Ambika Cotton Mills

Disclosure: Not invested

https://www.screener.in/company/AMBIKCO/#chart

@Jose ,

Thank you for clarifying the data and analyzing the Inventory/Finished goods ratio.

The company demonstrates a comprehensive understanding of the cotton/finished goods cycle and the temporal parameters governing its operations. This comprehension facilitates heightened profitability during periods of elevated cotton prices, leading to an augmented operating profit margin (OPM) and an appreciable surge in the market share price. Conversely, a decline in OPM during the low cotton price phase of the cycle results in a market derating.

It is evident that the informed retail shareholder should align their investment strategy with the same cyclical pattern, adopting a time horizon spanning 3 to 4 years. Drawing parallels to financial instruments, the company, based on historical performance, can be likened to a 2-year fixed deposit.

Capturing that exact low and selling at that exact high may be possible for the raw cotton price enthusiast :).

Before finalizing our algorithms, it is noteworthy, as per @Jose ‘s discerning observation, that the inventory/finished goods ratio is notably high. Additionally, @praveen_potnuru highlighted that a significant portion of exports is directed towards Bangladesh. The recent upheavals, such as violent protests, have adversely impacted the garment industry, attracting attention and likely affecting Ambika.

One could suppose that this problem is deeply embedded and had an impact on Ambika prior to the bursting of the boil. Pure speculation on my part.

Even so, these problems will eventually be solved, and Ambika should be back to its regularly scheduled cycle.

A more substantial concern that the Cotton/Finished Good ratio raises, albeit with a lower probability, is the prospect of Ambika facing heightened competition and a consequent erosion of customer loyalty. Such a scenario could exert considerable influence on the OPM, thereby diminishing returns for the retail shareholder.

thank you @Jose and @praveen_potnuru for the insight.