I am not disagreeing with anything you are saying.
But, if HDFC is so confident about the safety of affordable housing lending - why do they have a subsidiary for it?
Why is almost everybody doing affordable housing finance through a subsidiary? Would you know why?
Figures are in Million
Excellent working capital management, Advance from customer increased from 26 crore 2014 to 76 crore in 2015 (this reminds of eicher from 2009/8 onwards advance from customers increasing), company getting 70% repeat customers and increase in gross margin indicates customers accepting price hike which speaks quality product and after sale services.
WCAP/Sales from 0.24 to 0.17 speaks of asset light in my view.
Will echo your statement completely - add to Cartica I guess holding for last 5 yrs by Nalanda Capital is a big positive
Thanks Mahesh for your reply, 1 question though for my clarity of thought -
Why are you using EV/EBIDTA for valuing MPS? I think I also see in other threads like PI that you are using this metric for valuations, please can you explain the rationale. Thanks.
Agree with your point that major CAPEX except acquisitions is unlikely unless some major top line improvement is foreseen in which case it will again be beneficial....regarding domestic opportunity I don't agree as in your example of school books moving to tablets, more established domestic player like Repro might benefit more than MPS as MPS will have to invest a lot in acquiring domestic clients in which case margins might suffer.....but anyway it's not MPS focus as otherwise CEO would not base himself in US.......
Valuations are getting very attractive at less than 15 times FY16e EV/EBITDA but a lot will depend on nature of acquisitions.....the long time taken to acquire the company out of QIP proceeds has reduced margin of error considerably for MR. Arora and even a slight mistake on that front might not be taken kindly by the market......however, unless a blunder is committed, correction might be more in the form of time correction rather than price correction.....but, in case of a right decision, scope of appreciation seems tremendous and your contention that at current rate odds are more in favour of reward seems logical....
Corporate governance and IR is excellent and the only missing link the acquisition -- I hope a good acquisition gets announced by q2fy16 numbers.
Rgds.
To add to Hitesh's points, PI is placed at an interesting juncture right now.....so far management has delivered excellently by not faltering on any of its commitments given to investor community and there is no reason to believe that in future such trend won't continue....order book of CSM is also healthy and is maintained at 2-2.5 years which is very commendable at this scale....the rich valuations that we see is all the result of these....because of its exceptional past track record, minor uncertainties or falterings might be taken lightly by the markets and in such events it might only experience a time correction rather than a significant price correction......
However at the current scale of CSM, how long can it sustain 25 % p.a. growth that needs to be seen....if it can sustain for next six to seven years even a 20% growth its valuation multiples might be in a different orbit altogether and it might get very richly valued much richer than current multiples......for that first it will have to invest more as Jambusar might not be able to serve that kind of growth for more than next 3 years.....secondly, with only agrochemical sector exposure, how scalable is the opportunity that needs to be seen as company's attempts to diversify seems to have met with limited success so far.
Rgds.
While we are at this discussion, Gruh is slowly inching up for a break out, a convincing breakout above 267 thereabouts should see 300 in no time as per charts. As I have been maintaining, Gruh will command premium valuations until its business characteristics change and I see no reason for them to change for a long time, but we should be cognisant of this in future. 50 bps Repo cut should help housing finance companies lower their average cost of funds and more so for Repco as its average cost of borrowing is higher than Gruh by about 50 basis points. Disclosure: Invested in both.
@PP1: The past NPA figures, risk of new lending is common with all banking and financial stocks. Didn't stop HDFC Bank, Kotak Bank, Gruh and Bajaj Finance from becoming 100+ baggers. Even risky Yes Bank is up 20 times in last 11 years since it's IPO. In this industry, most important thing is to manage lending risk. Growth should be lower priority. And HDFC group is known for doing this for decades. Hence market's bullishness on Gruh.
Hi Sodhi,
Thanks for your post on Board Meeting. From the lens which I see the agenda items to be discussed in the upcoming BM are of significant importance:
1) To consider acquisition of a PVC plant (Inorganic growth reducing the learning curve in PVC business) and 2) Approving Employee Stock Option Plan (Big Sign of good management).
In stock market there will always be negativity & volatility. No stocks are bullet proof. Even Nestle who bonds have a AAA rating worldwide came for some serious bashing in last few months. No stocks are safe.
Gruh with all those negativity is already a 100 bagger and a big winner in front of our nose. Only problem in Gruh is its hugely expensive (may be the most expensive financial stock worldwide). But its also diff to get a financial stock that maintains a constant ROE of more that 30% ( for past few years) and a dividend yield of nearly 1% with near zero Net NPA.