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Hitesh portfolio

Both shasun and granules seem to be on a tearaway run.

In pharma space I prefer companies in the formulation space which find presence in doctor’s prescription. Both shasun and granules are in bulk drugs space and dont have any prescription (read retail presence) presence.

Problem with these bulk drug companies is that we dont expect rerating to happen to the extent that seen in the former companies.

Hi Hitesh,

As for granules, with 3X capacity expansion in FD segemnet, 2X capacity addition in PFI segment, promoter slowly releasing pledged share, promoter slowly buying stocks from open market -> won’t that result in increase in EPS, and an increase in PE?

subash,

I have never looked too closely at shasun so dont know too much about its earnings or expansion plans.

Currently i am sticking with things I know most about in pharma sector – ajanta, unichem and fdc.

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Hi Hitesh,

As for granules, with 3X capacity expansion in FD segemnet, 2X capacity addition in PFI segment, promoter slowly releasing pledged share, promoter slowly buying stocks from open market -> won’t that result in increase in EPS, and an increase in PE?

subash,

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fdc.

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I too feel that staying with the ones with strong brands with growing traction is a better strategy. The branded players ( although they are branded generics players and not brand innovators owners per se) with their dedicated sales force targeting retail doctors have better control over pricing and margins as compared to bulk manufacturers ( like Granules) or even CRAMs players ( like Dishman). Hence I too am more comfortable and hence invested in Ajanta & Unichem.

Also the export segments with Ajanta’s niche export markets (select brands in select geographies) and Unichem’s growing traction in exports present a better complement to their domestic sales growth and hence additional comfort.

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Hitesh Bhai

What’s your take on wockhardt?

A bigger company quoting at same valuation as ajanta and also growing at the same pace

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Not too much study on wockhardt. So not much to offer by way of comments.

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Hitesh,

What is the basic criteria on returns expected when you invest in an opportunity? - Say Capital protection + 30% return p.a.

Regards

nadakarni,

Its difficult to gauge the returns the stock can generate because it all depends on market factors as well.

But if we can find a company which can grow at around 25-30% for next 2-3 years and is with low debt, good return ratios aand available at reasonable valuations it makes sense to invest in the company after due study.

There are some opportunities where downside seems reasonably protected. e.g fdc , sree sakthi papers etc. In these cases one has to reduce the expectations and wait for some sort of trigger for stronger returns. If after a fixed period of time the stock fails to live up to expectations or in a situation where you get a better seeming opportunity, one can switch to the new idea.

Of late what I intend to focus more is on capital allocation. Stock picking is just one aspect to making outsized returns. Allocating sufficient weightage to a good idea is also equally important.

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Thanks Hitesh, It is really really helpful.

hitesh bhai,

why hawkins why not ttk prestige is there any development in supply side from hawkins.

Even though valuations of Hawkins might look stretched on ttm basis, I think once the temporary problems of Hawkins are settled, it can come out with a string of good results.

And when things fall in place for a company the good news will not always be limited to the problems we have seen so far. There might be good news pouring from all quarters. Hawkins also is likely to see good times. What one needs is patience and perseverance.

Even though no news regarding pollution control are out, the stock price has moved out of the band it used to trade in earlier – 1450-1600 and now manages to trade consistently above that level. That must tell us something that markets know better and within a short time things are likely to fall in place.

sir, GRP payout has been very less , any specific issues , and besides this its in a cyclical business, so timing matters the most in investing in this business, its not a secular growth story

zulfi,

GRP payout has been on lower side mainly bcos it is still in expansion mode and needs capital for expansion. It is almost on verge of completion of expansion the fruits of which could be seen in next 2-3 yrs.

Regarding it being cyclical – they seem to have done quite well till now with all the up cycles and down cycles of the economy. So in a way its difficult to label them as a cyclical.

**Best part is that its sales has wide geographical distribution which provides it some insulation against cycles. **

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Hiteshji,

Is your current investment driven by current positive bias among investors towards Pharma?

Regards

Not necessarily. I have a lot of other stocks like hawkins, grp, muthoot, mayur, kaveri seeds, atul auto etc.

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Among pharma I have ajanta, unichem, fdc .

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Today bought some shilpa medicare. It has been on my radar since a long time. Sales growth has been encouraging since past three quarters. Company is doing on avg around 75 crores sales as compared to earlier run rate of around 60 crores. Currently margins are not consistent q-on-q but I have taken a bet that margins will take care of themselves going forward. Plus it has net cash on balance sheet. and when a chart set up suggests a buying chance I took the plunge today. Lets see how things pan out.

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hitesh, if you look at the consolidated results, the revenue in jun-12 was 88 cr vs 68 cr in jun-11 so good growth of roughly 30% although profits seem stagnant. could be an interesting bet once the profitability returns to original levels. technically i can see the inverse head and shoulder pattern you were hinting at but i still can’t see a completed the pattern. i see that it needs to break 300 with strong volumes to establish an uptrend(300 has been a strong resistance for the last few quarters, being the neckline of the pattern). it made an attempt at 300 a few weeks ago which failed. may be the next quarterly result does the trick.

Hiteshji,

Is your current investment driven by current positive bias among investors towards Pharma?

Regards

Not

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attached a chart for your reference


Hitesh,

i think financial sector to outperform going forward with all those reforms and steps by US fed.

will u still prefer a Kaveri orsomething from Banks / NBFC.

would also like to have ur view on Ajanta going forward.

Hitesh , would also invite to have your views on Avanti Feeds and Wimplast where growth seems good and forward valuations FY '13 very reasonable.

vimal

regarding banks outperforming going forward, I am not too sure about that. But if that were so, its better to stick to good private sector banks unless one can find out a PSU bank with low asset quality concerns.

regarding ajanta – I think yes it will do well going forward. Consistency seems to be the hallmark with ajanta.

Kaveri still looks good for further upsides. It would not be unusual to expect Kaveri to trade at PE of 15-18 going forward looking at the track record and the balance sheet strength.

Avanti Feeds and Wimplast I think Ayush might be better placed to answer to your queries.

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