The Most Important Things per my understanding:

• Business has no entry barriers: Oversupply [addition of new lines] is a norm as soon as industry sees good times [margin improvement as and when new capacity is consumed by the future growth.

• Earnings are cyclical: Due to overcapacity most of the times and crude price linked raw material (RM) cost. Hence, margins are never stable and revenue growth remains unpredictable [finished good prices increase and decrease along with RM cost].

• 80% portfolio speciality: It’s an aspiration for many years and will remain so because additional capacity starts with commodity and slowly graduates towards speciality in order to become commodity in the long run. This requires non-stop capex to keep pace with the changing times [innovation/technology/sustainability/scale etc.]

• Actual production capacity is ~75% of total paper capacity.

• Payback period [basis Operating Profit] of up to 3.5 Yrs. motivates capex for new lines.

For anyone looking to buy the stock, it requires an immense timing element [Elevated PEs for all listed players, mainly due to stock price increase even when earnings look bad in a foreseeable future].

@hitesh97

If I know that a company will face headwind for next 1-2 years and if I were holding the stock I would exit as early as possible. Or if I have to consider it, I will stay away. This is because I am a momentum investor and don’t want to waste my time and money on stocks that are not in a strong uptrend.

However for fundamental value buyers, this kind of situation often provides fertile grounds to keep this kind of company in watchlist and buy at appropriate time.

Currently we have the example of chemical companies (and the so called high quality companies mainly due to tepid growth inspite of high valuations) which have been under pressure due to various reasons like high raw material costs, high power costs, transportation costs, etc. After massive bull runs these are in corrective mode due to above mentioned factors. These kind of stocks have not moved much during the roaring bull market that we are currently in. And all this while the stocks in fancy, with earnings tailwinds and in strong uptrend have gone up nearly 2-5 times or even more. Even somebody with no fundamental prowess, but who detected the PSU bull run could have made crazy money.

A strong trending bull market ( like the one we are experiencing) provides a great time to make quick returns in short period of time of 2-3-5 years. Portfolios can go up 5 to 10 times or more. This is often the differentiating feature between being rich and being wealthy, and finally financial freedom.

Just to give an example, stocks like HDFC Bank, Kotak bank etc have not moved much during the past 2-3 years, whereas stocks like HBL, Usha, most of the PSU companies and PSU banks etc have gone up multifold. And still some investors are stuck like a limpet on HDFC bank and the likes. These stocks will also have their day but in the current scenario, they are rank underperformers.

A superb growth in Q3 with an excellent margin.

Regards,
Raj
Disc: Invested since low levels

Thanks for sharing details about MIT.

Attaching below is the screener link for their current holding

https://www.screener.in/people/131399/massachusetts-institute-of-technology/#shareholdings

Hope you find it useful for further study.