Hi,
I invested in Punjab Chemicals instead of IPL as I feel that the level of undervaluation is higher in Punjab, when both IPL and Punjab have similar business and growth profiles. On similar topline of around 1000 cr., Punjab is available at a market cap of 1200 cr. vs IPL which is available at 2800 cr. Mcap.
I think the main reason for this gap is that IPL has shown very good margins since 2018 whereas Punjab still has lower margins. If Punjab is able to improve its margins over time (from 13-14% to 18-20%), their profits can grow from 80 cr. to 200+ cr. in 2-3 years. However, that kind of improvement is harder for IPL as they are already operating at industry leading margins (even higher than PI Ind). It also brings in a risk of margin contraction at some point of time.
My experience in the past has been that market rewards delta in earnings more than absolute nos. All this being said, IPL has been doing very well and I have been having this internal debate of what to sell to buy IPL.
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