@visuarchie
Question – Is there a reason why you only look at the 250 Smallcap stocks and not the entire small cap universe?
a genuine multibagger which is a small-cap can be outside the index and will only come into the index after meeting certain criteria which can take long time to meet?

Buildup of Cash: 720 Crs in books!
400 Cr capex in last 3 yrs, without any incremental debt!
Promoter holding went up by 3% in this year!

Hi Manohar
Yes.
The management has always over promised and under delivered. And yes, It’s disappointing to see the management pushing the targets to next year.
My investment thesis:

1. Confirmed orders from Auto OE suppliers, which are of higher margin. The growth and margin growth may lead to operating leverage and my estimation is profit of 200 cr by Fy26 04 FY27.
2. Downside risk: The stock was traind at ~400 rs even in Mar 2023, when most of the stocks took a beating. This combined with anticipated profit growth (Point 1) made this co seem like a opportunity with limited downside risk at the time of purchase. My avg price is ~532 rs
3. Even at current price the stock is trading 20% below it’s market price, which is not too bad compared to the correction that others have seen. And I’ll cap the downside at ~400 which is the price is Mar 2023

The management commentary in Q3 FY24 indicatds the delay in execution of orders and delay in growth. With this my returns would be lower than what I earlier anticipated (2-3 years time frame).

While this is not the best outcome for me, I don’t think it’s a mistake. It’s just that I’ll make a decent CAGR (15-20%) returns while I earlier anticipated a 25-35% CAGR.

Please share your view on this co and what you think of my investment thesis.

And why have you udpating your Portfolio thread. Would be a reader if and when you resume it

Thank you

Praveen

Hi Praveen,

Thanks for sharing the update on your portfolio.

I just wanted to understand your thought process on Mayur. The promoters are promising and promising each quarter and not delivering. They come up with one or another problem. I can understand the businesses are uncertain. But from the response given during the earning calls by promoters, does not instill adequate confidence. Beside that now the freight rate challenges will show up on next quarterly numbers.

Do you feel investing in this business is a mistake?

Thanks
-Manohar

CAREER POINT Ltd

Computer Point Ltd. (CPL) is in the process of restructuring, wherein the education business will be demerged into a separate listed entity (CP Edutech Ltd.), leaving CPL with the NBFC business.

CPL offers diverse products & services across the entire spectrum, starting from Pre-school, right upto Engineering/ PHD courses. Apart from the Universities managed by them, it offers numerous distance learning courses. The Company has established a niche in test preparation and school curriculum tutoring through a nationwide network of branches. It runs an asset light model & is growing at a fast pace. Apart from a few owned centres, there are a number of franchisees & school association centres, currently a network of about 86 centres in 73 cities across 21 States & counting.

CPL is also running schools & universities in Kota, Jodhpur and Hamirpur. Education is a negative working capital business. Every time a student is enrolled, cash flows are received upfront, and are assured for the entire duration of the course which could run over a number of years. Setting up a university also has huge entry barriers as it requires a state legislature approval, entailing a huge amount of liaisoning, in addition to the capital investment.

The NBFC part of the business funds the institutions (schools/ colleges) & is entitled to interest income while the education business manages them for a mgt. fee. The entire operations are managed from internal resources (including the NBFC business) as the Co. is pretty much debt free.

It is pertinent to note that while some more illustrious names in the industry have been burning money, threatening their very survival, CPL has always been profitable, even during Covid times.

For the current year, CPL should do revenues of about 107 crs with profits of about 58 crs. The market cap is only about 457 crs so the investment is available at rather attractive valuations. Further, the Company is currently available below its book value, leaving enough margin of safety.

CPL announced a second interim dividend along with its Q3 numbers, something not done before. It could well be an effort at catching investor fancy/ interest for the stock & following on in the same vein, a decent final dividend could very much be on the cards. Besides, the Co. has invested enormous efforts & time at the ongoing de-merger exercise. A pre-curser to the value unlocking going forward?!

Disc: Invested.