Yash Portfolio Feedback

Portfolio Update: 2 new entrants. Also added a short-term trading bet (not discussed) which sucked up some portion of the cash.

1. Added Krsnaa Diagnostics: Credit to @Chins for this one. A lot of the deep work on Krsnaa has already been discussed in the VP thread. Not much more to add. Company is in the sweet intersection of sectoral tailwinds with states increasing budgetary allocations to Public Diagnostics Programs, a strong competitive positioning with limited competition, ability of Krsnaa to ‘exclude’ competition via technical bidding criteria, reaosnable economics leading to 20% ROE and attractive valuations. Investors have fair visibility today based on tenders already won by the company. Current price is not even discounting the existing won tenders let alone new tenders the company will win. Company comes with substantial risks, its similar to an EPC business with similar risks: political involvement, receivables, etc. Want to do more on the ground work before scaling up the position.

2. Added FDC: I view this as a 1-2 year Margin mean reversion play. Company has strong brands, namely Electral and Zifi. Margins have fallen quite dramatically in the last 2 years. This is mainly because prices are controlled and company cant take price hikes frequently. The price hike allowed last year was not sufficient to deal with the increased cost inflation. This year will see another double digit price hike; at the same time cost pressures are easing. This should see margins going back to 20%+. Company’s exports are also rebounding and scaling up well. Contrary to peers, the export business is extremely profitable because FDC also gets a share of the distribution profits. If the multiples rebound to ~3.5 P/S, that gives 35% re-rating return + 12-14% revenue compounding CAGR + 2% div/buyback yield. Quite attractive, especially if the re-rating can happen quickly.

3. Swapped some portion of Star Health for Religare. So far, I am behind on that trade. I am also behind on the Manappuram for Ujjivan trade; which is up 25% from my sell vs Ujjivan only being up 15%.

Still have some good opportunities. Would like to increase FDC and Krsnaa weights. Also some smallcaps have come to attractive levels: Coastal Corp, AMC stocks, Punjab Chems, diversified financials: Motilal, Edelweiss. At the moment, struggling to see where I can reduce weights in the existing portfolio; to re-allocate to other ideas.