Hello Hiteshbhai
Thank you for sharing all your knowledge. I’ve learned a lot from your insights.
What are your views on GMM Pfaudler & Divis laboratories?
Hey @barathmukhi! thanks for the lovely graphics, its very insightful. About averaging up, bounces are almost always more than 20% for a given stock. How do you know when it has made the bottom and now is the time to average up? For example: HDFC bank made an intraday low of 738.75 on 24-03-2020. 20% higher price is 886.5 which was achieved on 2 days after on 26-03-2020. It then went down to 810 on 03-04-2020 and again went up to 1019 on 30-04-2020. It closed at 838 on 22-05-2020. How do you define 20% higher? Any insight will be useful.
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I should have mentioned, consider buying (I may or may NOT buy, depending upon market and business conditions) 20% from the bottom only when we start to see some data points which indicate bad loans have been written off and bad times for the business are starting to come to an end. This is a subjective decision and cannot be quantified.
Let’s assume Bajaj Finance’s stock touches 1000 bucks at some point in the next few months and if you beleive Bajaj finance has the ability to go back to it’s all time high price of 4900 odd in the next 3-4 years, then what difference does it make whether you buy it at 1200 or 1300 or even 2000 bucks (once it starts bouncing back)? And that’s the whole idea.
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My view is that if people are going to work places than why they will not go multiplexes
I think there are rational when we talk abt workplace and multiplex
Basically etiquettes when it comes to office
Hygiene and mainly we keep in mind abt our colleagues and social distancing
Especially in some workplaces, they keep routine switch of colleagues rather than bringing all together, leaving one chair ideal for gap in office
Using your own equipement whether chair or personal space
And mainly u can tell your colleagues what to do and not to follow or make them follow via rule
When, we talk about multiplex
Everyone is a stranger
Freedom of option, opinion, choice will definitely makes situation worse
Would u sit next to a sick person at this point of time? Ease of spreading disease…
Govt regulations on air conditioning and lot more… one can figure it out…
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Hitesh ~Any thoughts on cadila/zydus stock and also in terms of management quality?
I think it is totally upto the management that how they will maintain the discipline and will sanitize the palce after every show
In my opinion slowly with some changes everything will open
Both DB Corp and Jagran have been in strong downtrends and have corrected a lot since past few quarters.
DB corp has corrected from a high of 447 in Oct 2016 to recent all time lows of below 60.
Jagran posted a high of 213 in Oct 2016. It has corrected to below 40 which again is a decadal low.
While the profits have not gone down precipitously for these companies (peak op profit for db corp is 640 odd crores and ttm op profit is 520 crores. simiarly peak net profit for db corp was 375 crores in fy 17 and ttm profit is 305 crores. Similarly for jagran peak op profit is 640 crores in In March 17 and ttm op profit is 516 crores. Peak net profit for jagran was 517 crores in March 17 and ttm net profit is 329 crores.)
That clearly shows that market perception related to the profitable growth of these businesses and the terminal value assigned to these businesses has undergone a big negative revision.
Market perceptions are often prone to changes in relation to the kind of markets we are in besides other variables affecting the business which can be temporary in nature, like raw material prices, demand scenario etc. The current concern seems to be profits being impacted due to reduced govt ads, reduced ads from sectors like auto, real estate etc, due to the current macro scenario.
In my view both businesses have strong financial characteristics with good cash flows, decent balance sheets good capital allocations in form of buybacks and dividend payouts.
At 3-4 PE, and less than or equal to two times EBIDTA, these to me appear to be statistically very cheap. And in my book can qualify to be value buys with little to lose. Reversion to mean is a strong concept and it can play out here too.
But one has to be patient while buying these kind of companies and keep accumulating even throughout the downtrend and be ready to sell if and when the stock price goes close to or above fair value.
Both seem to be interesting value plays but I am not comfortable playing the value game (in isolation, because here in these cases, though there is value, the growth puzzle remains difficult to decipher)
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In the previous post I had mentioned about the strong de rating both Jagran and DB Corp underwent in recent months. GMM Pfaudler is exactly reverse of that. With big capex in pharma, agrochem, speciality chem and a duopoly market (along with HLE glasscoat) the stock price has undergone strong re rating because of strong growth visibility. But at 80 PE for a company which cannot grow at more than 25-30% due to capacity constraints, it seems expensive to me.
But in markets things which appear expensive tend to get more expensive and those that appear cheap tend to get cheaper till the trend reverses and once the trend reverses, it tends to bring great pain or joy as the case might be. 
Maximum money is made when this change in market perception is identified early on in the journey of the perception change. For me GMM is at best a hold if bought cheaper.
Divis has done a big capex of close to 2000 crores the fruits of which are yet to mature. Inspite of flat to negative profit growth in last 3-4 quarters, stock price has gone up in the hope that given time, company will return on strong growth path in terms of profitability.
I like to pay up for growth and am okay paying up for companies like alembic, laurus where there has been strong growth in quarterly numbers and a promise of the trend continuing, even inspite of stock price run up, but when it comes to paying for hope in growth, I draw a line.
Many a times, stock prices run up on hope, even for a few months, or quarters and start faltering or going sideways when actual numbers start getting reported. For the short term guys, it is often buy on rumours and sell on news. For the medium term guys, its often buy on hope and sell on reality.
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Covid-19 treatment: Cipla, Hetero Lab get nod to manufacture and sell Remdesivir
Hitesh ji,
Can you comment on this news? What is the market for this medicine and to what extent these companies could get benefitted?
Thanks
Analysing a company of the size and variables of Cadila healthcare is tough. Except to decipher the general direction of the business. Cadila has a strong US generics and exports market presence and a strong domestic business as well. Overall looking at the growth in exports shown by companies like alembic, ajanta etc, Cadila can also do well.
It is saddled with zydus wellness as a subsidiary. And the latter company made a big acquisition from the Heinz portfolio and is still to reap the full benefits of the acquisition. And the current situation doesn’t help either. So for the near to medium term, it can remain a slight drag on Cadila Healthcare.
Management quality of Cadila seems okay, though for that purpose I would rate Cipla and DRL among the top. One area of concern for me has been the frequent problems at Moraiya facility during usfda inspections.
The more interesting part of Cadila is its chart. After remaining sideways between 320 to 342 for nearly 18 trading sessions, it has managed to close above the crucial 342 mark during the last two trading sessions. Sustained strength above these levels can attract much higher levels for the stock price.
disc: trading position in the stock, based on techno funda picture.
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Remedesvir is at best a trial drug which may or may not work in Covid19. I dont attach too much importance to these kind of newsflow in absence of anything definite. The more pertinent part for Cipla is the approval it has received for a big molecule in the form of g albuterol where besides the innovator, it is the only player in the molecule and the size of the molecule in us markets is reasonably big.
Cipla on the charts seems to be showing very good strength and on sustaining above 640-650 can show good upsides. Its all time high of 752 was posted during March 2015 and that remains a level to watch going ahead. A move above that in the weeks and months going ahead can propel it into all time high zone.
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You are correct sir… Remdesivir results are not encouraging and I think that won’t be adopted by lot of countries or doctors to treat covid-19 patients. Have seen lot of news flows with these recently, it was hyped up too much before trials to be a success.
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Just to add price of Remdesivir:
The Dhaka-based Beximco, which counts Norges Bank as one of its investors, will sell remdesivir for about 6,000 taka ($71) a vial to private clinics but will give it free to state-run hospitals treating Covid-19 patients, Rabbur Reza, chief operating officer at the company, said in an interview. A critically ill Covid-19 patient will need at least six vials, he said.
Read more at: https://www.bloombergquint.com/business/first-copies-of-gilead-virus-drug-to-start-selling-in-bangladesh
Copyright © BloombergQuint
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Hi Hitesh bhai,
How does Cipla compare to Dr reddy labs ?
Is Dr reddy more USFDA ready than Cipla ? How do both compare on quality paremeters and from medical doctor perspective ?
Also read your reply on Glaxo, if possible can you share the experience so that amateurs like us can learn from your experience and avoid such mistakes if possible ?
Hitesh bhai, Which stocks, according to you have the strongest possibility of rerating due to perception change ?
Many thanks
Both cipla and dr reddys provide detailed presentations of their results, good details in their AR and do concalls. You can take things forward regarding US generics strength of both companies.
Glaxo first decided to do capex of 700-1000 crores for in house manufacturing of products. But probably due to ranitidine fiasco or maybe due to some other reason, they decided to write off the capex which according to me was not a thing expected of such a company. As per me it was downright stupid and irresponsible.
Regarding which stocks are going to provide maximum returns going ahead, due to perception change due to rerating , well if I knew that I would be one of the richest guys around. At best, we can make educated guesses and take a call.
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Hello Hiteshbhai
Can you recommend a SEBI registered research analyst to whom i can seek advise professionally?
If you were running a PMS, i would bet on you :-).
Hitesh bhai might recommend…you cns also visit freefincal website where the list of sebi registered RIA are maintained
@hary197 we have a whole thread dedicated to the subject. you can go through it.
https://forum.valuepickr.com/t/equity-advisory-services-in-india/14792
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Thanks so much Hitesh bhai for sharing your experience. Its insightful as most of the time I wrongly had a bias that mnc mgmt are thorough professional . But thanks to your experience sharing, it’s a learning for me that one cant assume professionalism . What’s your view on lot of these mnc in different sectors floating different unlisted subsidiaries ? Ethical ones like Nestle ( it has a pet food subsidiary but its unrelated business ) , 3m and HUL dont but many do . How does one decide if the business in future doesnt shift to these companies if presently the business shows good traction ?
Yes Hitesh bhai tried reading but both are having different strength and hence it confuses . Hence requested your suggestion from doctor perspective .
Many thanks Hitesh bhai for always sharing your insights