@SSK, Both HIkal and NGL Fine chem are well run companies with similar situations in terms of future growth. Both companies have done/are doing big capex and likely to grow quite well over the next few years.
Hikal business mainly consists of pharma and agrochem sectors where they partner with innovators and supply the intermediates and APIs to their clients. Business model is built on years of trust with their customers which gives them some competitive edge as these relationships cant be built overnight by competitors.
NGL Fine chem is mainly into Animal APIs and has done capex after a long time. The recent quarterly results have been lacklustre because of a variety of reasons and hence stock price has corrected.
You can study both companies as resources on both of them are available on VP also.
If I buy stocks based purely on fundamentals, i.e when all the things I need in my investment thesis fall in place then I dont give too much importance to technicals unless I get some very clear cut picture of a potential up or downmove.
In technofunda picks I look at the technical picture and prefer to look out for breaouts of some kind and subsequent consolidation/mild correction to take a position. In breakouts I look out for either 52 week or multiyear breakouts or some pattern breakouts like flag pattern, cup and handle, rounding bottom etc. These supported by good fundamentals makes things easy.
The company is undergoing a transformation in its business model after the fiasco in MFI segment induced by demonetisation. As of March 2018, the MFI part occupies a small part of overall business of the company. I expect the company to return to strong growth trajectory in the newly launched product segments. Their borrowing profile shows an interesting change. Retail deposits, savings account etc now make up close to 30% of total borrowing and this figure is likely to increase going forward according to management in concall. This should help in reduction of cost of borrowing and have a big positive impact on profitability going forward. Plus as AUM increases, cost to income ratio also would go down. And write offs in MFI book had been largely been finished by Dec 2017 quarter. March quarter results could indicate things to come going forward.
MAS Financial Services.
Recently listed but in business of lending since 20 plus years. Developed by first generation entrepreneurs Kamlesh Gandhi and Mukesh Gandhi, company has grown its AUM at a rate of 40% plus cagr and has undergone dilution only 3 times till date which includes the recent IPO. Good asset quality. It has a differentiated business model which supports growth with minimal dilution. Anyone interested in researching this company has enough resources in the 2018 Annual report and company presentaion and concalls.
MAGMA Fincorp
Again a business undergoing transformation under a new management. They have included a top guy from Chola and a whole team is put in place to drive the company forward on the growth path. Last few quarters have been devoted to cleaning of books and now onwards company targets to increase its AUM now that its balance sheet has shown signs of improvement.
These are not recommendations and everyone is urged to do their own due diligence before investing. I am not a qualified advisor.
@hitesh2710
Hello Sir , good to see your new investment in micro finance …
My question is … Why Satin Credit is not into your watchlist… Considering HFC added , doesn’t it provide better chances of getting good returns going forward?
Hi Hitesh , Did you analyzed Ujjivan financial also. If yes , what made you choose Equitas or other companies from Micro finance over Ujjivan financial. Would like to know your views on the same.
@hitesh2710 What is your latest portfolio looks like ? If you can tell a brief liner about the rational behind its selection & future growth prospect that will be great.
About Equitas vs Ujjivan, I tried comparing the two but preferred equitas as the percentage of MFI loans out of total lending is close to 28% as on March 2018. For Ujjivan that figure is much higher. I didnt want too much exposure to a company with predominantly MFI lending and hence opted for equitas.
Converting to small finance bank would improve the borrowing profile of both companies with CASA and retail term deposits likely to be a major driver of reduction in cost of borrowings. Against that the new branch rollouts would entail higher cost to income ratio. Once the newly opened branches start gaining traction and generating more business per branch, the cost to income ratio should moderate going forward.
With public sector banks reluctant to lend and private sector banks not too interested in small ticket lending I think if these SFBs get their act right then these can be an interesting space to be in.
I have never tracked Satin so not much idea about its financials or promoters etc. Main comparision was between Equitas vs Ujjivan. I think a combination of the two could also have been considered but the lower proportion of MFI segment in Equitas tilted the balance in its favour.
@Invest, About all the picks from the NBFC sector there’s nothing intentional. There are other sectors under watchlist but not yet zeroed in on any company.
@Rits I exited SKM recently because having given enough time I could not see the results I expected from the company. While topline growth was good bottomline remained subdued. Plus I felt I was getting better opportunities elsewhere.
@kartiks, I dont have much idea about eris life or its products. But a look at the link u mentioned seems to indicate products which are frequently prescribed by doctors. A lot would depend on how the company markets its products.
@hitesh2710, Any views on recent development in KRBL and specific views on frequent corporate governance issue that retail investors are exposed in India. Any pointers to mitigate this risk. Thanks
Personally, i have been holding Equitas since it’s listing and despite the poor performance of stock the most disappointing factor is its recent foray in to secured(?) lending space, which only led to higher GNPA which was sort of diworsification that they did I feel. Having said that the same mgmt have also raised 3500 Cr. of deposits by converting most of their branches in to SFB’s with 35% CASA in just a year of its operation is quite commendable which keeps me holding the stock during this entire roller-coaster episode going on for years
Hello Hiteshji, thanks for the ideas, shall take a closer look and try to read up on these companies.
What is your opinion on JM Financials? The stock has been corrected quite severely during the recent midcap correction. I couldn’t find anything fundamentally going wrong with the company, if not anything the price has become favorable to average down. Do you still hold it?
Thank you Hitesh. I am holding both Equitas and Ujjivan (with Ujjivan having higher weightage). Your analysis certainly helps. Thanks for sharing your knowledge.
Hitesh bhai - post the recent fall in Avanti Feeds, what is your view on this stock? Is it good to hold or a partial exit is advisable now / in near future.
Avanti has had a big fall from around 970 levels to current 483 levels which is close to 50% from its top. This kind of a fall in a company which has been loved a lot and closely followed will attract a lot of guys to buy at every fall.
What one has to understand is that routine corrections of the magnitude of 20-25% from top are a norm and should be considered as a buying opportunity if business momentum is intact.
When a stock has had a run up like avanti had from 160 to 960 within one year then it corrects, besides price correction it will also undergo time correction. So there should not be too much haste in buying. Let the stock price settle in a range and watch the company’s fundamentals for some time before taking a call. Just for example sake u can see what situation was there in pharma stocks like lupin, sun pharma etc. Those who were patient in buying suffered a lot less. Thats not to say Avanti can fall that much but its better to be cautious in buying. Another way could be staggered buying spanning a few months.
Thank you for the ideas, shall take a closer look and try to read up on these companies.
What is your opinion on JM Financials? The stock has been corrected quite severely during the recent midcap correction. I couldn’t find anything fundamentally going wrong with the company, if not anything the price has become favorable to average down. Do you still hold it?
Jm fin has been in a correction mode from its high of around 190 to current levels of 110-120. Fundamentally the margins for the company have been declining gradually and that is probably responsible for the slide in price.
While it may look very attractive on valuation basis, I think one needs to do a bit of homework by listening to concall and going through the annual report and try to figure out how the company plans to grow its business going forward. I had exited jm some time back post q3 fy 18 results.
All companies in the sector namely jm, motilal, iifl have been correcting. Edelweiss seems to be showing some relative strength by correcting less as compared to others.i think the stocks in the sector may remain sideways/down for some more time.
The way these stocks have corrected has come as a bit of surprise to me too but a lot of other small/midcaps also have been hit hard despite good results and optimistic outlook. I guess the market preference has shifted to large cap and there is no strength in small/midcap space.
Stocks considered to be high quality like page inds, fmcg cos, bajaj fin etc are fancied and are quoting at rich valuations.
These kind of market moods and preferences keep changing every few months as can be seen from the market fancy in january and now.
Good afternoon. Would it be possible for top contributors and moderators in this forum to make a list of companies/sectors which novices could start analysing at this time. I ask because the current volatility, seems to be a good time to buy and yet I find myself floundering - not knowing what sectors to look at. Everything seems to be swinging so wildly. Would be very helpful. if I have missed the post would be grateful if someone could point me in the right direction. Have read the one by Mr Yogesh Sane with his thoughts. Thank you.
I see you are recently buying into NBFC. I am a long term investor in L&T Finance almost since IPO. I am tracking results, management commentry etc…all seem to improve but stock is down. Is this a buying opportunity or market seems to know something more?
I am a little thoughtful because last 2 quarters even after excellent results and vision ahead, stock is down 30-40% from highs. Compare it o Bajaj Finance which is making new highs every week in this market mayhem. Agree that it is in sweet spot because of retail exposure and L&T Fin still have significant wholesale exposure…but look at the valuation P/B difference already…L&T is around 2 - 2.5 times whereas bajaj finance is at 8 times…
I was a little concerned when I saw in resuts 2 qtr back that developer loans were significant part of L&T Fin housing loan book but did not sell as I could see management focus on improving things…
Should I have sold or should I sell or keep holding? What should be a sell trigger for this NBFC company? Things to look for to sell? I am unable to figure out when to sell…
