Hi All,
I think, HAL has received tax refund for AY2010-11 and also for 2015-16 as per their letter to BSE & NSE dated 17th February 2022, hence the tax outgo seems to be only 3% in FY22.
Hence as an investor, one may have to consider this and adjust the EPS accordingly.
Disc : Under analysis. No investment.
Few Extracts from Annual Report:
1. Industrywide Break up:
2. Client Location:
3. Outlook:
Currently, production capacity of the Company at its existing facility is almost fully utilized. The Company increases CAPEX every year for debottlenecking, which will continue this year. The process of raising further capacity is also under way for the financial year 2022-23 and 2023-24. This will enable the Company to cater to rising market demands.
Looking forward, the Company anticipates that the rising demand and optimization of internal processes will lead to a increase in business volumes.
5. Investments : INR 34 cr vs INR 28 cr consol PPE:
Disc: invested
Looks like research needs some scuttlebutt and checking online reviews, a granular research unlike established business like FMCG, because I think things can change quickly with the arrival of new brands. People who can spend 1000, can spend 1200 if they think they are buying a more premium product. One’s appearance to one’s own self is subjective, unlike taste, it may change, given more options.
As with many things in our country, perhaps there has come a change with lifestyle too, I don’t know, at least in the urban areas, in indeed that is true, this business if run properly and successfully can have a lengthy road ahead, prone to all the threats that exist for all businesses.
The conversations on Valuepickr will improve if we have a better understanding of the term “valuation”. A company is under valued if over the long term, say ten years, it gives much better return than index. Similarly it is over valued if it performs badly when compared to index. Performance over long term is the key because, at the end of day, that is what an investor earns.
But, except for time travelers, nobody knows the future returns of the stock. Instead we use various heuristics to determine whether the stock is over or under valued. PE ratio is just one such heuristic. Mostly when people say a stock is overvalued, what they meant is stock has high PE ratio. I don’t believe it is a good heuristic. In general, it is unlikely that an easily computable metric like PE ratio will give an edge in market. People who still use PE ratio, should backtest it to see if it works.
Understanding that PE ratio is just a heuristic, frees your mind to consider other possible heuristics. In particular, you begin to look for value in good quality companies, which you would have otherwise ignored due to their high PE ratio. Wlamart in 1974 was a good example.
Wal-Mart’s 1974 Annual Report: Sometimes You Get What You Pay For | PHILOSOPHICAL ECONOMICS
It traded at twice the PE of index, but its long term returns were much superior to index. The most important takeaway is that for Walmart to be fairly valued, its PE should have been around 600. That’s an astronomical figure, especially in the era where index PE was just 6.9.
Hi Nimit,
I can try explaining some points raised by you.
Receivables: This should be looked as a % of sales and not as a % of profits. Broadly, receivables have stayed around 90-100 days which makes sense as they are exporting to unregulated markets. If you look at like to like peers, here are the statistics for receivables/PAT based on FY22 nos
Bharat rasayan ~ 2.64x
India Pesticides ~ 1.57x
Insecticides India ~ 3.07x
Heranba ~ 2.17x
So Heranba receivables are very much in-line with similar sized companies. Also, we should take into account quality of receivables as a majority of Heranba’s exports are into unregulated markets. If you can do a peer wise comparison, it will be very value additive.
Inventory: Again we should look at this in reference to similar sized peers. Here is the March 2022 inventory nos for Heranba’s peers, Heranba’s inventory nos are one of the lowest.
Bharat rasayan ~ 120 days
India Pesticides ~ 165 days
Insecticides India ~ 208 days
Heranba ~ 100 days
Also, building up inventory can be a business strategy. If you look at quarterly results of agchem cos, almost everyone is reporting fall in margins as cost of intermediates have shot up significantly. In this context, Heranba’s inventory positioning makes sense.
About securitization of receivables: I do not have much expertise in this, so will refrain from commenting. Maybe someone with better understanding can help.
Disclosure: Invested (position size here, no transactions in last-30 days)
Synopsis of this business:
Polycab has degrown more QoQ than KEI because of retail channel destocking has been severe and Polycab is more B2C than KEI. Nothing else. History also tells us such things happen and Polycab has slighly outperformed as well but more or less same -
studied the result, spate of disappointments in past many quarters with the worst one this q, price action hinting towards a bottom made, management strong near & medium term commentary on expected nos going ahead, remains somewhat of a deep value play with a solid long term ‘not baked in’ pipeline
Its frustrating & easier to just sell out and buy something else with more certainty, which in my investing experience has often tended to be the worst time to do exactly that, this is the time to buy
Seems, you need to wait till Oct 1, 2022
