Usha Martin- Coming out of Chaos

I think you need to answer a few questions related to Usha Martin business before asking these numerical questions. ( and here too, if stock price worked on excel sheet or mathemtical calculations, all the statisticians and mahematicians in the world would be the billionaires. )

1. What were different segments of business in 2020?

2. What are the sales figures for the last few years? Which are the segments contributing to these numbers?

3. How have the margins panned out over the period in question?

4. How has the balance sheet and return ratios evolved over the period in question?

5. How is the consistency and predictability of the business now as compared to earlier. ? ( for that one needs to listen to concall and get a sense of the business. )

Usha Martin is a textbook case to understand an evolving multibagger when it was first put up by @Anant in this forum. You should first make an attempt to go through the threads ( we have two of them, one is Colloborators corner and the other one is older one)

Earlier Usha Martin was a company which had not gone anywhere with two warring cousins trying to get control of the company and wanting to run company in their own thought out way.

First real piece of good fortune/smart decision was sale of commodity steel business to Tata Steel. Secondly this was followed up by cleaning up of debt using the above sale proceeds. Third was focus and capex into the higher margin and much more predictable and steady wire ropes business, where company was in a dominant position and had global ambitions. Fourth was more transparency from management, with presentations and concalls, so that investors got an idea about the business and management intent and integrity.

If this transformation was to be summarised in a few words, it was a transformation of a largely commodity type of business into a more predictable business with global scale. Improvement in quality of earnings is a big trigger. This is a recipe for multibaggers and this kind of model can be used in future also to uncover potential winners. One needs to have an open mind to see and accept the changes without getting caught up in numbers.

Beauty lies in the eyes of the beholder. Same thing applies to valuations. Something that appears expensive might appear to be reasonable for others and that is the only reason why there is a buyer for a seller most of the times.