@mntolia 's question is quite a pertinent one. I’ve been having similar questions regarding Sanwaria. Bought on the basis of fundamentals with the aim to hold long term. No urgency to sell currently but the pace at which the price has risen coupled with the entry of investors looking to make a quick buck makes one question how the market is pricing the stock currently. After the Q1 results we saw a rapid rise from 7 to 11 and then a retracement back to 7; makes me wonder whether to book profits now and enter again when it is more “fairly” valued at say 12 levels (based on historical multiples).
Personally I believe strongly in the long term future of this company and recognize that the right temperament is exactly what separates good investors from the novice investors who feel the tendency to always “do something”. It would be good to get the perspective of boarders who have successfully navigated these doubts and managed to hold onto their multibaggers.
I think today’s announcement is emblematic of the management integrity risk here (highlighted earlier by @Nolan . Promoting such trivial news with forward looking statements is never a good sign. Further examples of such promotion can be seen in the AGM announcement on September 29, 2017. One can also see from Dr. Anil’s Twitter feed and the company’s official Twitter feed some “unprofessional” activity - e.g. liking of tweets celebrating upper circuits in the stock price. How much of this can be divorced from the excellent business results and how much should one attribute to Sanwaria still being an unpolished, provincial company?
It is a positive development but not conclusive enough. 11 lakh shares acquired by FPIs is not even 10% of daily traded volumes. My thesis on management integrity is based upon improvement of OPMs. Management cannot justify rising sales of high-margin products with mediocre 3% odd operating margins.
I got a noob question, how PNB, SBI, BOB can rally upto 48-50% in a single day ? Whereas small caps/mid caps have a limit of 20% UC. Sanwaria is contiously hitting UCs but the regulators are not increasing the UC limit, infact they brought down to 5% from 20% last week. Does the regulators have weekly, monthly and yearly upper circuits limitation ? Please help me to understand.
Isn’t diversification (or as Peter Lynch calls it, diworsification) along with wafer thin margins (3.25%) a dangerous combination, especially when the said diversification is not coming from cash that the company knows not what to do with but by raising funds externally? Raising 100 million USD for this diversification sounds like a grandiosely stupid idea, especially when it is half of the current market cap and equal to last month’s market cap.
I have big respect for companies like KRBL that have grown well without stressing their balance sheet using internal accruals doing the one thing they do best.
KRBL valuations are quite stretched already. I find Chamanlal Sethia a much better bet at current price for someone who does not like Sanwaria. My reason for entering Sanwaria was that it was grossly undervalued at Rs. 7. Now whenever a business is taking off, not all levers fire in tandem. Thats why the extra risk and the extra return. Besides, more than the plan, execution plays a major role. And I feel that is what will decide Sanwaria’s future. Wafer thin margins have been discussed extensively in previous posts and it would be prudent to keep a close eye on that.
Sanwaria may be next v2 retail provided
1.long term debt should be reduced in each quarter(I will keep a check)
2.margins are low ,it should be increased considerably
3.ROE/ROCE should increase (will be increased if point 1 is taken care)
They are having some 25 crs cash in hand ,they should use the same to repay debts,Managments is working hard and the same is being reflected in the results.
Few months back, I was looking at turnaround companies and came across this one. Even though I made money it appears to be a manipulated one looking at the way it UC and LC every now and then. And as someone rightly mentioned every Qtr they are in a hurry to announce results before anyone else.
Is it a bad thing to publish results before others? Is that something to watch out for? Newbie - so unaware of these indicators.
Disc: Invested at 8 levels
It is not a red flag per se. As you will find in your investment journey and that there are no laws set in stone in the investing world. Everyone has different ways to make money in the market. There are so many exceptions to each rule that there is always a grey area which needs to be interpreted subjectively by the investor in their own capacity. You will find as I have, that the answer to most financial questions is, “it depends.”
Coming to publishing result before others, it depends on a multitude of factors. Running a business is a highly dynamic activity and even the simplest of businesses cannot report their numbers like clockwork. So if a company is repeatedly declaring results on the very first day after the end of the quarter, it is a little difficult to digest.
It is best to consult a CA to understand the accounting process and how much time it takes to form financial statements of businesses of various sizes. Then you will understand if there is a red flag here or not.
I agree to that and another point since your are a newbie you will have a tendency to look at single digit cheap stock and get excited about it . Not sure if this is just another entry in your portfolio otherwise I would suggest you look at the whole process and learn the big picture in investing and chasing better companies . I can vouch for it since I had done similar mistakes.
I remember on another instance I chased a penny cheap stock seeing it hit UC regularly , however it ended up in LC in the remaining days and I was not able to sell when I wanted to .
@mntolia - High volume, optimism and upper circuits were seen even in AU Small Finance Bank, HUDCO and CDSL which are midcaps with a way larger market cap, before the dumping back in July. It is a whole lot easier to manipulate this scrip than those. Not saying that’s what is happening now but that it could be.
I agree with you that there is a possibility of manipulation and it is a lot easier with these scripts. My reply was only meant for @jayakumaru05’s logic on circuits on penny stocks.
As for HUDCO, AU & CDSL, there was no developments in the company to actually support the sudden rise in price. An analyst I follow even gave a sell call for HUDCO since there was no logical reason to support the upward movement.
But for Sanwaria there are good reasons to support the upward movement.
