B's Notes : company analysis, portfolio roundup

[brijwanth]

Hi folks,
Let me just summarize on what can be your expectations on reading this thread.

1. It is more like an investigative notes and not a summary where I provide a comprehensive view. You can read the company’s thread or search in google etc.
2. I prepare my notes in crispier format, which means a gist of few sentences and may be few financials. My rule is unless I can’t fit the story in a page, I have not researched the stock.
3. I expect the fellow Investors to pick up the holes in my theory so that we can come to a logical conclusion.
4. " I have the right to be foolish". What this means is, I need not be correct always and sometimes we may not agree.
5. I am a small retail investor so the resources (mainly time) I can invest are tiny. So please be patient if some of the articles are not properly put.
6. In future the expectations may change and probably will change. So “Change” will be the buzz word.
7. I am not a SEBI registered analyst. So please assume that I may or may not buy/sell stocks discussed on this thread or may own some of them.

So that stated lets get on with the thread. If this post is not reported.

[brijwanth]

Nykaa (FSN E-Commerce) Notes

Key Factors:

1. Scale and Ad-spends
2. Pricing and Valuation

Please go through these sources for detailed info:

Nykaa’s Story Listen to SOIC: https://www.youtube.com/watch?v=Pmgky8DkqWY

Nykaa RHP: https://www.sebi.gov.in/filings/public-issues/aug-2021/fsn-e-commerce-ventures-limited_51574.html

Nykaa Summarised: https://forum.valuepickr.com/t/ipo-review-discussion-until-listing/14547/239

IPO Valuation: https://forum.valuepickr.com/t/ipo-review-discussion-until-listing/14547/235

About Category: Beauty Products are those that require consistent advertising to get the Sales. It can not be compared to something like Zomato, where you are hungry you order. You need to constantly push to achieve Sales Growth that is what Nykaa seems to have achieved.

The company was not profitable for 2019, 2020 but made its maiden profit in 2021.

A beauty product sale co. has only 3 major costs.

1. Product cost,

2. Employee Cost (store front + tech stack)

3. Advt. Costs.

So only logical cost reduction is possible on Ad spends (In fact company reduced spends in 2021 by 30 Cr. vis-a-vis 2020 out of total profit of 61 Cr,). So lets check international firms whether there are any scale benefits(no other financials available)

1. ULTA (NASDAQ: ULTA). The average advt.(SGA) expenses for ULTA were at 23-26%. ULTA has saloons as well and operates in matured countries.

2. Sephora is part of LVMH Group and financials are not available separately.

Can the company get scale effect in Ad spend without sales dilution ???

Here’s a toy sheet to find out if what would be the likely revenue growth and EPS

Excel File attached below

[Returns on Capital]
(https://www.notion.so/c86be69071bd4df4b91183bd4ecf5c5f)

The company on an average requires 100 Cr. every year (excluding profit) to run the show with growth.

The co. is now raising(Non-OFS) 630 cr. for company’s use and is gonna partly pay Borrowings.

Coming to P/E it’s around 567.30. Unheard of but what Ms. Nayyar says in her interview as a summary:

Guys, I am gonna give you the whole Online Indian Beauty market, so can’t you pay for the growth we will deliver for next 10 years.

Link: Nykaa IPO | Nykaa IPO pricing: Enough left on the table for the investor while fixing Nykaa IPO pricing: Falguni Nayar - The Economic Times

Is it worth it depends on the context, see the Amazon returns graph till 2008

1998-2008 $4 to $138 -34 times

Post 2008 graph

2008-2021 $138 to -$3376.07 - 24 times - The red mark in both pics is same

Important learnings:

• Peak to peak 1999 to 2007 too 7 years to just recover money
• You never know if any thing in such a long term hits you
• Not every company is AMAZON

Scenario 1: Whenever there is Turbulence(Bear Market)

Co. gets Scale effects then no visible effect else gets dumped

Scenario 2: Party Continues (Bull Market)

Co. continues to get re-re-re-rated till …

Scenario 3:

Zomato type double/triples and then quiet

What scenario is most likely ???

PDF File with Graphics and Table
Nykaa_(FSN_E-Commerce)_Notes.pdf (71.8 KB)

Nykaa playsheet.xlsx (10.8 KB)

[brijwanth]

A sorry is due as I was unable to post since a while.

The previous Nykaa post seems prophetic and scenario 3 seems to have played out. The company did have a fall but the market seems to have more tolerance for Nykaa than other New gen companies. The answer lies in the free cash flow that the company generates and the nominal profit the company posts. The management seems very likeable(no controversies). Still the valuation is not something which is comfortable(maybe for me).

I am posting my portfolio for any comments that which are the companies which have reasonable valuation and scope for further growth.

company name	% of portfolio
Avenue Supermarts	31.8%
P. I. Industries	12.7%
Bajaj Finance	9.4%
Clean Science & Technology	5.2%
HDFC Bank	4.8%
Pidilite Industries	3.6%
Shree Cements	3.4%
Divi’s Laboratories	3.3%
Sanofi India	2.2%
Britannia Industries	2.0%
Kotak Mahindra Bank	1.7%
Asian Paints	1.6%
Marico Limited	1.4%
Computer Age Management Services	1.3%
Caplin Point Laboratories	1.3%
Nippon India ETF Bank BeES	1.3%
Coforge	1.2%
HDFC Life Insurance Company	1.2%
Dr Lal Pathlabs	1.2%
Nippon India ETF Nifty BeES	1.1%
Procter & Gamble Hygiene	1.0%
ITC Limited	0.8%
ICICI Prudential Life Insurance Company	0.7%
Colgate-Palmolive India	0.7%
Tata Consultancy Services	0.7%
Berger Paints	0.6%
Dabur India	0.6%
HDFC Limited	0.5%
UltraTech Cement	0.5%
India Pesticides	0.4%
Nesco Limited	0.4%
ICICI Lombard General Insurance Company	0.4%
Titan Company	0.3%
Dalmia Bharat	0.3%
Max Financial Services	0.2%
Happiest Minds Technologies	0.2%
Zydus Wellness	0.1%
Hindustan Unilever	0.0%

LIC IPO Time: Meanwhile have look at this Life Insurance companies comparison

Life Insurance Companies - Comparison

Bumping the thread as I have covered 4 insurers as prep for LIC IPO There are 3 key factors in the Industry, which all can agree: You have to get max. premium so that you can easily pay your claims while keeping cost of getting premium, low. You have to be the best in industry when growing funds with very good rates of return Be the best underwriter i.e. skewed underwriting where you prefer certain demographic like non-smokers, govt. employees (excl. police/army) etc. Leadership in …

[brijwanth]

This is a update to my earlier series on Life insurance companies comparison

First a little Context in what we are trying to do here:

• As you must be aware that insurance is a business of taking on risk for a fee. The underlying financials of most of the insurance companies are almost like greek and latin, even for the well versed in accounting.

• The Industry and accountants simplify the whole financials in to simple monitorable like VNB(Value of New Business), Mortality Rate, Types of Policies (Participating and Non-Par) etc. These figures take some facts and some estimates to get to the right answer. The problem is that these estimates differ in each company and have a lot of financial implication on how the company will fare in the future.

• The problem I am trying to solve is three-fold:

1. Make the financials comparable across the companies in the life insurance sector.

2. Take the financial parameters which are as real and not as much subject to estimates as possible. If not at least the parameter must be well regulated (i.e. if the company falsifies the parameter then the promoters should be put in jail).

3. Make it as easily understandable.

Please go through the previous post mentioned below to avoid repetition and to understand what additional updates we are adding.
https://forum.valuepickr.com/t/life-insurance-companies-comparison/11913/259

[brijwanth]

Life Insurance Companies - Comparison

First a little Context in what we are trying to do here: As you must be aware that insurance is a business of taking on risk for a fee. The underlying financials of most of the insurance companies are almost like greek and latin, even for the well versed in accounting. The Insurance Industry and accountants simplify the whole financials in to simple monitorable parameters like VNB(Value of New Business), Mortality Rate, Types of Policies (Participating and Non-Par) etc. These figures take …

[brijwanth]

https://forum.valuepickr.com/t/polycab-india-connection-zindagi-ka-w-c-fmeg-and-epc-player/23619/234?u=brijwanth

[brijwanth]

NSE Symbol : Polyplex

• Sales Growth has been falling in the last few quarters with PAT
• Promoters & Institutions exited, Public rolled in
• P/E very high with reference to company’s standing

Disc: Presently not Invested. I’m not a SEBI RIA. Please consult an RIA before investing.

[brijwanth]

Limited Data Post- Listing

NSE Symbol: RKSwamy

• Company’s brand name Hansa
• The company’s growth since FY22 growth has dropped
• RoA is surprisingly low for an ad agency, which is considered asset light business
• Does seem to have some unlisted co.'s in similar activity(requires deeper search)
• Leverage seems to be on higher side but will reduce post-listing (fresh issue part). RoE will also reduce.
• Book Debts seem to be high at 255 days (almost 3 quarters)

Any comments on company’s business are welcome.

Disc: Presently not Invested. I’m not a SEBI RIA. Please consult an RIA before investing.

[brijwanth]

Symbol : Dream folks

Company Name: Dream Folks

Its business model is negotiate with the actual lounge owner in the airport and with the credit card company. Offer a software layer between them. The charges are not per software use rather they are accumulated at both ends making it a B2B company.

So there is low CFO, High receivables despite a thriving business with temporary hiccups

[brijwanth]

Company : Remedium Lifecare

opm is insanely low
only public shareholders
debt in all forms

[brijwanth]

1. The company has seen growth in profits due to exports, but it hasn’t translated it into cash flow.
2. Electrical products are currently popular due to Renewables Theme.
3. Transformers are one-time investments and not regularly bought moreover technology is widely available for their manufacture except for High Voltage DC Transformers.
4. Growth is being driven by exports, but it might not last.
5. The stock’s price-to-earnings ratio is high, suggesting it may be overvalued, and the public has been buying up the stock.
6. If you are wondering what the 1st graph was it was Sales from 2012 till 2021 where it was almost stagnant. A lomg term historical perspective sometimes is useful