It is always prudent to take entry into quality stocks at right valuation...if the growth from new brand launch is successful and margin expansion continues....I believe it is bound to get good returns at CMP given overall macro remains good
Disclosure: Invested and the views may be biased
HI Arjun
I could not have written this better. Very well put.
From AR, with revenues less than a crore for 2014-15 and loss making, wondering why would the promoter take ~25 lakhs as salary (~25% of revenues as salary !!). This doesn't speak highly of promoters.
Varadha,
While I appreciate that they would constantly require inventory in order to increase sales, please also note that despite higher working capital requirement, there is no capex requirement. Further, the inventory level has been marginally higher as company increased product range from 3 to 7-8 segment over last 4 years. So there might be working capital efficiency achieve from Minimum scale of operation coming in the newer segments. Having said that, it would be 10-20% lower inventory days in my understanding and not more due to nature of business.
What I see positive is that even after accounting for increased working capital, the company generate free cashflows. The increase in dividend from 2.5 per share in FY14 to 4 per share in FY15 does in a way give indication of promoter willingness to share wealth with minority shareholder. There were concern about promoter getting warrant at 43-63, but then at level of 320/-all shareholder are questioning the promoter issue. The price at which warrant allotted was SEBI determine formula price, at which anyone could have bought share from open market. So to me, it would have great had promoter not diluted equity, still to an extent, it align promoter interest with increase stake in business with shareholder.
Further, the company can almost double the sales from current level without much capex. An indirect way to check cashflow of business is also higher debt raised/ or large equity dilution. As against Rs 19 cr capex in Guwahati, there is no term debt in company. I see that also positive. Increase in working capital requirement is partially financed from working capital limit without much gearing. In my opinion, one way to look at company contribution in working capital being only deducted from free cash flow rather than total incremental working capital can also be a way to look at free cash flow. Of course, that would apply only if company has gearing say less 0.7 times as at higher level of gearing, the bank may not be willing to finance working capital and it may be tricky to that extent.
Last, personally got a good comfort from management, particularly Mr. Shiv Kabra.
To summarize, not a HLL business which would see increase in free cashflow with higher sales, but at the same, not even Infra company which would use cashflow with increase in sale. So increase in sales, does translate in lower free cashflow. If you are looking at HLL type business, then this is not one. But if you are looking at 20%+ growth Sales, 25% growth Profit growth (and also cashflow) with moderate profile promoter for next 3-4 years, I would find Control print fit that segment
Disclaimer: I hold share in the company and my view may be biased. Investor shall do its own due diligence before investing.
In this recent correction in market, made some minor changes to my PF, just thought to update for more learning and comments
Bought Torrent pharma after bumper Q1 and expected bumper Q2, stock corrected to below Q1 level price due to this correction and valuations are very compelling for FY16 estimate, its only 15 forward PE, for such a great mid cap pharma company/stock, ripe for rerating and very limited downside in this volatile market,a good defensive bet, can rise up to 40 % in 1 yr on a conservative basis.
Bought Avanti feeds, again after superb Q1, and trusting the mgmnt guidance, stock corrected to lower level after bumper Q1 due to mkt fall, stock split etc will keep it high, I think along with Q2 numbers is expected to be again good.
Reduced Capital first due to LAP concerns and no pick up in Indian economy as expected, higher NPAs, found better opportunities due to mkt correction
Can Fin Homes 25 %
Kitex Garments 20 %
Ajanta Pharma 20 %
Torrent pharma 13 %
Avanti feeds 10 %
Repco Home 10 %
Arman Financial 2 %
Jan to Sept YTD return is down to 40 %
Looking forward to Q2 results for some zing in PF 
Ya correctly Said.I should look more into torrent's balance sheet now than the price in the screen. Thanks Hitesh
Dhiraj
Much appreciate these detailed notes - the one concern I had speaking to their customers is that CP holds the consumables inventory at the customer's premises at their cost which results in WC getting locked up and hence to low OCF - OCF is consistently not even 10-30% of EBITDA which is really low.
I spent a lot of time on what generates cash in a business - out of OCF of Rs. 27 Cr. more than Rs. 19 cr. went back again as inventories and receivables - that's not a sign of a moat. If they have one inventory write-off because of technology obsolescence etc,it will hit the business badly.
Like charlie munger would say, its a tread mill business where more and more of the profits have to be invested into the business to keep running. Given that, the sales growth means not much until they can shrink the WC.
Would you have a view on when the company can improve upon this ?
I will not talk about numbers. i am not convinced about the business. to me it looks like a me too. it will be very difficult take on brands like Allen solley, lp, van heusen etc. moreover, i haven't seen a single exclusive store of indian terrain. they just occupy some small space in big malls. i have personally used their products. they are ok. but nothing great.
I can not digest this ' advance system' of revenue. I doubt if it is legal. But the question is," is it possible for market to be irrational for such a long time."
Arun
I concur your views. Perhaps that is why the markets even at the recent high of the stock is not giving it any great valuations. My limited point is that there seems to be too much pessimism and fear driving the stock to ridiculously low valuations and that is why it may just be a short term investment case for now. One can alter the stand later on as the information flows and future becomes slightly more clear.
Disc - No investment, neither any planning