Shivalik has been a major milestone in my investment career. The exceptional execution in last 3-4 years along with end use sectors tail-wind is expected to continue drive growth in medium term for the company. However, the company allocation has increased from 2% to 20% in my portfolio since last 2-3 months. While I continue to remain optimistic for long term business prospects, in FY24, my understanding from Q1FY24 Con call, in FY24, the business (sales) would be growing at around 15-20% and Net profit may be around 20-22%. This is my expectation and may be completely wrong. Based on that, the valuation appears rich and hence, after holding for almost 5 years, last week I decided to sell 20% of my holding. I continue to hold 80% of my original holding and remain optimistic about the prospect of the company.

Since I have been contributor to thread, I thought to keep members updated (Whatever it may worth ).

The selling proceeds from Shivalik Bimetal has been reinvested in HCL (28%, Dividend yield with growth fitting in definition of dividend compounder which I have special respect), Akzo Noble (26%, again a dividend compounder), Jagran Prakashan (14%, a medium term trade with expectation of superior profit growth due to lower input cost, higher advertisement spending and recovery in Music India, a subsidiary performance), Jenburkt Pharma (11%, my old time favourites, nothing expectational in business, but have respect for promoter group integrity and like tortoise approach of management, slow and steady) and Premco Global (10% of proceeds, amazing company in my view with manufacturing capacities in India and Vietnam, two of the most important sourcing region in global textile chain with great customer relationships and superior capital allocation (now declaring quarterly dividend).

Disclosure: Shivalik Bimetal is my second largest holding. My view may be positively/negatively biased due to holding and recent sale respectively. I am not SEBI registered advisor. I am not recommending any investment action. I may buy/sell above mentioned stocks without informing forum. Investor shall do their own due diligence before making any investment decision.

I am also interested do add …thanks

TARSONS Q1 FY24 RESULT & CONCALL

• EBITDA MARGIN- Due to the lower absorption of fixed expenses due to decline in revenues affecting margins & one off 2.8 cr for failed acquisition.
• Our sales have de-grown, but we have not lost any of the customers.
• Life science sector is experiencing a slowdown leading to a notable reduction in demand for plastic laboratory-ware products, both in the international and domestic market. demand in the first quarter has been relatively lower for the consumables segment.
• REVENUE – Factor to the decline in the revenue is the high level of inventory, which is there in the distribution channel. An issue is that there are these huge inventory levels at the customer end as well compared to the distributor end.
• ACQUISITION- our strategy involves an inorganic opportunity that fosters the strengthening of our channel and distribution partnerships.
• PANCHLA – Panchla is introducing cell culture and increasing capacity in existing products. We anticipate that the first round of production will begin in Q3 FY ’24.
• The pressure in the Asian subcontinent is much higher than the European and American subcontinent.
• OVER CAPACITY – I think it’s not only China, but globally that there has been a lot of capacity.
• Cell culture is still primarily dominated by Europe and the U.S.
• Q4 is a very strong year in India because people look to complete their budgets in purchases. Distributors look to complete their targets. Sales people look to complete their target.
• CAPEX UPDATE- out of the total capex, we already incurred about INR 430 crores. INR 525 crores, INR 530 crores will be total capex.
• We expect cell culture business to – at full capacity should peak out closer to the INR 100 crores of revenue.
• our purchase prices of raw material continue to increase as the euro has gone up and the dollar has gone up.
• Asset-turnover ratio on the gross blocks would be in the range of 0.65 to 0.7.
• BUSINESS UPDATE- We started receiving orders from the customers for PEG bottles & we have started revenues in small numbers for the serological pipettes from our pilot production, batch production.

AMTA PLANT- don’t expect cost savings, but we expect operational efficiencies because we need a bigger place to be able to tackle revenues, which are significantly higher than INR 300 crores. 5% to 10% would be the Gamma plant and another 10% would be manufacturing.

Any viewpoints around below aspects will be a great help:

• Business journey from my viewpoint: 1st 50+ Yrs. mastered the art of making starch and its derivatives. Next 20 Yrs. spread the manufacturing footprint across India. Installation of mega-plant at Punjab in FY20 elevated the financial performance. Now, I sense that company wants to snowball capacities at a faster pace. What has changed in recent times to bring urgency in company’s aspirations in the form of establishing bigger plants and incremental capacity expansion?
• Company intends to expand the capacity from 1600 TPD (Tons Per Day) to 2000 TPD over the next 24 months. But, the industry leader, GAEL, aims to add 2000 TPD in this period. Why Sukhjit’s expansion pace calibrated compared to the industry leader, considering that Sukhjit’s management consists of 5 owner operators who know this business very well?
• Where company stands on the outlook envisioned under the company profile on the website? “Sukhjit sets out on a new journey by exploring fresh possibilities such as working with alternate commodities – Wheat, Rice and increasing its portfolio of value-added Products like HFCS, Sorbitol Powder, Functional Starches, Grain based Alcohol, Feeds, Pet Food, Bio-Fuel etc.”
• What they meant by the idea ( “commitment to migrate customers in Tier 2 and 3 cities from the unorganized sector to the organized sector.”) touched upon by the MD in the latest investor presentation of FY23?
• What is the rationale to hold Investment of 78 Cr. and Investment Property of 22 Cr. along with long term borrowings?
• What is the plan for the phased-out unit at Sarai Road?
• How much capacity expansion is doable in each of the other 3 plants at AP, WB and HP plants before space becomes a constraint?
• How the business manages the impact from the volatility in the raw material costs and energy costs?
• What’s the least operating margins of this business?
• What are other factors that matter besides price to retain and grow the market share?

Disc: No position. Sent the above to the IR team as a due diligence exercise but never heard back.

The other way to look at it is seller may have many reasons to sell not linked to business, like redemption, better opportunities elsewhere etc etc……buyer read investor has primarily one reason to buy value and opportunity in business.