That is not true. The portfolio that I have shared here is giving around 18% CAGR. It is possible to obtain over 20% through long term investing. It is also possible to make money day trading, manually as well as algorithmically. You can read about those who have been doing this successfully in market wizards book series.

I believe that the difference lies in risk first approach. Most people trade focussed on gain. They become impatient and want to earn big money quick, and in doing so lose sight of the losses they will take if they are wrong. If they are lucky, they manage to avoid big loss for some time, but luck runs out eventually and they end up losing an amount they can’t afford to lose.

Q1 FY23

Few comments and TODO items based on Q1 results –

PTFE

PTFE capacity is roughly 1500 TPM (Value Added – 900 TPM and Regular 600 TPM). PTFE prices have gone up due to 900-950 rs due to various reasons. At 900rs, the monthly revenue potential comes to 135cr and annual revenue potential comes to 1620cr.
With 25% capacity addition by Q4 exit, capacity comes ~1900-2000 TPM and annual revenue potential goes to 2000cr.

SRF PTFE capacity, which is for regular grades, comes online by Oct’22. We need to track PTFE prices, especially in domestic market when that happens. Also management claims of developing various specialised grades for PTFE and hence some sort of competitive advantage will be put to test from FY24.

We also need to keep tracking PTFE prices in global market with export restrictions on HaloPolymer.
TODO – Look at market sales and realisation trends of HaloPolymer and also Dongyue in PTFE. We need to see if HaloPolymer does dumping in Indian market (although there is ADD on it).

Overall, PTFE will remain 2000cr +/- 200cr type of business for GFL from FY24. How much to analyze this segment other than sharp drop in PTFE prices is one’s own call.

New Age FP

New Age FP capacity was 700 TPM at the start of FY22 – out of which 250 TPM was micro powder PTFE. Micro powder PTFE should really be counted in PTFE itself but nonetheless, real new age FP capacity is 550 TPM.
This 700 TPM capacity has gone to 1100 TPM at the beginning of FY23 and will be 1500 TPM by the exit of FY23.

TODO – Try to find out how much is micro powder PTFE capacity out of new 800 TPM capacity that comes online, mostly all the new capacity is towards PVDF, FKM etc. but it would be good to go through EC etc. and ask management.

New Age FP have 50% more realisation than PTFE. So at 18$ average realization, revenue potential for FY24 comes to 1500 * 18$ * 78 * 12 = 2525cr. So ~ 2500cr of entire new segment is going to be created which is going to have higher margins.

TODO – Find out the new age FP capacity by FY24 exit (should be another 400-500 TPM).

Another thing in this segment is incoming forward and backward integration which can lead to margin expansion –

• PVDF binder is slightly more complex product than plain vanilla PVDF. Sales of PVDF binder have not started yet. PVDF sells at 18-20$ currently. I am hoping PVDF binder sells at at least 25$ and that is one lever for margin expansion (forward integration).
• Similar is the case for PVDF films which is also a sort of forward integration.
• Another thing is that company has already backward integrated till R-142B in PVDF/FKM chain. There is one more step of backward integration coming up with VDC – hopefully by FY23 exit.

TODO

• We need to map PVDF current capacities and expansion of few big players like – Arkema, Solvay, Dongyue etc. We need to map how much of this capacity is in Europe, China and Rest of the world. This will help us clearly get market formation in PVDF and potential early hints about PVDF pricing trends.

Overall, a very strong 2500cr segment with margins better than company average is coming in revenues. How much of this is factored in valuations is one’s individual call.

Battery Chemicals

In Q1 call, company stated ambition of creating another segment of battery chemicals (LiPF6, additives etc.) which will be of size 2000cr in medium term. Initial capacity would be 2000 TPM and initially sales will be to export markets and then towards domestic markets.

TODO – We need to find out realisation of LiPF6 and margins that other players make. We need to understand the chemistry chain and how much backward integration can GFL do. We need to have some estimate of ROCE in this segment. If globally some player has achieved some sort of competitive advantage (LG Chemicals ?), we need to understand the source of that competitive advantage.

Another item in TODO –
Find out capacity of R-142B and VDC and how much will be used captively and how much will be sold in open market. (I think in Q3/Q4 concall, this info was given – need to look up).

Disc – Invested and extremely biased. No transactions in last 30 days. Not a buy/sell reco.

FY 2021-22 Annual Report for Jamna Auto is lot more descriptive as compared to previous Annual Reports. Also, pleased to see very specific details around Lakshya 50XT:

Lakshya #1: 50% revenue from New Products by 2026: Actual is 37% till FY22

• Parabolic share in the overall spring market is increasing. There has been a steady increase over the last 6 to 7 years, but it has further accelerated with the introduction of BS6 vehicles.
• JAI has planned to increase parabolic capacity in the existing spring plants covering all the regions of the country. The new manufacturing lines at our Yamuna Nagar plant have already been commissioned, and parts are under production. Expansion in other plants will be completed by FY23.
• A new parabolic plant will be built in Adityapur, close to Jamshedpur OEMs. We expect the commercial production to commence by June 2024. This capacity enhancement will not only help us to secure a majority share of the OEM market, but will also increase our parabolic sales in the aftermarket.
• Mahindra & Mahindra Agriculture Implement Division has accorded us a contract to supply rotavator blades. The components are under development at Yamuna Nagar plant and supplies are expected to begin by January 2023
• The commissioning of a new factory under wholly owned subsidiary i.e. Jai Automotive Components Limited in Derabassi, Punjab to manufacture fabricated parts is in progress. The
  commercial production is expected to start by July 2023.
• The construction of a new factory in Indore to manufacture U bolts, Hanger Shackles, and Spring Pins has started. Commercial production is expected to begin by January 2024 expanding the product range and content per vehicle in the CV industry.
• The first phase of investment in machining set up in Uttarakhand has been completed, and production will begin by January 2023. This will increase our product range and content
  per vehicle in the CV industry.
• Launched new products in the After Market India such as clutches, bearings, and brake linings.

Lakshya #2: 50% Revenue from new Markets by FY26: Actual is 23% till FY’22

• This year we have got 23% of the revenue from aftermarket and exports.
• We continue to build a strong foundation in the aftermarket by selling directly to retail, establishing an efficient supply chain and widening our network to cover every nook and corner of India. Retail model will help us to eliminate inefficiencies in the whole value chain, which will help us to make products cheaper to the end customer.
• Allied products sales in after market has started to pick up. This year our allied products sale was 4% of the total after market sales.The brand is now fully recognized in the after market domain.
• This year, JAI has launched high consumption parts like clutches, bearings, and brake linings, which have huge potential in the aftermarket. We plan to sell this by leveraging our existing aftermarket network.
• We are opening “JAI Shoppe” in Transport Nagar’s major trucking centre to showcase and enhance our product branding to get closer to the fleet owners for direct selling. The pilot Shoppe in Delhi will be inaugurated by December 2022.
• We had our first success in increasing after-market export tonnage in the European region. e will continue to focus on after market exports.

Lakshya #3: 50% ROCE by FY26: Actual is 26%

• We have achieved 26% ROCE (33% Net of Bill Discounting) against target of 50% to be achieved by FY 26.

Lakshya #4: 50% Divident pay-out:

• total dividend payout of INR 1.50 per shares for FY 2021-22 and amounts to 42.5% of Profit after Tax.

Misc:

• “ICRA Limited (“ICRA”) has reviewed the credit rating of the Company and at present, the Company’s long term credit rating is [ICRA]AA- (pronounced ICRA double A minus) and short term rating as [ICRA] A1+ (pronounced ICRA A one plus). The credit rating assigned to Commercial Paper (CP) reaffirmed at [ICRA] A1+ (pronounced as ICRA A one plus).”
• Our strategic collaboration with Ramco Systems presents us with new digital competencies and thus digitises all of our after-market services, such as management reviews, data analysis, performance management, among others.
• Our certification from IATF 16949 (highest quality management system standards for the automotive sector) further attest to our quality centric approach
• CV market witnessed a broad-based recovery, recording 29% growth in FY 2021-22 compared to FY 2020-21.

Disc: Invested from lower levels. Transactions in last 60 days.

When I come across the business mode of Zomato (& Swiggy), I considered it as a type of business like e-commerce – Amazon & Flipkart. Ecommerce companies provide convenience (home delivery) & cost advantage (discount). Their growth may have been limited if they only offered convenience. Home delivery is cost-saving for consumers and they may have grown even if they have offered free or minimum home delivery charges. E.g. I used amazon to order my ccl coffee and girnar green tea. Am getting it at MRP (No discount) but am not charged for delivery hence am saving on transportation (girnar and ccl are not available at nearby Kirana). They have grown multifold as they created an ecosystem where they offered both convenience and cost advantage. Amazon and Flip did a great job.

On the other side, Z & S as a business model did a poor job. They may have offered a discount to consumers as a restaurant is saving by delivery vs Dine-in. The same discount is used to offset full or some delivery costs. Take an example of Restaurant A X km from home.
A. I can go there, order and take delivery which cost me say Rs. 50-100 of transportation & 30 mins of my time. May save time if I order them on phone and get delivery.
B. Restaurants provide delivery, which may cost them manpower and transportation.
C. Z delivers – As they use manpower efficiently it cost them lower than options 1 & 2 and they got the negotiation power to offer discounts to consumers or offset the delivery cost to consumers.

Hence naturally business model is beneficial to Z & S. But the same is not the case practically. I come across specialised paratha chain which offers their item at Rs. 200. In general 2 families of 8 needs 4 items; cost Rs. 800. The same item is offered by zomato at Rs. 300 (Price is fixed by Restaurant); hence it may cost Rs. 1200. Rs. 400 additional is no way most of us are happy to shed.

I will invest in Z if they offer me the same cost as the restaurant offering in Dine-in (no discount is okay). Will be happy to pay them reasonable delivery charges which may be equivalent to the actual cost of my transportation and after that, they are breakeven at a unit economic level.

Just a random note for my investment thesis.