Bull therapy 101-thread for technical analysis with the fundamentals

Esab India, Monthly - Has been consolidating for a year in this wedge while numbers have improved consistently. Current quarter numbers are an all time high and should hopefully lead to a breakout from this consolidation.

Esab India is into welding consumables (welding rods or stick electrodes), welding equipment and cutting products. Seems to be a picks and shovels approach for capex play. They supply to Shipbuilding, construction, transport, energy and also in repair and maintenance of steels mills, cement, sugar etc. So this is probably the safest way to play the capex. The company has a very good return ratios with RoCE around 45% and RoE around 33%.

The company came up with some very good numbers over the weekend - 25% topline growth and about 33% bottomline growth YoY. Margins were at an all time high as well owing to operating leverage playing out. Unsure of what the capacity utilisation currently is but if these sort of margins continue, there could be disproportionate growth ahead.

Permanent Magnets, Daily - Broken out from pre-result prices with a gap up, most of which it filled intraday. Might re-test the trendline at around 630 levels

Numbers have been quite good here again with a 45% topline growth and a 65% bottomline growth with good margin expansion. More details on the business are present in AR and investor presentations and the AGM recording.

Disc: Have a position in Esab India from around current levels. Permanent Magnets from 550 levels and added a bit more today. A re-test could be good levels to add more.

13 Likes

QoQ growth continues for Arman, as Quarterly Pat crosses 19+ crores and Interest income has also grown.

Stock close to 52 Week highs

Disclaimer: invested since 700s. Mfi cycle, lets see signs of picking up pace with funds raised hitting Bs next Q. Run rate should accelerate

8 Likes

Techno Electric, Monthly - 1.5 years of downtrend under that trendline along with the business which has gone through Covid, commodity prices and execution problems, being predominantly a EPC player. Currently though all of them are easing and orderbook is at an all time high 3200 Cr and the management thinks it will end FY23 with an orderbook of 4000 Cr in the Q2 concall.

Execution in H1 has been tepid though the management has guided for 1200 Cr topline (conservatively, as per management) for the year, which means H2 will see about 800 Cr topline (Q3 to be better than last 2 quarters and Q4 will have bulk of it). The EPC margins guided are 12% (again, conservative) but if commodity prices ease, can be higher (Recession in Europe management says could be a positive for them). Considering H2 FY22 EBITDA of 82 Cr, the EPC EBITDA alone could be 96 Cr (12% of 800 Cr). On top of this, the Power segment could contribute about 25 Cr so H2 EBITDA growth could be ~50% if my guesstimates are right.

Those near-term positives should help the breakout.

On a long-term perspective, the valuation for the business is at ~9x EV/EBITDA. There is about 1200 Cr cash on the books and there’s a buyback going on for 160 Cr (~50 Cr buyback completed I think) which should lend support to the price. The management has guided for giving out 500 Cr as dividend as well. FY24 and FY25 topline could be in the order of 1750-2000 Cr as per latest guidance since the orderbook is timebound and has to be executed in the next 2 years.

The data center business is a nice optionality in the valuation and could positively surprise from next year. They have guided for revenue contribution from July onward next year. I don’t quite understand how this works but it looks like it could be a 250 MW data center and Techno Electric could get 10 Cr per MW. I am yet to study this bit and what term sheet they are getting into and so on since I haven’t considered this in the valuation but this could be a positve long-term surprise.

The chart and valuation and business prospects says there isn’t much to lose from here. Technically a monthly close above 320 will confirm a strong breakout which should happen in the next 2-3 months. This can be a very illiquid stock on some days and quite liquid on others - so staggering buys could be a better approach.

Disc: I have some positions around 290, initiated today. Not SEBI registed and I am a novice, please research and use your own judgement. This is my written thesis for clarity for the trade and nothing more.

15 Likes


They are selling one third of their power assets. Does this change anything in your estimates?

1 Like

Nice write up @phreakv6

The 250MW target it till 2030. In the first phase it will be 30MW at Chennai. They will look at other locations like Kolkata for the next one. The cost is around 45Cr/MW. They are actively looking for a partner for this business and in discussion with quite a few. They want to use their wind assets to power this data center so that it can be categorized as green and the tenants who have ESG commitments come to them.
They will have a revenue potential of 10Cr/MW (-power cost).
Ref: Conf call
Disc: Invested recently

4 Likes

GE shipping ,Monthly :- It broke it’s lifetime high of 625 today that it made during 2008,I am not much of technical guy but fundamental wise the stock is bound to break it’s lifetime high due tanker rates being super high due to ongoing russia-ukraine war.This quarter they posted the highest net-profit ever in the history of the company and management in this con-call has guided for an even higher net profit due to Europe subsituting it’s energy needs from USA and other countries instead of Russia and demand for these commodities is higher in winters leading to more demand for ships and shios have to travel extra miles.Even if russia and ukraine war was to stop tomorrow ,it will take time to heal wounds and for Europe to start buying gas and oil from Russia again so these tanker rates might not fall in the near future.This is the only listed shipping company apart from shipping corporation of India which is a Psu,Shipping business is all about cyclicality might not be worth investing in Sci as it works for the nation then the shareholders.

Historically the company has traded between 50 to 110% of it’s book value currently at 65% and with all the tailwinds(high dollar rate, high scraping price for ships, company becoming net debt free, new shipping scrapage policy reducing supply of ships in the shipping sector this might do very well.

Counter arguments :- a global recession could trigger a low demand for commodities leading to what happened in shipping stocks 15 years back during the 2008 financial crisis. but the company is ready with cash this time in balance sheet to add to it’s ageing fleet this time.

Disc :invested from 280 levels will add more if the tankers rates keep going higher and price stays rangebound.

4 Likes

Pricol, Monthly - 4 year bottom formation and a lot of dilly-dallying around for 6+ months this year and then getting a move on. A breakout like this generally doesn’t happen unless there’s strong fundamental shifts and a price struggle for 6 months post breakout also implies the confusion for sustenance and the belief is perhaps in the price its trading it last 3 months. This pullback that’s currently on could be a good entry for the long-term.

Why Pricol? The recent (this year) partnerships show the company is ambitious and hungry. Three very good partnerships - with Sibros in the driver info systems and telematics space (DIS will show everything from speedo, odo, temp, battery etc., along with ability monitor where the vehicle is remotely and also do OTA updates just like most smart devices.)

Another partnership with BMS Powersafe that gets them into the BMS space. I like how Vikram Moham the MD explains about BMS - as the equivalent of an engine for a EV (although I see it more as a ECM - Engine Control Module, which is the brain of an ICE vehicle, controlling the fuel injection, spark plugs and the firing). This gets them future ready into crucial EV components

The partnership with Candera will help them design good UX in their DIS. As the layout, the nature of colors, the design of menus etc. will matter a lot in their digital TFT screen based touch-screen interfaces, as compared to the traditional analog instrument clusters.

The products they make currently

Good clientele

Recent product launches

It looks like the sort of interfaces we are used to in cars, are making their way to 2W space now.

They also make instrument clusters for CVs, tractors

They also make some crucial components like Fuel pump, water pump for ICE vehicles and count CAT, Ducati, BMW, Volvo etc. among their clients in the export market

There seems to be some sort of transformation happening the business and having seen this business making auto meters and boring analog instrument clusters, its nice to see them reinvent and get ready for the future.

There is a lot of info in the concalls Q4, Q1 and Q2 and investor presentations Q4, Q1 and Q2 and the AR

The earnings have started to show up in the recent quarters but I believe the future may have a lot more to offer.

The balance sheet is lot stronger of late after they have taken some hard decisions to sell of some of their subsidiaries to re-align themselves.

The valuation at 10x EV/EBITDA isn’t very expensive for a company displaying the hunger to grow in a country with a lot of opportunities to do so. There are margin risks though in the business since a lot of the electronic components like the TFT screens are imported from China which exposes them to forex risks. There’s also risk of obsoletion of some of their products in the ICE catalog and the analog instrument clusters. However the business is perhaps in a better place today to overcome those than anytime in its history.

Disc: Have positions around 175.

43 Likes

South Indian Bank- weekly chart

Crossed the nearest resistance with very high volumes, indicating entry of institutions. Volumes in recent months have been life time high.

Price is the indicator and volumes are the weight of the evidence.

Relative strength vs the Bank nifty indicates out performance.

Coming to Fundamentals:-

  1. New book vs Old book mix. After the new MD joined in 2020, there has been a conscious focus on asset quality. Also sector level, credit risk has bottomed out after years of credit quality issues.

Here is the background of the new md & my industry checks indicate he is someone stringently focused on asset quality.

  1. Asset quality of the new book vs the old book. New book has higher Net interest margins and higher share of corporates that are A+ rated vs the legacy book.

NNPA of the new book is 0.01% vs 2.41%+ for the old book.

  1. Improving NIMs:

-Firstly, rate transmission to depositors has been slower. This has been true for the entire banking space, and will start normalising.

-Second part, which is much more structural. The new book that is built (33k crores) has higher yields, better NIMs, better quality. As the older book keeps getting churned, the newer books profitability will reflect. And overall NIMs should start looking sustainable.
Nims in newer book is 3.6%.

  1. Valuation:- Book value per share is already at Rs. 30. Key monitor able is net slippages in Q3FY23 result. If net slippages come in net negative, then all street estimates will get revised. Beats in expectations basically.

Disc: invested since Rs11.One of the top 5 allocations in the PF at the moment. Risks are huge too.

24 Likes