**
Thanks HR for your prompting reply.
I was expecting some answer on Market Trend Vs Small Cap/Midcap P/E expansion in future prospect. As most of the midcap stocks reach to 30-45 p/e so can I still expect P/E expansion or now I can consider only EPS growth for Returns ?
Please suggest.
Hello Hiteshbhai,
Are ?All 
** Suggest. I **
** years. what **
? **
Hiteshis
**
Thanks HR for your prompting reply.
I was expecting some answer on Market Trend Vs Small Cap/Midcap P/E expansion in future prospect. As most of the midcap stocks reach to 30-45 p/e so can I still expect P/E expansion or now I can consider only EPS growth for Returns ?
Please suggest.
Hello Hiteshbhai,
Are ?All
** Suggest. I **
** years. what **
? **
Hiteshis
Hi Amit,
I would leaveit to Hitesh to reply to your above query as fellow members come up with queries for him 'coz of his credibility and trust in his opinions.
All I can say is that despite the basics of investing remaining the same, every investor may have his unique style of investing. I believe it is very important in investing to define your individual boundaries in investing and work within those.
On your above query personally I think that such corrections are very good.
In a bull market everything starts going up with the rising tide. Such corrections in a bull markethelp separate the wheat from the chaff. Such correction provide good opportunities and offer good entry points in good quality stocks. Although I believe in the course of a bull run as well you will see more deeper corrections. Good part about bull market is that it alsomakes a little bit easier to exit the stocks that one may have entered in haste (difficult part is in a bull market it is not easy to identify your mistakes, but as I said such corrections would help you in doing so).
Hence in short if you are convinced abouta stock/business then utilise such opportunitiestoadd.
I think Hitesh can attend to the your main query in terms of market trend and pe expansion, etc,.
Cheers,
HR!
Hi Hitesh,
In agro chemical space, there is a recent listing of Sharda cropchem. This looks to be little unique model. Please share your views if you’ve a look at it.
-Muthu
@muthukumar, I havent looked at sharda cropchem in too much details but the listing has been spectacular.
@amit, As rightly pointed out by HR, one has to take these 10-20% corrections in one’s stride if one professes to be a long term investor. You cant expect to make 100-150% returns without digesting 10-20% corrections.
Stock market prices dont always move in a linear direction even for stocks in a sharp uptrend. There are bound to be price and or time corrections in between. These are often necessary for the strength of the uptrend as each sharp correction tends to shake off the weaker hands and the stocks then migrate to stronger hands (with higher conviction) which lends additional strength to the uptrend.
Hitesh Sir,
What are the stocks you are looking at as of now or to rephrase it your top picks as of now ?
ravenrage,
currently I am buying into tube investments, besides the housing finance companies. gruh seems to be undergoing the much needed time correction while canfin, repco, gic etc seem to be range bound.
Hitesh Bhai,
Request your opinion on the HOVS stake sale in SourceHOV and your views on promoters of HOVS (on ethics, expectation of dividend etc).
Thanks
vaibhav
Hitesh,
Tube investments derives most if its valuation & growth from Chola. So why not invest in Chola itself. Do you expect TI to grow faster?
-Nav
Hitesh Sir,
I am accumulating Repco too. Gruh keeps looking expensive and keeps up with its valuations wonderfully well. Will certainly have to look into Tube Investments. The last time I was a little sceptical before buying into MPS but your recommendation was definitely one of the more important reasons to get into it . I think Eclerx is also worth looking into. Any views on Accelya? It has remained range bound for quite long and offers an enviable dividend yield . I feel it could move higher. Your views, Sir.
Regards
Raven.
vaibhav,
I dont track HOV so no comments on that front.
ravenrage,
Among the stocks you mentioned accelya mainly due to its dividend yield offers solid downside protection. If growth does come about it can provide decent returns. Gruh has in the recent past always remained expensive. Trick remains to keep buying during its sideways consolidation. Currently a lot of stocks are discounting fy 16 and fy 17 earnings. Based on that if one considers gruh with very few variables in its business, it looks reasonably attractive for a heavy allocation.
Nav,
Tube Investments has 50% stake in Chola finance and 74% stake in unlisted Chola MS Gen Insurance. (Axis capital guys in their report mentions that the fy 16 net profits for the latter company is likely to be around 150 crores. Assigning a 20 PE to that business, provides a valuation of 3000 crores. (With some amount of fancy beginning for the insurance companies’ holding companies it could fetch even higher valuations bcos post breakeven insurance companies tend to deliver exponential profit growth.) 50% stake in Chola valuation comes to 3400 crores plus around 2300 crores of the 74% stake mentioned above comesto 5700 crores. Add another 400-500 crores for shanthi gears 50% stake. so effectively the holding company valuation comes to 6000 crores plus. standalone debt is 600 crores. So the main engineering company is available for peanuts. (practically free)
So all in all there is room for quite a few positive surprises coming out of Tube Investments. BIcycle business generates ROE of 60% by itself. That is a business that is available at near free valuations.
Above is the broad investment thesis for tube investments. Chola finance itself also seems to be growing quite well. Plus the feedback about promoters from all quarters is very positive about their integrity and business acumen.
technically as posted in the techno funda section stock has broken out of flag pattern on weekly charts which seems bullish. Overall techno funda correlation seems good.
Hitesh Sir
From what I understand , both these companies - Chola and Tube should do well . Also, the cyclical pick up which we all expect (and hopefully happens sooner than we are expecting!) should act as a great booster to the stock. What should be the targets for the flag breakout ? Your views on Canfin ?You think CanFin deserves a better multiple for all the growth it has given ? I have stuck to Gruh and Repco . Somehow, Canfin seems to be running away !
ravenrage,
You can drop the sir bit.
Regarding chola and tube doing well obviously if chola does well tube follows. But the trigger for tube can be in the form of value unlisting in form of insurance subsidiary listing. Plus as u mention cyclical pick up (and at an opportune time when they have just commissioned large diameter tube plant - whose product is an import substitute) in the core engg business also can act as a trigger.
Flag pattern targets are in the range of 420-430.
Regarding HFC all of them will do well but Gruh and Repco have a slight edge over other similar smaller HFC bcos of the clientele they cater to. Both have run and hence undergoing the much needed time consolidation. Canfin seems to be running away bcos valuations still offer some more juice. at current price levels its at below 2 times book.
I think GIC with a book value of 120 and quoting at 1.3 times book with a good dividend payout could also provide reasonably good returns even if they show modest growth.
Hi Hitesh,
Thanks again for the great explanation on business valuation in very quick and awesome summary on tube investment.
I was just going through the investor presentation, AR, and 10 year financials to co-relate and learn more about the business. Fundamentally, overall business ROCE seems to very low levels < 10% similar like FY2008-09.
Valuation wise on insurance – Currently it made 70cr PAT in FY14 and 150cr looks to be achievable in FY16? Is this business can be co-related with valuation of Max India. Compared to Cholamandalam Finance with 20PE trailing, TI looks to be at 65PE+ trailing.
Engineering Valuation – It made 40% revenue mix + PBIT of ~230Cr in FY14 including shanti gears. With 25PE, it may be around 1500cr. Is this a correct valuation we can assign?
TI is having 48,000 GIC housing shares!
-Muthu
Hiteshbhai,
May I trouble you for one more stock pls? Missing your valuable comments/views on the Kesar Infrastructure thread.
This is a company’s sales are growing @ CAGR 20% and profits @ 30% for past 3 yrs. It is available at 13 PE. The trigger is its Composite Logistic Hub project near Itarsi, which will be operational in this year. But it has raised/raising a lot of debt for this project. Its a micro cap though, with mkt cap of 155 cr.
http://www.valuepickr.com/forum/stocks-for-the-long-run/342135032
http://www.screener.in/company/?q=533289
Pls share your views if one can enter at this price.
Rgds,
Advait.
advait,
I havent looked at kesar terminals in details but from numbers it seems good. I dont know the quantum of debt but if it is too high relative to its size I would be careful bcos of a precedent set earlier by Arshiya in a similar space.
Regarding whether one can enter or not is one’s own call one has to take.
Thanks a lot for your unbiased comments…
Hi Hitesh ,
I read that some revisions have happened to DPCO last month. Do you see any particular pharma company benefiting from that?
aware,
I think some pharma companies are able to raise prices of drugs under dpco citing inflation adjustments. Those should benefit. I think jb chem and fdc which have some drugs under dpco should benefit.
Dear Dr Hiteshbhai,
How do you rate FDC and Wyeth Labs at current market rates.
FDC at 150 and Wyeth at 1075.
