Stock Portfolio Review-Open Journal [Exited]
To keep tracking easy, I am moving all the exited positions to a different page.
Here is the document for Stock Portfolio Review-Open Journal Current Holding
Exited
- IEX ✅ — may buy
- Dr. Lal Path Lab ✅ — may buy
- Relaxo ✅ — do not plan to buy
- ITC ✅ — do not plan to buy
- VMart 1.2% ✅ — may buy
- Aaavas 1.5% ✅ — may buy
- Nuvama 1.3% — do not plan to buy;
small positions received as bonus shares from Edelweiss Financial. needed funds for Equitas; wanted to consolidate portfolio, and eliminate very small positions - Neogen ✅ — may buy if valuations become favorable
- Laurus Lab 2.2% ✅—not inclined to buy, may have to re-evaluate
it was a high-risk bet. holding was not sizeable and could not increase holding due to lack of conviction; decided to move funds to SSWL. - Fine Organics 3% ✅ — may buy in future after 2–3 years; good company
market leader in fragrance & taste related chemicals for FMCG/Food; green chemistry (expected to go under consolidation… not expected to give returns as growth is unlikely and numbers are likely to return to normalcy after); needed funds for Senco Gold - KEI Industries 2.6% ✅ 🏆 — may buy in future if valuation becomes favorable; sold because upside was limited from the valuation levels also wanted to consolidate holdings to higher conviction ideas
- Divi’s Lab 2.6% ✅ 🌟 — market leader in contract API manufacturing — may buy in the future. Sold because wanted to consolidate the portfolio. Was not keen on buying more at the current valuations but was getting better opportunities. Moved funds to Kotak.
- Home First Finance 2.2% ✅ — moved funds to a newer opportunity that looked more cheap. Was not able to increase the size at current valuations. Not sure about buying it in the future.
- HDFC Life 4.5% ✅ 🌟 — market leader in pvt life insurance — consolidated portfolio. The growth rate was normal also felt there are simpler businesses with the right valuation.
- ICICI Lombard 4.8% ✅ 🌟 — market leader in general insurance — same reason as HDFC life. Also, competition was higher in the general insurance space. Unlike life where the liability side is limited, general insurance is competitive as well and liabilities appear to be higher e.g. in segments like health, motor, etc.
- Titan 6% ✅ 🌟 — market leader in organized jewelry — valuation comfort primarily. Moved funds to HDFC Bank.
- Naukri 4.1% ✅ 🌟 — market leader in job listing — valuation comfort & also part of the consolidation effort.
- Deepak Nitrite 4.5% ✅ — market leader in Phenols — part of the portfolio consolidation effort.
- Kama Holdings .79% — holding co of SRF, a chemical conglomerate, the market leader in fluorine — part of the portfolio consolidation effort.
- Mold-Tek Packaging 3.2% ✅ — market leader in IML packaging, less polluting, recyclable
- Pricol 3.2% ✅ — market leader in 2W driving navigation systems
- Steel Strips Wheels Limited 3.8% ✅ — market leader in steel rims in automobiles
- Edelweiss 5% ✅
- NRB Bearings 5.8% ✅ — market leader in bearings for two-wheelers
- Syngene 1.8% ✅ 🌟 — may buy in future. market leader (or current largest) in CDMO/ CRO. Moved out for consolidating portfolio.
🏠 MidCap Inv#1 SYNGENE🏠
Source: SOIC
First Entry: 2021-10-04
Last Entry: 2023-05-19
Ave Purchase Price: 595.57
Status: Sold at 26% gains
Last Review: June 25, 2023
Exit Plan: Not at the momentLong-term structural growth story.
🏗 SmallCap Inv 5 NRB Bearings🏗
Source: Nalanda Capital
First Entry: 2023-06-30
Last Entry: 2023-07-11
Ave Purchase Price: 208.11
Status: Sold at ~325
Exit Plan:
Moved fund to better opportunityReview business after FY24 annual results around June 30, 2024📗Brief Thesis / Interesting facts →
- Market leader in its niche i.e. NRB has a 60% market share in Needle bearing industry in India
- Diversified revenue concentration-> Almost 65–70 % of the domestic demand from OEMs and Tier I customers is met by NRB while the rest 12–15 % is supplied to aftermarkets. Exports account for almost 20–25 % of OEMs & Tier I customers. However, no single OEM — Tier I customer accounts for more than 10–12 % of the total revenues thereby de-risking client concentration
- Nalanda Founder Mr. Pulak called out the founder as one of the best strategists he has ever met
- The co. has planned CAPEX Investments of Rs. 200 crores for the next 2–3 years (by FY24–25)
- Promoter buying (2% bought in Mar 23)
- Earning growth trigger
- Fairly valued as compared to other bearing companies; up to 40x, 60x P/E; scope of re-rating
- 2% Div Yield at current price
📗Napkin Math →
- Expected ~22% earnings growth for the next 2–3 years
- Expected → PAT FY24: 115 cr; PAT FY25: 130 cr
- A potential beneficiary of variant perception change in Auto Ancillary; re-rating scope
🏗 SmallCap Inv #2 Edelweiss 🏗
Source: Mohnish Pabrai
First Entry: 2019-11-06
Last Entry: 2023-11-06
Ave Purchase Price: 47.94
Status: Sold at 77Gains include credit and sales of Nuvama shares;
approx 50% of the value of Edelweiss holdings on the day of sales.🏗 SmallCap Inv 10 Pricol 🏗
Source: SOIC
First Entry: 2023-03-14
Last Entry: 2023-05-29
Ave Purchase Price: 197.81
Status: Holding
Last Review: Nov 18, 2023
Exit Plan:📗Thesis → TBD
📗Napkin Math →
- Revenue guidance of 3600 crores by FY ’26 still maintained, expecting to reach 13.5% margin earlier than that [Nov 2023 Concall]
🏗 SmallCap Inv 11 Steel Strips Wheels Limited🏗
Source: SOIC
First Entry:
Last Entry:
Ave Purchase Price: 281.10
Status: Sold at 7% loss; 261.18 on Feb 9
Last Review: Nov 21, 2023
📗 Brief Thesis → TBD
📗 Napkin Math →
🏠 MidCap Inv#8 KAMA Holdings 🏠
Source: SOIC
First Entry: 2023-11-16
Last Entry: 2023-11-16
Ave Purchase Price: 2,954.01
Status: Buying
Last Review: Nov 18, 2023
Exit Plan:Napkin Math
Holding Co discount to SRF is at 73%.
MCap of SRF * Kama’s Stake * (1–0.73)= MCap of Kama
If it comes down to 60% then it will result in MCap of 14,500 cr i.e. 50% jump. SRF is expecting to grow at 20%–25% in chemical biz which is ~70% of all the revenue and 80%+ of PBT.
So 15% earnings growth + 15% growth due to holding company discount becoming narrower;
estimated ~30% Mcap growth over the next 3–4 years
🏗 SmallCap Inv 1. Mold-Tek Packaging Ltd 🏗
Source: Marcellus
First Entry: 2021-02-09
Last Entry: 2021-09-09
Ave Purchase Price: 417
Status: Holding
Allocation: Keeps varying basis price movement; 6.8% (as per last review)
Last Review: Feb 11, 2023
Exit Plan: Not at the moment
Key results to monitor: Sales growth of 2x in the coming 3 yrs i.e. by 2025-26
📗Brief thesis, Thesis from SOIC
🙊Commentary during review on Feb 11, 2023
Revenue & Growth both have shown consistent quarterly growth in all the preceding 4 qtrs as compared to the previous year. The ppt available for Feb 2023 highlighted info about new plants commissioning and land acquisition for capacity expansion.
New Plants- Sulthanpur- Food and FMCG commercial production from Feb/march • Land acquired in Daman, Panipat, Cheyyur for new plants
The core theme emerged as capacity expansion in both greenfield and brownfield (machine additions in existing plants). Post all the capacity addition, looking at the sales of 1200 cr — 1600 cr which is 2x from today’s sales. It also onboarded new reputed customers.
Some highlights from transcripts from June 2022
80% max capacity up to Rs. 1,200 crores to Rs. 1,250 crores turnover is possible
Yes. Companies like HUL, P&G, GSK, Arun Ice Cream, and Amul, all these companies were generally out of developing any new concepts of packaging in the last two years because of COVID and uncertainties in the market. So, now we have seen that in the last 3, 4 months, some of them have started releasing their clearances to go ahead with the new product development with IML
Reverse DCF over 10 yr period suggests ~19% growth rate has been in the line with the past record and the base is still not very large
📝 Business prospects look good. Looks like can easily continue to hold for the next 2–3 years.
🏠 MidCap Inv#4 DEEPAK Nitrite 🏠
Source: SOIC
First Entry: 2022-02-22
Last Entry: 2023-06-26
Ave Purchase Price: 1,863.85
Status: Buying
Last Review: June 29, 2023
Exit Plan:Brief Thesis, Recent Commentary (Q2FY23 Results Analysis)
📝 Napkin Math for the next 4years:
Management wants to double the revenue in the next 4 years. 2500 cr capex planned (current fixed assets of 2000 cr). New capex in high-value-add products i.e. likely higher margins. Import substation from China continues to be the trend.
In the next 4 yrs, ==> 8000 cr becomes 16000 cr.
Current Operating Margins of 15–16%; Assuming improved margins to be ~20% and PAT margins to be 13–15% results in PAT of 2080–2400 cr.
Current PAT 850 cr. For PAT growth standpoint, it is 2.4X to 3X over the next 4 years i.e. PAT CAGR of [22%-32%]
🏛 LargeCap Inv 5. Titan 🏛
Source: Marcellus, Late Rakesh Jhunjhunwala
First Entry: 2023-02-28
Last Entry: 2023-03-24
Ave Purchase Price: 2,501.28
Status: Sold at 3,545.50; booked 41% profits
Sold to consolidate portfolioBrief Thesis: Shark in the Ocean;
Proxy for the Indian discretionary spending as India grows. Titan plays in the top two non-food categories i.e. Jewelry and Apparel & Accessories (eyewear, clothing Taneria, etc.)
Napkin Math about Jewelry Industry: 68% unorganized market; 30% organized retail jewelry, Tanishq is ~6–7%
Expecting 20% growth in Tanishq with multiple optionalities within Titan like eyewear, clothing, fashion
Anti-thesis pointers:
- It is a Market leader so can be impacted GDP slowdown as discretionary spending goes down
- Working capital issues due to regulatory changes on gold purchases/leasing/lending etc.
- Entry of other big players
🏠 MidCap Inv#1 NAUKRI / INFO EDGE🏠
Source: Marcellus, Nalanda Capital
First Entry: 2022-07-14
Last Entry: 2023-06-02
Ave Purchase Price: 4,083.76
Status: Sold at 5,284.96 on 6 Feb 2024; 30% profit; Brief Thesis
Long-term structural growth story. Listed VC.
🏛 LargeCap Inv#3 ICICI Lombard 🏛
Source: Marcellus
First Entry: 2021-05-10
Last Entry: 2022-07-04
Ave Purchase Price: 1,411.80
Status: Booked 10% abs profit; Sold at 1,560.30 on 6 Feb 2024
profitability growth for next 3 years should be at 20%+
effect of merger with Bhnarti AXA📗Brief thesis video 1, video 2 Blog
Extremely risk avoiders; no write-off on investments; achieving good yield on RoI while being conservative in investing floats
🙊Commentary during review on March 18, 2023
- Acquired Bharti AXA
- Trying to build health insurance by partnering with a new fintech app, b2b biz
- Focussed on profitable growth
📝 Napkin Math: Assuming the firm stops operating, the total investment float is 41,000 cr. The cost of claims that the firm will honor is likely to be 8000 cr (based on ICICI annual reports of historical patterns). Deducting it, the firm is likely to have 33,000 cr of investments left. At 8% yield, it is approx 2600 cr in PBT till eternity. Such an annuity is likely to get valued at approx. 20,000 cr at a 14% discount rate. The firm’s market cap is 52,000 cr. So it can be considered that the current market cap is backed by 40% with investments. So one is essentially paying 32,000 cr for the future growth of the company which is approx. 20–25 times current earnings of INR ~1500 cr. Given premiums come from existing customers as well as new customers, it is quite fairly valued.
🏛 LargeCap Inv 1. HDFC Life 🏛
Source: Marcellus
First Entry: 2021-05-10
Last Entry: 2022-06-13
Ave Purchase Price: 661.97
Status: Sold at 574.25 on 30th Jan; Booked 15% loss
Key results to monitor: Accelerating Growth & Improving Operating Margins.
Sales have 2x b/w 2017 to 2023. Other income from investments grew from
140 cr to 900 cr. Still overall profitability is tepid.
📗On industry 1 video 2 video 3
🙊Commentary during review on Feb 12, 2023
With newer generations coming, protection & retirement planning will continue to gain market share over the next one or two decades.
Life insurance is sold on customers’ self-awareness & brand trust i.e. (a) a lot of people are not aware of term life insurance and/or don’t see value in it esp. in India. It requires a lot of self-awareness to be able to purchase & continue to pay for life insurance (b) such people also understand that they should rely on trustable names so that if at all need arise, their family doesn’t face problems.
Protection is also a profitable product for insurance companies and a genuinely good product for customers.
Market share in premiums of 4 largest private player has rises from 50% to 64% over 2009–2019 period
Despite secular sectoral tailwinds, consistent sales & premiums growth, its stock price has not moved. Looks like time correction is over.
In the past, HDFC Life has highlighted the lack of enough trained sales executives. The Exide Life merger, now completed, was supposed to add significant additional sales strengths for the agency channel.
Long-term growth guidance has been consistently between 17%-20% and it is also reflected in the numbers. The firm is tight financial control. Jan 2023 transcript reflects the firm has been executing its plan.
The firm is widely covered by analysts with consensus predicting the price in the range of 680–720 range which is ~32% upside from current levels.
✍️ The company looks ready for accelerating growth over the medium term i.e. 2–3 years. The long-term story remains intact as it is i.e. similar to private & public banks of the 2000s. The total assets are just 5% of LIC i.e. 2 lakh crore vs 40 lakh crore; sales are 9% of LIC. Insurance is a growing market with a consumption story in India (both in penetration & ticket size). Value migration is also at play i.e. product mix changes i.e. from ULIPs to protection & non-par with financial awareness improving in new generations. Regulations also seem to be facilitating sustainable growth of the industry. ️
🏗 SmallCap Inv 5 HOME FIRST🏗
Source: Marcellus
First Entry: 2023-03-13
Last Entry: 2023-03-13
Ave Purchase Price: 666.25
Status: Sold at 46% Gains at 972
Last Review: June 29, 2023
Exit Plan: Monitor growth rateProxy on Affordable Housing; Growth profile
Risk: the ability to grow beyond 10k cr loan book
Guidance on Growth from Management Commentary
- Branch Expansion and Disbursements:
- Physical branch office distribution crossed 100 branches and disbursed more than Rs 3,000 Crs in this financial year demonstrating a growth of 48.4% over the previous year.
- The company intends to maintain a 5% to 10% kind of growth on previous quarter disbursements.
- Branch expansion to continue at 20–30 branches per year.
- The company is targeting an AUM growth of 30%+ for FY24 to enable them to cross the 10,000 Cr AUM mark in the next 12–18 months.
- The company has a three-pronged approach to growth — centered on expanding distribution, increasing market share, and expanding the addressable market through co-lending.
- The company is confident of maintaining spreads of 5.25% on the loan book in the medium term.
- The company plans to target AUM growth of about 30% over the next 2–3 years.
📝 Napkin Math for the next 3–4 years:
Assuming earnings growth of 20%, P/E compression to 24 from the current 30, MCap Growth Rate = 11%
If P/E does not compress (given long-term median has been 40) then MCap Growth Rate = 20%
[11%, 20%]
Earning growth may shoot up to 25% instead of 20% in which case
[18%, 24%]
🏛 LargeCap Inv 2. Divi’s Lab 🏛
Source: Marcellus, SOIC
First Entry: 2021-10-04
Last Entry: 2023-02-28
Ave Purchase Price: 4,309.17
Status: Sold at 3900; 10% capital loss
First time, reduced Stakes due to valuation concern and moved funds to PI Industries
Second time sold to move funds to Kotak
Last Review: Oct 28, 2023
Exit Plan: Not at the moment
Key results to monitor: Sales of ~15000+ cr in the coming 3-4 yrs
i.e. 2x by 2026-27
Execution on six growth engines;
start of Kakinada plant;📗Brief Thesis Video 1, Video 2
🙊Commentary during review on March 04, 2023
Read the latest conference call transcript to understand Management’s outlook. It seems the pricing pressure on raw materials should normalize. Also, I watched the commentary on the recent situation.
Past sales growth 20% CAGR 2011–2021.
📝 Napkin Math for the next 4 years: My understanding of the transcript was that with the current plans, it could continue in the 16%-20% range for the next 3–4 years. It can take 6–8 quarters to return to growth levels & margin stability. So relax for the next 2 years on Divis. Looks like easy 2x in 3–4 yrs from here i.e. ~26%-19% annualized return over the respective period.
🏠 MidCap Inv#6 KEI INDUSTRIES🏠
Source:
First Entry: 2023-03-13
Last Entry: 2023-03-13
Ave Purchase Price: 1,582.65
Status: Exited with 77% Gains;
Allocation: Had small allocation of about 2%; wanted to consolidate
holdings to other higher conviction ideas
Brief Thesis Management Commentary
Proxy to India’s infra push for the coming decade.
The Context for Growth from Management Commentary
- KEI Industries plans to invest INR250–300 crores in greenfield expansion for cable and wire in Gujarat, spending every year around INR250–300 crores for the next 3 years to maintain a CAGR growth of 17–18% per annum
- KEI Industries is doing a brownfield capex of INR45 crores in Silvassa plant, generating an additional top-line revenue of INR500 crores, leading to a 16–17% growth in the current financial year
- Strong growth in solar energy projects, renewed distribution strengthening schemes by various distribution companies in India, and growing demand from the manufacturing sector, especially from steel, oil and gas, petrochemicals, cement, and miscellaneous industries
- India’s strong infrastructure pipeline and focus on infrastructure, especially railways, metro railways, urban railway systems, highways, and large buildings, is expected to create strong momentum in cable demand in the coming financial years
- Power and solar cables are gaining traction in the export market
- Strong demand from data centers, 5G networks, railways, highways, solar power, and industries like steel and petrochemicals
- KEI Industries has a strong order book position of more than INR850 crores for high-voltage power cables and expects to do close to INR550–600 crores in sales for the same in the current financial year
- KEI Industries aims for 1.5% EBITDA margin expansion in the next 4–5 years with greenfield capex. KEI Industries expects operating leverage to kick in when the greenfield capex is done, and commercial production from there will be started
- Management guidance of doubling sales to 12000 cr in 3–4 years while improving margins to 11%.
📝 Napkin Math for the next 3–4 years:
~1000 cr PAT (vs 477 cr today) on a topline of 12000 cr revenue (vs 7000 cr today) i.e. PAT CAGR of [18%-26%]
🏗 SmallCap Inv 6 FINE ORGANICS🏗
Source: Marcellus
First Entry: 2021-05-10
Last Entry: 2023-06-26
Ave Purchase Price: 3,848.11
Status: SOLD at 11% Gains on 2023-11-21
Allocation: 3.% CNBC Video (very balanced biz)
(1) leadership in oleo-chemical-based additives in the domestic and global markets with a loyal customer base; (2) unique business model with high entry barriers; (3) diversified product portfolio; and (4) pricing power. Q3 EBITDA/APAT were 57/78% above our estimates, owing to significantly lower-than-expected raw material costs, lower-than-expected operating expenses, and lower-than-expected tax rates.
Con call highlights from HDFC Securities report: (1) All plants (excluding the Patalganga plant) are expected to run at full capacity by Mar-24. Without any new capacity addition in FY24, we expect the growth to remain muted, and will only pick up the pace from FY25. The company is awaiting land allocation from the Gujarat government. (2) The company plans to commission the Thailand plant by Sept-23. (3) In order to supply material in a timely manner, the company started maintaining higher inventories at its sites in the US and Europe. The company is also evaluating establishing manufacturing facilities outside India and looking at inorganic growth opportunities to be closer to its customers. (4) The management guided that the sustainable EBITDA margin should be ~18–20%. (5) The contribution of exports to total revenue was 68% in FY23 (vs. 60% in FY22).
📝 Napkin Math for the next 3 years:
For the current price, the company is reasonably priced for the kind of pricing power and growth profile it has had in the past.
If growth does not come and margins go down to normalcy of 18%-20% (vs 27% in the previous FY) then P/E may expand from current levels i.e. the current price might just be fairly priced.
The company’s price may under-go time correction and stock may not move.
🏗#1 IEX (Indian Energy Exchange) 🏗
Source: Mohnish Pabrai & Guy Spier; Mohnish exited around 2019-20
First Entry: 2020-08-25
Last Entry: 2020-08-25
Exit Date: 2023-06-30
Ave Purchase Price: 64.08
Exit Price: 125
Status: ExitedRemarks:High risk bet due to dependence on govt proposals but still the pie is largeMonitor:
MBED Proposal (positively impacts), Market Coupling (negatively impacts)
CERC has given approval for the third exchange
📗Detailed business thesis Link1, Link2
🙊Commentary during review on March 11, 2023
🚀 Multiple Growth Drivers with a demonstrated record of growth, Huge Industry Tailwinds, Network Effects & Many optionalities from long terms perspectives
Optionalities: Indian Gas Exchange (IGX), International Carbon Exchange (ICX) 📈
The company has been returning money to shareholders through regular buybacks & Div yield is also 1.34%.
🚩Red Flag #1: Smart money has moved out and retail investors have come during the 2021 frenzy.
Reputed PARAG PARIKH FLEXI CAP FUND & Guy Spier via Aquamarine Funds still hold.
🚩Red Flag #2: Valuations & upside from here. Reverse DCF implies that if the terminal PE falls from 45 to 25 while the firm growth remains ~18% then the implied Market Cap growth is around 10.55%.
Now the question to ponder is, can IEX grow at a rate faster than 18% over 10 year period? What kind of growth triggers are likely to be there?
🚩Red flag #3: Transaction price on the platform can be changed by the govt that can change earnings overnight.
📝Napkin Math: As of March 11 2023, not able to justify the valuation red flag #2. It appears the company in its core biz faces uncertainty due to regulatory risks but carbon exchange can provide totally new opportunities that might be larger than IEX itself. So holding for now. But it requires more research and reviewing my own opinion.
🏠 MidCap Inv#2 Dr LAL PATHLAB🏠
Source: Marcellus
First Entry: 2022-01-31
Last Entry: 2023-05-19
Ave Purchase Price: 2,560.91
Status: Booked Loss. Sold at 2,287.70
Allocation: Keeps varying basis price movement; 2.68% (as per last review)
Last Review: Aug 15, 2023
Reason for Selling: Needed funds for other opportunities.
And did not see it to be a good from returns perspectives for ~ 2 yrs.
Rebuy: May buy in future. Thesis has not changed.Marcellus Reading, Other readings
📝 Napkin Math for the next 3 years:
Conservative sales growth target of 12% for the next 3 years i.e. 2017 cr X 1.12 ^ 3 = 2833 cr
Long-term PAT margin of 17% (check table below)
PAT (3 yrs from now) = 2833 * 17% = 481 cr i.e. 2X FY23-PAT
PAT CAGR (3 yrs) = 26%
If multiple sustains, share RoI = 26%
If multiple compresses to 55 from 75 today then share RoI = 13% over 3 yrs
Return expectations over the next 3 years [13%-26%]
Given the market size of the opportunity and the dominance of the firm, the odds are not significantly in favor over the next 3 years.
But as COVID induced anti-bodies return to normalcy, price competition from startups cools down, long-term sector formalization continues, the long-term trend of health consciousness & increase in preventive health checks pick up / continue, and very long-term trend of population aging; considering all these factors, the company has 15% sales growth compounding opportunity for 10–15 years ahead.
Not increasing allocation but not selling too as of June 29, 2023.
Have sold as of Aug 15, 2023, but may buy in the future.
🏠 MidCap Inv#3 Relaxo🏠
Source: Marcellus
First Entry:
Last Entry:
Ave Purchase Price: ~1050
Status: Booked Loss. Sold at ~900
Allocation: ~6%
Last Review:
Reason for Selling: Was not convinced about next 3 years.
It looked extermely overvalued to justify valuation.
P/E was north of 150.
Also, firm could not demonstrate pricing power.
Lost market share even after increasing price after 5-6 years.Rebuy: May buy in future if Sparx brand picks up.
But repurchase is at least 5 years away.
Better stocks to play consumption theme Ethos Ltd, Titan etc.🏛LargeCap Inv#1 ITC 🏛
Source: Marcellus,
First Entry: sometime in 2020
Last Entry: Feb 2023
Ave Purchase Price: 209
Status: Booked Profit. Sold at 86% Gains; ~390
Allocation: ~6%
Reason for Selling: Needed funds for other opportunities, primarily Titan.
Also, thesis in ITC looked complete.
It was primarily value-buy i.e. 3-4% Div Yield and P/E of 15 when purchased.
Rebuy: Not planned to buy again.🏗 SmallCap Inv 4 VMART 🏗
Source: Marcellus
First Entry: 2022-10-18
Last Entry: 2022-12-05
Ave Purchase Price: 2,801.40
Status: SOLD; Exit Price: 1686; about 39% LOSS
Exit Date: Nov 15, 2023
Allocation: Small position;
Keeps varying basis price movement; 1.81% (as per last review)
Last Review: June 29, 2023
Exit Plan: Exited because found a better opportunity (Equitas Bank)
and wanted to consolidate the portfolio and eliminate very small positions
Long-term valuation: Mcap / sales ratio of 2; for the last five years 3.1; current valuation 1.7
📝 Napkin Math for the next 3–4 years:
The company has done two major acquisitions lime-road for its e-commerce foray and Unlimited for market expansion to southern India. Results are yet to come.
The company has been generating CFO.
The company has a growth target of high single-digit for the coming year. It has taken debt recently.
It is undervalued as compared to other retailers like Trent 8x Sales.
Trigger 1: As the margin profile improves, debt levels go down, and PAT is reported even if growth is not very high from here, the valuations should return to normalcy.
Revenue Growth of 8% for the next 3 years i.e.
Revenue 2023 = 2465
Revenue 2026 = 3100
PAT of ~150 cr (5% PAT Margin)
Firm valuation:
Possibility 1: 40x P/E = 6000 cr OR 2x Sales = 6200 cr it will be
~13% CAGR in MCap
3x Sales = 9000 cr, it will be 28% CAGR in MCap
[13%, 28%]
Trigger 2: If growth also comes then possibility of significant re-rating also.
Revenue Growth of 15% for the next 3 years [in line with historical average]
Revenue 2023 = 2465
Revenue 2026 = 3750
PAT of ~190 cr (5% PAT Margin)
Firm valuation:
Possibility 1: 40x P/E = 7600 cr OR 2x Sales = 7500 cr it will be
~21% CAGR in MCap
3.5x Sales = 13000 cr, it will be 44% CAGR in MCap
[21%, 44%]
🏗 SmallCap Inv 6 AAVAS 🏗
Source: Marcellus
First Entry: 2022-07-14
Last Entry: 2023-06-28
Ave Purchase Price: 1,870.88
Status: SOLD; Exit Price: 1487; about 20% LOSS
Exit Date: Nov 15, 2023
Allocation: Small position;
Keeps varying basis price movement; 1.81% (as per last review)
Last Review: June 29, 2023
Exit Plan: Exited because found a better opportunity (Equitas Bank)
and wanted to consolidate the portfolio and eliminate very small positionsProxy on Affordable Housing; Growth profile
Risk: the ability to grow beyond 10k cr loan book
Guidance on Growth from Management Commentary
- The company is guiding for a growth rate of 20%-25%, with deeper growth in existing geographies and moderated growth in new territories.
- The home loan and non-home loan mix is not different than in Q4 of last year, with a focus on MSME and LAP portfolio.
- Margins have come down slightly due to the increased cost of borrowing and time required to pass on increased rates to new assets, but the company is confident in maintaining 5%+ spread.
- The company plans to remain between 30–35% non-home loans and 70% home loans.
📝 Napkin Math for the next 3–4 years:
Assuming earnings growth of 24%, P/E compression to 24 from the current 30, MCap Growth Rate = 18%
If P/E does not compress (given long-term median has been 58) then MCap Growth Rate = 24%
[18%, 24%]
🏗 SmallCap Inv 2. Neogen Chemical 🏗
Source: SOIC
First Entry: 2021-07-26
Last Entry: 2021-08-03
Ave Purchase Price: 933
Status: Sold at 1560
Allocation: Keeps varying basis price movement; 2.70% (as per last review)
Last Review: Nov 18, 2023
Exit Plan: SOLD;
Had become 4x in 10 years type firm despite aggresive growth plans
Found better opportunities; was already heavily valued at P/E of 80
Not at the moment
Key results to monitor: Monitor revenue growth & profits growth;
capex plan execution;
risks of oversupply of LiPF6 resulting in subpar RoI on investments🙊Commentary during review on Feb 26, 2023
Two major divisions: Lithium Products + Browmine Products
- Leader in Browmine Products (the founder Mr. Haridas Kanani is called Browmineman of India)
- Proxy in EV opportunities via Lithium products (Salts, electrolytes); early stage of market creation
- India has recently found Lithium reserves in J&K
The company is at ~500 cr revenue today and will likely go to ~5000 cr revenue over the next 10 years with the kind of Capex plans they’ve highlighted. 🚀
Here is a takeaway from a recent conference that reinforces the growth potential, plans, and execution direction.
🏠 MidCap Inv#7 LAURUS LABS 🏠
Source: SOIC, Value Investor, Other Chemical Sector Experts
First Entry: 2022-02-22
Last Entry: 2023-03-06
Ave Purchase Price: 363.11
Status: SOLD at 370; no pricinpal loss but lost opportunity cost;
Sell date Nov 20, 2023
Allocation: Small position;
Keeps varying basis price movement; 2.86% (as per last review)
Last Review: Mar 11, 2023
Exit Plan: FY2026; execution on Capex & Diversification;
Overall its a risky bet as reliance on diversification beyond core biz
Sold due to too much risk and bet on too-much turnaround 🙊Commentary on 2022–23 Fall (Mar 04, 2023)
Multi-site, multi-segment investments in high margin biz; the Year 2025/ 2026 to watch for Laurus; High on non-ARV (low margin); expanding & growing in Custom Synthesis Biz & CDMO Biz (high margin). Debt levels are 1.3x equity; plans for deleveraging post the capex is complete; Current PE ~20
📝 Napkin Math for next 4 years: Earning Growth → ~800 cr to 2000 cr (on the back of the capex in high margin product i.e. 2.5x in 4 years i.e. ~26% Earnings CAGR); PE Rerating potential due to high growth → 1.5x; Time Horizon next 4 years by FY2026–27. The total upside from here is ~3.5x in 4 years i.e. ~37% CAGR.
Need to keep an eye on execution on a quarterly basis and news coverage. High risks because the core biz is different and is not growing and cashflow are being used to diversify into other areas. Almost like an internal turnaround story. 💀
