I seek some insight on the position that I own. Your valuable feedback will always be appreciated irrespective of it being negative or positive.
So current portfolio is as follows:
- Hang seng bees (China Etf of Hangseng index) - 10%
- Kaveri Seed Company ltd- 10%
- Vaibhav Global- 7.5%
- Indiamart Intermesh- 7%
- Matrimony Ltd- 6%
- TTK Healthcare- 6%
- Brookfield REIT- 5.5%
- Kotak Mahindra Bank Ltd- 5%
- Maharashtra Scooter Ltd- 5%
- Antony waste handling cell Ltd- 3%
- Flair Writing Instruments Ltd- 2.5%
- Linc Ltd- 2.5%
- HDFC Bank- 2%
- SG Finserve- 2%
- SG Mart- 2%
- La Opala RG- 2%
- GHCL & DCW (Soda ash cycle play)- 2%
- Care Ratings- 2%
- Cash- 18%
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I had studied Linc Ltd in 2023 and have been tracking conference calls and IPs since then. I believe Linc has plateaued with respect to their writing instruments segment. Management has been cutting their guidance since the last few quarters too. In the recent conference call, they subtlety admitted that their pens industry has no further growth yet and hence, they are planning to expand in adjacent categories like markers, mechanical pencils, etc. Managment guided that FY25 would flattish and FY26 will be ₹600 crores. Initially, they had guided ₹750 crores for FY25, it is clear that management is not acting what they believe plus, when you listen to the conference calls, you’ll realize that the Promoter is fumbling while answering questions.
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See I bought Linc recently and you are correct that they may have plateaued but the new uni balls Joint venture, exports focus and re-entering 5 rupee pen segment might bring that growth back in writing instruments. Further the deli partnership in creative and stationery segment can be learning curve for them for future to come with their own products.
Management guidance was extra bullish but as analyst you have to have some common sense there were so many IPO’s in sector and that growth might have peaked for sector as whole and might take 1 year or even more to make base from there and grow further.
Now I believe growth and valuations are not that cheap but reasonable expectation are baked in, in the price of stock. However not that cheap to make it 5-10 percent of my portfolio as i will add up/down over the next quarters depending on how company performs. Plus the guidance was based that they will make linc the colgate of India giving it to every nukaad and gully but that did not make sense as distribution and collection are not worth it for now so they did dialed down on it which is a good thing.
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It is tough to generate returns in Matrimony imv. I get the appeal - good cash throwing biz, decent balance sheet as compared to peers that are bleeding (maybe shaadi is going to b.e soon). But here is the issue - it’s a biz where almost all profits generated have to be ploughed back into the biz in the form of advertisements. And yes it makes sense but the problem is there has been barely any market share movement for it in the north. The larger competitors still dominate. It’s going to be a treadmill like journey, and the management in one of the calls mentions and he quotes
“The advertising spends is not to increase the market share, but to maintain it” - so unless some large competitor breaks, which seems highly unlikely as they are backed by good large groups too and no one’s willing to back down cause marriage market is a large market, matrimony will keep struggling. The management didn’t seem confident of the overall growth rates of the company in the near term as well. Link to the call -https://youtu.be/2qw5aIsKcRc?si=K5C3e6WgafbTlKTO
Due to this reason, they are also tackling for other areas - the naukri version for grey collar workers, remarriage platform and other smaller initiatives like astrology and stuff - but they are more complimentary and the marriage biz will remain dominant. The other biz will take a long time to scale. Better to view this business when the optionalities start to fire, or you see signs of larger competitors giving up the market. That will create a J curve outcome for the biz - but till then it’s just hope investing imv. Had tracked it a long back and came to the same conclusion 2 years ago and hold the same views: x.com
The problem is simple - usually any kind of saas/platform biz look for higher LTV. But this biz model is rigged against them. Once a couple is married they are both gone, and then starts the cycle again -market and acquire- same is with dating apps, but now a clear leader has emerged in that space, and that’s why it’s able to grow. Will that moment come for matrimony ? When will that come ? And the base biz growth rates are already starting to emulate the overall industry growth rates, which is in single digits. Thus avoid for me - at least for the time being.
Yes you are correct @Shubham96 here but my average buy price is 1000 crore market cap so 300 crores you get cash in the balance sheet and Enterprise valuation is around 700 crores, when they didn’t had all other segments other than matchmaking business used to throw 70 crores of free cash so i am getting core business at 10 times free cashflow.
Now all these other initiatives are ones company can afford to look for growth avenues without risking the balance sheet now that’s something a promoter should do right? Looking to expand the business without risk the company. Further looking their history they won’t burn money for sake of it like their competitiors if that business model does not make sense they will shut it.
Getting on marketing spends in matchmaking yes they have been elevated but you listen to Info Edge concall they are reducing the spends in big way to make Jeevansathi profitable so now the spends atleast won’t rise for matchmaking and can be spent on other avenues such as marriage services, luv.com, meraluv, astrology, blue collar job, etc. so it will help and optionality you never know which one will materialise and even none does i won’t loose that much money so its perfect asymmetry atleast for me if we see it from today point of view.
Heads- I make money and Tails- I don’t loose that much.
Update on the portfolio:
I have rejigged some of my portfolio and cash to align with the market declines so the current portfolio stands as follows:
- Hang seng Bees- 10%
- Vaibhav Global- 9%
- Kaveri Seed Co Ltd- 8.5%
- Indiamart Intermesh Ltd- 7.5%
- Matrimony- 7%
- TTK Healthcare- 6%
- Brookfield REIT- 5.5%
- Kotak Mahindra Bank- 5.5%
- Maharashtra Scooters Ltd- 5%
- Antony waste handling cell Ltd- 3%
- Linc Ltd- 2.75%
- Flair Writing Instruments- 2.5%
- VST Industries- 2.5%
- HDFC Bank- 2.25%
- Care Ratings- 2%
- SG Finserve- 1.75%
- Dreamfolks- 1.75%
- SG Mart-1.5%
- La Opala RG- 1.5%
- Cash- 16.25%
I have exited the DCW & GHCL as I am finding some opportunity in other linear or more players in industry where I have decent confidence of predicting the earnings of future. Refer my next thread where I provide rational of each position.
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Hang seng bees-
- First bought it last year when everyone Fund manager on TV was saying it was uninvestable. (It was music to my ears as it was perfect John Templeton bet.)
- As it was deemed uninvestable whole index was available for near 10 time PE with dividend yield of around 4%.
- I continue to hold these as PE stands at 12 times (after all these gains) & 3.5% dividend yield. These earnings further one can debate is somewhat depressed and further growth from revival of economy can provide boost.
-
Vaibhav Global
- Company did acquisition of Ideal World in UK & Germany operations which was newly started were bleeding money as most of investment is upfront expensed in P/L & benefits is accrued going forward in coming years.
- As a result company share went in depression mode (literally… if you don’t believe me just look at price chart).
- My expectation is just simple reversion to mean whereby now company has broken even in both business and in future will contribute to profits once scaled.
- Further business is of good operating leverage whereby most of incremental revenue after breaking even contributes to bottom line. Thus a 10-12% top line can lead to 15%+ growth in bottom line (for of long period of time) once certain operating leverage is achieved. (However that cuts both ways as happened in previous years.)
- Kaveri Seed Company Ltd
- Cotton business struggled as company was not able to produce inventory due to issue in cotton production of seeds leading to lower sales.
- Export business was in lull due to decrease in sales in Bangladesh & one-time order in base in last year.
- Going forward with better contribution of non- cotton seeds in revenue (which have higher margin) & decent cotton production one was having good earnings base for next year along with improving margins due to operating leverage.
- Further over the years company has bought back its stock aggressively whereby just for reference for earnings of 300 crores in Mar-15 it had EPS of 43.68 whereby now the company for same earnings of 300 crores in Mar-25 would have EPS of 59.10.
- Indiamart Intermesh
- B2B platform player present horizontally whereby company is dominant due to network effects. It generates operating cashflow of Rs.550 crores (not used PE there is deferred revenue in mix). Cash at balance sheet stands at 2600 crores roughly along with 900 crores of investment in Associate or Investee Companies whose market value can’t be determine for now.
- So with this I get a good business with moat for 15 times operating cashflow after removing book value of investment & excess cash from Market cap.
- However there have been issue with the net customer addition for quarters now which is key monitorable as if paid suppliers churn continues the network effect can come under threat.
- Matrimony
- Matchmaking platform being core business (where it is market leader with Jeevansathi & Shaadi.com being other 2 players) generating operating cash around 70 crores each year, 315 crores of cash sitting on balance sheet whereby I get business for 12 times operating cashflow.
- Issue company is facing- Plateauing of new subscribers, Bleeding cash in new initiatives such as Marriage services, Loan for marriages, Dating platform, Astrology & Blue collar job platform for which results may come after long time leading to depress in earnings.
- Also company was facing heightened marketing spends in previous years but now expect to moderate as Jeevansathi is turning less aggressive & starting to monetize.
- TTK Healthcare
- Company has diversified business but what interest me is the 950 crores cash in balance sheet giving option for expansion in various line of business it is in or just give it back to shareholders like me.
- Brookfield REIT
- Occupancy expect to rise from 85% to 95% maybe in coming years. Backing of strong sponsor group i.e. Brookfield Asset Management.
- I get distribution of FD rates and any increase in occupancy will further increase it along with any capital appreciation is icing on the cake.
- P.s. It is dravid of my portfolio.
- Kotak Mahindra Bank
- Lifting of embargo will spur its growth rate in 811 area and its ability to maintain pristine NPA across cycle make it perfect bank to own.
- Does not expect too much other than 1-2 percent of Alpha over the index returns.
- Maharashtra Scooter Ltd
- Levered unlevered bet on the Bajaj group as it holds investment of 30,000 crores in same with having market cap of only 10,000 crores.
- Antony waste handling cell ltd
- To be honest most of my holding is more than year old so it was cheap at that time my bet was on increase in awareness regarding waste management along with company track record of handling big waste processing & waste C & T contracts.
- Currently it has decent prospect of growth with new WTE plant in Pimpri, Bio-mining in CIDCO & renewed Navi Mumbai C&T contracts.
- Linc Ltd
- Bought recently business went from bad to average with Pentonic range pens being hit which increased Margins of the company.
- Partnership with Deli stationery giant for distribution of its products, JV with Uniball for pen manufacturing and selling in India & potentially abroad and re-entering Rs.5 pen segment can bring growth which can be value accretive.
- Flair Writing Instruments
- New Disney licensing for creative segments products, Hauser XO pens being rage in market, exports orders hitting if freight rates decrease in future and other stationery products such as Mechanical Pencils being manufacture in-house. (Steel bottles which has BIS certification is also revenue accretive)
- VST Industries
- Current year margins depressed due to increase in tobacco prices leading to decline in profitability.
- With Normalized earnings of 300 crores we get it for 15 times, with 5%+ dividend yield & growth can be easy that of nominal GDP it is starting to get cheap.
- Potential party pooper- Increase in excise duty as company is in low end of cigarette segment as it doesn’t have too much pricing power to pass increase in cost to customer however concentrated nature of Market make it easier for company to maintain good margins and return ratios.
- HDFC Bank
- Reversion to mean from FY 27 onwards whereby till then I expect the growth rate, NIM and CD Ratio to go to its earlier levels. (Hopefully its valuation too)
- Care Ratings
- Holding for more than 2 years to be honest so my thesis is Corporate India has good balance sheet is in good condition so cross play on leverage cycle of Indian Corporates as companies needs to be rated.
- Company subsidiaries expected to hit profitability from losses earlier probably providing growth vectors for Care Ratings.
- Turnaround in business.
- SG Finserve
- Book value expected to be Rs.225 next year.
- Niche player in supply chain financing with stop supply agreement with the company’s dealers it finances. Further growth expected to come from moving in down the supply chain financing to retailer, Entering in new agreements with new anchors & using tech as platform for achieving operating leverage by keeping number of employees lower.
- Company has good churn rate in books, maintaining spreads of 4-5 percent.
- Dreamfolks
- Proxy play to increase in per capita income, luxury travel & increase in usage of lounges.
- Company however faces headwinds as banks its primary customer are tightening the rewards based on spending by customer.
- SG Mart
- B2B trading house initial in construction materials, Growth rates expect to be high initially & margins to improve with new service centers opening up and stabilizing till FY28.
- Promoter has good background APL Apollo group operating in same sector thus having some experience.
- Proxy for Infrastructure growth in India
- La Opala RG
- Cheap as compared to history whereby sector has seen lot of competitive intensity.
- Business is shifting in new facility with modern machinery & expected cost of production in par with competition or maybe lower.
- Depressed profitability due to maybe liquidation of earlier inventory.
- Thus it provides good base for next year for growth.
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Matrimony.com recently came on my radar when i was tracking promoter buying in this gloom and doom scenario. There could be some merit in diving deep
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Hallo Dhiren, can you elaborate how to invest in hangseng etf.
Use hang seng bees listed on Indian exchanges. That’s how I found it convenient to invest in China other than that I was a dumb guy to sell Hang seng tech etf by Mirae early and missing doubling of the same.
Hope you find my answer helpful.
FYI it’s not promoter buying just result of buyback due to which promoter stake increased in the overall holding in case of matrimony.
I see, thanks for the heads-up.