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Danish Power Ltd (12-11-2024)
Danish Power Ltd:
About the company:
Danish Power is an ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 certified manufacturer specializing in various types of transformers and electrical control systems. Their product range includes inverter duty transformers for renewable energy projects like solar and wind farms, as well as power and distribution transformers. Additionally, they provide control relay panels and substation automation services.
Product portfolio:
Key products include inverter duty transformers (up to 20 MVA), distribution transformers (up to 5 MVA), and power transformers (up to 63 MVA).
- Inverter Duty Transformers (multi-winding) up to 20 MVA 33 kV Class for Solar Plants, Transformers for Wind Turbine Generator
- Distribution Transformers up to 5 MVA 33 kV Class
- Power Transformers up to 63 MVA 132 kV Class
- Panels includes Control Relay Panels up to 400 kV Class, Substation Automation (SCADA), Bus Bar Protection Panels, LT Panels, APFC Panels.
Cold Rolled Grain Oriented (CRGO) Electrical Steel, Copper Wire, Copper Strip, Copper sheet and Aluminium Wire, Strip, Sheet, Mild Steel, Transformer Oil and Relays these are the raw materials required by the company and procures them either through imports or local suppliers.
Manufacturing facility
Manufacturing facility located at Mahindra World City in Jaipur. And company owns a vacant land in here which will used for expansion plans
Danish Power has received the all India First Licence for Outdoor/Indoor type liquid immersed Distribution Transformers up to and including 2500 KVA, 33KV- Part 3 Natural / Synthetic organic ester liquid immersed as per: IS 1180: Part 3: 2021.
Value chain analysis
- Raw Material Supply: Involves sourcing core materials like copper, aluminium, silicon steel, and insulating materials.
- Core Components Manufacturing: Production of critical components like laminations, cores, windings, and bushings.
- Assembly: Integration of components into the final transformer unit.
- Testing and Quality Control: Ensures each unit meets safety and operational standards.
- Distribution and Sales: Transporting transformers to the market for end-users.
- Installation: Setting up the transformer at the desired location.
- Maintenance: Includes routine servicing, repairs, and condition monitoring.
Clientele:
Their transformers are designed to ensure efficient power transmission and distribution across several industries, with notable clients like Tata Power, ABB India, and Torrent Power, Waaree Renewable, Jakson Green Private Limited.
Over the years, company has established a diversified client base across different customers in the power industry like renewable power EPC projects like solar power plant, wind power farms, other power generation plants, power transmission, electricity sub-stations, power utilities etc. like Tata Power Solar System Ltd, Waaree Renewable Technologies.
Revenue Mix:
Difference between Power distribution and Inverter duty transformer
Industry overview
• From April 2020 to September 2023, the renewable energy sector in India attracted US$ 6.1 billion in FDI equity investment.
• India has received a cumulative amount of US$ 3.8 billion in foreign direct investment (FDI) in the solar energy sector over the past three fiscal years and the ongoing fiscal year until September 2023.
• India ranked fourth in the list of countries to make significant investments in renewable energy by allotting US$ 77.7 billion between 2015 and 2022
• In the Budget for 2024, the government’s 14 power sector initiatives have been allocated funds that are 50% higher. Increased funds have been allocated to green hydrogen, solar power, and green energy corridors in line with the renewable energy target for 2030.
• In order to meet India’s 500 GW renewable energy target and tackle the annual issue of coal demand supply mismatch, the Ministry of Power has identified 81 thermal units which will replace coal with renewable energy generation by 2026.
CEA: Distribution System Plan 2030
Projected Installed Capacity by March 2030:
• Expected total installed capacity: 786 GW.
• Compared to March 2022: Increase from 400 GW to 786 GW.
• Renewable capacity percentage: Envisaged to be around 62.6% of total installed capacity.
Current Power Sub-Station Statistics (as of March 31, 2022):
• Total number of power sub-stations: 39,965.
• Total installed capacity: 4,82,810 MVA.
Planned Sub-Station Expansion (2022-23 to 2029-30):
• Planned addition of sub-stations: 12,192.
• Total power substation capacity addition: Approximately 1,41,522 MVA.
Projected Cumulative Sub-Station Capacity by 2029-30:
• Cumulative sub-station capacity by 2029-30: Around 6,24,332 MVA.
• Increase compared to March 31, 2022: 29.31%.
National Electricity plan:
The budget outlay for the National Electricity Plan (NEP) for 2023–2032 is ₹9.15 lakh crore.
Planning for Future Demand: The NEP outlines strategies to meet the country’s projected electricity demand over the next 5-15 years, ensuring energy needs align with economic growth.
Renewable Energy Focus: It emphasizes increasing the share of renewables like solar, wind, and biomass to reduce carbon emissions and move towards cleaner energy.
Infrastructure Development: The plan includes proposals for expanding and upgrading the transmission and distribution networks to support reliable power supply and reduce losses.
Energy Efficiency and Security: NEP aims to enhance energy security by reducing dependency on imported fuels and encourages energy efficiency across sectors.
Grid Modernization: Focus on modernizing the power grid with smart technology and digital solutions, including battery storage systems, to handle renewable energy’s variability.
Support for Universal Access: Prioritizes providing electricity access to all households, particularly in rural areas, contributing to socio-economic development.
Five-Year Update Cycle: The NEP is updated every five years to reflect technological advancements, policy changes, and shifting energy demands, keeping it relevant to current needs.
Growth in Transformer Allied products
Transformer Oil market 2028 $3 Billion 5.90%
Oil immersed transformer market 2028 $28.2 Billion 6%
Transformer monitoring market 2028 $3.7 Billion 9.10%
CRGO steel market 2032 $20 Billion 5.90%
Peers capex plans
Growth Triggers
• Diversified Product Base
- Company is involved in manufacturing of different types of transformers including inverter duty transformers which are used in renewable power projects like solar power plant or wind farms, oil and dry type power and distribution transformers, control relay panel along with substation automation services.
• Industry Tailwind - Due to increased demand for power projects, need of transformers is increasing rapidly.
- India has set Target of 500GW of renewable energy by 2030 which will require substantiable amount Inverter duty transformers.
- All the stake holders in the industry have announced aggressive capex plans to cater to the upcoming demand
- By 2035 Indias peak power demand is expected to be 1400 GW.
- Budget outlay of INR 9.18 lakh crore which will significantly increase the demand for transformers
• Existing relationship with the clients - As company is in B2B business segment they operate in business due to delivery of quality product and timely delivery.
- Top 10 clients contribute 87% of the revenue.
- Their existing relationship with the clients have helped them to acquire new clients.
• Guidance - Revenue growth of 15-20%
- Net profit margin of 11-12%
• Capacity expansion - Increasing capacity from 4681 MVA to 11000MVA which will significantly increase sales.
- Aims to improve revenue mix from Power transformers to reduce the share of Inverter duty transformers.
• Experienced Promotors & Management team - Dinesh Talwar, Whole-Time Director, has 39 years of industry experience in transformer and panel manufacturing, while Shivam Talwar, Managing Director, brings 17 years of expertise.
- The promoters’ deep industry knowledge has been instrumental in the company’s consistent growth and business expansion.
- Shivam Talwar holds a Bachelor of Engineering in Electrical & Electronic Engineering, enhancing the team’s technical and leadership capabilities.
Key Risks
• Reduction in Govt spending in capex could result in lag in revenue recognition.
• Delay in Company’s capex plans could affect the guidance given by the company.
Peer comparison
Assuming Shilchar realization per MVA is 10Lakhs and capacity fully utilized at 7500MVA.
Here Danish power is compared with Shilchar Technologies is because of their similarity in product profile.
Conclusion
Danish Power Ltd. is an attractive investment opportunity in the growing renewable energy and transformer manufacturing sectors in India, especially with the government’s goal of achieving 500 GW of renewable energy by 2030. The company boasts a diverse product portfolio, including inverter duty transformers essential for solar and wind projects, and is expanding its capacity from 4,681 MVA to 11,000 MVA to meet increasing demand. Danish Power is well-positioned for sustained growth with a solid financial performance, established relationships with key clients like Tata Power and ABB India, and a favorable forward price-to-earnings ratio compared to peers. Despite potential risks related to government spending and capital expenditure delays, its proactive strategies and experienced management make it a compelling choice for investors looking to benefit from India’s renewable energy boom.
Disclosure: Invested since IPO levels and Biased
Journey of Equity investing learnings , growth and scaling (12-11-2024)
@Cshar – when you say large position – how much in terms of % of portfolio ?
SG Mart- Can it successfully create a marketplace? (12-11-2024)
SG Mart Concall Notes:
Volume:
- Done 330k Ton in Q2 – around 110k Ton/month
- Now doing 120k Ton/month Sales and guidance 1.2 Million Ton per FY25
- Guidance of 150k Ton/month in FY26 and 250k Ton/month in FY27
Service Centers:
- 3 (Gaziabad, bangalore & Pune ??) operating now and another 2 (Raipur & Dubai) by this year
- Working on Solar Profile Structures (40k Ton/month ??) and PEB Segment (Pre Engineered Buildings ) – Purlins & Deck Sheeting
- 10 New centers planned next year across India, Will deploy cash.
Steel Prices:
- Sharp decline in steel prices in Q2, around 15% per month, unprecedented situation, once in a decade, Still came out EBIDTA positive in the Quarter.
- Inventory Loss of around 1% sales (18Cr??), Have to protect customers also
- Steel Prices Stable now.
- Inventory days around 8 to 10 days
Margin Guidance:
- 2% is for the year, Not for quarter, will stick to 2%
Business Segment Sales:
- Now Trading 65%, Service Centers 20% and B2C 15%
- In Future with new Service centers it should reach 40 to 50%
- Inventory days will increase to around 20 days with new service centers and around 20 times inventory turn around
- Cash and carry – No credit given
Disc: Invested
SG Mart- Can it successfully create a marketplace? (12-11-2024)
An analyst, Vivek Patel, asked a question regarding the risks involved in the business.
- The question was
First is, would there be any broad guidance that you’ll be sharing at this time for FY25? what would be your key assumptions to this guidance and the key risks of not meeting them?.
Management said
if you look at FY25, we are looking at around INR7000 to INR8,000 crores of revenue, right, which will translate into like 1.3 million ton of steel business put together. And margin should be around 2.5%, The risk to this guidance, I think now that we are in the fifth month of the year already, we don’t see any challenge as of now to achieve this number.
Another question asked by Alisha Mahawla
- The question was
what is the kind of inventory risk that we carry? Because these are commodities at the end of the day, and while you have highlighted the working capital cycle, is it an inventory gain, inventory loss kind of situation that we have to keep making adjustments for every quarter?.
Management said
So, because our margins are low, around 2.5%, right? So, we have to ensure that that 2.5% is protected, okay? There is no threat, there is no risk to that margin, to that thin margin. Then the inventory write-off. Now, steel is a volatile commodity. It carries a lot of risk and with such a low margin, our risk management has to be very strong, which it is. So again, all the three verticals, Alisha, the first vertical, which is metal trading, here we are doing back-to-back sale, like purchase and sale. So, the risk what we carry is from 0 to 10 days. Which is very limited. Steel prices in India normally are reviewed like once in a month. On the first day of every month, all the steel producers come out with a new revised pricing policy. So, if you are doing business within 10 days, there is no risk as such to carry to your balance sheet.
Management said they purchase in bulk, so they get a discount and maintain inventory days of 10 days. They mentioned that the volatile steel price won’t affect the margin. I think management is too optimistic about the business. If they can’t pass the increased cost to the customer, that won’t benefit the business.
Disc: Invested
Samarth’s Portfolio & Learnings (12-11-2024)
Below is a write up I wrote on the holding period in Small & Microcap Space:
“In 1988, Warren Buffet famously said, ‘Our favorite holding period is forever.’ This quote has become a tagline for many investors, including me. But on thinking and evaluating this quote, I find it to be misleading.
Many investors, including myself, when reading Buffett’s shareholder letters for the first time, took this quote literally. However, Mr. Buffet’s real intention was to convey the message that he intends to buy stocks he can hold forever. So, in 2016, after he got sick of people misinterpreting his statement, he said, ‘Sometimes the comments of shareholders or media imply that we will own certain stocks “forever.” It is true that we own some stocks that I have no intention of selling for as far as the eye can see (and we’re talking 20/20 vision). But we have made no commitment that Berkshire will hold any of its marketable securities forever.’
This makes one thing clear: in investing and in life, a person’s intention matters the most. Here’s the difference between trading and investing:
In Trading: A person’s intention is to sell the stock, while,
In Investing: a person’s intention with every purchase is to hold it.
His intention was to hold his stocks forever, but as the business or macro situation changed, he sold them, though he made good money on them (that’s a different topic). This proves what we know to be true, but don’t like to admit: all stocks have different shelf lives.
Shelf life refers to the amount of time until a commodity or food is consumable without being unfit for consumption. For example, vegetables have a shelf life of 2 to 3 days, fruits 5 to 7 days, milk 1 to 2 days, and pickles 1 to 1.5 years.
Just like food, every stock or investment in your portfolio has a shelf life. The difference between food and stocks is that we know the shelf life of food, but with stocks, we don’t know the shelf life when we buy them. There’s no one-size-fits-all approach to estimate it as all businesses evolve differently. Some are gradual compounders, and some are momentum sprinters. This also differs from investor to investor.
Now, if I ask you to define your stock holding framework, many of us would define it with an exception rather than a norm, like: ‘I do deep research and understand different businesses and industries and identify a handful of wonderful businesses that I buy and hold forever.’ Isn’t it funny? Like Mr. Buffet, maybe only 2 out of 50 businesses you analyze would be worthy of owning for 10+ years. They are exceptions, not the norm, as not every business is in the buy-and-hold category.
We love to define our investing strategy as finding those 2 wonderful businesses, but in reality, our investing strategy depends on how we deal with the remaining 48. We can still make a lot of money on those 48 because what I realise is that finding those 2 business is also a matter in which luck plays a significant role and apart form finding those 2 business it also becomes equally important to get allocation and execution right.
But here’s the dilemma no one in the market likes to talk about: the skill of selling. It’s an admission that either your thesis is wrong or that ‘you don’t hold stocks forever.’ Admitting you are wrong means you are not perfect, and no one wants to admit that they are not perfect – though none of us are.
My intention with every purchase is to hold the stock for 5+ years, but less than 5% of the stocks meet that criteria of a wonderful business. Thinking on this line, I did an assessment of my own portfolio, and the results were quite surprising. Over the last 5-6 years, I invested in 40-50 companies and held only 3 stocks for more than 5 years. My average holding period across my stocks was 2.5 to 3 years, as I invest primarily in small and microcap companies. The natural shelf life of such companies is shorter than that of mid and large-cap businesses.
I’ve observed that in Indian Markets, for a small and microcap business, that shelf life is 4 to 10 quarters. In this part of the market, it also becomes equally important to evaluate management as small-cap investing is mainly surrounded by evaluating whether management is lucky or skillful and how long it will last.
And also, most small and microcap investors, including me, try to fit too hard into the camp of ‘buy and hold forever,’ but the shelf life of most small-cap companies is 2.5 to 3 years. I’m trying to be more aware of this issue and figuring out ways to avoid it, but I still haven’t got a proven way.”
This is my way of thinking and this may apply to only me but, I am just trying to share my thoughts and as a learner we should always endevor to develop our own thinking and though process as in life and investing borrowed skill and conviction are harmful.
Samarth’s Portfolio & Learnings (12-11-2024)
In past few days or say weeks got little busy in some family event due to which I couldn’t update my blog but hereon I’ll try to share my thesis as often as possible and update it as well.
Time Technoplast is a company which I invested with when the current leader Mr. Bharat ji Vageria came in had visited there facility back when Anil Ji was heading the company and looking at the corporate history of the company, it was always a technocrat company bringing in newer technology in IBC and Chemical Packaging space but took a hit in terms of poor capital allocation & management not walking the talk, but with coming up of new leadership this problem started to get resolved and focus of new Mgmt started shifting from low margin established product range to better Margin Value Added Product Segment, easing out of corporate structure, selling of non-core assets in form of land parcel at Karnataka on which earlier mgmt planned to do real estate business.
One Mental Model I use is
Great Business – High/Better Margins & High/Better Turnover
Good Business – Better Margins & Low Turnover
Okayish Business – Medium Margins & Better Turnover
Gruesome Business – Low Margin & Low Turnover
So when Management shift from Okayish Business to Good Business Markets starts to appreciate the fact… as value creation starts to get better.
Below I have shared my thesis in the form of small write up
Time Technoplast Limited Report.pdf (1.1 MB)
On 16.04.2024 in blog of Time Technoplast I wrote
Time Technoplast is a medium term bet and the internal business is cyclical in nature but right now the company is in sweet spot because
- Chemical sector is slowly gaining traction in terms of production and still major revenue contribution for the company comes from IBC so now establish business will also post good numbers.
- In India on 35 cities are covered under CGD and still many part of India is dependent upon cylinders for there cooking fuel so that is not a problem and since composite cylinder can store more fuel than traditional type 3 or metal cylinder it will gain traction in HORECA industry with time so one can check out of close to 2 to 3 crores (damaged) cylinders that come back what is the proportion for type 4 cylinder going back to the market.
- Once the new capex is completed in this year company will also enter the retrofitting market and that has a huge potential as only maruti a single auto company has committed to produce 4 lakh CNG vehicles plus autorickshaw had also this demand because current cylinders are heavy and stores less gas.
- Now, most important of all as company was a technocrat from very beginning but intresting thing is now Bharat ji is walking the talk and not just committing high things but actually delivering the result as seen in last year where company didn’t receive money from divestment of there offshore business through which they planned to add new capacity for CNG cascade but still added any how without increasing further debt and in the established business company is doing only maintenance capex.
ValuePickr- Mumbai (12-11-2024)
Hello, I would like to join the WA group, have sent the request.
The Anti-Portfolio (12-11-2024)
Vikas ji!
Since I’m a bit of an “action hero” in the market (read: click-happy 
), I’m always itching to buy something… usually one stock at a time, then more if it drops. And in this bull market, if it doesn’t rise, well, nana-mota position gets the chop!
For me:
- Renewable energy? even the hills of the Sahyadri have heard the full saga by now!
- Transmission & Distribution? Looks confirmed—be it green, blue, or even grey power, the juice is flowing!
- And the next hot theme? Room ACs seem to be all the rage! I’ve loaded up on KRN, hoping it’ll chase the PGEL run… right now,(after reading PGEL presentation) it’s hot on that trail. is it 5X -10X type?
Have you or anyone from “Finance Samaj” here have checked out this RAC story yet?
Journey of Equity investing learnings , growth and scaling (12-11-2024)
Untill you have concentrated bet, you wouldn’t be able to make it meaningful, there are risk associated with large bet hence valuation comes in picture, mostly turnaround, forgotten by markets or stocks sitting at cusp of growth triggers. You need some luck as well. Higest the safety of margin, higher the chances or capital protection if events not unfold as you thought.
I have done it repeatedly in last 7-8 years with 80% success rate. Its an art which requires lot of courage and patience, holding a rising large position is more problematic. I have done it with Vodafone Idea, Tata Motors, Shoppers stop, ABFRL, Latest Kalyan Jewellers, Started with 25K stocks in Nov 22 at 115, diluted 2K at 300, diluted 5K around 500, diluted 4K around 650, diluted 11K between 700- 750 as its too expensive for me now, holding 3K, will sell it again as Istock is discounting 2 year forward earnings and competition is heating up after entry of PN Gadgil, Novel Jewels, PC Jewel, Senco and other small IPO’s. This sector is avoid for me know.
Built up a large position in SAMHI hotels which is trading at 10 EV/EBIDTA own 90% of real state, discounted around 50% with marque brands like Merroit, IHG, Hyatt. Can’t lose much from here.