Thanks for the Suggestion. As of now, Added HCL & TECHM as Tracking Position Only. Will study HCL/TECHM/LTTS/ELXSI further before adding it.

For me, Valuation is the foremost parameter. If a company fails this parameter, then no matter how great it is fundamentally, I will not look at it. Just cannot accept the avoidable risk of multiple contraction plus low valuations would give margin of safety against unforeseen future circumstances.

I have Two Category of valuations depending on the type of business.

1. For non-moated businesses (average businesses) – BUY when price is at-least 25-30% Discount to Intrinsic Value calculated based on AVERAGE HISTORICAL EARNINGS (Avg ROCE, Avg EBIT margins etc.).
   This ensures that we have two tiers of margin of safety.
   One is the flat 30% discount Demanded on intrinsic value.
   Secondly, By using AVG Earnings power, we can buy when the earnings are on the lower side of the avg, thus giving a chance for reversion to mean (A very powerful and persuasive phenomenon) and also protecting on the downside against further earnings decline. (some basic business analysis is of-course required to figure out where in the cycle earnings are currently and what are the catalysts for mean reversion)

2. For Strong / Moated Businesses – Buy at Fair Value, usually 10-12 EBIT/EV Multiple, so that we get all the future growth + Multiple re-rating chance for free.Here numbers are of secondary concern and business analysis the primary. Significant judgement about business fundamentals, industry dynamics is required to determine the strength and sustainability of competitive advantages. Thus, if a company passes the business analysis test, then buying it at fair static intrinsic value would give us all the good things about growth without having to pay for it!

Wondrela Holidays

All signs of a should-avoid stock!

Many a times technical -analysis skills can help you to keep away from highly recommended, highly tracked ,high pedigree stocks.

This one falls in that category.

A quick look at the monthly chart can tell you a lot of things

a) Look at the size of the upper wicks of the candles ! Sellers come running in as soon as it tries to move up.

b) A storng resistance ( red line) , that happened to be a support -level till Dec 19.

c) RSI never went above 60 on monthly charts for the past 5 years- above 60 RSI indicates that there is momentum in buying interest .

c) All upside movement from Covid -lows is overlapping, no clear impulse wave ( as per EW)

On weekly chart – as per stage analysis, lot of up & down movement around key moving averages (10WMA,30 WMA) , Not able to break the trading range for ast one year.

In short – Basic technical-analysis skills can help oone person to stay away from traps.

Disclaimer : Charts are for study purpose only. Opinions are personal, can go wrong. No suggestions ,no recommendations.

Was going through their earnings call. Thought I would summarise it here, which touches on some of the topics including marketing.

Concerns:
Implementation of GST seems to have material impact, especially in Chennai. This would result in high ticket price that would test customer’s willingness to pay.

I dont know if GST is the prime reason to have resulted in low ROCE.

On the willingness to pay, when they expand the capacity, the price should come down as they need to attract a lower income people. This is a significant constraint on scaling out vertically. If I am right, the current strategy is to scale to multiple locations and target the higher income group that pays more for tickets. Rest is dependent on economy growth.

Tailwinds
It is interesting to note that the company is entering into digital advertising only now! But, at least they are in right path and not beating around the bush on that.

If things augur well, then there can be some good volume realisation through targeted marketing and improving customer relations.

However, there is a limit to success here. Each park can only grow to a certain peak volume. The key is to improve non-peak volumes and improve ARPUs.

But each park can be expanded to handle 3 million, provided the footfall picks up.

There is a good scope for expansion across regions. If ROCE is stabilised, this is a very good long term play.

What I like the most is the capital preservation, provided if management is good and ethical (which they are IMHO).

Views
Overall, I think the next 2-3 years are going to be a good year for them as long as there are no macro economic issues. The management is good and is quite conservative in their strategy, which is important for an capital intensive company.

Disclosure: Have a tracking position. Might scale up over next qtr

On valuation I’ve seen in my 2 years journey that you make money when the valuation is so cheap that you don’t need to do too much hardwork on valuation. And probability of not making money increases when doing valuation becomes very difficult.
Scenario 1: I bought a NBFC company named CSL Finance Ltd in February 2021 with price being lower than the book value after substracting all the gnpas( which was very low). The promoter was buying from open market. The mgmt managed the NPA to be stable throughout the covid. The adjusted PB ratio was 0.65. It was a no brainer buy at that price and it became a 3 bagger. Didn’t fall at recent sell off at all. Still the company is available at 1.2 PB ratio but now the valuation is little bit hazy. I mean it’s no longer a no brainer buy.
Scenario 2: I bought Prince pipe after it became a multibagger. The PE ratio was 36 but the earning growth was also superb. It was a 25% grower company at 36 PE so I thought even if it grows by 20% I’ll make money because the ROE ROCE was good. After I bought next 2 qtrs results were also good. But then the crude price shot up margins reduced and the stock price is still consolidating and now in the lower range. Though the sector has tail winds. But I’ve lost in terms of opportunity cost. I could have invested now. Because the valuation is much better now. 15% grower at 22 PE with structural tail winds. But will I buy it? No there are much better opportunities which represent no brainer buys.
Scenario 3: Krsnaa diagonistics, a moated player+good management+ Huge runaway for growth. Excellent growth in last 3-4 years. The stock corrected by 50% because everyone thinks increasing competition in Diagonistics sector js going to hurt the existing players. it’s true for dr lal path labs and other like them. but krsnaa completely operates in different field. So here we have a company which can easily double the earnings in next 2-3 years due to huge operating leverage. So it’s a no brainer buy at this valuation.