I have made the following changes in the model portfolio.
- Sold 2% position size in Cochin Shipyard and added Stylam Industries as a cyclical bet
- Switched 1% position size in Atul auto with Geekay wires in deep value portfolio
Stylam: They have grown very well in past few years, reduced debt by selling non core IT business and are now building a branded B2C business. Valuations are in fair range, so upside will be because of good sales growth and margin revival to 16-18%.
I got interested in Stylam because of their continuing export growth because of penetration into newer markets such as Saudi Arabia, which has differentiated their growth trajectory vs other building material cos like Carysil. Additionally, Stylam is getting more aggressive in domestic market.
In terms of margins, despite having 20% lower realizations vs market leader Greenlam, Stylam has higher operating margins due to integrated nature of operations. If their branded business in India succeeds, it will be a huge margin boost for them.
Geekay wires makes steel wires and nuts and sells them in USA. They have shown tremendous growth in past few quarters (50%+ growth in past 6 quarters) and are trading very cheap (6x PE). There are 2 issues which I could identify with the company:
- They sell in US through a promoter owned subsidiary
- They have an ongoing anti dumping duty probe against them in USA.
This combined with them being very small in size (70 cr. Mcap), I have limited its position size, but am happy adding it as valuations are very cheap given their growth profile. Lets see how future unfolds.
Updated portfolio is below. Cash stays at zero.
Core compounder (42%)
| Companies | Weightage |
|---|---|
| I T C Ltd. | 4.00% |
| Housing Development Finance Corporation Ltd. | 4.00% |
| NESCO Ltd. | 4.00% |
| Eris Lifesciences Ltd. | 4.00% |
| Ajanta Pharmaceuticals Ltd. | 4.00% |
| HDFC Asset Management Company Ltd | 4.00% |
| Aegis Logistics Ltd. | 4.00% |
| Gufic Biosciences | 4.00% |
| HDFC Bank Ltd. | 2.00% |
| PI Industries Ltd. | 2.00% |
| Shri Jagdamba Poly | 2.00% |
| LINCOLN PHARMACEUTICALS LTD. | 2.00% |
| Godfrey Phillips | 2.00% |
Cyclical (48%)
| Companies | Weightage |
|---|---|
| Kolte-Patil Developers Ltd. | 4.00% |
| Sharda Cropchem Ltd. | 4.00% |
| Avanti Feeds Ltd. | 4.00% |
| Aditya Birla Sun Life AMC Ltd | 4.00% |
| Alembic Pharmaceuticals Ltd. | 4.00% |
| Amara Raja Batteries Ltd. | 4.00% |
| Chaman Lal Setia Exp | 4.00% |
| Ashiana Housing Ltd. | 2.00% |
| Ashok Leyland Ltd. | 2.00% |
| Heranba Industries | 2.00% |
| Kaveri Seed Company Ltd. | 2.00% |
| Control Print Limited | 2.00% |
| Sundaram Finance Ltd. | 2.00% |
| Time Technoplast Ltd. | 2.00% |
| RACL Geartech Ltd | 2.00% |
| Manappuram Finance Ltd. | 2.00% |
| Stylam Industries Limited | 2.00% |
Turnaround (4%)
| Companies | Weightage |
|---|---|
| Punjab Chem. & Corp | 4.00% |
Deep value (6%)
| Companies | Weightage |
|---|---|
| Geekay Wires | 1.00% |
| Jagran Prakashan Ltd. | 1.00% |
| D.B.Corp Ltd. | 1.00% |
| Shemaroo Entertainment Ltd. | 1.00% |
| Modison Metals | 1.00% |
| Suyog Telematics | 1.00% |
I have answered this in the past (links below). Alembic Pharma can be a beneficiary of an upcycle in the US generic market due to their very large capex, which is now getting approvals from FDA. To give some context to the size of Alembic’s ANDA pipeline, only Aurobindo files similar no of ANDAs annually and they are almost 10x bigger than Alembic Pharma. If growth comes, delta in earnings will be the highest for Alembic vs peers. Also, currently there is a shortage of anti biotics in US due to flu season which should benefit Alembic temporarily. Lupin and Ajanta should be larger beneficiaries, but Alembic will also benefit from this.
Its actually quite simple. Just compute your monthly returns using formula below and keep benchmarking yourself against peers (MFs, Nifty and PMSs).
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