I digged deep into the goodluck india, it seems I might have entered the cyclical business though we are in the tailwinds. I will play it like a cyclical business only for now until it becomes structural.
There are chances it can become structural. Here is how →
- Management execution capability is good or exceptional
- China downturn remains for few years which can give the management enough time to repay long term debts and expand their capacity of Auto tubes and forgings. It will lead to less volatile margins.
- The automobile cycle does not turn bad.
- Management should not focus much on the structure division of theirs if it is eating their cashflows.
- No anti dumping duty by government on hot rolled coils as it impacts their regular business.
Need to understand more about management execution capability.
Also about the forging business in general.
I have found out the reason why the business have volatile cash flows and margins. Here is my thread for the reference → Goodluck India Ltd - #54 by royatirek