Hitesh portfolio

@nitinmukhi, what are your conclusions?

over the next 3-5 years:
->major consolidation in the banking sector
->current status of 75:25 between public and private banks will reverse
-> within the private banks, the principle of “winner takes it all” will start to play
->private bank which is most suscessful with its digital payment strategy, will steal away most of the saving a/c
-> private bank with most saving bank balance will have the lowest base rate
-> low cost will trigger high market share on the asset side. and the entire vertuous cycle of low cost and high market share shall commence

u may want to share ur views…

1 Like

Not trying to hyjack Hitesh’s thread here, the below link takes you to 14 Fin Tech Start Ups that are buzzing in India…

i think payment banks are going to speed up the distruction of PSU banks. lets say for instance, if a paytm steals the saving a/cs of SBI and some how a HDFC is able to maintain its 40% CASA (i.e. escape the onslaught from Paytm) . Then obviously, the base rate of a HDFC will be smaller then a SBI. And SBI and other PSU banks will loose market share on the asset side.

2 Likes

Hi Hitesh,

Any views on the writeup we had for Vishnu chemicals or National Fittings? Would be great to have your viewpoint, if not on shares, then on our analysis.

Akash & Nikhil

I dont follow either of the two companies vishnu chem or national fittings.

Hello Hitesh bhai,

I too was initially piqued about a short term opportunistic bet on Cadila, but on dissecting the warning letter i was concerned about the failure to address consumer complaints about the product mix-up.

I am highlighting the relevant passage from the warning letter -
http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2015/ucm479712.htm

Over a three-year period, your firm received nine consumer complaints related to potential mix-ups among products produced at your facility. Complaints were reported by different pharmacies and distributors.

Your firm’s systems should be capable of detecting adverse trends. Your complaint review should determine whether other products and batches are potentially affected by the problem reported in a consumer complaint. Due to this deficient SOP and incomplete complaint handling practices, you did not ascertain the scope of quality defects, such that you could link consumer complaints to other potential quality problems.

As a result of FDA’s inspection, you re-opened your investigations related to the nine consumer complaints about product mix-ups. You eventually identified manufacturing deficiencies that could have led to the product mix-ups. Also, as a result of our inspection and your subsequent re-opening of these investigations, you submitted FARs and initiated a product recall of several lots.

Your response indicated you planned to conduct a retrospective review of product complaints, deviations, and product failures from January 2013 to August 2014. This retrospective review appears to focus on your solid oral dosage products and is only conducted over a limited period. Your retrospective review period is insufficient and does not appear to address whether other dosage forms made at the site may also be vulnerable to mix-ups or other major defects.

FDA clearly expects Cadila to have a more effective Pharmacovigilance systems in place, and this is going to be a recurring theme in future considering the recent flak FDA received due to poor post market surveillance (PMS) of drugs by GAO (Govt Accountability Office in USA)

FDA Lacks Reliable, Accessible Postmarket Data on Drugs, GAO Says
http://www.gao.gov/assets/680/674183.pdf

Above report released around Dec 2015, mainly stresses on New Drugs but one can expect it to trickle down to generics down the line, and companies such as Cadila could be low-hanging fruit for FDA to make immediate corrective action and pacify the legislators.

I understand that company has recognized the seriousness of the issue and taken stringent and proactive actions. But one cannot rule out the possibility of the consumer complaint issue in other plants on account of an ineffective SOP.

Long term, i feel having a good Pharmcovigilance system in place is essential, because it would be required in case of biosimilars.

Would appreciate your inputs.

7 Likes

Hi Vishnu,

I totally agree with the points on the USFDA compliance. Having met few of the pharma companies, I think it more trickles down to how lower and mid level employees handle the compliance issue despite top management trying to implement very strong measures. The issue I think with many of the employees is to employ short cuts (‘jugaad’) and not following the lengthy procedure that USFDA or even top management might desire. I still think that the complaint issue could have been handled more diligently even by top management.
Having said that, despite the company having issue with its Moraiya plant (contributes around 60% of the revenues and 40% of the future pipeline to total US sales), it still got its other two formulation plants compliant by USFDA after the issue in Moraiya and even recently got Establishment Inspection Report (EIR) for its fourth plant at Baddi - BSEINDIA.
I think if the site transfers for many of the big products from Moraiya is successful, it can be seriously looked at. Although, havent studied in detail, but as per few research reports and going on just numbers, the ANDA pipeline does seem long and good.

5 Likes

Cadila has the second highest pending ANDA’s after Aurobindo. Besides, it has other optional triggers - Biosimilars (not an easy path), Animal Healthcare (recently acquired Zoetis India assets) and the Diabetes pie.

As u highlighted. site transfer is key as they missed the 180-day exclusivity launch date for gAsacol in Nov 15.

I would give it another couple of months to ensure there is no further FDA actions, before i think about buying. Definitely interesting.

4 Likes

Hi Hitesh
As you are using technical analysis to complement your fundamentals, could you recommend a data service and a software package.

I use metastock and a data supplier here in Kolkata but am looking for alternatives.

Please advise.
Thanks
Kumar

I wont be able to help u as I too use metastock and not much idea about other providers.

1 Like

Hitesh,

Did u find the innitial introduction on presistent systems, interesting enough to find more info abt it??

i am keen on researching some good mid-cap consumer discretionary companies…would u be able to suggest something tht i can dig deep into???

hi

persistent does seem interesting but too complicated for me to grasp. So gave it a miss.

About consumer discretionary companies , there are many of them listed like kajaria, whirlpool, various AC companies, titan and other jewellery companies, jubilant foodworks etc. I find most of them priced to perfection.

ok.

well some of the name u suggested, have promoter issues, like jubiliant food works. it belongs to the bhartia family, which also owns hindustan times and have close affiliation with congress party. plus issues with pledging of shares, plus issues of their pharma arm not doing too good. therefore the likelyhood tht the promoter would take decisions at group level rather than specific co. level.

i am not to concerned with pricing, because, quality comes at a price. my bigger focus is “competitive advantage”. if a mid or small cap company already has a compatitive advantage, tht means its something special. and i want to learn more abt them. till now, i have discovered two, (1) pc jewellers, (2) Lt Foods (owns dawat basmati brand). in india basmati is discretionary and not staple.

Hitesh Ji,

I posted this in a suspended thread so reposting it again to get further understanding.

Dear Friends,

Can you guys share some PDF, Links to get sectoral understanding of HFCs, Its SWOT, long outlook , driving factors, market size & industry cagr, threat from banks & NBFCs, etc. Seems every ace investors are betting on HFCs. Now there must me some tailwind in the sector for sure, otherwise why it would come up in MC.com/CNBC :slightly_smiling: On a lighter note, I am bit afraid, I read some where " The moment your stock or sector is making TOI Headline, its nearing a crash "

However I tried my best to do a fundamental analysis & relative valuation on HFCs, interestingly GRUH Finance is not among the top - from entering perspective. Need views on whether the analysis makes sense. Clearly valuations are not attractive & margin contraction is happening, thus rank has gone down compared to peers. However its also true that paying up for quality is not bad. Bit confused ? :confused:

Also why all Realty stocks are beaten down to death, property brokers are jobless, Metro cities home prices have corrected by 30%- Delhi/NCR but HFCs are doing quite good / continue to do good. Isnt there a disconnect.

Hi Hitesh,

Are you tracking Nocil in the rubber chemical industry? profits have been rising due to lower crude prices and margin expansion

@dipen, I dont track nocil.

@anupam regarding HFC the tailwinds have been since past 3-4 years as reflected in the run up in stock prices. Coming to the table u put up I cant get myself to apply such generic formula to my investments. I take each company seperately and try to do diligence.

Hiteshbhai, I also wanted to ask this query on HFC. Yes, there is slowdown in real estate sector, thousands of square feet of inventory is lying idle, we are reading this as headlines in major dailies and the stocks in this sector are battered. One of my friends works in a HFC and according to him, although the business is ok, majority of it is coming in form of BT (balance transfer) & BT top up.

This clearly shows people are switching loans from one HFC/Bank to another for either (i) Lower interest rate and/or (ii) More loan value on same property. Again, this means that - (a) The new demand is slow, (b) BT will only squeeze the NIMs of the players. Banks will be the biggest beneficiaries in this case, as they have got access to the cheaper CASA funds, while the cost of funds for HFCs are supposedly higher.

To sum it up, the underlying sector is not doing too well and there is pressure on margins. Why would HFCs do well in the near future? Am I missing something or my assumptions are incorrect. Kindly help with your opinion pls.

Tks & Rgds,
Advait.

2 Likes

advait,

I think the big ticket properties in real estate is having a difficult time whereas small ticket home segment is showing robust growth. Disposable income in hands of lower and middle class has led to good times for HFCs.

Plus with HFCs it doesnt take too much effort to open branches in any location and that would add to incremental business. Whereas banks will have their limitations.

1 Like

Dear Hitesh Bhai, Do you think at current price Ajanta Pharma and Alembic Pharma are offering adequate margin of safety for a long term investment. Regards