Just putting down few random thoughts:
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This isn’t the 1st time that Kitex’s H1 revenues are flat or less as compared to previous FY’s H1 earnings.
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Not the 1st time that Kitex’s Q2 earnings are less than Q1 earnings. Last year too similar apprehensions were there on topline growth but mgmt. had said that they wud deliver in H2 or by last Qtr. (which I believe they did).
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This year too mgmt. has come on record to say that this has always been the pattern that Q1 is not great and H2 is always better with best earnings normally being reported in Q4.
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Mgmt. maybe ambitious in their targets and guidance, but at the same time we do have their previous performance which speaks for itself. They have created state of the art manufacturing unit over the years with good labour conditions etc.,. which is there to see.
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Previously there were apprehensions about when would new clients be added, when would the US brand be announced etc.,. That eventually did come.
Few other points:
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Earnings can’t always be linear.
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We should give good mgmt. time to perform and time to nurture their business. We should allow an investment thesis to play out over a period of time.
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If we have a decent mgmt. in a good business that has performed well and has good future potential
then we should give benefit of doubt in terms of delivery i.e. if what the mgmt. says will be delivered in 1 year is delivered in 2 years then still we should persevere as long as we believe that delivery will come [even if with a lag (not saying that this wait should be infinite
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I think it is also not a bad idea to sometimes discount mgmt’s. plans in terms of time it will take for delivery of the same. Helps keep expectations (sometimes unrealistic expectations) in check.
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Would we be have been asking same questions if stock price had reacted positively to same set of results/numbers? Maybe not
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Why we might not have raised apprehensions if stock price would have moved up on same results? Maybe coz we like excitement as humans or as humans we always want something to keep happening, and we get that excitement or satisfaction from stock price moving up.
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Why do we start asking questions or raising doubts when stock price moved down on same result/numbers? Again maybe coz we as humans always want some action. When we don’t get that action in stock price, then we start finding that action or sense of excitement by trying to find reasons into
why this happened? We try to satisfy ourselves and convince ourselves by trying to justify the so called reasons that we find. -
2 years back we may have been happy with this same set of numbers. But we may not be satisfied today coz we have seen a rally in the markets in last 2 years. It becomes more difficult to accept status-quo or inaction when things around us are moving so fast.
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If price action from 830 odd to 750 odd makes us think that there is something wrong in the stock, then maybe we should be putting our money to work at some other place and not stock markets. By this logic there might really be something great that might be happening in the company as we have seen price rising from 58 to 750 in last 2 yrs
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In bull mkts. we start expecting the businesses also start performing in a fast forward mode (which doesn’t happen overnight, it takes time), which is not fair.
Above are just my thoughts (not sure if they make sense as I am not good at expressing/explaining my thoughts n the best possible way) with all due respect to other people’s views.
Discl: Invested and maybe biased.
Regards.
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