The performance of the company’s stock price is very weird, it has not really moved since the covid crash, but whereas the NP CAGR and Sales CAGR have outperformed the stock price, anyone wonder why?
Probably it ran more than it should in everything bubble and now in time correction. One can always observe most of the chemical stocks were in multi year consolidation phase prior to 2020 esp. COVID era darlings. We never know when they will break out again. Especially now that Chinese factories are back online they are exporting their deflation mainly in all commodities. This is hurting our companies as well.
the stock was very overvalued back in 2021 or so when it peaked. A capital good can not command 50-60 PE multiple. It’s just that the earnings are finally catching up to the stock performance. Its fairly valued now I think
Earnings have been in negative growth from last few quarters. Order backlog is falling from almost an year. New order intake is lower than the revenue, for the last quarter order intake is around 750 crore while revenue is 850 crore. Unless the order intake shows growth there is no way stock price can move up.
is there any other reason for stock price degrowth?
Reason being rich starting valuations (Marcellus owned stocks trade at premium)
GMM and HLE’s business is front ended and you would have seen these guys getting business from chemical and pharma players as they were setting up capacity in 2019-2020. So their fortunes are closely tied up with these guys doing well and setting up capacities of their own. But hopeful of their revival in coming Qtrs. Tracking closely.
GMM is also focussing on non glass lined businesses, therefore there margins and revenue not picking up due to slowdown in chemical & pharma (though looks like improving gradually) and capex in non glass lined.
The guidance itself is very conservative which means they don’t want to create unnecessary hype.
What drives me towards the company is the management (acquiring the parent company) and expanding overseas. Sooner rather later the glass lined business will perform. The OPM is around 14% since 4 FY’s and not so volatile since 8 quarters, that proves management’s calibre.
Invested and tracking closely.
They are currently working on diversifying the business away from the usual end user industries. Which increases their terminal value and makes them less volatile. Optionalities have increased which should be something a Long term investor should like