Dharmaj had a very good FY24, with sales growing 24% and EPS by 34%. This was a year when most agchem cos had a very bad year. They are confident of 25%+ sales growth in FY25. Concall notes below

FY24Q4

• Targeting 900 cr. sales in FY25

• Technical division

  • Started with 7-8 products in phase 1, 5 synthetic pyrethroids (Cypermethrin, Alphamethrin, Lambda Cyhalothrin, Bifenthrin.) + 3 non-synthetic pyrethroids (Thiamethoxam, Chlorantraniliprole, Pymetrozine, Dimethomorph). Have achieved desired purity levels in May

  • In phase 2, will commercialize 3 new molecules in 2024

  • Average monthly production of 200 metric tons per month (30% utilization in FY25) – 275 cr. capex

  • Witnessing price increase in pyrethroids . Gharda is the largest manufacturer for synthetic pyrethroid and have shut plant for last 6-8 months as they are shifting plant from Dombivli to Sayakha which will become operational in 2 years

  • Started exports in April, achieved 27 cr. sales in April + May (sold 300 tons of synthetic pyrethroid)

  • Quarterly expenses: depreciation 3.7 cr, finance cost 1.1 cr. (this includes government subsidy), fixed overheads 9 cr.

  • Targeting 70 cr. annual overheads (33 cr. fixed + 37 cr. variable), 150 cr. sales and 15-20 cr. EBITDA loss

  • Will breakeven at 200-220 cr. (40% utilization to be achieved in FY26)

  • Will see 3-4% EBITDA margin improvement by FY27 (and 400-450 cr. external sales)

• B2C

  • Tapped 4 new states in South India (Odisha, Andhra Pradesh, Karnataka, Telangana) expanding to 24 states. Wont add new states in FY25

  • Rajasthan grew to 23 cr. (vs 13.5 cr. in FY23)

  • Gujarat sales was 80 cr.

  • 25% growth target in FY25

• B2B

  • 25% growth target in FY25

• Volume growth was 45-50% in FY24

• Targeting 800 cr. formulation sales in FY25

• Reduced payables to avail cash discount

• Formulation has 90 days credit period, technical division will have 120 days credit period

• Accounting changes

  • Cash and quantity discounts were earlier reported as other expenses and will now be netted directly from sales. (FY23 revenue has been restated by ~9 cr.)

  • Out of 275 cr. capex, 260 cr. was on physical assets with remaining being capitalization of interest, consulting fee, intangible items.

  • 6.25 cr. expenses in FY23, one-time professional and consulting fee for Sayakha project

Disclosure: Invested (position size here, no transactions in last-30 days)

The intent of the forum is to learn new things, it is also on us to unlearn preconceived misconceptions. Incorporating elements like stop-loss orders, stage analysis, and fundamentals (e.g., promoter holdings) into a momentum strategy can indeed provide additional layers of risk management and fine-tuning. However, it can also dilute the purity of a quantitative momentum strategy. Here’s a breakdown:

Stop-Loss Orders

• Pro: Protects capital by limiting losses during sudden price drops.
• Con: May lead to premature exits due to normal volatility, causing missed opportunities.

Stage Analysis

• Pro: Helps in identifying stocks in the early stages of an uptrend, enhancing the likelihood of catching strong momentum.
• Con: Adds a subjective element to the strategy, deviating from pure quantitative measures.

Fundamental Analysis (e.g., Promoter Holdings)

• Pro: Ensures that selected stocks have a solid backing and are less likely to be speculative, adding a layer of safety.
• Con: Shifts focus from purely price-based indicators to qualitative aspects, diluting the quantitative nature of the strategy.

Pure Quantitative Momentum Strategy

• Simplicity: Focuses purely on price movements and trends without additional subjective filters.
• Consistency: Follows a strict, rule-based approach, reducing the risk of emotional decision-making.

Balancing Both Approaches

While integrating these additional factors can potentially improve the robustness of a momentum strategy, it also moves it away from a purely quantitative approach. Each investor needs to find a balance that aligns with their risk tolerance, investment goals, and comfort level with subjectivity.

Conclusion

Adding stop-loss orders, stage analysis, and fundamental checks can enhance a momentum strategy by providing better risk management and selection refinement. However, it does dilute the pure quantitative nature of the strategy, making it more complex and potentially introducing biases. Each investor must decide based on their preferences and investment philosophy.

JB Chemicals –

Q4 and FY 24 concall and results highlights –

Q4 outcomes –

Revenues – 862 vs 762 cr, up 13 pc
Gross Margins @ 65.2 vs 63.9 pc
EBITDA – 198 vs 164 cr ( margins @ 23 vs 21 pc )
PAT – 126 vs 88 cr

FY 24 outcomes –

Revenues – 3484 vs 3149 cr, up 11 pc
Gross Margins @ 66.1 vs 62.9 pc ( big improvement )
EBITDA – 897 vs 696 cr ( margins @ 26 vs 22 pc )
PAT – 553 vs 410 cr

Gross Debt @ 357 cr vs 548 cr YoY
Cash on Books @ 464 cr. Company is now net debt free

Capex of FY 24 @ 135 cr – expansion of lozenges manufacturing facility @ Daman

Domestic Business – revenues @ 1897 cr, grew by 17 pc YoY. Company now ranks 22 in the IPM. Excluding the acquired Opthal portfolio ( from Novartis ), the company’s domestic business grew by 11 pc. Opthal portfolio clocked revenues of 16 cr + for Mar 24

Brand Wise sales ( top brands ) –

Cilacar & Variants – 600 cr +
Metrogyl and variants – 300 cr +
Rantac – 400 cr +
Nicardia – 170 cr +
Sporolac – 120 cr + ( last 3 yr CAGR @ 33 pc )
Azmarda – 70 cr +
MR productivity @ 7 vs 6.2 lakh / month YoY

International Business – Revenues @ 1587, grew by 5 pc. Formulation sales @ 1069 cr, CMO sales @ 432 cr, API sales @ 86 cr

Guiding for an EBITDA margin of 26-28 pc for FY 25 vs the earlier guidance of 25-27 pc

Guiding for a high teen growth in CMO business in H2 FY 25. Should do 10-12 pc growth in H1 in CMO business. Should commercialise their new – Immunity Boosting, Melatonin and Pain Killer lozenges in FY 25. This is a high entry barrier, long gestation period business

Company believes they can achieve high growth rates in the newly acquired Opthal Portfolio. These brands were previously under leveraged and under invested. Company has also taken the MR count in this division from 75 to 105

Company should be able to grow its topline in the high teens in FY 25

Company is still open to acquiring more brands to keep the growth momentum going

Aim to do 180-200 cr topline from the acquired Opthal business in FY 25

Company doesn’t face any Chinese competition wrt its Lozenges – CMO business

Disc: holding, biased, not SEBI registered

But ROE remain concerning, maybe causing lower valuation
can anyone explain

The fundamentals of a momentum strategy are:

1. Price Trends: Focus on stocks that have shown strong recent price movements, as they tend to continue performing well.
2. Relative Strength: Select stocks that outperform their peers.
3. Holding Period: Hold positions for short to medium terms, typically a few months.
4. Rebalancing: Regularly update the portfolio to include the strongest momentum stocks.
5. Risk Management: Use stop-loss orders, diversify, and control position sizes to manage risks.