In this recent correction in market, made some minor changes to my PF, just thought to update for more learning and comments

Bought Torrent pharma after bumper Q1 and expected bumper Q2, stock corrected to below Q1 level price due to this correction and valuations are very compelling for FY16 estimate, its only 15 forward PE, for such a great mid cap pharma company/stock, ripe for rerating and very limited downside in this volatile market,a good defensive bet, can rise up to 40 % in 1 yr on a conservative basis.

Bought Avanti feeds, again after superb Q1, and trusting the mgmnt guidance, stock corrected to lower level after bumper Q1 due to mkt fall, stock split etc will keep it high, I think along with Q2 numbers is expected to be again good.

Reduced Capital first due to LAP concerns and no pick up in Indian economy as expected, higher NPAs, found better opportunities due to mkt correction

Can Fin Homes 25 %
Kitex Garments 20 %
Ajanta Pharma 20 %
Torrent pharma 13 %
Avanti feeds 10 %
Repco Home 10 %
Arman Financial 2 %

Jan to Sept YTD return is down to 40 %
Looking forward to Q2 results for some zing in PF

Dhiraj

Much appreciate these detailed notes – the one concern I had speaking to their customers is that CP holds the consumables inventory at the customer’s premises at their cost which results in WC getting locked up and hence to low OCF – OCF is consistently not even 10-30% of EBITDA which is really low.

I spent a lot of time on what generates cash in a business – out of OCF of Rs. 27 Cr. more than Rs. 19 cr. went back again as inventories and receivables – that’s not a sign of a moat. If they have one inventory write-off because of technology obsolescence etc,it will hit the business badly.

Like charlie munger would say, its a tread mill business where more and more of the profits have to be invested into the business to keep running. Given that, the sales growth means not much until they can shrink the WC.

Would you have a view on when the company can improve upon this ?

I can not digest this ‘ advance system’ of revenue. I doubt if it is legal. But the question is,” is it possible for market to be irrational for such a long time.”

Edelweiss Financials – My investment case below

I have not finished reading the complete annual report however went through presentation and other details I could gather. A year back also I had a flirting with this stock twice but at that time I don’t remember what happened but I never made it an investment position. However the stock definitely deserve a closer look and may be a worthwhile investment case.

Well laid out fortified diversified business model, innovative and ambitious company, they seem to be in right spaces and are pacing up at right time.

I always maintained that Financial services like new age banking and NBFCs with a mindset of innovation in roots and powered by digital wave, fore front in best in class IT technology and data analytic adaptation would be biggest wealth creators in coming times. One needs to have perhaps a basket kind of approach just as in case of Pharma sector in a portfolio with a sizable chunk allocation. Look around and you will see even in worst times banks and NBFCs do tend to make profits and here the competition intensity does not matter much as the profit pool size is humongous. Many a times I am surprised not to see banks and NBFCs in portfolios. At best little allocation here or there with housing finance little more lucky. Why this is reserves for sometime later and I will write later on it but for now….

Few quick facts
1. Since listing always a dividend paying company without fail
2. Since inception every single quarter profitable with CAGR in PAT>30% for past 10 yrs
3. Company ROE ex insurance finally breaking 15% threshold and seems to be sustainable now. Sometime back I went through MOST 100 bagger study and there was an interesting theory of an inflection point wherein company passes 15% ROE for the first time and on sustainable basis and thus announcing the emergence of itself as a multibagger.
4. GNPA and NNPA are relatively better at 1.4% and 0.39% respectively
5. Since I have an Edelweiss trading and demat account I can vouch for their better digital interface platform and customer relationship service than ICICI or Sharekhan atleast. The research reports are good enough. Just gives me good confidence as a whole on the company though the broking side of business may be of little % as a whole.
6. RJ, Saif Advisors and Amansa Capital in Top 10 shareholder category. RJ investment here is sizable so he must have done due diligence. Same can be said about Amansa Capital as well.
7. P/B of 1.4 on TTM basis looks very attractive.
8. Their insurance business with Tokyo Marine of Japan as JV partner is the fastest growing insurance business in India and their funds are top rated by Morningstar. They also have the highest branch productivity in the country.
9. Agri Financing business, one of their new product has untapped and very large scale opportunity in coming times and has the potential to be a game changer.
10. Ranked no 1 in public issuance of bonds with 55% market share
11. Cost to income ratio very high at 59% and is negetive
12. There was a buy back by company in 2014 at a price of Rs 45. CMP is 55.
13. Promoter’s shareholding is low at 30.53% out of which 60% approx is pledged which is slight negative.

I guess for now above info is good enough for me to have it classified as low conviction stock and will allocate the capital accordingly. As and when the conviction builds up and the information flows to me then will make a case later.

Good Night

sorry but this is not the way to start a discussion on valuepickr. this is not mmb