You are majorly paying for:
- A management that is known for keeping their promises. Mr. Anil Gupta gives very measured responses in all the interviews.
- The infra push happening in India. I am also including power reforms. Till the company has growth visibility, people would be wiling to pay up for the stock. The company is also expanding their current capacity which is indicative of the future growth prospects.
- If my information is correct, KEI is the only player or one of the two, which is providing EHV cable(s) having capacity of upto 440 KV. Many players are providing cables of upto 220 KV capacity, but not 440 KV. Smart cities require these type of cables for provisioning of electricity. This is also an export contributor.
As far as exit criteria is concerned, I have not came across any mathematical framework that would provide a timely exit. Classic example would be that of Asian Paints which has always commanded premium inspite of sluggish growth in the recent years.
The only exit criteria that I consider as a reasonably well contoured is stage analysis and thus, be on the look out for movement from stage 2 to 3, implemented via a trailing stop loss adjusted on a weekly basis. Basis for exit criteria is the real life experience of fundamentals always trailing technicals. Experienced this phenomenon in Gujarat Fluorochemicals, Alkyl Amines and IEX.
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