SBIN weekly break from FLAG with volumnes
Have u attended Ceinsys tech agm. Can u plz share the q&a discussed in that. As per Instagram they and there subsidy allygro are on a hiring spree.
Thanks and Regards
@ashish_agarwal Please find the ceinsys AGM transcript here. It is one of the AGMs where there are lot of detailed responses from management. You can simply google like this in the future to find transcripts. The very first link in the results is the link I’ve shared.
Update based on results so far
Garware, Daily - Strongest result and broke out with volumes post numbers.
Based on the concall, some of our guesswork came up right. PPF volumes ramping up very well. IPD still a drag but yet company has posted all-time-high revenue and profits. Margins have clear levers for growth above 20% when 1. IPD margins improve in the next 6-12 months 2. Market spends taper off 3. SCF volumes come back in summer.
Management thinks 600 Cr per quarter and so 2400 Cr topline is doable with current production lines which means, operating leverage accruing from fixed costs of production will also contribute to improving margins. No plans for merging GIL or selling Mumbai land but plans seem to be on for selling Aurangabad or Nashik land (don’t remember). A better capital utilisation plan will act as a trigger for re-rating alongside further improvement and sustenance in numbers
Sharda Motors, Monthly - Three months of sideways movement post breakout.
Results here too have been good. There’s clear volume growth in BS-VI, if we excuse the lack of topline growth due to company reducing catalyst trading and looking at gross profits. Essentially at an absolute level, profits are growing and understandably margins as well, with the trading component removed. Market has been chasing skirt with PSUs and ignoring value stocks like this but hopefully things will turn. One thing to note though is that TREM-V might be delayed to Apr '26. I see it more as an optionality at this point and valuation doesn’t reflect even BS-VI growth at this point. Payouts have got to go up as well and are probably the reason market isn’t getting excited. Hopefully dividends for FY24 would be better.
Taal, Monthly - Support from previous monthly tops from '22 and '23. 2400-2500 levels should be strong support here.
Has been the worst result of the lot as margins have continued to be hit despite topline growing. The breakneck hiring done in FY24 (520 to 620 employees) is causing a big drag on margins (employee cost gone up from 22 Cr to 28 Cr per qtr). My thesis was that margins will revert back to 30-33% levels sooner or later. As per the management, they don’t hire when they don’t have projects, so hopefully these people will become billable soon.
It continues to remain cheap, so I intend to hold for another quarter or two since there aren’t many value buys available at this point. On the NCLT side things seem to be progressing well as per latest order from Feb 8.
Disc: Invested in all 3. No recent transactions in any of them. I am not a registered advisor and I write for clarity. Please do your own research
Vaibhav global seems to have gotten in wave 3.
Fundamentally, the business has reported a good result recently and looks ripe for operating leverage to kick in once the sales growth is back.
Adding my chart analysis for Vaibhav Global. Smaller red candles on pull back from stage 2 BO would have been more encouraging. But the setup along with good results look good for a stage 2 rally.
Experts please feel free to correct.
Discl. - Not invested. For study purposes
Updates on results (contd.)
Ceinsys, Monthly - Continuation of trend post numbers. Continues to do well in geospatial and engineering services businesses. The best here might be yet to come as Q4 is generally the best quarter for the business.
This might be the best way to play overall GIS enabled digitisation theme of the govt., be it in roads, power, water, rivers, land records etc.
(From FY23 AR)
AllyGrow business also is doing well and overall business continues to remain cheap despite the runup.
Wockhardt, Monthly - After breakout last month, this month has seen all sorts of re-testing of last month’s levels. It is consolidating and should continue in the direction of trend.
Results here are good as well, though there isn’t much to read into it, since thats not the thesis. Losses continue to narrow and company remains EBITDA positive consistently probably due to the US business structuring.
From today’s filing
Things of interest to us - WCK 5222 phase 3 has recruited 50% patients and is progressing well. Compassionate use in 20 patients has led to 100% cure. It will likely be launched in India in early 2025 post the 60 patient study. US phase 3 completion requires funds, so anything on the QIP would be a trigger here.
WCK 4873 will be launched in India in second half of 2024.
PML, Monthly - Breakdown with a close below 200DMA and taking support in 20 MMA.
Results here are bad with topline being flat but margins compressed big time. Management has mentioned this business cannot be compared YoY or QoQ since product mix can vary a lot between quarters. Still the fall in margins am not sure if its due to some one off expensive inventory of alloys or product mix or lower volume and operating leverage cutting profits in half or something else. These are the times a management has to communicate and strangely there isn’t even a presentation, leave along a call.
My experiment in long-term investing has encountered its first hurdle. PML continues to shrink in the pf without me doing anything. Turns out businesses don’t report good growth year or year and quarter after quarter. What is surprising though is market reaction to every bad result or even fair numbers on the results day, within an hour post numbers, as if selling wouldn’t be possible a month or two or quarter from there. That’s how short our horizons have become? In fact the most profitable strategy in this quarter I have observed could be buying beaten down names post results and selling for big gain in a week or month. (See recovery in Taal already for eg.)
Sharda motors has bounced strongly from 1350 levels and has made a fresh ATH today and is looking quite good on the charts
Garware had broken out and was re-testing pre-breakout tops at low volumes and has now bounced back with volumes today to make a fresh closing high.
Disc: Invested in all names mentioned. No recent transactions in any of them
Mar’23 qtr ceinsys tech margins were 30% which is not the trend, thus inspite of higher topline, there is a chance that op profit may show a dip. Any thoughts?
Shaily, Monthly - Broke out of the two year downward trend last month and continuing the trend post results. The business on the surface has been consolidating last 2 years and growth is back in the recent few quarters.
Shaily is into multiple segments of business from home furnishing, toys, steel furniture, automotive plastics and healthcare. Of interest to me is the last since it can be very high growth and also high margin business. It is a business where Shaily has strong moats due to the nature of business.
In healthcare division, there are multiple streams of revenue - from pharma devices to pharma packaging. Packaging is straight-forward as its containers for sterile liquids etc. (like eye drops) which is still not so exciting. The devices which involves, inhalers, pumps and pens (both contract manufacturing as well as own IP) is where possibly good growth lies in the future.
Shaily has 5 platforms of pen devices, used for different purposes from delivering insulin, GLP-1 molecules (semaglutide, liraglutide) and synthetic parathyroid hormones like teriparatide.
In insulin glargine, among the top 3 which is Novo Nordisk, Sanofi and Eli Lily, Shaily supplies the All Star line of pens to Sanofi. (they also supply for Wockhardt)
Bigger future growth could come from Semaglutide as Ozempic loses exclusivity where the management thinks they have 70% share in semaglutide generics market. This could be as big as half a billion pens in market size as per management. Current run rate for pens is at 14 million if am not mistaken (used to be 6 million 2 yrs back and scaling quite well)
Going forward the contribution from own IP pens will go up above contract manufacturing which will improve the margins. Also since Shaily owns the IP of these pens and the generic players who tie-up with Shaily for delivering their molecule end up paying a platform access fee which somewhat de-risks Shaily’s design and development efforts. This is fairly high margin (difference between consol and standalone is what is contributed by Shaily innovation UK is essentially platform access fee income) amounting to 14 Cr topline and 11 Cr at EBITDA level. As per management this accrues over 9-12 months and as they keep signing up new Customers, they have good visibility over next 2-3 years.
Actual sales of Semaglutide pens would happen from FY27 onward in RoW markets and FY29 in US where actual explosive growth could come. Until then, the design and development work has good near-term triggers.
It is a bit harder to model what numbers will be like without knowing what molecules they have signed on for what Customers (and what stage of approval they are in). This information might be available in next quarter and can provide much better visibility.
Valuation appears fair given the growth. Capacity utilisation is at low levels and utilisation levels are going to increase across segments as per management, so it doesn’t appear like any further capex is required in the near-term. Recent pens capex is about 125 Cr (done in last 2 yrs) and will be sufficient to do about 300 Cr topline. Cashflows could be used to pay off debt which can improve bottomline further in the future. Depreciation for new capex has already started hitting (capitalised in Oct '23) so current rate can be projected to the future as well.
- The rest of the business can be a drag. It still is ~85-90% of revenues. But healthcare will be 25% of topline by FY27 (this is ~30% margin in their own IP pens). Already topline growth is flat as their Ikea and toys business is degrowing but still performance is shining despite that as healthcare business grows 35-40%+ or so
- FDA risk - both from Shaily’s side and at innovator/generic manufacturer side
- Management has taken some steps in the past and reverted. Eg. Toys business seems to be winding down as customers are not sticky. Its good that they are course-correcting soon and focusing on what works. (Toys capex of 25 Cr seems to be used for appliances now)
- Management has overpromised and underdelivered in the past. This however might be changing as management appears almost scared and guarded these days
Also due credits to Aman Vij (@Rokrdude) who has been following this business for a long time and helped me get a quick grasp of things both directly and indirectly (from his insightful queries in the concalls across the years)
Disc: Invested between 460-470 levels. Am not qualified to advise and just sharing my trade note
Do you think that Mazda has become expensive given the runup it has had?