Commodity and Cyclical Plays

Hi Jiten,
Thanks for your write up. Would something like a Shankara Building Products excite you…It’s kinda Dmart of the building product sector & with the construction activity in full swing in major parts of the country, this would definitely gather attention going forward.

Thank you,
Jugal

Jiten,
I am looking at HSIL,Visaka industries. But i see some negatives in this counter and i am not sure how much it will affect so still i am waiting.
On visaka industries : There is ban-aspetoses campign. http://www.asbestosfreeindia.org/ so i am waiting for get clear idea. Your inputs on this welcome
On HSIL: Their ROE is very less compared to peers. They are less efficient capital allocator. so i am not get confidence this too.
Both are from my initial analysis, you can give your suggestion. so i will go ahead and look in detail of this stocks.

Regards,
sathish

Yes. Because of Asbestos these companies never get a high multiple (HIL, Everest, Visaka). But revenue mix, especially in HIL, is going to change from 25% to 60% (building products) in next few years. So automatically asbestos share will come down. I haven’t looked at those nos in Everest and Visaka. These companies will also be GST beneficiaries.

HSIL has a good brand but somehow never been able to deliver.

Both these stocks I plan to study in deep as and when I get time. Currently not invested in these 2.

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@jitenp how do you view the results of Cosmo?

quarterly results will always be lumpy. As I had said in Cosmo thread too, margins can fluctuate. Was expecting soft results as BOPP prices had come down more than input RM prices.

New plant is good and more competitive. As economy picks up and utilization improves, we should see better results.

Thanks @jitenp. Appreciate it very much

@jitenp, Hi Jiten,
Don’t you feel that CEMENT has atleast 5 years of good future (unless GOVT allows import of cement due to cartelisation). AWAS yojana will be a good kicker for cement.

How about HIL due to its building products? Happen to hear Mr.Naresh Kataria at TIA seminar. even though he didn’t spell any company, I thought he was referring to HIL for its AAC (aerated autoclaved concrete) blocks. Of course, JK lakshmi and ultratech are also in similar product.
Can you share your opinion?
Prasad.

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Naresh is a good friend of mine. HIL, should benefit from various reasons. AAC, GST.

Cement, I continue to stay bullish from mid to long term prospective. Utilization’s will increase as demand picks up. Also not a lot of new capacity is coming up.

Hi @jitenp Can you share your opinion about deccan cement ?
Hemen

Deccan Cement, I hold from very low levels (450). And will continue to hold. Valuation-wise (EV/tonne 62$) also it is quiet cheap. Profitable and almost nil debt.

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Hi @jitenp What is EV/Tonne & how do u calculate it?

EV is (mcap+debt)/capacity

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Lovely Presentation Jiten Bhai…Loads of wisdom

Very nice informative presentation. Thanks a lot Jiten.
Do you see any buying opportunity in current market?

@jitenp Hi Jiten,

Thanks for the excellent post. I love your approach here and have been thinking to replicate the same for the cement sector. Could you advise how you are playing the below approach in cement sector? i am currently invested in Ultratech and Sagar cements from last 1 year.

“My approach has been to build a basket of stocks in any sector/commodity/cyclical play where I go with 3 good companies, and 2 companies which are outliers”

Oh yes. Last 3 days, I have been putting the cash raised earlier to work.

Thanks @jitenp for the feedback. I am planning to ride the cement cyclical play for next 2 years in Sagar, Deccan and NCL and will then shift to Ultratech completely. Low EV/ton definitely makes a strong case.

Thanks again!

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I am not sure if anyone has views on Agri cyclical play. The current govt push for direct subsidy transfer and doubling farmers income by 2022 gives me a confidence of strong performance from this sector. The monsoons can play their own part though.

I have been personally building positions in this space and have invested in GNFC(fertilizers), Aries Agro(increasing crop yield) and EPC industries(micro irrigation) for next 2-3 years.

Appreciate views from others on Agri cyclical play.

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Thanks for your regular inputs in this thread. I am also bullish on Agrochemicals. Is there a cyclical uptrend in the sector? I am invested in PIind. But it has been sideways for quite sometime. Is it because of their intent to enter contract manufacturing in Pharma that PIind is subdued?

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Yes. I believe cycle is in favor for agro/fert. Also, predictions of good monsoon augur well. My idea has been to invest in companies which can outperform by a wide margin during cyclical uptrends.

PI Ind/Dhanuka are superb companies. But these can be only compounders. And my quest has always been for higher returns than that :slight_smile:

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