Atirek portfolio

Entry and Exit in ICIL
In last month, added ICIL and even sold it.

The reason why I added ICIL was that it was a market leader in home textiles with growth when compared to Welspun.

Textiles are gaining market share from China and Bangladesh.
Cotton prices are dropping so there would be margin expansion.

I bought it before the result and sold it before the quarterly result.
I bought it near to 360 and sold it at nearly 380.
I made it 3 percent of the portfolio as it was a cyclical industry instead of the usual minimum 4-5% allocation.

The reason behind selling as it went to 450 and came back to nearly 380 and I could not find the below reasons.

• I could not explain to myself why India is gaining market share from Bangladesh and China.
• I could not explain to myself the triggers behind the management guidance.

Entry in Sandhar Technologies Limited
Industry structure –

• There has been an upturn in 2W and passenger vehicles which is quite evident now. Especially TVS and Bajaj are growing better than the competitors. Currently 30% revenue contribution from TVS and 19% from Hero as per Q3FY24 for Sandhar.
• More job creation due to budget, 2 wheeler and 4 wheeler sales increasing again.
• Good monsoon this year
• Increasing profits as capex will slow down and new plants will mature.
• Market leader in locks and mirrors
• Sandhar’s business outperforms their client’s revenue growth. In downcycles, their degrowth is not as bad as their clients. (Link → Sandhar Technologies – An emerging market leader).
• 300 Cr Operating cash flow when compared to 3800 Cr valuation
• Increasing ROCE from 8% to now 12%
• Management tries to attain the asset turnover ratio of 3 and it takes 2-3 years normally to attain it.(Q4FY24)
  PE expansion

Not possible

Operating leverage

Yes as capex will slow down and new plants will mature. Already playing out.

Increasing revenue

Due to the shift from manual to smart locks.

Large scale launch for smart locks in october in honda and suziki

PV and 2W growth and this company is EV agnostic.

Triggers

New smart locks(Min 5x revenue when compared to manual locks) – Near to mid term

Operating leverage – Near term

2W and PV growth – Near-term

Deleveraging increase in profits as hinted by management(Least priority for management for now) – Long-term

Negatives

• New smart lock adoption fails

• Check for Hero and TVS sales degrowth

• Low margin(near to 10%) means dependent upon the customer

• Maybe have paid a little higher.

Moat

Make plants near clients and hence if new player needs to come, they needs to invest substantially to setup plant nearby
Patent in smart locks(Need to understand completely)
Market leader in locks

Optionatility

Entry in EV space.

Notes
Max the margin can expand to 12.5%(https://www.youtube.com/watch?v=LTSwUsNFr1Y)