this was helpful Sahil. You inspire a lot more people than you think.
Posts tagged Value Pickr
Omkar’s Portfolio Analysis and Discussion (19-05-2024)
Warming Up to Vinati Organics - Planning to increase allocation to 4% from 2% at present
After Suprajit and Ajanta Pharma, first time I have a feeling that - I have got a candidate to concentrate albeit it’s too early. My typical allocation life cycle is 5-6 years for concentrated positions. Suprajit : 2014 - 2020, Ajanta 2016 - 2023. Vinati, I have started journey in Jan 24
Rationale behind increasing the allocation
1. Clarity emerged as one time gains withered away
From 2017 - 18, there were series of one time windfall gains clouding the true margin profile of the franchise. Lubrizol exit, change of business matrix in covid, chinese supply disruption, aggressive customer stocking - all these events boosted margin profiles in short term but it was not the true reflection of the long term strength of the franchise. In my view - FY 24 margins of 24-25% ( which are decadal low ) is a good starting point to model future trends. Margins can still go down further but I believe we are somewhere at the bottom
2. Journey towards diversification while maintaining the speciality franchise?
From 100% ATBS, IBB portfolio in 2008 - 09, company now has more diversified profile with ATBS/IBB contribution reduced to 55-60%. Company plans to introduce 2-3 new products every year. I do not have strong reasoning yet to decide - “are the new products diluting the speciality franchise or really making it granular?” Example - even after Anti Oxidant being doubly backward integrated to butyl phenol and IB, it is still not matching Chinese prices which can be confirmed from the management response in Q4 FY 24 confall that AO is the only product in the portfolio which is facing pricing pressure
3. Understanding the durability of ATBS/IBB product franchise
This point is also work in progress. Company has shown proven capabilities of scouting, absorbing and re-engineering the third party technologies. For me, proof of pudding still lies in ‘’time’’. If Vinati can defend its ATBS franchise over next 1-2 years when there is more competition is propping up, that itself will act as a good data point to ramp up allocation further
ValuePickr Bengaluru (19-05-2024)
Hello Bengaluru People,
I and a few like minded folks are interested in conducting a valuepickr meet up. Our thinking is to share stock ideas, business analysis and investing insights in general. Pls like the post or dm me if you are interested to attend.
Tentative meetup date: 26th May (Sunday)
Location: TBD (In Koramangala)
Venus Pipes- Pipes & Tubes (19-05-2024)
The company plans to nearly double its share of exports from 12% in FY24 to 20-25% in FY25. Exports is a 2-4% higher margin business as compared to domestic business. So you can definitely expect some growth in margins.
30%+ volume growth + margin expansion could help bottomline grow by at least 40%-50% in FY25.
Hindustan Unilever (HUL) (19-05-2024)
HUL and Asian Paints both giants in their category maybe at lowest valuations in a decade, but does it alone make a strong case for mean reversion??
In this age of digital marketing where new comers with limited budget can also become big in less time, do large FMCGs like HUL with low growth even deserve 50+ PE?
Comparing below the screener data for Honasa with HUL and Asian Paints with Indigo paints//
Agreed that some of these businesses might not make it big and profitable in the long run, but surely some of them will. and that should be enough to question what valuations should we really put to these large fmcg firms…
Hindustan Unilever (HUL) (19-05-2024)
HUL and Asian Paints both giants in their category maybe at lowest valuations in a decade, but does it alone make a strong case for mean reversion??
In this age of digital marketing where new comers with limited budget can also become big in less time, do large FMCGs like HUL with low growth even deserve 50+ PE?
Comparing below the screener data for Honasa with HUL and Asian Paints with Indigo paints//
Agreed that some of these businesses might not make it big and profitable in the long run, but surely some of them will. and that should be enough to question what valuations should we really put to these large fmcg firms…
Sanghvi Movers (19-05-2024)
thanks for the calculations which look very logical to me. How would you consider heavy cyclicity in Wind Energy in these calculations . There could be serious slow down after 5 years which has serious impact on Cash flows of the Company for many years with cranes lying idle. (the way it happened during 2018 to 2021).
Sanghvi Movers (19-05-2024)
thanks for the calculations which look very logical to me. How would you consider heavy cyclicity in Wind Energy in these calculations . There could be serious slow down after 5 years which has serious impact on Cash flows of the Company for many years with cranes lying idle. (the way it happened during 2018 to 2021).
Piccadily Agro Industries Ltd (19-05-2024)
In the interview , it was clearly said that malts are sold when it’s 2 to 3 years old to other breweries who produce blended whiskies . So the malt produced in the new capacity will not be fit for sell for at least 2 years . The problem here is we do not have a few important pieces of information…
- How much Indri is ready for sell if someone wants to buy it all today ?
- What percentage of their malt output is being used for their single malts ?
- How many casks of maturing single malt do they have ? All 40000 barrels ?
- How much is profit per case ? How much of the barrel content is lost during bottling ?
There is no end to these questions and while one can get rough estimates , how accurate they would be is anyone’s guess.
As I see it, they did not seem to be worried about satisfying market demand for next few years . One thing is clear…even if they continue selling at present rate …they would earn around 17 rs eps. Even if we give it 60 PE, the stock should be somewhere near 1k . Then with QIP, dilution, expansion and all those present unknowns, I am not getting into complex maths . In my case, I have monetized enough to let it give a long leash and ride it till I envision stagnation (nowhere in sight at the moment) .
@DrHarshilRohit It depends on the price at which they do it . Assuming 750 … they would need to issue 1.2 crore shares. So 1.2/9.4 = 12.7% approx. They have changed the authorised capital to 110 crores… or 11 crore shares . So that is the outer limit assuming lower floor price .
Disclosure : invested since sept 22 and still largest allocation in portfolio by present value.
Piccadily Agro Industries Ltd (19-05-2024)
In the interview , it was clearly said that malts are sold when it’s 2 to 3 years old to other breweries who produce blended whiskies . So the malt produced in the new capacity will not be fit for sell for at least 2 years . The problem here is we do not have a few important pieces of information…
- How much Indri is ready for sell if someone wants to buy it all today ?
- What percentage of their malt output is being used for their single malts ?
- How many casks of maturing single malt do they have ? All 40000 barrels ?
- How much is profit per case ? How much of the barrel content is lost during bottling ?
There is no end to these questions and while one can get rough estimates , how accurate they would be is anyone’s guess.
As I see it, they did not seem to be worried about satisfying market demand for next few years . One thing is clear…even if they continue selling at present rate …they would earn around 17 rs eps. Even if we give it 60 PE, the stock should be somewhere near 1k . Then with QIP, dilution, expansion and all those present unknowns, I am not getting into complex maths . In my case, I have monetized enough to let it give a long leash and ride it till I envision stagnation (nowhere in sight at the moment) .
@DrHarshilRohit It depends on the price at which they do it . Assuming 750 … they would need to issue 1.2 crore shares. So 1.2/9.4 = 12.7% approx. They have changed the authorised capital to 110 crores… or 11 crore shares . So that is the outer limit assuming lower floor price .
Disclosure : invested since sept 22 and still largest allocation in portfolio by present value.