Tarsons Products Ltd is Saurabh Mukerjea’s latest stock pick

Discussion in 'Portfolios Of Famous Investors' started by Arjun, Feb 10, 2022.

  1. Arjun

    Arjun Chief Executive Officer (CEO) Staff Member

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    Saurabh Mukerjea, Founder & CIO of Marcellus Investment Managers, has announced that Tarsons Products Ltd is his latest stock pick.

    Tarsons is a smallcap with a market capitalisation of Rs. 3400 crore. It is engaged in the designing, development, manufacturing and marketing of 'consumables', 'reusables' and 'others' including benchtop equipment, used in various laboratories across research organizations, academia institutes, pharmaceutical companies and Contract Research Organizations ("CROs"). It is a provider of lab equipment and equipment to diagnostic labs such as Dr Lal PathLabs (another of Marcellus portfolio companies).

    It is a dominant player and has a robust business model with 50% EBITDA margins and 30% PAT margins. The size of the industry is around Rs 1,200 crore.

    Tarsons is the dominant player in this lab market. It is a small company today with Rs 300 crore top line but 30% PAT margins and our discussions with dealers and distributors of Tarsons suggest that this is a well run, moated company with very few competitors in the Indian market,” Saurabh told ET.

    We have built a substantial position in Tarsons,” he disclosed.

    As the specialty chemicals industry and the pharma industry grow, we reckon the lab equipment space will grow similarly because they will supply to the speciality chemicals companies who in turn will supply to the pharma companies,” he added.

    NBFC stocks

    Saurabh revealed that Marcellus is building larger positions in Cholamandalam, Aavas Financiers and ICICI Lombard.

    ICICI Lombard is a stock where we are continuing to build a larger position in our flagship product which is a consistent compounder,” he said.


    Specialty chemicals


    Saurabh stated that specialty chemicals stocks continue to be big favourites despite the margin pressure. The volume growth and the market share gains that we are seeing Indian specialty chemicals deliver are more structural, he said.

    He disclosed that his favourite midcap companies in the space are Alkyl Amines and GMM Pfaudler.

    IT services space

    As regards IT services, TCS is a long standing favourite, but in midcap IT, L&T Technology Services continues to be a company where we are building a larger position, Saurabh said.

    He pointed out that like in financials, in midcap IT, specialist providers who can deliver 30-40% fee cash flow growth, 20%-30% PAT growth are not that common. Larger IT services companies find it hard to deliver 20-30% PAT growth consistently.

    We think L&T Technology Services has a product suite around engineering R&D which will give it a solid five-six year growth runway and hence that is part of our midcap build up,” he opined.
     
    Last edited: Feb 10, 2022
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