Any idea why promoters sold their holdings in large quantities on June 24, since the future looks bright and they might be aware of pending orders?
Posts tagged Value Pickr
Indian Defense Sector (01-07-2024)
Hello, everyone in this thread seems to be bullish for this cycle of defense sector rally and as we have seen in past overly bullish approach in any sector leads to disasters.
I will try to present my thesis as to why I think the valuations at the moment are stretched and very little to no valuation comfort lies which is contributing to a dangerous euphoria.
Defense Sector Red Flags:
- Indian defense sector is in itself at a nascent stage.
- We come no where close to the defense RnD spend done by countries like US, Russia and China.
- Defense sector in India is highly concentrated and dependent on govt. funding no private players exist which can give competition to big names such as HAL, Mazgaon Doc.
- Sector requires high capex before any additional set of revenue can be turned into profits.
- Intensive RnD lead sector.
- Since dependence on govt spending is key sector demands high growth in GDP to defense expenditure YoY.
- Govt policies have a strong say in spending and procurement of defense equipments, a coalition govt in centre may not be able to continue with the old growth plans although in the current scenario this is unlikely. A strong opposition also might scrutinise the defense deals leading to delays.
We will be looking at listed companies which are directly involved in making of arms, ammunitions, armoured vehicles, aircrafts, ships, frigates, UAVs, night vision devices, missiles, launchers and avionics.
The prominent listed companies along with their p/e and p/bv are: (P): PSU;
- HAL (P) - 46 ; 12xBV
- Mazgaon Dock (P) - 44 ; 14xBV
- Cochin Shipyard (P) - 42 ; 12xBV
- Bharat Electronics (P) - 56 ; 14xBV
- Data Pattern - 93 ; 13xBV
- Paras Defence - 182 ; 13xBV
- Taneja Aerospace - 141 ; 13xBV
- Bharat Dynamics (P) - 96 ; 16xBV
- Krishna Defense - 153 ; 14xBV
- Zen Technologies - 26 ; 5xBV
- DCX Systems - 60 ; 4xBV
- Bharat Forge - 85 ; 11xBV
- Garden Reach Ship Builders - 73 ; 15xBV
On current valuations the
- Avg pe: 84 vs historic avg pe: 32.3
- Avg p/bv - 12xBV vs historic avg p/bv: 4.5xBV
Apart from these very basic valuation metrics the order book scenario of major defense companies are below, these numbers are usually thrown around on the internet to show potential upside in top and bottom line, while this might be true in a bull run investors are often
A lot of these companies especially companies working solely in defence manufacturing are dependent on each other for components and survive through orders given to them by a bigger vendor. This poses a serious problem because if a bigger vendor is late on its payment it will have a tinkering down effect on the smaller players. Mutual fund houses also have recently launched their defense funds which is signalling exuberance in the sector.
The problem with order book led stock rerating is that while a 94,000 cr order book look monstrous from a bird eye view it might not be as attractive when the execution is done over a period of 2-3 years. Order book concentration is also something to be cautious about since a few orders in the pipeline may boasts the majority of the revenue posing a longevity threat.
What is important here is to look if the companies are going to substantially increase their revenue YoY while maintaining their margins, equally important is their profitability. Since the street tends to pay for the actual EPS growth when the froth settles down it would be dangerous to bet on stocks which tend to over estimate their growth in the next 3-5 years time frame.
Assuming all of the order book is executed on time without any operational delay and assuming the payment from govt comes on time and more new orders are procured we seem to be over paying for a lot of what these stocks are worth for.
For eg: Paras defence order book is 600cr at a market cap of 5561cr the mcap/orderbook comes close to 9.
DIY Momentum QnA and Discussion (01-07-2024)
The price action Remains same, do a paper trade on all these time frame strategies note down your do and don’ts apply that in your real trade, atleast 90 trading session required for paper trade you will definitely find good results. SL as per your risk appetite.
I don’t use SL, some may that is fine, try that also in paper with and without SL.
Pragnesh’s portfolio (01-07-2024)
Sure.
Give me some time.
Thanks
Marksans Pharma- Can it be the next Pharma Biggie? (01-07-2024)
What could be the reason for such a decline in US generic prices? also apart from this tweet is there any paper or research report which he shared?
Although I’m still bullish on Marksans given the kind of growth they have done and are further expecting in FY25-26 in US/UK markets, however this news if true might create some overhang on the fundamentals for few quarters.
Sansera Engineering (01-07-2024)
Not invested currently, developing a view on it; growth in top-line is the biggest thing, so trying to develop a sense on it.
BSE (Bombay Stock Exchange)- Bet on Financialization? (01-07-2024)
Quick snap shot of BSE’s performance during the quarter(Q1 2025):
Derivatives:
The derivatives volume in general has been showing growth month over month during the current quarter - average daily premium turnover has moved steadily to above 8000 Crore during the month of June. The growth in premium turn over coupled with significant increase in price will lead to an exponential growth in revenue from this segment during the quarter. I expect the revenue from this segment to be at least 50% higher as compared to March quarter - the profit from the segment would be a positive surprise when the results are declared.
Star Mutual Fund: Robustness in growth continues with the total number of subscription and redemption orders showing a growth in excess of 25% and 40% respectively as compared to Q4 2024. Expect the segment revenue and profits to grow by at least 25% as compared to Q4 2024.
Cash Segment: The numbers seems to have slightly dipped as compared to Q4 2024. Expect the results to be slightly lower as compared to last quarter.
Currency and commodity markets are not showing any sign of improvement.
Overall, the results are expected to be blockbuster for Q1 2025. Looking forward to managements commentary on the new single stock futures product that is being introduced from July 1st.
AJ
Disclosure: Remain invested in BSE.
Nuvama Wealth Management: Proxy to Affluent India (01-07-2024)
Hey! Great questions let me try answering them
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One major component is Loan advances. around 1300 crores is in loan advances. Remove that and it’s already positive. Secondly, If I am not wrong, You need to park cash as requirements in different segments of business. This goes under wc items. I would say compare this with 360 ONE WAM as these are the most similar. Also in the earning calls, you can notice analysts and promoters discussing dividend policy because they generate a lot of cash. Its not a point of worry(according to me)
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Dividend policy is set to come by next quarter. they have mentioned that in their earnings call. However, the thing is Nuvama is investing and guiding for the Highest growth of all. they are aiming to double RMs in 3-5 years and AMC 5x in 4-5 years( low base so easy to do this but good growth rates) So honestly I would rather prefer cashing going into these growth engines rather than dividends.Personal opinion though so it won’t change anything and dividend policy will be announced soon.
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NIMs is 5-5.2% in general but was 4.7% in Q4. Most of the loans are to existing clients and it is given on the collateral of the assets that their clients have under AUM of Nuvama so its 100% protected.
They haven’t commented on the gearing ratio, however 360 ONE said they are fine till 4x. That could give a potential idea -
Two answers to this. First, Nuvama aims to be a one stop solution so a client need not go anywhere. A promoters lists it business via Nuvama’s IB and then gives the proceeds as an HNI or UHNI for wealth management. When cash is needed, they use these assets against collateral and get that. Holistically, it’s a good model. even they mentioned they dont chase growth or anything but its an added service as a full circle kind of a thing
However, AMC and wealth management are the high ROE ones and the least cyclical of all. so they are aiming to focus on that and if you observe their share of profit has continuously increase and will continue doing so! their growth rates far exceed other segments
hope this helps, if you have doubts or if I got something wrong, let me know and I will try delving deeper.
Moreover, I am working on an article covering the wealth management space so I will cover these ideas in detail.
I will share the article here later for business analysis