Prasad portfolio

prasadvk · September 3, 2013, 12:46pm

spent few hours in zara shoroom in pune.Found store doing brisk business in women’s wear category.Compaed to all other (mango) merchandise was fresh and more youth centric and wearable.(it drilled a hole of 9200 rupees in my pocket as bitter half was with me).

But one thing was absolutely clear there is no slowdown and pessimism in women consumers

and the consumption stocks which cater to women consumers will keep on doing well even in slowdown.

Trent seems to be list discussed stock on most of the forums.Most of the people are put off with the fact that it is trading at 50 plus PE and do not bother a single look.But it is run by a credible management and is mostly debt free has to be taken in acount.If we are ready to pay 40 plus PE to page why not trent which has got wider basket of products,more scalebility and better management.West side is performing good in semiurban areas and even in metros women buy stock cloathing( office/college and casual) from westside and quality is good.Heard from wife that she get fed up with dress but the colours do not fed up.Star bazar is picking traction. Trent looks a good long term safe bet.A tiny marketcap is again a plus point.

raj1968 · September 3, 2013, 2:06pm

Prasadjee,

How about Jubilant Foodworks? Have you looked at it. To me this also seems be a great business with years of growth ahead till it matures.

Also one big difference what Page has with other textile companies that while the undergarments do not go out of fashion, other clothes have to be sold out at discount very quickly as the fashion changes fast…that’s the reason you see sale every now and then…Just my 0.002$

Regards,

Raj

prasadvk · September 4, 2013, 12:17pm

With annual sales of Rs 405 crore, each of Zara’s nine stores in the country on an average made Rs 45 crore last fiscal, over six times more than the country’s largest apparel brand Louis Philippe and a tad higher than the country’s largest department chainShoppers Stop.

Zara is a clear winner.It has become a darling of urban women.There is a huge shift from traditional salwar-kamij/sarees to western wear.Zara is the only brand where you get new fashion stock every week straight from milan and paris at affordable prices.Generally fashion brands are valued 3 times the sales.Going by last year’s figure zara is already 1200 cr market cap. With 18 more stores comming up this year we can safely assume sales to cross 600 cr this year.

Stuff going out of fashion is a problem all the garments companies face but globally zara has fared better than others in this department also.On to of that it has something to offer to everybody especially kids and women.Zara kids undergarments are of very good quality.

I compared stuff in AND,MANGO,VERA MODO, MADAME,MS,VH etc and I found zara has hit the nail as far as fashionable urban women are concerned and has attracted the fashion concous women.Women generally follow herd tendency and try and copy trendier among them hence zara looks to be a game changer for trent.

prasadvk · September 4, 2013, 1:02pm

Rajee

Jubilant foodworks is a very good stock in a great business. They are mostly in home delivery and their products are machine made. This makes easier for them to expand easily

without incuring too much compared to fine dining.Presently there are only two major players pizza hut and Dominos hence life is very easy as on now.

But personally I feel that domino’s pizzas are not as good as pizza hut.The quality of bakind,chesee,base,toppings,quantity everything is inferior to pizza hut but the cost is low.So when we want to treat others we normally order from Domino’s and when we want to eat out we prefer pizza hut.(this is just my personal opinion and nothing to do with the stock)

But you are right consumption theme believers cannot ignore jubilant foodworks.

dkirand · September 7, 2013, 3:35am

Hi Prasad,

I looked at Trent and at current valuations, it looks like there isn’t much upside left.

a) They seem to be bleeding with Westside and Landmark. Star Bazaar is just about picking up (I am talking of numbers after reading the ARs and other news items). They are closing down non-profitable Landmark stores (the huge store in Forum mall at Bangalore has been closed). So, that’s a positive.

b) The 49% sales and profits from Zara stores seems to be holding up the stock for now. I am sure it would continue to hold up the stock and push it upward from here. Zara stores seem to be operating at 25% operating margin, but the blended net margin of Trent seems to be razor thin. Not sure how long it would take for Zara’s 49% profits to overtake Westside and Landmark’s poor margins

c) However, at close to 50x valuation and running a few numbers, I couldn’t see more than a 15-20% upside over the next 2 years at these prices (of course, can be proven wrong, but my current analysis tells me so)

d) They are trying to do a v-mart kind of model through Fashion Yatra, but are still in baby steps.

For now, it’s a pass for me.

Here are a few interesting links for people interested in researching this further and coming up with a contra view (would be happy to discuss):

a) Firstcall research - gives a good overall perspective -http://breport.myiris.com/firstcall/LAKME_20130601.pdf

b) Last 4 years annual reports can be found on the BSE website.

c) Arisaig Fund bought into Trent in April - Arisaig is a very focused domestic consumer sector fund in Asia, with a good track record in India - so maybe they are indeed seeing something which I am unable to currently -http://www.dealcurry.com/2013044-Arisaig-India-Fund-Buys-Stake-In-Trent.htm

prasadvk · September 8, 2013, 6:52am

Hi kiran,

You are right landmark was and is a big drag on trent.But management has woken up to this

quickly and actively promoting online version of landmark.

West side is performing well in rural/semiurban areas and basically catering to middle class with value for money durable cloths.

Zara is catering to upper class with trendy and fancy wear.

Star Bazar operations are picking up.

Management is having good predegree (tatas). Infact tatas have a past track record of aquiring foreign JV partners.Over next decade we may have interesting aquisitions here

catapulting trent as a global retailer.(tatas may bid for zara global operations or tesco itself)

Hence I feel that this is a secular growth story and one should always keep this on watchlist.

All the businesses trent operates have huge scalability and three to four years of good

growth can put the present EPS in a totally different league.

But as you said presently it is expensive and not a screaming buy.But so are other stock from consumer business.

prasadvk · September 16, 2013, 1:08pm

Apart from trent another sector on watch presently-- welding

three companies from this sector look attractive

1)Ador fromtech

2)Esab India

3)Ador welding

With next leg of investment cycle expected to pick up one industry which gains secularly is

welding regardless of who is getting the main contract.All three companies are likely to benefit and can be played as extension of consumption theme in infra sector and available

at attractive valuations.Esab especially has got monopoly in high quality welding equipment and especially MODI talking about manufacturing in shipping and defence sectors these stock appear no brainer.

Views invited…

prasadvk · September 27, 2013, 4:58am

Initiated position in ADOR WELDING.

prasadvk · September 28, 2013, 2:48am

Present portfolio

1)Hawkins-45%

2)Gruh- 40%

3)International travel house-10%

4)Ador frontech-2.5%

5)Ador welding-2.5%

As mentioned earlier slowly aligning portfolio to new evolving themes.Feel that story of direct consumption(obvious names) has already played out and we need to find out newer

untapped pockets of consumption.I am positive on travel,tourism,intercity transport,marriage companies,welding companies,fasteners and joining materials,women’s apparel brands and kids wear.

Feel that TVS MOTORS and SUNDERAM FASTNERS can be good investment bets. Tvs is in

process of revamping the portfolio and partnership with BMW will come handy.Company

has got good rural presence and available at good valuations. Sunderam fastners could

be direct beneficiary of increased infra spending after 2014 gen election.

Trent,Arvind and gokuldas exports are also on watchlist.

If modi comes to power (which now looks to be reality) ADANI POWER and enterprise could really fly.Power seems to be a better bet.

Feel that Larsen could outperform all largecaps over a period of next three years and could become largest marketcap in India.Tempted really to buy in larsen.

Overall time has come to switch to different set of players.Next matches would be on easy subcontinent wickets with friendly pitches hence players like sehwag,yusuf pathan,yuvraj and raina ( technically not correct–analogy companies with unattractive ratios) are likely to outperform dravids and pujaras (pristine balancesheets).

prasadvk · June 26, 2014, 8:54am

Posted byPRASAD V. K.at September 28. 2013