Budget over the years has been a non event as far as the fate of economy goes. But stock markets do get excited in the short term because of its announcements for various sectors. Within a few trading sessions its business as usual.
Companies like APL Apollo have done well over the past many years inspite of poor condition of real estate. It has a lot to do with infrastructure development. Newer product launches do target housing segment but there it is trying to create an entirely new cateogry of steel doors and trying to make a brand out of what seems a commodity business. Astral did that successfully and we need to see how APL fares.
Regarding budget steps trying to revive economy, I feel there is very little budget or govt can do to spur the economy. Economy will revive at the time it is supposed to get on track.
I keep tracking Banco on a consistent basis. While quarterly nos have been weak, a lot of this negative news seems baked into the price. Among European clients, they have more focus on Netherlands and Poland etc. I dont know how much Britain contributes to its revenues.
Company’s balance sheet remains sound and the company’s current plant has come to be a very attractive piece of real estate. There are a lot of housing complexes like societies, flats etc in area surrounding the company and company has huge land on which plant is standing. That also offers some notional value although that should not be the sole consideration while considering investment.
If the auto cycle turns, this can provide very decent returns.
Hi @hitesh2710 ji what are your views on apollo pipes? mgmt is same as apl apollo , has a great track record for scaling up the steel pipe business.
they are into the fast growing pvc segment and also entering the bathroom fitting , faucets business - a higher margin business. company is present predominantly in the north , looking to expand into other geographies. on a small base the company has ample scope to grow for many years. Also the plants are operating at very low capacity utilizations as of now, can expect operating leverage with better ultilisations.
Hello Hitesh bhai, Are you still tracking gmm pfaudler? The company had recently shared its 5 year plan and post the q3 results stock price has been running like no tomorrow. There is some news of big PMS entering this stock, but at current juncture what are your views on the business and the valuation ?
GMM has been reporting steady numbers since a long time. But where earlier there was no froth in the now it is being considered as a company with a very strong runway for growth at least for next few years. Especially looking at the duopoly nature of the industry with only two players namely GMM and HLE Glasscoat (and probably could be some smaller unlisted players ) catering to the whole agrochem/pharma/speciality segment capex… I think looking at the stock price move, its in a bubble sort of parabolic move and is akin to riding a tiger. Journey is very fast as long as it lasts, but the momentum is so much that its often mentally difficult to get off. How long this phase atleast in terms of price momentum lasts is anybody’s guess. Many a times these kind of stocks top off much before the actual business momentum is lost and hence one has to be careful in these cases.
@Shikhar I dont have much idea about Apollo Pipes.
In pharma companies that are more focussed on domestic segment are showing very good strength and that is evident both in the results they are coming out with and in the charts where most of them are quoting at life time highs and at 52 week highs in some cases.
Where one cannot generalise is in companies having a big part of their revenues coming from exports specifically USA geography. There companies are having issues of their own and while there are the odd bounces here and there, one cannot go ahead and buy anything from the basket. One has to be more stock specific and try to figure out the company specific triggers and then take a call.
Glaxo India has fallen by around 20%from it’s recent high due the loss in this quarter. Based on your vast experience and more specifically in this sector too, do you think it’s an opportunity to buy at current prices or one should wait for another quarter or two to see the turnaround?
Thanks in anticipation
@bhaskarbora67 Both eris and laurus are different companies. Eris focusses on domestic sales with more focus on marketing. Its margins are unbelievably high. Laurus is a bulk drug manufacturer which earlier was into APIs and now shifting gears into finished dosages. Difficult to compare the two. I have been invested in Laurus post its q2 results.
@atul1082 Glaxo was another Multibase moment for me. Such a reputed company suddenly scrapping plans for manufacturing facilities (and as of yet not having started Ranitidine manufacturing ) was worrisome for me and hence at the sign of a mild bounce to 1500 levels I had got out with close to 10% cut. Going forwards, I think it will take a lot of time to make lost ground and in the meantime markets provide plenty of other opportunities to make decent money. The lesson I learnt from Multibase was to get out quickly on signs of bad news rather than stay invested in hope. That learning I applied in Glaxo. (dont know if it works or not but atleast I had peace of mind after getting out, not having to worry about all the negative newsflow and whether it will end here or continue)
Whether the news is bad or good is a judgement that is largely subjective after taking into account the available data and facts.
In case of JB Chem, ranitidine contributed 10% of topline. Besides even USFDA had not prohibited the molecule’s sale in US markets. There was only a soft warning to which a lot of companies responded with alacrity. While some companies continued to sell it the bigger players opted out of the market I guess fearing litigation if something wrong was proven.
In India, the response from the authorities was more in line with the US results without any one doing independent testing. And there, my experience being a doctor helped. I have seen ranitidine being prescribed since I was in 1st MBBS and it was given even before that. And all of a sudden there is this hue and cry of it being cancerous. The sheer volumes of the drug being consumed by people should have caused some kind of observations much earlier if there was something wrong with the observation. So I was sure that this was a false scare. I tried communicating it too but I guess people were scared and even stock price was moving slowly down (though not alarmingly) so a lot of people were unsure of the outcome.
Nestle’s maggi crisis came precisely at the time of launch of Patanjali products. One can read in between words in the same line. And the product being a blockbuster product, Nestle was unlikely to give up easily. That was a great opportunity i missed.
In case of Glaxo, the decision to put up a big capex for manufacturing drugs on its own was made only recently. Idea was to have a control over quality and timely delivery. And the sudden U turn took me by surprise and therefore I acted quickly. I was never scared about ranitidine in case of glaxo too.
While buying during a temporary hiccup, I first allow price to settle down after a fall and then see if I am comfortable with the time line of the temporary hiccup being resolved. Usually during these times one gets plenty of time to buy. Recent example is the Assam issue in case of Bandhan Bank. Management is on record during concall saying that their collection efficiency dipped only for few days during this turmoil. But markets being markets, stock price corrected from 550 plus to 420-30. I was not too worried on the issue and hence had decided to buy. And I kept buying all the way down from 480 in a gradual manner till 425-30. Even today its at 440 odd levels which is not too away from its recent bottom.
In such crises once you decide to buy it considering it as an opportunity, it helps to decide what kind of timeline this opportunity is going to offer you for buying. This usually is a guessing exercise and not too difficult.
Hitesh Bhai do you track India bulls housing finance. Among all the damage which has happened in NBFC sector, they have done all the right things and despite the carnage in price their business has with stood these really trying times … They conserved capital, promptly paid NCDs and are becoming a retail focussed franchise , the only hangover seems to be the case in Delhi high court…
Hi Hiteshbhai,
Great explanation . Only issue is one really feels fearsome when such Maggi issue happens . How does one overcome that and separate wheat from the chaff ? Like whether it is inconsequential like Maggi (although at that time it felt really bad ) or real scare one like yes bank
Any views on Bajaj consumer care ? Stock has been going through similar hiccups. Temporary or permanent is debatable.( My opinion is it’s temporary )
Positives are
Has good roce, some cash on books. Promoter pledges removed. Good brand. Planning to increase adv and promotion. Got Bain and co involved to improve sales. Promoter has stated intent to increase stake in creeping acquisition
Risks are
Single brand concentration in a single category. Sales growth has been low. Other group companies are capital guzzlers. Bond issue of group company laltipur power had to be withdrawn Recently.
Ibulls housing was a company that made me uncomfortable right from the beginning. And I will tell you the reason why. For an NBFC, the raw material is money. Now if that company gives out dividend payouts in range of 40-80% how is it going to function? The obvious answer is borrowing more. If I think as an owner of the business, what will I do? Obviously I will reduce dividend payout and reduce my dependence on external funding and try to fund my own growth. This type of payouts I felt were the management’s way to play to the galleries. These things can go on for a long time but after a time, the shit has to hit the fan. And this kind of antics are never standalone antics. Usually there are a lot more funny things going on on the sidelines. So for me, even if I missed that story, I was okay with it. And I still maintain that stand.
@A_shah In the the Maggi fiasco, one needed to just put two and two together. The answer was self evident. Only the timeline was something that was not clear as to how soon the mess was going to be cleared. In the case of banks (and financial institutions) one has to be very very careful. A few big NPAs can wipe out a whole bank. Hence I have always been a big fan of HDFC Bank. Till date nothing alarming has come about for it and it has a very long operating history. That is not to say nothing wrong will evey happen but odds of that hapenning are pretty low. And the price pattern for yes bank at the time was clearly indicating that something was rotten and it turned out that a lot was rotten. You can go through Yes bank thread which is a great exercise of understanding how those invested and those not invested think especially the endowment bias. One can even see how the price was manipulated by keeping the newsflow going. Even newsflow was largely manipulated. I think one can write a conspiracy novel on yes bank episodes.
@Unknowninvestor Bajaj consumer care has been one trick pony for too long, relying on the hair oil category for too long. And the management track record of creating wealth in group companies does not inspire too much confidence as an investor. Just look at the investor returns provided by Bajaj Hindustan, Bajaj electricals and Bajaj consumer and compare them with Bajaj auto and Bajaj finance returns and you will get my point. There will be some managements/promoters which rarely create sustained investor wealth. Or there are very few promoters/managements which have created consistent wealth. Instead of Bajaj Consumer, I think the recent correction in Marico offers a far better company to look into and may be invest at appropriate time if so convinced.
Hi Hitesh,
Please through light on marico on below points
Volumes came down…no growth for next 6 months or 1vyr…even after as per one of PMS…volume growth is low single digits i.e 2 to 5 …how we can look at this volume growth especially on saffola…
I have seen many people stopped buying saffola due to health reasons…went to organic oils
As health conscious increased…how saffola will grow
3.there is huge competion on hair oil…
With other companies …how marico can with stand and grow…at least in single digits
Do you still think roe and roce…they can maintain going forward
And the product being a blockbuster product, Nestle was unlikely to give up easily. That was a great opportunity i missed.