Why does the street value NCC the way it does? I think the other two EPC players undertake more complex projects but have far lower margins. The number of retail investors is over 4lakh as per screener for NCC. Is Mr Basant Maheshwari correct in saying that the higher the number of retailer into a stock , the more it looses it’s momentum.
With CO2 emissions going up… what is the alternative to steel production without coal? Is induction the only option?
Hi,
It’s a great initiative. I am also based in UAE, would be really interested to be part of discussion. Please count me in.
It is as per their guidance
Expansion will complete by Dec 24, by may Next year should cross 1000 Rs – 90 crore PAT with 40 PE can be higher too
Mr Singh,
Did you get the opportunity to see the Kamat Hotels results? Any view on it?
I am surprised by lack of discussions in this counter on the recent market developments.
South32’s Groote Eylandt Company (Gemco) have been suspended because of a tropical cyclone – till Jan-March 2025. Gemco contributed 3.5-million wet metric tonnes – or c. 10% of world production.
This loss in production caused the global Manganese ore prices to shoot up, with MOIL increasing prices by 25 to 40%. Moil shares rise 10% after 40% hike in manganese, ferro grade ore prices (upstox.com)
Manganese ore index, 37% Mn, cif Tianjin, $/dmtu (fastmarkets.com)
The stock reacted positively over the last month and is already up more than 50% – but with operating leverage, I expect profits to increase multifold.
Happy to hear thoughts/counterthoughts on this thesis.
Disc: Invested, c.5% of my portfolio. This is not an investment advice.
Very well reasoned summary, Hemant. Really appreciate the details involved. In most forums, I keep getting the same question from the audience and I have found this write-up (fireside chat) in the TCS Annual Report 2023 very useful. This was written by Mr Anantha Krishnan, CTO TCS and an Industry Veteran and it gives a detailed insight into why GenAI can be value accretive to the IT Industry. He also brings in the economics of why this phenomenon cannot be compared with farm mechanization, which led to effort deflation. I hope you find this useful too.
What is the evidence for this thesis (IT Industry wont become redundant with the advent of GenAI)?
KAK’s response – The evidence is empirical. Every new generation of technology has led to reduction in programming effort per function point. But while that has steadily fallen, aggregate spending on IT services has only risen year after year, over decades. Take for example, the switch from assembly language to C. Its compilers came with large, extensible libraries of reusable pre-defined procedures. A developer could invoke a procedure with one line of code in C and embed its entire logic in the codebase, without actually coding all of it from scratch. Three lines of C accomplished what took 30 lines in assembly language. The 10x effort deflation didn’t result in mass layoffs of programmers. Instead, there was an explosion in software development because the same IT team could now build ten times as many function points.
Similarly, enterprises adopted offshore outsourcing, it led to a big cost deflation, but nobody’s IT budgets deflated. Instead, those savings went into building new systems and volumes rose to fill budgets and spending on IT services has only expanded. Likewise with low-code, no-code platforms.
**Why is that so? Farm mechanization caused effort deflation and rendered the agricultural workforce
redundant in the West. **
KAK: With most goods and services, when the price falls, any increase in volume is limited by how much of that good or service the market can consume in a defined period. When farm mechanization reduced the cost of tilling, the increased demand for men in tractors was not large enough to compensate for the effort deflation because there was only so much land available
to till.
Demand for IT services behaves differently. In every enterprise, there is significant unmet demand. Every CIO has limited capacity for new system development, resulting in a requirement
backlog that never gets fulfilled. Technologies like generative AI or low code-no code can help a CIO expand capacity and accomplish much more with the same budget. But even then,
the backlog never goes away because there is no limit on business users’ ingenuity or competitive drive. Demand just rises to fill the incremental capacity created by new technologies. The emergence of new technologies triggers more ideas, experimentation and more demand for our services. To that
extent, business application of generative AI, along with other technologies, will itself drive the incremental demand that fills up the capacity it frees up through higher productivity.”
I have gone through some of the YouTube video of pulak. He may be right to some extent…
While capital protection is important. But at the same time, as investors we also need to get some return at least more than Bank FD , though return expectation could be different for different people depending upon one’s risk appetite time horizon.
And with so many investment strategies available today in the market place , thanks to our so many Guru’s / authors on stock investing , it may be possible for everybody to make good money in the market place if the strategies are learnt and followed.
it may be worth mentioning that many conservative investors even without any Guru or without having to read those famous books on stock investing or technical charts and without any knowledge on Micro’s and Macro’s make Good money @30 % CAGR in a 10 years period through SIP in a couple of MF’s, if the investor is consistent in SIP’s. If you are aggressive in MF investment style in choosing Small Mid caps , one can still make more money in long run.
In fact , 40% of my investment is through MF SIP’s which I never stop whether we are in bear or bull market and it works great
Meson Valves : ‘Make in India’ player
A quick Google search : ‘Ship valve manufacturer in world’
Meson’s name comes 4th ( sometimes 6th) but, always features in the first page.
During the defence expo 2024 in Pune, I happened to meet Mr. Kishor Makvan, Executive Director
handling operations at Meson valves. I was surprised to find the Naval chief Mr. R Hari Kumar having a 20min. discussion on the second day of the expo.
I waited for the chief to go and then had a word with Kishorji. Since I hail from an instrumentation background and having
worked with a refinery two decades back I discussed the technicalities of valves. Naval vessels require non-ferrous valves for which Meson has expertise.
This company was incorporated in 2016, the company was ‘Sander Meson India Private Limited’ and the assembly line was
started in Goa.
In 2019 the name was changed to ‘Meson Valves Private Limited’ and in 2023 it was
changed to ‘Meson Valves Limited’.
In a very short time they received ISO 14001:2015 , ISO 9001: 2015 and ISO 45001:2018 . From 2022 onwards, they have moved their assembly line
to Chakan MIDC, Pune.
Meson had raised Rs 11Cr for Plant and Machinery, 11Cr. for general working capital when their IPO came in Sep. 2023. They have bought 3 machines from Jyoti CNC and
Sheetal Lathe machines and some other CNC machines are about to be delivered from Jyoti this year.
Moat:
a. TYPE approval: These guys have got TYPE approval, meaning that certain valves dont need repeat inspection / testing so the delivery is faster.
Testing / inspection process is time consuming and involves multiple parties including defence personnel
as well.
b. Ability to pass on costs to raw materials:
Since they are specialised into manufacturing of non-ferrous valves the raw material price may fluctuate due to the current geopolitical scenarios.
Their customer also acknowledges this and hence they are able to pass on
the price to the customer since they have limited competition in the segment they operate.
c. Backward integration with foundries:
Since the Meson team is experienced with the entire process and workflow of valve manufacturing/ assembling, they have experienced that margins can
be significantly improved if backward integration is done with foundry.
They are in advanced stages of having a fully functional backward integrated site at their current location in Pune, which would help them in faster and efficient delivery to their clients.
testing and
inspection
d. Spares business
This is a ‘no brainer’ considering that the entire ‘valve ecosystem’ needs a lot of parts in order to be in working condition. Meson is in a good condition
to source the spares in a good quantity.
Competitors
L & T valves, Malhar, DelValves and GDPA.
Meson is a dominant player in Hull and triple offset valves owing to the teams’ technical expertise in this field since 19 years.
For Meson, the testing and inspection on time is
not that tough it seems because of its location in the Dehu cantonment area. Armed forces since the last five years are working like a private company much alike the previous years and even they understand the criticality of on-time inspection and testing for timely delivery of
components. Meson being in Pune, can source a lot of valve components like actuators and from other players. These sourced products are low margin products so manufacturing them doesnot make sense. akin to Maruti not manufacturing tyres,seats etc.
That makes their delivery faster so that they can focus only on what they are specialized in. They don’t need to pay any royalty to their parent company. Meson’s global presence has opened doors for them to do business worldwide where due to the current geopolitical
instability, more defence vessels are being ordered.
The R&D done at their Pune centre gives them an edge over their competitors to build niche and valves for submarines and defence ships.
they have exclusive contracts with foundries with whom they work.
This makes it difficult for any other vendor to give finished components matching Meson’s quality
Future Business lines:
a. Waste Water Treatment
Management has extensive experience in water treatment
Especially for defence premises, there is space for specific vendors who do water treatment and create solutions for challenges face by the military for water
availability at critical locations
Meson valves is exploring various solutions on waste water treatment and working on possible ToT to explore this space
water treatment and hopefully something positive should come in the coming months, as per their sales team estimates.
Order visibility:
Almost all the major PSU shipyards have significant defence vessel orders from the Govt. of India for the next 4-5 years. And looking at the Geopolitical situation and need of Indian Navy, the demand for Naval ships will increase, with good focus on
exports of naval ships.
Vessel costs vary from over 100 cr to sometimes 20000 cr depending on complexity of the ship.
Meson valves with high quality, certification, and high end technology combined with possible Value added services in Valves , has a very good chance to
bag critical and major orders, for which the delivery time could be between 1 – 3 years and this time would ultimately decrease as they do backward integration.
Their focus is also to integrate valve related components like actuators, filters etc for better service to end user.
Aircrafts
For aircrafts, they are developing certain critical valves for which R&D is currently is going on
Location benefit:
Being in Pune, they can source a
lot of valve components like actuators and from other players to make delivery faster.
Chakan MIDC starts with the defence area of Dehu area where Munition India and Ordnance depot is located.
‘Defence’ is in the air as one enters the MIDC area.
Value added services:
Meson is planning to provide Value added services in a partnership with
NIBE Ltd. These two companies are located at a distance of just 5Km from each other. A greenfield vessel production requires a lot of manpower
The shipyards need to complete defence vessels on time for
which they have a limited number of contractors.
Meson plans to work at the site providing value added services for a defence vessel on piping systems along with the valves. This is a different category of the business for which the potential is huge and they have seen a
positive mindset of the yards in this business aspect.
There are a lot of components in a defence vessel which are ‘plug and play’. Meson team prepared a solution for those components and given to the yards for the approval so that a vessel delivery can be made faster
Financials:
The current financial figure for H2 may surprise the investors.
Current visit’s purpose was only to do the due diligence of the work they do
As per my assessment, Meson’s promoters are more than capable to scale the company to newer heights.
My views can be biased. I am not a SEBI RA.
Negatives:
Initial reaction to Q4 results – a mixed bag, but more negative than positive given they had guided for better numbers in the Q3 earnings commentary. Volumes were up, but lower than expected. PNG growth (both domestic and industrial/commercial) has been quite good QoQ, and domestic growth has been particularly strong YoY. CNG growth is steady – the good thing is they are still growing here despite the headwinds around EV adoption.
However, clear margin pressures seen across both CNG and PNG. EBITDA margin down 1.2% QoQ and EBITDA per SCM was only Rs. 6.58, much lower than the Rs. 7.5 they are targeting for FY25. Given CNG prices were cut in March, chances are it will fall further in Q1 FY25. Haven’t listened to the earnings call yet – wonder what was the reason for this fall in Q4.
While valuations are ok, some more caution warranted here, I guess. Not clear to me what is the growth trigger even if margins bottom out in Q1.