Trying to join this conversation and to keep it as simple as possible. –
1. Ambika Cotton is a commodity provider.
2. There seems to be a global slowdown, specially in China and Europe, US also has tepid growth.
3. Domestic demand in india is slowing down..
4. Due to 1 above, Ambika Cotton would be a cyclical.
5. Due to 2,3 above Ambika Cotton would have a rise in inventories (about the same levels as in 2010 and 2011 is seen in the balance sheet). Last 4 quarters show flattening revenue growth and I would suspect declining revenues going forward.
6. Due to slowdown in Commodity and Consumer Demand, people might want to switch to cheaper alternatives.
Which means headwinds ahead, Sales Slowdown and therefore Earnings/CFO slow down. So this should have an impact on Ambika stock prices going forward. Inventories going up and flattening sales means lack of demand..supply side constraints don’t apply if demand is slow. One way to check this would be to find out who the clients of Ambika Cotton are and see their income statements for the last 10 quarters…
I know this is simple without elaborate calculations….but I am trying to understand whether this is worth my time before diving deeper. If I have made any mistakes here pls. point out and I will be grateful.
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