The first sign that a stock is likely to be a winner comes when the super-savvy investors start tucking into in a quiet manner and without alerting anyone.
Lashit Sanghvi and Nikhil Vora qualify as super-savvy investors because of their stellar track record in finding winning stocks. The duo teamed up on 10th April 2015 to buy Ashapura Intimates Fashion, a micro-cap (Rs. 540 crore) manufacturer of lingerie and similar garments which are sold under the brand name “Valentine”.
While Lashit Sanghvi and Neha Sanghvi bought 1,25,000 shares each of Ashapura Intimates Fashion at Rs. 145 each, Nikhil Vora bought 1,75,000 shares at Rs. 147 each on the same day. The investment by Lashit & Neha Sanghvi is Rs. 3.62 crore and Nikhil Vora’s investment is Rs. 2.57 crore.
Ashapura Intimates is presently at Rs. 278, giving gains of 60% to the duo.
Another of Nikhil Vora’s stock picks that requires mention is Vidhi Dyestuffs. I reported that he had pumped in Rs. 2.35 crore on 05.08.2015 in buying 497,114 shares at Rs. 47.40 each. Vidhi Dyestuffs is presently at Rs. 75, giving gains of 58% in just about 5 months.
Ajay Relan of CX Partners has a chequered history when it comes to picking stocks. MPS, his stock pick of 2014, thrilled investors by surging like a rocket and giving multibagger returns. However, Career Point, his stock pick for 2015, has not lived up to expectations (so far).
Ajay Relan has given a detailed explanation about the criteria that he looks for when picking a stock. The criteria stipulated by Ajay Relan are very well thought of and ought to be adopted as a check-list by every investor wanting to invest in potential multi-bagger stocks.
Ashapura Intimates fits Ajay Relan’s criteria like a glove. In the latest issue of Outlook Business, Ajay Relan has given a detailed explanation on why he is willing to trust Ashapura Intimates with his money. The essence of the analysis is that Harshad Thakkar, Ashapura’s promoter, has done all the right things so far and has grown the business in a systematic and sustainable manner.
Ajay Relan also emphasizes that while Ashapura’s valuation at 15x expected FY16 Ebitda is not cheap, if Ashapura does the right things, going forward, it can triple Ebitda in the next three years, with a concomitant increase in its stock price. He also points out that the market for the sort of products that Ashapura is into is worth a gigantic Rs.50,000 crore. He explains that as consumers become more quality- and brand-conscious, Ashapura can capitalise on this trend and grow disproportionately quicker than the secular organic growth rate of 10% in its product categories.
Ajay Relan cautions that Ashapura would need to exhibit “flawless execution and the highest standards of corporate governance” and that it would have to procure “the best management talent to run the company, implement the best management information systems that can generate actionable business intelligence, relentlessly pursue efficiency in both operations and working capital management and put in place a truly distinguished and independent set of directors to provide inputs about the company’s strategic initiatives, corporate integrity and transparency”.
At the end, Ajay Relan advises investors to “hold this stock and forget about it” and promises that it will offer a “pleasant surprise” when they revisit it three years later.
Ashapura Intimates is the new buzz name that is being compared to Page Industries. For the last 7 years, the company’s topline has grown at 95% CAGR and bottomline at 123%, which is phenomenal indeed. The return ratios look decent. But is the stock a good buy at its current price? I doubt it. Barely 2.5 years back the stock was offered at Rs 40, not it quotes at 270. However, the operating cash flows depict a different story. The company’s cash flows have been negative in 6of the last 7 years. Its receivables are as big as 40% of sales, compared to 5% for Page Industries. The cash conversion cycle stretches to 268 days, as compared to 94 days for Page Industries. Growth in earnings and sales is debt driven. Debt-to-equity ratio stood at 1.8 times in FY15. I wouldn’t touch the stock with even a barge pole!
Nice comments Sir, I too wont venture anywhere near Ashapura Intimate Fashions. Inspite of being in the stockmarkets from the past 12 years I still cannot fathom how it works. Markets give crazy valuation for wrong stocks, and get away with it. Also, many thanks to Arjun for putting together this article.
Thank you Vinay Kumar ji for giving the correct perspective.
Wonderful post brother. I read some article related to it in BUsiness India few months back. Some thing is suspicious.
I agree with Venky — The brand will take years to establish if they plough back profits into brand building.
Maxwell is so much better — VIP Frenchie has an immediate recollect and they are now restructuring to capitalize on their goodwill. Another quarter or two and the results will be seen. This is the time for accumulation at a sensible price.
It would be not justifiable to compare Page and Ashapura Intimates. Page has established and Ashapura is still in nascent stage.
People were feared of buying page at 500 levels but same people jumped into it after 2000 levels.
I have full confidence in Ashapura Intimates.
Well, I also feel the same, Ashapura do have a lot of upside left.
Aifl is good bet it’s cash revivable is only 130 not 270 you have not right information its eps for year ended 10 rs per share good one last year sales 177cr this year maybe 235 & profit 17 cr compare of last years 8.5 & it’s sister concern momai may merge to it so momai 20 cr sales & 5cr profit & to it so March 2016 end its financial look like 250 cr sales 22 cr pat 120 days of cash revivable . Great buy it