Latest portfolio of Gateway to India Fund
First, we have to peep into the latest portfolio of the Gateway to India Fund to check whether everything is ship-shape.
The top ten holdings of the Fund as of 30th April 2017 are as follows.
|Div. yield||5yr Avg||5yr EPS|
|Stock||P/E FY17e||P/B FY17e||FY17e||ROE||CAGR|
|LIC Housing Finance||17.4||3.1||0.9%||18.3||16.9%|
|Indian Oil Corp||12.2||2.5||4.1%||11.3||34.4%|
|Gujarat Heavy Chemicals||7.3||2.0||2.7%||25.5||54.0%|
|The Ramco Cements||21.9||4.4||0.8%||14.5||14.8%|
|Housing Development Finance||21.1||4.1||1.4%||18.1||15.8%|
|Cholamandalam Inv & Fin||24.1||4.0||0.5%||17.7||30.1%|
As one can see, Sanjoy Bhattacharyya has hand-picked each stock after careful application of mind.
The following are the salient features of the stocks in the portfolio:
(i) All the stocks are quoting at reasonable valuations. Balkrishna Industries is the most expensive stock non-financial stock with a P/E of 24.2x FY17e. Yes Bank, the powerhouse Banking stock, is the most expensive with a P/BV of 4.2x FY17e;
(ii) The two blue-chip PSU OMC stocks offer a hefty dividend yield of 4.1 and 5.5% respectively, which implies that these stocks are safe as houses;
(iii) All stocks have an impressive 5-year average RoE as well as an impressive 5-year EPS CAGR. This proves that these stocks are not one-night wonders but have a long and distinguished track record of generating profits;
(iv) GHCL stands out as an exceptional stock. It is quoting at a P/E of 7.3x which is a throwaway valuation by today’s standards. In addition, it offers an attractive dividend yield of 2.7%. The 5-year average RoE and 5-year EPS CAGR are impressive at 25.5% and 54% respectively.
It is worth recalling that Ashish Kacholia holds a massive chunk of 15,00,000 shares of GHCL as of 31st March 2017. The investment is worth Rs. 36.75 crore at the CMP of Rs. 245.
The stock has given a return of 47% on a YoY basis and 172% over 24 months, which is hefty by any standards.
Manpasand Beverages – latest stock pick of Ocean Dial Gateway to India Fund
Now, the big news is that the mandarins of the Gateway to India Fund have homed in on Manpasand Beverages as the best investment candidate.
As expected, the logic for picking Manpasand Beverages is flawless and can be summarized as follows:
(i) The size of the beverage industry in India is US$10bn of which packaged juice is US$1.2bn1. The segment is growing at more than 30% per annum in the last few years;
(ii) The per capita soft drinks consumption is 1/20th of the USA and 1/8th of Thailand and the Philippines;
(iii) The growth accelerators come from increased purchasing power, growing awareness of the health benefits from fruit juices, and low penetration;
(iv) Manpasand Beverages already has 5.0% share of the Indian juice market. There is huge scope to increase this share;
(v) While ‘Mango Sip’ is a seasonal based drink, “Fruits Up”, “Coco-Sip”, “Pure Sip”, “Manpasand ORS fruit drinks” etc are all-year drinks;
(vi) In addition to increasing the market share, Manpasand Beverages plans to increase capacity from its four manufacturing facilities, all of which are currently running at full capacity. The total output will be increased by 80% over the next three years from 125,000 cases in FY16 to 225,000 cases per day;
(vii) The arch competitors, Coca-Cola and PepsiCo, are focusing on their respective cola products. Dabur is targeting the premium segment. Parle Agro is promoter owned and run and appears to lack the strategic vision to grow further;
(viii) Manpasand Beverages has already delivered compound revenue and net profit growth at 60%-70% respectively in the last four years;
(ix) The valuations at PE 31x FY18e are in line with consumer staples and are not unreasonable given the PAT growth of 37%.
At the end of the dissertation, it is concluded that Manpasand Beverages has “higher growth potential” and is “a genuine long term investment opportunity”.
Boycott/ Ban of Coca-Cola & Pepsi to benefit Manpasand Beverages
According to press reports, the Traders Federation in Tamil Nadu has decided to ban/ boycott the beverages of Coca-Cola and Pepsi because of some alleged grievances. A similar boycott call has been issued in Kerala and Andhra Pradesh.
To cash in on the crises, Manpasand Beverages has invested Rs. 150 crore in Sri City to cater to Tamil Nadu and other key southern markets.
It is obvious that the parched citizens of these Southern States have nowhere to go but to come to Manpasand Beverages to quench their thirst.
— avanne dubash (@avannedubash) March 16, 2017
Manpasand Beverages aims to have revenues of Rs 5,000 crore in the next five years
Ajita Shashidhar of Business Today has conducted an in-depth study of the affairs of Manpasand Beverages.
She has noted that the ambition of Dhirendra Singh and Abhishek Singh, the founders of Manpasand Beverages, is to make the Company a Rs 5,000-crore company five years from now and up its market share in juices to 20-25 per cent from the existing 10 per cent.
Indian Railways will contribute 50-60% growth in sales
Manpasand Beverages has tied up with the IRCTC for direct selling to vendors as well as with its e-catering service to sell their brands.
The Company is eyeing significant growth in its revenues through the Indian Railways. It will expand its presence in all stations pan India in the coming fiscal year.
Currently, the railways contribute 20-22% to the overall revenue. The company is targeting 50-60% growth in sales in the next five years.
Taapsee Pannu appointed brand ambassador
Manpasand Beverages has done the sensible thing by appointing Tapsee Pannu as its brand ambassador. Tapsee Pannu is an icon amongst teeny boppers and has considerable sway over their buying and drinking habits. They are likely to make a beeline for Manpasand’s drinks when they see Tapsee guzzling it.
Manpasand Beverages has strong growth potential: Motilal Oswal
Motilal Oswal has recommended a buy on the following logic:
“Valuation and view: We believe strong summer, along with the focus on advertisement, will drive superior performance at MANB. Demand continues to be strong in the fruit drinks category. However, on account of capacity delay of the fourth plant, we cut earnings estimates by 19% for FY19. The company’s presence in low-ASP/SKU products, addition of new capacities and foray into newer geographies provide comfort. Also, the planned advertisement campaign for Fruits Up should complement its recent Fruits Up capacity addition at Ambala. Thus, we expect a robust revenue and PAT CAGR of 45% and 52%, respectively, over FY16-19E. We value the stock at a P/E of 27x FY19E EPS, with a target price of INR841 (20% upside). Reiterate Buy”.
Manpasand Beverages has target price of Rs. 1067: Ventura
Ventura is also gung ho about the prospects of Manpasand Beverages. It claims that Mango Sip, the flagship brand, is growing by leaps and bounds and will grow at a CAGR of CAGR of 33.1% to Rs 1,408 crore by FY20.
The revenue from FruitsUP is expected to grow at a CAGR of 42% to Rs 439.4 crore by FY20 from the current Rs 108 crore in FY16.
What about the “curious case” of Manpasand Beverages?
There was some controversy earlier because 2point2 capital alleged that there were accounting irregularities in the Company.
However, the strength in the stock price indicates that market experts don’t consider these allegations serious.
Manpasand Beverages-Hits 52week high to hit 813 today
I Remember many ppl sold in loss when a malicious report was floated in market!
— Rakesh Laroia (@r_laroia) May 18, 2017
— Pankaj Singhal (@AnyBodyCanFly) May 18, 2017
Once again, we have to tip our hat to the brilliant stock picking mastery of Sanjoy Bhattacharyya. Manpasand Beverages has all the virtues that one looks for in a stock. It does look like “a genuine long term investment opportunity” and will hopefully bring mega gains to Ocean Dial’s portfolio in the foreseeable future!