Divis has largely remained only an API player. Whereas Laurus has besides APIs moved into formulations, biologicals, and synthesis divisions. I do not know whether it is a good thing or a bad thing, but till now formulation has helped Laurus in showing very strong and profitable growth. Plus it also increases the opportunity size, being in adjacent businesses.
Whether Laurus can repeat Divi’s feat is something only time will tell. But one pointer from history is that after a few years consistent growth and after gaining market fancy and trust, Divis commands valuations of nearly 45-55 PE. Whereas Laurus currently is at less than 20 PE based on estimated FY 21 EPS. So some amount of re rating can still happen if company continues to show the kind of growth it has shown. Markets often take time to digest and come to terms with the kind of numbers Laurus has been posting. So for Laurus investors it remains a game of conviction and patience.
Neuland remains an interesting company in terms of its market cap being small as compared to the opportunity size it has. Even after the recent run up it still remains a sub 2000 crores market cap company. The quarterly profit run rate is also small at around 25-27 crores since past 2 quarters. The company provides detailed presentation about its business.
The contribution of higher margin business continues to rise in the overall mix of things. Plus a new capacity has just come on stream since this quarter. So my guess is that company will continue to perform well going forward and that’s why markets are paying a premium to the company.
Hi Hitesh sir,
Thanks for sharing your thoughts. As a disclosure neuland is my second largest holding right now so my views are positively biased.
Just wanted to quickly add a couple of points for the benefit of your followers:
Neuland management is very conservative and only guide for 15-20% topline growth and 20% ebitda margins in medium term. I am stating this since the OP’s question incorrectly claimed that management is confident about 20% growth. In fact management has stated in latest concall that they are of a very conservative mindset and would like to underpromise and overdeliver instead of the other way around.
IMHO neuland is not richly valued, it is infact undervalued. The TTM pe is optically high due to 1 time tax outgo in March’20 quarter due to changing the tax regime and write down of some tax assets. Right now, price/sales might be a reasonable metric which is around ~2x right now despite the business mix changing in the right direction, as pointed out by you.
Thank you so much again for sharing your rich understanding and thoughts with all your followers, I personally continue to learn a lot from your writings.
Hitesh Sir
What’s your view on Auto sector
Companies likely to benefit post Covid and recent budget
Specially 2W - Hero MotoCorp
4W- Maruti
I am invested in both
Long term holding
Hitesh Sir,
request your views on Sahyadri Industries , a small cap company which is engaged in the roofing business . It has suddenly picked up growth since past 2-3 qtrs and having a TTM EPS of 51 and PE of 6-7 . I am invested and would like your views . Regards.
Auto sector has seen a strong revival after being in the dumps for many quarters.
I like all 3 companies in 2W space, bajaj auto, hero moto and tvs motors.
In PV and CV space, I think one can play through ancillaries also. Maruti going ahead is going to face heavy competition from the likes of hyundai, kia, Renault, VW etc. My guess is over the long term its market share is bound to go down, and with increasing competition, there could be pressure on growth rates.
Sahyadri is a typical cyclical company in the roofing sheets business. We need to be careful about not getting caught at the wrong time in the cycle.
Optically, these companies appear cheap on PE parameters bcos market does not pay high multiple to these types of companies.
Currently earnings are on an upward trajectory and there may be a case for investment in it. But these kind of investments come with an expiry date. One needs to know when to sell. These are not buy and forget type long term bets.
Hi Hitesh Sir, do you track RACL Gear Tech in the auto ancillaries space. Would like to know your thoughts if you do. There is a very interesting thread on it here and found many Value Pickr members bullish on the company. Based on my analysis, it has all the right mix to become a multibagger.
Hi Hitesh Ji! What is your view on Ester Industries. Its fundamentals appear to be very appealing for investment. Its share price appreciation has been very significant in last few months. It has not been able to break the resistance level at about 122 or so. What is your view in respect of its future? Regards!
Hitesh Sir,
Thanks for your views on Sahyadri Industries. Will keep in mind your suggestion to exit at the appropriate time.
Another interesting company is Savita Oil Technologies Limited ( SOTL) . Very outstanding results with strong fundamentals.
Request your comments . Regards
Ur views on the Infra (and allied) sectors after the Budget announcement. Various leaders across the sector are up beat for the next 4-5 years as Govt has decided to invest in Infra.
What companies should we be looking at? I have PNC, KEC, Timken, Honeywell in my watchlist.
Sir, Please help me understand how do you predict EPS/Earnings for any company? Do you use any kind of models? Basically trying to understand how do you arrive at any future EPS/Earnings number as I saw in some of your comments.
Hitesh Sir
I am novice Investor
wanted to make a long term portfolio of 10-12 stocks (3-5 years)
I am reading valuepickr messages and made a list of few companies
I am confused among few contemporary stock. I know they don’t below to exactly same categories but I put together so that I can choose the best bet among them.
The list is as following
Kotak Bank / HDFC Bank / IDFC First Bank
HDFC Ltd / Bajaj finance / Muthooth Fin/ Chola Finance/ Hdfc life / Hdfc AMC
Reliance / Adani port / Adani Total Gas / Gujarat Gas
Tata consumers / ITC / ADF Food
Can you help me in selecting the 10 stocks of equal weightage from above list
please forgive if this is silly one
Looking for your help
Regards
Manish
Its difficult to predict earnings of a company precisely. One can make an educated guess about earnings by looking at recent past results and the management commentary or by looking at sectoral numbers.
This too is possible only for predictable businesses, where one can put in some numbers and try to guess the numbers.
The important thing to guess is the trajectory of the earnings. If we get it right then also its possible to be good at investments.
I dont track companies like ester, glaxo, savita, cera, godawari, racl etc. Those following the companeis are posting their views on the respective threads which you might find useful.
Most of the companies in the list you put up are good companies. Narrowing down the 10-15 companies from among them would be something you yourself would have to do. You can compare these companies with peers, try to figure out growth runway for these companies and then look at valautions and then take a call.
Thats what investment is all about. It would be an exercise which would help you develop as an investor. You have done the bigger job of preparing a list of companies worthy of looking at. Next remains the job of sifting through them and narrowing the list. If you ask 10 different investors they will come up with 10 different permutations and combinations and hence this is something you yourself would have to do. All the best.
In sizing up my bets, the foremost yardstick I use is how well do I understand the company. For me this boils down to how simple it is to understand the business. If that filter is easily passed then I go ahead with the company analysis.
Next comes the type of company in question and the triggers lined up for the company. If I can be reasonably confident of growth in the company and valuations are not too expensive/comfortable , and if management quality and business quality is good, most of the boxes are ticked for me.
Price run ups prior to a meaningful position is something that is to do with market phases. There are market phases when we get lots of time to build up a meaningful position and there are other times like the current market when one has to be quick in studying a company and coming at a decision.
I dont have any fixed formula for carrying fixed amount of cash. Most of the times I am fully invested. If I find an irresistible opportunity and have to raise some money to buy it, it often boils down to trimming down/selling the least attractive opportunities. But the latter is easier said than done. For me I am usually bullish on all my holdings and many a times I am not too sure when and how fast a particular stock is going to move. So some times I have to end up giving up some opportunities.
Portfolio construction and allocating weightages for me is often a matter of feel. I do not follow fixed formulas or models for these kind of decisions. But in situations where I understand the business, can figure out growth and unearth triggers and can find the valuations reasonable/attractive, I often end up allocating big. Every few years, some or the other big bet does pay off and life goes on. Fortune favouring the brave I guess.
Fortune favouring the brave I guess.