Alembic has undergone massive capex in last 2-3 years and hence the debt. While evaluating debt, we have to find out the reasons for spiralling of debt. And the possible benefits that can come out of raising debt… in this case it was for capex and with the company on a firm footing as shown by the results, capex looks likely to help the company in continuing its growth trajectory.
A debt of 1200 crores for a company doing turnover of nearly 5000 crores and profits of 800 crores plus is not too much. And even then management intends to repay most of the debt through cash flows and funds to be raised from qip at a later date. Besides company would get milestone payments from tg therapeutics for the molecule it outlicensed through rhizen pharma.
So for alembic, according to me, this debt is an ignorable issue. Dividend payouts are as per standard company policy and often needed to keep long term investors happy.
The company has already expanded Capacity more than 3X, even before stabilising it they are raising money for further expansion. Don’t you think they are being ultra aggressive? Also, if they don’t want to do Capex, then they don’t need raise money given the cash flows.
Give your views. Usually companies try to do QIP at the peak of margins and revenues.
As I can see from the charts you have put up, price seems to be at all time high. And once price crosses into uncharted territory, no price targets are too high. So one needs to focus on fundamental story and strategise investment. Indicators at best are ancillary parameters and should not be the sole determinants of investment. They can remain overbought for long periods of time and still stock can keep going up. Technical analysis has to be used in conjunction with fundamentals with a lot of common sense…
As said before many times, I am not too much of a macro guy. So I am afraid You will have to go back to the person who gave you these exotic indicators to gauge the state of the markets.
@Ansh_Gupta I think we are in a slightly frothy market and might be heading towards even more froth. This as we all know cannot last for too long and hence we have to be on our toes to watch out for signs of trouble. I am fully invested but keep an eye on signs of loss of monentum in the market and more specifically in companies I have invested in.
I think the kind of fund raising being talked about is not too much in the context of the market cap of the company and neither is the debt too large to be of too concern. At 19000 crores market cap, only 5% dilution will provide funds to the tune of nearly 1000 crores for the company.
Regarding qip being done at peak of margins and revenues, one cannot generalise. I can give you an example of Deepak Nitrite. Which did qip twice while it was trying to kick above its weight in terms of capex and still did pretty well for its existing invsetors as well as the guys who participated in the qip.
These kind of debates of capexes and debt and dividend payouts and so on and so forth are all well and good for endless debate, but as investors our focus has to be on making money rather than proving points of views.
Bottomline is if a company can grow its sales and profits without sacrificing margins and return ratios, rest of the things tend to fall in place.
Thanks sirji. Also, where do you think they will spend this money? Don’t you see any commercialization risk which may happen if they are going for new capex without stabilising the current one? Debt of 1400-1500 cr is nothing as compared to 800-900 cr cash flow that company generates
Hi Hitesh bhai,
Could this fall be march kind of a fall or a correction ? Can one stay fully invested or better to sell holdings and await correction ? Many thanks
Even though the question is for Hitesh sir, I just want to share from my very limited experience… I think if we are planning for the long term we should just sit back and relax. I tried this “sell holding and await correction” in the March-April lows and it backfired badly for me. I was holding Mothersun Sumi @ 57, the stock was trading at around 60 for many days and market was again showing -ve sign, I panickily sold to re-enter at lowest below 50 … the day I sold was the day it started UC and did that for some days and went up to 95. the same story with Delta corp, entered at 66 left at 70 hoping lower levels it went above 90. I hope my loss will be an example to someone.
Disc:- If anyone thinking why I acted this stupid… well, this is my first year and all I can say is I’m learning.
Hi Ramiz. This is not act of stupidity, mistake gives us experience and knowledge. Just for your information my advice is Try to learn Techanical analysis along with fundamental of stocks, this will help to take entry and exit at area of value based on chart. In initial phase don’t focus on return just concentrate on learning process.
Best book is Think and trade like champion by Mark Mienervini. Also “Trading in the Zone” is good book for understanding market psychology. I am also in learning phase. Hitesh sir can guide us how to use techno-funda strategy to invest.
First of all what I mentioned is a possibility. Some times markets tend to go much beyond everyone’s expectations. Remember the March correction? At that time no one might have imagined we could be at above 11k nifty in July. Such is the nature of markets. We have to be observant and see where the trend is and try to ride it till it is broken. No use projecting targets or trying to figure out direction in advance.
If I could figure out whether the correction would be March kind of correction then maybe I would be one of the richest guys around. Remaining invested partially or fully is entirely one’s individual call. Answers will be different for investors having different time frames. We have to figure out where we fit in and what our strategy should be.
Two books i have found useful on the subject of combining technicals and fundamentals are William O Neill’s “How to make money in stocks” and the " The next apple " , besides the Minervini book.
If I had to sum up things in a nutshell, it would be
Look out for stocks showing strong relative strength during a severe bear market , or look out for stocks that are the first to bounce back with strength from a bear market.
Follow these to see if they start hitting fresh 3,6, 9, 12 month or all time highs. This should provide a decent filter to work with. Once you get a list from these kind of filters, look at the fundamental picture of these companies. If the earnings trajectory or company specific or industry specific tailwinds become clear after going through the company’s fundamentals, one can think about investing in these names.
The Next apple book lays a lot of emphasis on strong base formation in the stock before it takes out 52 week high or all time high. These will have strong momentum once they cross their respective highs.
e.g Look at the chart of dr reddys. The stock went above July 2016 high of 3689 with a very strong upmove and since then has been forming sideways consolidation patterns like flags. I can see a weekly flag on top of a flag. ( mentioned in William o neil’s book). This is essentially a sideways tight consolidation within a range between around 3800-4100. Once there is a convincing move above 4100 and a few closes above that, the stock can launch an assault on all time high of 4370 and go past it. Then it could be in a free zone. (this is not a recommendation but an observation and how I try to combine things on technical and fundamental side) First quarter results are due on 29 th and I would keenly observe the price pattern leading up to the results. If it shows the necessary strength to move beyond the current supply zone of 4100-4170, then it should tell me the results are going to be good. (not necessary this always plays out but we have to have a working theory). Fundamentally, the thread on Dr Reddys started by Sandeep Patel and populated by views from other guys like Donald should provide more clarity on how things can go from here. In the meanwhile keep an eye on what kind of results other export oriented pharma companies are posting. All these things combined should help in making the picture near complete.
Thanks for the valuable advise. I believe I’m a different person now from what I used to be… All thanks to Valuepickr.
Here I came to know that I was not Interested in some companies but I bought them because I was seeing their names everywhere. Bought Motherson sumi but realized Auto Industry is not in my “Circle of Competence”.
Happy and content now. I don’t feel I lost something or loosing something by not participating… No FOMO now.
Sir, should these related party transactions be of any concern or is this just a way of withdrawal for Promoters other than Dividend or Remuneration,
Being a novice or is it that I am getting something totally wrong here.
hi @hitesh2710 I was a fundamental based guy. Recently started learning technicals. In you are opinion, what are some of the basic indicators one should consider?. Say if one were to limit to <=5 indicators. I understand there is no fixed rule here. But wanted to know from you. 20 day sma, 50 day sma, 200 day sma and RSI for 14 days is what come to my mind.
Hi Hiteshbhai,
Want to get your view on PSU?
There is momentum happening due to dis-investment news.
Some PSU like Hindustan Zinc, BPCL have good P&L. Do we find any value for short to mid-term?
I dont track jb chem too closely now. But what you have mentioned is some kind of compensation to the previous promoters. It could have been agreed upon terms with the guys taking over the company. I am surprised guys even look at such minute details in such a company which has been well celebrated for its ethical behaviour.
@barathmukhi Betting big means betting big without suffering sleepless nights. Lets not get into specific numbers.
@gautham1 I have replied to these kind of questions in previous posts. I look more at the broad patterns rather than getting stuck with indicators. So those patterns are the breakout patterns like cup and handle, flag, inverted head and shoulders or the 52 week high or all time highs or bottoming formation like double bottom or triple bottom etc. You can go through a presentation I did at VP annual conference I had made about combining technicals with fundamentals.
@Deven I dont track any of these PSU closely so no idea on what is happening there.
As an opportunistic bet, I have recently bought trading positions in polyfilm companies like polyplex and cosmo films purely from a short to medium term point of view. The realisations for these packaging films guys have improved and all of them are bent on cleaning up balance sheets . Plus the stock price charts of most of them show immense strength. Polyplex currently is around 600 and all time high is close to 667. The price of its Thailand listed subsidiary (where it has 51% stake) has broken out of a 10 year range. Cosmo currently around 400-410 has all time high of 479. If and when these all time highs are taken out, there can be quick returns.
Remaining invested partially or fully is entirely one’s individual call. Answers will be different for investors having different time frames. We have to figure out where we fit in and what our strategy should be.