Hi @StageInvesting ! Could you post the charts please for GMDC and SIB?

Cheers,
Rahul

I stumbled on this company when I was looking at high RoCE companies available at low market cap relative to FCF. Below is screener query that threw this name.

Valuation seems too lucrative to be true. Company generating 40%+ RoCE available at mkt cap to FCF of just 7 and PEG ratio of 0.27. It was available at 310 Cr. (371 Cr. market cap – 61 Cr. cash) with TTM revenue of 30 Cr.

I decided to dig further. It turned out to be a typical commodity business story.

Step – 1: Due to sudden development, demand outstrips supply.

Step – 2: Prices goes up. Companies make abnormal profits. Valuation looks cheap.

Step -3 : Underline development normalizes. Prices are back to normal levels. Company valuation tumbles.

In this case it is power cost. 60-70% of caustic soda production cost is power. Power in Europe became very costly due to Russia-Ukraine war. It became unviable for some of the plants to produce caustic soda and they were shut down. Lords Chloro gets power from Jaipur Electricity Board (JVVNL) and rate is unchanged since last 3 years. Hence it minted money. However normalization of energy cost in Europe and global recessionary fear have crashed caustic soda prices. Hence Lords Chloro margin suffered. So much so that it posted a loss in last quarter.

I have already burnt my finger in one such story of HEG. Hence I plan to stay out of this.

However this once again proves that if someone is skilled at timing commodity cycle, they can make good money in commodity stocks – 6 times appreciation between Sep’21 and Sep’22.

But please remember, it needs extreme skill and quite a fair share of luck.

Interested… Would love to learn

@StageInvesting

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I basically did read this company as part of understanding the Medical device segment in India. There are 100% FDI, PLI and Government intent to get medical devices manufactured in India but as of now India produces low value commodity products in India and the rest are distributed by importing.

My understanding of the company is as follow

• Company is the distributor for the foreign products – new and refurbished.
• They do few assemblies in India but no value-added manufacturing.

I did not dive deep into the company as I could not find any attractiveness in its business – they are one among the distributors and products they sell do have a lot of players in the market.

In case you are checking in more detail do check if they are planning to enter move value added manufacturing in coming years.