Chins’ Portfolio

Updates on current portfolio and positioning for FY24.

• Have held Ugro for two years now. Stock has underperformed expectations and has remained cheap over the last two years, but I’m very happy with the underlying business. We’re now at the year where the scale in co-lending should reflect in the bottom line. Expecting 200 Cr. of PBT in FY24.

• MFI sector looks to be set for a good cycle. Fusion and Spandana are both available at less than 1.5x FY24 book, and can both do 4%+ RoAs if the cycle remains strong.

• I’ve used the time since the last update to scale my position in companies trading at 12-15x trailing earnings that can show good growth in FY24. GLS, Transpek, Caplin, Ultramarine, Sharda Cropchem, and many more fall into this category.

• Following on from this post, I have a basket of companies in the dyes and pigments space between Sudarshan, Ultramarine, and parts of Valiant’s business. I’ll scale both Sudarshan and Ultramarine post Q4 should the outlook turn more favourable.

• I have the highest confidence in Caplin Point’s IRRs at this price. It’s trading extremely cheap, with no impairment of earnings. There are additional optionalities with a loss making subsidiary turning profitable, strong product launches, and capex triggers towards the end of FY24. For this reason, I have scaled Caplin to 8% of my portfolio. My exit model is at 20x earnings, and 500 Cr. of PAT, around 1200 per share.

• Coastal Corp has overpromised and under-delivered in the last year. There are three parts to the thesis: 1) client wins in Japan / South Korea that should drive growth in shrimp independently from what’s happening with Ecuador; 2) management claims Ecuador’s preferred market is China, and that inventory for shrimp should clear up in the US this summer, 3) their Ethanol plant could be the cheapest in the country and a very high RoE investment. Shrimp outlook in general is horrible and Q4 should be very painful.

• Maithan and Shyam are trading very cheap at the moment. Shyam has near term earnings triggers with a lot of volumes coming onstream soon. Maithan has not traded at these valuations for a long time, and often doesn’t remain below book value for long.

• KPI Green has time corrected since the last time I invested in it, higher up in the thread. Sitting on around 15% returns on it right now. Will probably sell if there’s a rally post earnings.

• Have started building a position in the textiles space. I currently have a preference for US facing textiles and domestic. The UK / EU should continue to see a cost of living crisis, and PDS may see FY24 to be challenging. Will do more scuttlebutt and invest when things make sense. My plan is to increase allocations to both GokEx and Rupa with time, and maybe also buy Lux.

• Recently met the MD of Ador Multiproducts to evaluate it as a turnaround candidate. Will make a company thread on VP soon.

Exits from the last update:

• Sold IMFA at around 320 per share, making around 22% on my investment.

• Sold Sandur Manganese at 1280 per share, making 38% on the trade.

• Sold Shivalik Bimetals at 510 per share, making 82% on the investment.

• Sold Kriti Industries at 107 per share, making around 26%.

I have a lot of ideas that I’d like to scale, but happy with my holdings right now and have no cash. Have brought down the valuations of the portfolio by buying more companies that are in the 12-15x earnings range, and in fresh sectors that have been seeing headwinds, like textiles.

There have been so many opportunities at these valuations that I’ve preferred to take multiple 2% positions, and only scale to 4% or more where I have more confidence that growth will sustain.

Portfolio is up around 11-12% since January.

Welcome any and all comments.