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I have gone through Annual Report – 2023 today, while there are many positives, I would like to focus/emphasize more on the negatives here as the concerns are high as per my understanding.

1. Almost 38% of its purchase is imported (roughly). In FY23, it has imported 50.5Cr. worth of goods/machines. So, the question to find is whether the company is an Assembler (with only a few parts of in-house manufacturing). If that is the case, it is an ordinary company with all sorts of similar competing companies.

2. The above fact is even more evidenced by the fact that Calcom’s Manufacturing Cost is reducing Year by Year and instead the Cost of Goods is increasing. Here is a rough common size:

3. The debtor days are increasing. It was 30 days (Low Point) in 2019 but increased to 41 in FY20/56 FY21/61 in FY22 and 65 in FY23. While debtors outstanding >6 months are not significant, rising debtor days all say either about competition or something else.

4. Ratios are at sub-par levels. ROE/ROCE/ROIC are very low to even beat the cost of equity. But as a growing organization, this is less of a concern and hence will require continuous tracking with an increase in revenue and operating leverage.

Note: These are only my negative pointers and there are many positives for the company as well. The first is Good Management and then Improving Product Expansion and Innovation. I would like if someone could point out the issues and highlight the counter for better insights.

Invested, but not a substantial amount.

Regards,
Mukul Jain

Force Motors Update : (AGM Key Takeaways)

I didn’t attend the AGM but this is what the people had to say who attended :

• Management has guided for around 15-20% volume growth in OEM business for next 2-3 years.

• Urbania exports to start by early 2024, Urbania-electric to be launched by mid-2024.

• Guidance of around 15% growth in Engine business (to BMW,Mercedes) for next 2-3 years.

• JV with MTU (subsidiary of Rolls Royce) to achieve breakeven this year ; guidance of 500cr annual revenue in JV (in short term).

• Consol operating margins can sustain in double digits.

D – Holding from lower levels, not a buy/sell reco.

Good Question

Let me give some explanations wrt each company –

RPG LIFE, ERIS LIFE – Both have great focus on branded Indian Mkts ( Eris doesn’t sell outside India ). Their managements are aggressive. Both companies throw up cash like FMCG companies ( Or like – Mankind Pharma, Abbott India ). Their return ratios are excellent. Growth in last 3-5 yrs has been Mkt beating. Its like buying FMCG companies at the price of Pharma ( ie sub 25 PE kind of valuations )

Syngene Ltd – Only end to end listed CRO to CDMO player with impeccable regulatory track record. As more molecules go into commercialisation, profits can really take off

Neuland Labs – Similar story except that it doesn’t do the CRO work nor does it have the biologics manufacturing capabilities. As more molecules get into commercial stage, there can be blue skies ahead. Here too – the regulatory track record has been very good

Senco Gold – Gold/ Diamond jewellery retailer. Only few except Titan have a track record of good corporate Governance. Senco is one of them. Plus they have dominant mkt share in East India. If they do not goof it up themselves, ingredients are in place for sustained growth and high valuations for the company

Angel One – A discount broker – like Zerodha. Their tech platform is very good. Has been consistently gaining Mkt share for the past 4-5 yrs. Plus the F&O volumes in India ( the segment where they charge on a per trade basis ) have never seen a dip since 2008 on a yearly basis. No Dip was seen in 2008 financial crisis, nor during the COVID fall. To me ( as suggested by data ), its a secular story commanding cyclical valuations

Explanation for the rest of the pack by tomorrow. Thanks for the Push !!!