Wish granted in a recent interview on the same platform

RBI द्वारा Risk Weight बढ़ाए जाने का Ugro Capital पर कितना असर? | Sachindra Nath, UGRO Capital

Diversification has its benefits and limitations. Allocation that is made to uncorrelated assets is safeguarded when market falls, but if the allocation is substantial, and if market is going up for extended period, we may feel we should not have allocated so much.

I vote for debt though, as this serves both as a cash flow in bad times, so that equity if fallen is untouched, and for investing more at such times. And as the equity allocation increases with time, despite the increase in knowledge and experience, it is hard to look at a big loss, even when it is notional.

It depends on the financial, psychological states and the age we are in life.

I am more invested in debt than in equity, with small allocation to gold and silver both w.r.t diversification and trading opportunities, and my learning is focused on equity, as I see it as an opportunity to get more than debt.

Going through the presentation and the post Q2 conference call the following points are forming my bullish thesis on Natco for the medium term (3-5 years)

1. Company is expecting 2 more years of growth from gRevlimid as the percentage share increases to 33% calendar year by Jan 2026 (pg 10), so 2024 & 2025 may still build over 2023 for this drug. Competition from other players have been factored in.

2. In these 2 years there could be atleast 3 formulations from the present approved para IV pipeline for which Natco may get to launch in the US and possibly other reguated markets. These being Ibrutinib, Carfilzomib & Bosentan, the brands being Imbruvica, Kyprolis, Tracleer and for all three they have the first to file as well. So Natco in all likelihood is not going to be a one trick pony in the coming years. If one looks at their presentations going 3 years back Imbruvica, Kyprolis, Tracleer brands were all there in the para iv pipeline and therefore this makes perfect sense when the promoter expects these molecules will provide growth (pg 7)

3. Company is targetting 25% annual growth from the Brazil & Canada subsidiaries (pg 6) and agro business (pg 8). Promoter has stated that he is confident of maintaining the margins for the next couple of years based on the product pipeline and launches (pg 14)

4. Despite the USFDA observations on Kothur plant, as all major products including Lelanomide has approvals from Vizag plant so the company expects minimum impact from the fallout. We should get some idea of it by February 2024.

In the mean time company has Rs. 1550 crores in cash equivalents and hopefully it would spend this growing cash wisely for the benefit of all its shareholders. Natco is maturing as a disruptive complex generics player and it is building up the para iv pipeline continuously. Q1 presentation it stated it had 19 para iv products in the pipeline of which 7 were approved and in Q2 this became 23 of which 15 are approved (on second thoughts this could be a typo in the Q1 presentation and I have queried the management on this. However, it doesnt take away the shine from the envious list that it is lining up).

Based on the above I expect the share price to form lows in Nov – Dec from a medium term perspective.

I think we need to see Fine Org in a different perspective.

If the buyer views their products as a must have and they cant do without them its a very big competitive advantage or “Moat” as its called. The possibiltity of a competitor entering becomes less and customer stickiness will help grow the business. It will take years for any other vendor to meet the levels of quality.

In my view if the product they sell is a small portion or the overall spend and very important it means that the company at some point will have a pricing power since they will not go below a certain price point and compete on pricing and can ( if they have the stomach) demand a better pricing ( I wouldnt like to believe what a PR agency says), and this is something we can try in our personal lives as well. That beside such companies will always be in demand and will find ways to increase their spend share with new products. The expertise of the company provides a lot of comfort that they will be able to compete in any environment.

Happy to get feedback and also be corrected.

Business Number 3 – Welspun Corp

Diversification of Product Portfolio and Demand in the Sector for the Product will Take Company To Next Level

WCL is a welded pipe manufacturing company engaged in offering solutions in line pipes used for onshore and offshore oil, gas transmission and can produce 2.15 MTPA of steel pipes. Leaders in the oil and gas industry, including Shell, Saudi Aramco, TOTAL, and Chevron etc

Company has given top line Guidance of Rs 15,000 cr by FY24 & EBIDTA of Rs 1,500 crore

Sintex acquisition will help WCL to expand its presence in the B2C market and become a more diversified player such as Line Pipe,DI Pipe,Drums ,Buidling Material and Targeting Rs.1,700 cr of revenue & 20% EBITDA margin for Sintex by FY26

Acquisition of ABG Shipyard can give more than its acquisition cost by selling the half-constructed ships/ scraps. The land area could be utilized for multiple purposes which the management is evaluating, and the potential worth will be realized over the next 12-15 months.

And in next five quarters the profit on the scrap at the ABG shipyard, which will add about 100 cr to EBITDA in FY24

Capacity expansion by 100 KMTPA at Anjar to take total capacity to 500 KMTPA in Next 12 Months and will reach 100% Capacity Utilisation in next 2-3 Years

Company Already have future Ready Capacities which will increase the generation of free Cash Flow with lower debt

Dis: No Buy/Sell Rico*