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Posts in category Value Pickr

Wonderla Holidays (26-07-2022)

Was going through their earnings call. Thought I would summarise it here, which touches on some of the topics including marketing.

Concerns:
Implementation of GST seems to have material impact, especially in Chennai. This would result in high ticket price that would test customer’s willingness to pay.

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I dont know if GST is the prime reason to have resulted in low ROCE.

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On the willingness to pay, when they expand the capacity, the price should come down as they need to attract a lower income people. This is a significant constraint on scaling out vertically. If I am right, the current strategy is to scale to multiple locations and target the higher income group that pays more for tickets. Rest is dependent on economy growth.

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Tailwinds
It is interesting to note that the company is entering into digital advertising only now! But, at least they are in right path and not beating around the bush on that.

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If things augur well, then there can be some good volume realisation through targeted marketing and improving customer relations.

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However, there is a limit to success here. Each park can only grow to a certain peak volume. The key is to improve non-peak volumes and improve ARPUs.

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But each park can be expanded to handle 3 million, provided the footfall picks up.

There is a good scope for expansion across regions. If ROCE is stabilised, this is a very good long term play.

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What I like the most is the capital preservation, provided if management is good and ethical (which they are IMHO).

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Views
Overall, I think the next 2-3 years are going to be a good year for them as long as there are no macro economic issues. The management is good and is quite conservative in their strategy, which is important for an capital intensive company.

Disclosure: Have a tracking position. Might scale up over next qtr

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StageInvesting +Elliot Waves (26-07-2022)

Thanks for checking.

1st one quick insight- stock-price of every company moves into cycle (we all know that ) . Now during down-cycle , it has two elements ( a) price-correction (b) time-correction ( price moves with -in a range) . Stronger the company, longer the time -correction and lesser the price -correction . The purpose of both of these type of corrections is to frustrate the non-serious investors , the free -riders (in layman’s terms) .
Many a times when price runs ahead of earnings (due to future growth projections), either the price should correct or it rests in a range to catch-up with earnings growth.

PolyPlex - Quick check.

Please keep in consideration that we don’t comment on day-to-day movement of prices - we tend to look for mid-to-long term trends .

Monthly Chart

It is a beautiful chart - moving in a channel from May 2020 – did not break the channel even in recent correction. Also it is moving above 9 months moving average (pink curve) , came below it in June but did not close below that and also took the channel support at the same time and bounced back.

Other point to note here is that it corrected upto 38 % of FIB level ( of the rise from Covid lows to ATH).This is also a good sign. In these type bear markets, many a times stocks tend to correct upto 50 -78 % levels . If the stock corrected upto 38% level only, that means it is in strong hands ( big money)

POLYPLEX_2022-07-26_08-56-09

Weekly Chart

On weekly, it is taking a support at 40 week moving average (green curve)-never closed below it since the days of COVID lows.

POLYPLEX_2022-07-26_09-03-20

What can happen next ?
Stock became more than 10 X from covid-low levels. To us, it seems to be in time-correction as of now ( it seems price correction won’t be much) , can move in a range between 2000 to 2500 for next few months.

Can it go up ?
Well it depends upon liquidity in the market and overall sentiments .For moving up, it should first trade and close above 61.8% & 78 % level of retracement of current decline ( 2530, 2700 respectively as shown on weekly chart) and then it should cross and close above recent ATH for few weeks.

Can it go down ?
Anything can happen in the market !

If we were at your place, we would track it weekly and monthly. We would draw a channel as well as would use weekly and monthly moving averages as pointed out in the charts.

On every weekend - we would check that it does not close below 40 week moving average for more than 2 weeks, and it does not close belwo the channel.

On every month-end - we would check that it does not close below 9 month moving avergae for more than a month and does not break the channel.

If we were holding this stock from lower level, we would keep it holding it for long term as overall structure looks good. And if we were not holding this stock, we would try to buy when it again comes close to lower end of the channel and track it closely before adding more or exiting.

Disclaimer : Charts are for study purpose only. Opinions are personal- can go very wrong. No suggestions , no recommendations.

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When Not To Buy (26-07-2022)

On valuation I’ve seen in my 2 years journey that you make money when the valuation is so cheap that you don’t need to do too much hardwork on valuation. And probability of not making money increases when doing valuation becomes very difficult.
Scenario 1: I bought a NBFC company named CSL Finance Ltd in February 2021 with price being lower than the book value after substracting all the gnpas( which was very low). The promoter was buying from open market. The mgmt managed the NPA to be stable throughout the covid. The adjusted PB ratio was 0.65. It was a no brainer buy at that price and it became a 3 bagger. Didn’t fall at recent sell off at all. Still the company is available at 1.2 PB ratio but now the valuation is little bit hazy. I mean it’s no longer a no brainer buy.
Scenario 2: I bought Prince pipe after it became a multibagger. The PE ratio was 36 but the earning growth was also superb. It was a 25% grower company at 36 PE so I thought even if it grows by 20% I’ll make money because the ROE ROCE was good. After I bought next 2 qtrs results were also good. But then the crude price shot up margins reduced and the stock price is still consolidating and now in the lower range. Though the sector has tail winds. But I’ve lost in terms of opportunity cost. I could have invested now. Because the valuation is much better now. 15% grower at 22 PE with structural tail winds. But will I buy it? No there are much better opportunities which represent no brainer buys.
Scenario 3: Krsnaa diagonistics, a moated player+good management+ Huge runaway for growth. Excellent growth in last 3-4 years. The stock corrected by 50% because everyone thinks increasing competition in Diagonistics sector js going to hurt the existing players. it’s true for dr lal path labs and other like them. but krsnaa completely operates in different field. So here we have a company which can easily double the earnings in next 2-3 years due to huge operating leverage. So it’s a no brainer buy at this valuation.

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Indian Energy Exchange (IEX) (26-07-2022)

SHP of IEX. There is this pattern. After a good company becomes multibagger and valuations become too rich then institutions start selling. Then with each fall in the name of buy on dip, long term investing etc etc retail share holders buy it. I think the way to buy these businesses is either spot them before the rally starts or buy them when they are cheap enough that one can easily do the valuation. If valuation is very difficult then it’s still overvalued.

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Tech Mahindra – It was Satyam Once Upon! (25-07-2022)

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IDFC First Bank Limited (25-07-2022)

CASA is usually very sticky. It’s hard to shift substantial sums for 1/2% delta in interest rates. In past too when IDFC FB reduced rates, the CASA barely moved.

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Grauer and Weil Limited- 101 out of 100? (25-07-2022)

Thank you Praveen. You saved me a lot of effort.

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When Not To Buy (25-07-2022)

Before buying any company, I must check my default check list.Apart from that even if all the check lists are satisfied,the most important thing I should not ignore is “valuation”.Remember that a company may be a good one since last 15 years or it might remain excellent for next 20 years.But its stock price will not be good in between this time period, from a buyer’s point of view.Stock prices oscillate in between cheap and expensive and I need to buy a good business in cheap or fair valuation.Sometime the stock price may not come to my calculated valuation and for years and I might have to sit with cash.It is okay if I sit with cash.But I need that margin of safety so that if the stock I purchased do not rise ,then also I can sit with mental peace.A good purchase price provides me that mental peace.

Scenario-1
Often you might be hearing this in business news channels that a particular stock is corrected 40% from its 52 week high and looks attractive.If the business is not worth investing,then there is no point in calculating the valuation of the stock.It does not matter how much % the stock is corrected from its top.I just don’t understand the logic behind it.TCS…no doubt …it is a good company… as on 19.07.2022…its stock price is Rs.3074/- and its all time high was Rs.4043/- .So,it means as on date the stock is corrected 32% from its all time high. Now TV channels are telling that TCS looks attractive.
Give me a break…
Look at its current market cap …its 11.21 Lakh crore …so at its all time high its market cap was 14.79 Lakh crore.
Even if you buy TCS at current price …if you think to make your money double in TCS ,then its market cap needs to be 22.42 Lakh crore.Lets say its earnings will justify its stock price ,then its current EPS (i.e. Earnings per share) i.e. Rs. 104 need to be doubled i.e. Rs.208. TCS has nearly 22% margin.So in order to make EPS double ,its revenue needs to be doubled i.e. from 1.95 lakh crore to 3.9 lakh crore.Lets say it will happen over next 5 years it means its revenue needs to be grown at 14% .But its revenue is growing at 5.71% since last 5 years.So if the whole IT industry will grow at 15% for next 5 years ,then it will cross India’s GDP perhaps.Again what other IT companies will do ? TCS is not the only company in this planet.Perhaps it need to go to the Mars for getting projects.
currently TCS is available at 30 PE multiple.Its growing at 5% and PE is at 30.It does not make sense.
Two things can happen…
1st… its stock price may stay there constant as it is for several years and gradually its earnings will increase slowly and justify its price.In this case you will not loose money in paper.But you will get -ve 6% yearly because in India inflation is around 6% minimum.
2nd…its stock price will collapse because market will not give 30 times premium to a 5% growth company.Lets say if it re-rates TCS to 15 PE multiple.So you will loose 50% of your money in paper.
In both way you will loose money.
Lets say we give premium to TCS …since it can give whole EPS to shareholders …still the 30 PE and target 22.42 Lakh crore market cap in next 5 years looks insane.
I may be wrong…but I don’t want to take that much risk to make my money double.
Where we make the mistake is…we see the correction in stock price in isolation.
But we need to see the following things in together

  • Current market cap of the company
  • Current Price to earning multiple.
  • How much headroom is there for the market cap to go up (considering the profit growth).
  • What % of the EPS, the company can give to shareholders as dividend without affecting its business.

Scenario-2
Often we take the wrong reference point to evaluate the companies in different situations.I consider these as false indicators.Some of these examples are.
Bank deposit interest rate during COVID pandemic is very low …say 3.5%.So, if TATA Power is available at 4% dividend yield,then we should buy its stocks.PSUs are available at 5% dividend yield ,so we should buy them.These are all wrong metrics which seems right in extra ordinary situations.You need to ask yourself, that whether you want to own the businesses like TATA Power and PSUs.If not then it just does not matter in what dividend yield these stocks are available.If the business is an investment grade and headroom for multiple year growth is available and stock is available at 5% dividend yield and low PE ,then it makes a perfect buy.But you need to consider all the parameters together.Remember you invest in a business for growth in earnings not for dividend yield only.
When interest rates are low,even the companies with 5% earnings growth ,available at 40 PE will attract you.This is a perfect illusion, as you are taking only the interest rates as the bench mark for calculating the valuation and ignoring the inflation completely.As per simple economics, interest rates should beat inflation and at present in INDIA ,it is not beating the inflation.So ,your mind will tell you that its ok to buy the stock at 40 PE since interest rate is very low.Remember that ,what is important is the "sustainability of growth in the prices of your stocks " .This is the whole point for which you are investing in stocks and this can only be justified by growth in the earnings of the company.But if you are justifying the growth in stock prices due to low interest rates,then it is nothing else just a bubble.
At present some of the good companies are available at insane PE & Market cap.
Example- TCS,Infosys,D-mart,TITAN etc…
https://themangoinvestor.blogspot.com/2022/07/when-not-to-buy.html

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When Not To Buy (25-07-2022)

Before buying any company, I must check my default check list.Apart from that even if all the check lists are satisfied,the most important thing I should not ignore is “valuation”.Remember that a company may be a good one since last 15 years or it might remain excellent for next 20 years.But its stock price will not be good in between this time period, from a buyer’s point of view.Stock prices oscillate in between cheap and expensive and I need to buy a good business in cheap or fair valuation.Sometime the stock price may not come to my calculated valuation and for years and I might have to sit with cash.It is okay if I sit with cash.But I need that margin of safety so that if the stock I purchased do not rise ,then also I can sit with mental peace.A good purchase price provides me that mental peace.

Scenario-1
Often you might be hearing this in business news channels that a particular stock is corrected 40% from its 52 week high and looks attractive.If the business is not worth investing,then there is no point in calculating the valuation of the stock.It does not matter how much % the stock is corrected from its top.I just don’t understand the logic behind it.TCS…no doubt …it is a good company… as on 19.07.2022…its stock price is Rs.3074/- and its all time high was Rs.4043/- .So,it means as on date the stock is corrected 32% from its all time high. Now TV channels are telling that TCS looks attractive.
Give me a break…
Look at its current market cap …its 11.21 Lakh crore …so at its all time high its market cap was 14.79 Lakh crore.
Even if you buy TCS at current price …if you think to make your money double in TCS ,then its market cap needs to be 22.42 Lakh crore.Lets say its earnings will justify its stock price ,then its current EPS (i.e. Earnings per share) i.e. Rs. 104 need to be doubled i.e. Rs.208. TCS has nearly 22% margin.So in order to make EPS double ,its revenue needs to be doubled i.e. from 1.95 lakh crore to 3.9 lakh crore.Lets say it will happen over next 5 years it means its revenue needs to be grown at 14% .But its revenue is growing at 5.71% since last 5 years.So if the whole IT industry will grow at 15% for next 5 years ,then it will cross India’s GDP perhaps.Again what other IT companies will do ? TCS is not the only company in this planet.Perhaps it need to go to the Mars for getting projects.
currently TCS is available at 30 PE multiple.Its growing at 5% and PE is at 30.It does not make sense.
Two things can happen…
1st… its stock price may stay there constant as it is for several years and gradually its earnings will increase slowly and justify its price.In this case you will not loose money in paper.But you will get -ve 6% yearly because in India inflation is around 6% minimum.
2nd…its stock price will collapse because market will not give 30 times premium to a 5% growth company.Lets say if it re-rates TCS to 15 PE multiple.So you will loose 50% of your money in paper.
In both way you will loose money.
Lets say we give premium to TCS …since it can give whole EPS to shareholders …still the 30 PE and target 22.42 Lakh crore market cap in next 5 years looks insane.
I may be wrong…but I don’t want to take that much risk to make my money double.
Where we make the mistake is…we see the correction in stock price in isolation.
But we need to see the following things in together

  • Current market cap of the company
  • Current Price to earning multiple.
  • How much headroom is there for the market cap to go up (considering the profit growth).
  • What % of the EPS, the company can give to shareholders as dividend without affecting its business.

Scenario-2
Often we take the wrong reference point to evaluate the companies in different situations.I consider these as false indicators.Some of these examples are.
Bank deposit interest rate during COVID pandemic is very low …say 3.5%.So, if TATA Power is available at 4% dividend yield,then we should buy its stocks.PSUs are available at 5% dividend yield ,so we should buy them.These are all wrong metrics which seems right in extra ordinary situations.You need to ask yourself, that whether you want to own the businesses like TATA Power and PSUs.If not then it just does not matter in what dividend yield these stocks are available.If the business is an investment grade and headroom for multiple year growth is available and stock is available at 5% dividend yield and low PE ,then it makes a perfect buy.But you need to consider all the parameters together.Remember you invest in a business for growth in earnings not for dividend yield only.
When interest rates are low,even the companies with 5% earnings growth ,available at 40 PE will attract you.This is a perfect illusion, as you are taking only the interest rates as the bench mark for calculating the valuation and ignoring the inflation completely.As per simple economics, interest rates should beat inflation and at present in INDIA ,it is not beating the inflation.So ,your mind will tell you that its ok to buy the stock at 40 PE since interest rate is very low.Remember that ,what is important is the "sustainability of growth in the prices of your stocks " .This is the whole point for which you are investing in stocks and this can only be justified by growth in the earnings of the company.But if you are justifying the growth in stock prices due to low interest rates,then it is nothing else just a bubble.
At present some of the good companies are available at insane PE & Market cap.
Example- TCS,Infosys,D-mart,TITAN etc…
https://themangoinvestor.blogspot.com/2022/07/when-not-to-buy.html

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Mangalam Organics Ltd. – A promising Pine chemistry story (25-07-2022)

A new CS is in place - "at the Meeting of Board of Directors of the Company held today i.e. June 29, 2022, the Board has considered and approved the appointment of Ms. Shachi Sanghavi, a Member of the Institute of Company Secretaries of India holding Membership No. A65080, as a Company Secretary and Compliance Officer w.e.f. June 29, 2022 ". But that’s unlikely to change the response.

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