Hi, I just came across this thread. Please add me as well for any future connect. I live in Germany.
Posts tagged Value Pickr
Rainbow Children’s Medicare – Niche player in Hospital Industry (22-10-2023)
(post deleted by author)
Lt foods (daawat) (22-10-2023)
L t foods update(from credit rating 2023 and one research report)
1…Performance 2022-2023
27% revenue growth
36% net profit growth
2…FUTURE FROWTH
…Segment wise Growth
a…Robust growth in basmati rice segment (+30%YoY, contributes ~83% of total revenue), supported by both volume and price growth.
b…Organic foods segment (~9% of total revenue) grew by 25%YoY and
c…Convenience & Health segment (~2.1% of total revenue) grew by 3% YoY.
A…Branding and distribution network
=LTF’s consistent efforts on strengthening the brands, widening distribution, and region
& product diversification through organic & inorganic routes have been the strategy for growth.
=LTF targets a 5Yr revenue CAGR of 10-12%, aided by continuous focus on
a…Expanding its product portfolio,
b…making investments in branding
c…and strengthening its distribution network.
=Retail outlets have increased by 9%YoY to 1.77 lakhs, which will strongly support future growth.
B…Organic food segment
= Organic business is continuing on the path of strong growth and registered a CAGR of 18% over last 4 years. Further, growth in organic business should lead to higher consolidated revenue over medium term and remains key monitorable factor.
C…LTF has recently acquired Golden Star Trading Inc. to strengthen market share in US (Jasmine rice segment, the brand has ~10% share in US
market)
D… The strategic transaction with SALIC (PIF, Saudi SovereignFund) currently holds ~9.2% stake in LT Foods (Rs.455.5cr) is expected to provide future growth plans in the MEA and Saudi Arabia regions.
E…Capex
=LTF is doing a capex of
Rs.140cr/Rs.120cr in FY24/FY25 in power generation, warehouse, and the capacity enhancement (by ~1 lakh tons)
F…Improving financial risk profile:
=LT’s group dependency on debt levels has reduced y-o-y. Group’s 80-85% of debt primarily comprises of short-term debt (working capital borrowings) required for stocking-up of paddy and seasonality in nature of business.
Disc…invested
Globus Spirits (22-10-2023)
the company seems good and well diversified avenues, they are also trying to pivot to IMFL brands. The key concern is dependence on FCI Rice (and open market in absence of that). As soon as Rice ban occured, it destabilized their margins. I was holding it, sold upon FCI Rice ban news, as I reckon it will continue for until next summer.
Paushak Ltd. – Alembic’s agrochemical business (22-10-2023)
Holding Alembic limited since long.
For the last 6 years, Vedanta Resources has been repaying its loans by taking more loans. It can’t do that anymore, so it wants to demerge. A fun read (22-10-2023)
If you’re a billionaire who owns multiple companies, one of the reasons for you to have multiple companies and not just one is to insulate your companies from each other. That way, one of your companies can do risky stuff, take loans, etc. while your other companies can do their own not-so-risky businesses. Forming multiple companies mitigates the risk of the entire ship sinking if one company blows up.
But what if you’re not the risk mitigating personality? What if you don’t care and you just prefer dumping all your businesses into one company? Sure, this is risky. But hey, you own the company! As long as you’re careful, the risks don’t matter.
But they matter to your investors! Usually—and this is definitely not a rule set in stone—public market investors like companies that operate in similar lines of business. If you’re a cigarette company but also export vegetables on the side, it can get a bit confusing for your investors. If they can’t invest in your addictive chemicals business without also investing in your organic vegetables, they might prefer not investing at all.
If you split your company into two, you’re going to get that investor who wants to invest in your cigarettes and you’re going to get the investor who wants to invest in your vegetables. The result is that if a company splits into multiple companies with separate lines of business, the total market value of the new, smaller companies can be more than that of the one big company which existed earlier. [1]
All this said, here’s Vedanta Ltd:
The board of Vedanta Ltd. approved a plan to separate the business into six listed companies: aluminum, oil and gas, power, steel and ferrous, base metals and Vedanta Ltd., the company said in a statement Friday. For every share of Vedanta Ltd., investors will receive one share of each of the five new companies.
Anil Agarwal is the billionaire owner of Vedanta Ltd. Until recently, he liked having all his business inside one company. Last month, he decided that maybe it was better if he split his company into six.
This might have something to do with it:
A heavy debt load at the holding company has increased the urgency to simplify the structure. Vedanta Resources Ltd., the parent of Vedanta Ltd., has $2 billion of bond repayments due in 2024 and another $1.2 billion in 2025.
Anil Agarwal owns his stake in Vedanta Ltd via Vedanta Resources, another company which is registered in the UK. And Vedanta Resources is in a lot of debt! It has to repay $3.2 billion by 2025 and that’s not even all of it.
Bonds bonds bonds
If you buy a company’s stock, you probably think that the company has a sound business model, its management is making wise business decisions, the market for its services is large enough, stuff like that. But if you buy a company’s bonds your calculations are different. I wrote last year:
If you’re a lender to a company, you don’t really care where the money that’s repaid to you comes from as long as you’re paid back. If you buy a company bond, you don’t have to bet that the company will succeed; only that the company survives long enough to pay you back. The money might come from the company’s business (it isn’t), from the owner’s personal fortune, or hell, even from the most recent lender.
Lenders—or, in this case, bond investors—just want to get paid! Here are some of the bonds issued by Vedanta Resources:
- In 2020, $1 billion with an interest rate of 13.875%. The purpose of this bond issue was to repay earlier bonds that were maturing in 2021.
- In 2019, $400 million at 8% and $600 million at 9.25% to repay bonds that were maturing the same year.
- In 2017, $1 billion at 6.125% to buy back some of the bonds maturing in 2019 and 2021.
You see what’s happening? Vedanta Resources has been borrowing a billion dollars every couple of years for the last 6 years to repay the bonds it had issued earlier. And every new bond issue is riskier than the last, [2] so Vedanta Resources has to pay more interest on the new bonds.
Interest rates were famously down in 2020. Everything was being funded practically for free. And yet, Vedanta Resources issued bonds with a nearly 14% interest rate. [3] This wasn’t a choice—no one wanted to lend to them for any less. Interest rates are up now so I can’t imagine what the lenders would want now.
Size of the pie
One way for a company to get debt is to issue bonds. We just saw how Vedanta Resources particularly enjoyed issuing bonds. Another way for a company to get debt is to borrow against its assets. Just around the time Vedanta Resources issued those expensive 14% interest rate bonds in 2020, it also started borrowing against its stake in Vedanta Ltd. Today its entire stake in Vedanta Ltd is pledged for loans.
Vedanta Resources can’t sell its shares in Vedanta Ltd to repay its debt because they’re all pledged. It can’t issue any more bonds because the interest would be unaffordable. It also can’t borrow any more against the shares, because hey they’re already all collateral.
But the hope is that the demerger goes through and investors prefer buying six smaller companies versus one company. If that happens, the size of the pie goes up and Vedanta Resources may be able to sell some shares. Or borrow even more, for that matter. It’s a lot of hoping but entrepreneurs are usually optimists. Anil Agarwal certainly seems to be.
Footnotes
[1] I want to emphasise again that this is not a rule! It might turn out that no one really wanted to invest in your vegetables in the first place and were only in it for the cigarettes, in which case your standalone vegetable company won’t be worth a lot. But it’s a generally accepted idea that splitting a company increases the combined market value.
[2] Every time Vedanta Resources new bonds solely to repay the older bonds, in some ways, it failed to repay the money it owed earlier. So the risk of default for the newer bonds goes up.
[3] Interest rates in the US in 2020 were nearly 0%! So Vedanta was paying 13.9% over that. Today the interest rates are around 5%. Would Vedanta pay 18% as interest on a billion dollars?
Pragnesh’s portfolio (22-10-2023)
Paushak -Moats
1…Backward integration
=Paushak’s strong operating efficiency is aided by its backward integrated operations, which have led to strong operating margins (37.1% in fiscal 2021 and 31.2% in fiscal 2020). Return on capital employed (RoCE) was healthy at 18.7% in fiscal 2021.
=While most of the specialty chemicals industry depends heavily on import for their raw material supplies, the company has a low import bill
2…Strong .Barriers to Entry
=Highly explosive
= further heightened due to stringent government regulation and arduous process in getting licenses (for new entrants and for existing capacity expansions). On an average, any approval takes between 4-5 years.
3…Low-Cost Producer
(however, it is yet to establish itself as ‘the’ Lowest Cost Producer)
Due to .Economies of Scale
4…Large fish in small pond
=The key market of Paushak is the phosgene-based specialty derivatives catering to the Pharmaceutical and Agrochemical industries. These markets contribute to roughly 10% of the entire Phosgene market. Hence, the market may be too small and too specialized (due to high quality requirements) for the larger players to enter. This could be one of the reasons why Paushak has been facing competition from limited players (primarily from China).
5…Technology
=Paushak has also accelerated its efforts to improve the technology while enhancing capabilities and capacities to emerge
as “Technology driven global Specialty Chemical Company”.
=Paushak has been able to develop indigenous technology
for its one of the key product portfolio and would be expanding the capacity to a much larger size with “Make in India”
approach. It will not only result in import substitution in India but will also help Paushak to become a global supplier
while ensuring cost competitiveness
Pragnesh’s portfolio (22-10-2023)
1…I bought paushak @25 PE
2…It is already 2 times for me(previously 3 times😀)
3…Very strong moat(huge entry barrier)
4…Big fish in small pond
(Only Atul and paushak for phosgene)
5…At present all chemical companies have worst result. Even such bad time paushak has 25% opm
6…As per me, it is best buy, at this time
I will share moats of paushak…
Kajaria Ceramics Ltd (22-10-2023)
Kajaria Ceramics Ltd –Q2FY24 –Earning Call Highlights –20th Oct23 :
Financials :
–Revenue : 1122Cr –Growth of 4% YnY
EBITDA : 179.71Cr–Growth of 39% YnY
EBITDA Margin : 16.02% —growth of 400bps on 12.01% YnY
PAT : 107.96 Cr –growth of 55% YnY
Volumes : 26.47 MSM —Growth of 6% YnY over 24.91 MSM in Q2FY23
Sanitaryware / Faucets : 85.29Cr –Growth of 14.5% YnY
Plywood : 23.47Cr —Growth of 21% YnY
Adhesives : 13.03Cr –Growth of 38.2% YnY
WC days decreased to 53 days from 62 days QnQ
–While H1FY24 witnessed weaker than anticipated demand, gradual pick-up in volumes since September and expected improvement in demand environment emanating from rub-off of strong growth in real estate sector is expected to drive better volume growth in H2FY24
–The recent commissioning of the Sikandrabad and Gailpur modernization/expansion projects augurs well for our future growth.
–India is become a production hub for exports –being the lowest cost producer in the world. India exports increased to 16k Cr in FY23 –which is likely to reach 20/21k Cr in FY24. Indian exports a/c for 15% of world’s total exports
—If the current rate of growth continues , INDIA will become largest exporter in the world for Tiles by FY25
–Revised guidance : Looking at Q3 better than Q2 and Q4 will be better than Q3 –so things are improving . Margin guidance is 14 to 16% but it will be at upper end of this band with 6% growth in Volumes in Q2 and 7% Volume growth in Q1 & if we are able to achieve 16% , going forward it should be slightly better
–Fuel pricing outlook : Q2 was 38 INR & going forward it will be more or less same +/- Rs 1.00 as brent has slightly increased so it would be in this band & since we are using Bio-fuel so it wont go beyond that
—Regional breakdown for Fuel : Gas is 40 INR in North , 38 INR in south , West is 33 INR and avg. is about 38 INR for Q2FY24
–Saving of power & fuel was expected to be 150Cr for full year , how much was it in H1 ? – it was slightly better than 75Cr & some of it was passed on to the trade so it would be 80/85Cr Approx
–Capex : This year we will spend 370Cr in FY24 and going forward it would be 200/250Cr for the next 3 yrs. 50Cr in Gailpur Modernisation & Sikandrabad was 100Cr+ , Nepal project is 91Cr , Kerrovit global is 80Cr & Corporate office is around 50Cr & 26Cr is capex maintenance —total of 370Cr in this FY24
–Export : H1 exports from India is about 10kCr +
–Pricing action in Tiles ? —No change
–Demand : Real estate is good for the last 2 yrs , earlier they sold own inventory , 2nd year the construction started , our demand has started coming now with Sep’23 better than last 5 months and things looking positive . First they sell cement & other bldg material product for making the bldg like cables etc & now the time has come for finishing end where tiles / sanitaryware / plywood / paints –all these segments have started moving & Now we are seeing demand coming back in the real estate sector for our segment.
–Volume Growth : Q1 was 7% , in Q2 we did 6% and with the mkt looking up it will be better than first 2 Qts and Q4 will be better than 3rd –so avg. will be close to 9/10%
—We gave a guidance of 13/15% in Volume terms growth in May’23 & now what is happening in the industry we see a tough mkt and whatever is the on-ground situation , we have revised accordingly. Cables and wires are used in the time of construction , post that tiles / sanitaryware / paints / plywood etc starts moving
–Employee cost spike ? —We have taken increment provision in this Q2 & next Qtr will be slightly higher than Q2 .
Ad Spend : We spent 108Cr last year & tgt is to 130/140Cr by FY24
—Where is the demand getting generated from ? — First 6 months the volume growth was 6/7% and next 6 months it will be better than 6/7% & growth is coming from everywhere in good proportion , mainly from Tier2/Tier3 cities where new houses are being built & more for renovation so greater demand from smaller towns
—Increasing our Footprint in International mkt with JVs in Dubai & UK mkts , what is the export sales outlook ? —Overall we are strong in domestic mkt & exports will always be a small % of our overall sales & by opening a showroom in Dubai & London –we are trying to see how we can get some share of export mkt & increase them
—Revenue Split or Dealer Split between Tier 1 & Tier2/Tier3 Towns ? —Currently for Revenues —Metros are 15/16% , Tier 1 is about 30% & Tier 2 is 30% & Tier 3 is the balance and Tier 4 is hardly any %. & Our expansion plan is Tier 2/3 where major construction is happening & partly into Tier 4. The current distribution is similar to Revenue mix
—Split of Revenues between Tiles / Bathware & Adhesives & their respective Margins ? —For last 6 months – Tiles is 90% , Bathware is 7% & Adhesives + Plywood is 2/3%. Respective Margins : Tiles is 16% EBITDA , Bath ware is 9% EBITDA , Plywood is -ve 2/3%
—Bathware & Sanitaryware combined demand outlook ? —For us it grew 16% in H1 & next 6 months will be much better than first 6 months so we are looking at blended growth of 20%+ for the entire year
So Tiles we are talking about 9/10% Volume growth and for Bathware / Sanitaryware we are looking at 20%+ growth
—Dealer No. for 30th Sep : Current strength is 1950 Dealers & we started with 1840 Dealers & these are all over India
—Other expenses are higher ? —Mainly due to Ad expenses & it will be similar to Q2
Exports mkt for Tiles from INDIA , what is driving this ? —Gas prices what we have now are also there internationally , Indian mfrers are paying similar to International prices . Last year in FY22 –Gas prices were 8X to 10X & India was 1.5X / 2X but right now more or less its same & India is competitive due to Morbi where we have more than 600 Mferers
& out of that 120 are focussing mainly on exports because we are a competitive producer as Country so that’s why exports are up and looking forward we will see this going up.
—Realisation for Subsidaries has gone up & outsourcing has gone down significantly , any reason ? —There is some error at our end where instead of subsidary it got added to outsourcing part so now we have corrected it and going forward whatever we have reported in Q2 will be the trend
–Gas cost as a % of topline and as a % of operating expenses , they have increased QnQ while your avg. cost was 38 INR & in Q1 it was 39 INR so what is the reaons ? –It has gone up slightly due to some power cost increase in one unit in Rajasthan where there is some change in the JV .
The capacity utilization in Q2 is higher ( 95%+) than Q1 so that’s the reason Power cost has gone up Qtr on Qtr
—Volume growth in Sep’23 and for Oct first 15 days ? —Sep’23 was roughly about 9% & Oct it should be better
—Our JV has not taken any Shutdown in Morbi Last year when rest of them had taken shutdown in Q3 & this year also we have not taken / planned any shutdown
–Overall Ceramic World data , the Industry Volume had degrown by 9% in CY22 because of poor pricing ( 9/10X ) in certain parts of the world but everything has come back to maximum of 1.5X so the industry overall in the world should do better.
—In the last 6 months of the year the growth is always been better , this is the trend of last 5/10 yrs . Elections are always +ve trigger as there is more work in the system so basically its positive
—Pricing & discounting trend in Q2 ? —Slight gas prices have gone up by 5 INR from 24th Aug & 1st Sep’23 & in Morbi and nothing much will happen in Q3 gas pricing so we are not looking at any changes in future Qtrs as well
—Last year in Plywood the turnover was 77 Cr and this year its 100Cr + & as of now plan is to invest in this biz as the Plywood industry is 27500Cr in the country with Organised only 7k Cr & unorganised in 20500Cr & the trend is from unorganised to organised shift so its a big industry and we will gain some mkt share as we move forward
—Capacity Utilization : 98%
—Natural gas is linked to Brent crude & as Brent prices have gone up recently as high as 97$ . The prices of gas cost in North would have been much higher but fortunately since we are using Bio-fuel , we have been saved & current Avg. in Q2 was 38 INR & for Q3 it will be similar +1 INR max
—Morbi capacities : our info. Says that there are 25/30 plants are coming up in Morbi but mainly they will be for exports because its picking up in exports
PS : I may have missed 1 or 2 points due to Audio clarity issues, please refer to detailed transcripts as & when published
Rainbow Children’s Medicare – Niche player in Hospital Industry (22-10-2023)
Rainbow, HCG and Narayan- Adding all three for the longer term.