 Good day, fellow investors, and welcome to the second part of the four stocks to buy in November video series. I put everything in a playlist and the links below so that you can see all the four investments. The fourth will come later. The stock I want to talk about today is Amira Nature Foods. I recommend that the stock back in June at 4.75 now it's at 6 which is okay, but I really think the stock will do much better and my target short term to medium term target is 15. That's a huge target, huge difference, but I'll show you today why I believe that Amira deserves a much higher valuations and what are the catalysts that will propel it to a stock price of 15 at least. We have visibility into Amfi's earnings that will come out at the end of November. Amfi is a basmati rice reseller so they buy the paddy from the farmers, they age it because you have to age it between 6 and 12 months and then package it and then resell it to customers around the world. And look at the basmati prices. If you look at the price in 2015 was 849 dollars per ton, 2016 795 dollars per ton. From January to October 2017 it was on average 1,132 dollars per ton and now it is again in October the first week so October 1200 dollars per ton. This means that in the current period the average basmati price is 44% higher than the average price that Amira was selling it in the previous period. A 44% increase in the commodity that you are selling is huge and it's even bigger when you are selling it at the 44% higher price but you bought it at still the low price. People forget that Amira buys the paddy, ages it for 6 to 12 months and then sells the rice. So they buy the paddy on the chip, they have their own margin for aging it to make it basmati rice plus the price increased 44% in that period. So Amira will have fixed low costs from the previous period and high revenues from the new higher basmati prices and that will have a huge impact on earnings. I made a quick calculation here. I expect Amira to have 15% organic growth as their distribution is growing in India. They have 15 distribution centers in place of one that they had a few years ago. Secondly 66% of revenue comes from selling basmati rice. That revenue I expect that will increase 44% thus I expect Amira to have sales of around 310 million which is 100 million higher than the revenue they had in the same period in the previous year. I estimate similar costs to the past so there should be higher profits before taxes of 100 million. However profits before were 10 million I will be conservative and not attach all the 100 million but let's say we attach 85 million of profit before tax. Pay taxes also Amira has a very low tax rate because it's headquartered in Dubai so nevertheless I estimated 30% just to be conservative as much as I can so I expect Amfiz earnings for the first six months of their fiscal 2018 to be 60 million. 40 million shares that's 1.5 dollars per share for the first six months full year to 2.5 dollars per share for the full year. So first the 1.5 is huge when compared to the 30 cents it was in the previous period so huge beat on estimates huge growth in earnings that's the first catalyst. Secondly with such strong earnings per share Amfi will have a price earnings ratio of three or even going to two two and a half and that's crazy for any kind of stock and that's even more crazy for a company that has compounded book value for 15% per year in the last six years. Now I have discussed this with a few analysts all over the world with my friends and I asked them where am I wrong and they said it's a small CAC Indian company owned by a family so it's really under the radar unrecognized I think these earnings can really be the catalyst that put aside all the past short attacks and really propel the stock to doesn't have to be market level I think a price earnings ratio of 8 10 12 would be a fair price earnings ratio to Amira thus we are already talking 2 times 8 2 times 10 a stock price between 15 and 20 which is huge upside from the current position going back to the stock price I recommended the stock in June it was below 5 then we had a spike into earnings because people expected that those earnings will be explosive however those were earnings from when Basmati prices were still low then all those traders sold I don't know why and then we have had a healthy appreciation into earnings my expectations is that we appreciate more towards the end of the month as the earnings are really expected to be very positive and then when the earnings surprise we see a full appreciation of Amira stock price as I said 15 is my minimum target so this is the short term let's see a little bit about the long term because I also like to be positioned in a stock that will do well in the long term if the short term doesn't play out as I think it will the food and agriculture data shows this rice production utilization as stocks stocks have been growing as the production was higher than the utilization however in the last few years the production is lower than the utilization and you can see that the utilization grows at a steady pace as more more people eat rice in the world which is a very very positive trend I went to Amira's competitor KRBL I don't expect Amira to have a valuation like KRBL because then we would be talking about the price of 50 which okay I'm realistic so let's leave that to later when Amira hits 20 and then we'll discuss if it's possible to have a similar valuation nevertheless basmati rice is grown only in India and Pakistan you cannot grow it somewhere else if you grow it somewhere else it's not basmati that does they have a geographical mode so it's a highest quality high valued pro product they say not a commodity but okay this means that there are no government regulations because it's a specialty rice no government regulation china can't compete china can't produce basmati and then they say economic war global crop patterns have no impact on basmati and basmati prices rising premiums over the competition it's very difficult to enter the market Amira has a history of 115 years of dealing with farmers so probably they're dealing for years with the same farmers generation after generation something like that it's very difficult to multiply India basmati exports have been growing in the last year which is good however in the next year India is expected to export less rice which means that there will be a more demand from India which means higher prices more demand from the world but less exports therefore I think the basmati strength trend and we can see even higher prices going into 2018 usually basmati prices cycle lasts two to three years but the long-term trend is very positive so this is it Amfi is a company that like any other company has its issues there is a large amount of debt however the debt has been stable while the company is growing so I even expect there an improvement as the revenues are higher as the EBITDA is higher and debt will remain stable so I'm really really looking forward to the earnings I don't know if how correct am I with the calculations we'll see that at the end of the month be aware as always disclaimer this is just my opinion do your own due diligence and I'm looking forward to your comments I'll see you in the next video