of course, with a little help from companies like DeNora.
This is what DeNora India is all about. It quotes at a premium but the long term prospects are nonpareil. A must-have in your core portfolio.
Thanks for the information
The analysis does not have any numbers. Numbers will help ease decision making.
Please check their AR for numbers. I have analysed the business model.
promoter stake continuously decreasing…march 17 it was 56.8, June 17 it was 54.2 and sept 17 it came down to 53.69
It is because the Italian MNC has taken over the management.. the old Indian management is being reclassified as public holding
Sales halved in just one year.EPS down to 1/4th.Profitability can be variable,but sales shouldn’t be drastically come down.50% down in one year is something to ponder about.
It’s a cyclical industry with fantastic potential.. check their reserves and assets
sir
In assets the intangibles are a large part same is unexplained aswell.
It seems you have not read the annual report. This company develops software for its core applications such as water testing, desalination, extracting minerals from wastewater, etc. The intangible assets represent software, which is written off over 3 years. here is an extract from their annual report:
Intangible assets and amortisation
Intangible assets includes system and application software. These intangible assets are recognised only where
future economic benefits attributable to such assets are expected to flow to the Company and the cost of such
assets can be reasonably measured. Software is initially recognised at cost and carried to subsequent years at cost
less accumulated amortisation and accumulated impairment losses, if any.
The computer software is amortised over an expected benefit period of 3 years on a straight line method (SLM).
Intangible assets are derecognised when no future economic benefits are expected from their use and subsequent
disposal
Hi sir,
It seems to be an operator driven stock now.
Up 3.8 % until now – (12.10 14-11-2017) without much volume.
Operators are filling the top of order book with bid quantities of 1 each to hide genuine bid prices.
What tactic you will recommend in similar situations ?
Most stocks are operator driven. Long term investors have no option but to buy and hold.
I track this from long time but not performing since last one year
Management has passed from Indians to Italians. let’s wait for another 6-8 months and see what develops.
Kindly update the present position of Denora
Unsure, sir. Very erratic performance
why doe the share prices of De Nora rise particularly in winters, Any specific reason?