So They own both captive coal and iron ore mines or alone?
Disc, invested in godavari and prakash industries
CAREER POINT Ltd
Career Point Ltd. (CPL) is in the process of restructuring, wherein the education business will be demerged into a separate listed entity (CP Edutech Ltd.), leaving CPL with the NBFC business.
CPL offers diverse products & services across the entire spectrum, starting from Pre-school, right upto Engineering/ PHD courses. Apart from the Universities managed by them, it offers numerous distance learning courses. The Company has established a niche in test preparation and school curriculum tutoring through a nationwide network of branches. It runs an asset light model & is growing at a fast pace. Apart from a few owned centres, there are a number of franchisees & school association centres, currently a network of about 86 centres in 73 cities across 21 States & counting.
CPL is also running schools & universities in Kota, Jodhpur and Hamirpur. Education is a negative working capital business. Every time a student is enrolled, cash flows are received upfront, and are assured for the entire duration of the course which could run over a number of years. Setting up a university also has huge entry barriers as it requires a state legislature approval, entailing a huge amount of liaisoning, in addition to the capital investment.
The NBFC part of the business funds the institutions (schools/ colleges) & is entitled to interest income while the education business manages them for a mgt. fee. The entire operations are managed from internal resources (including the NBFC business) as the Co. is pretty much debt free.
It is pertinent to note that while some more illustrious names in the industry have been burning money, threatening their very survival, CPL has always been profitable, even during Covid times.
For the current year, CPL should do revenues of about 107 crs with profits of about 58 crs. The market cap is only about 457 crs so the investment is available at rather attractive valuations. Further, the Company is currently available below its book value, leaving enough margin of safety.
CPL announced a second interim dividend along with its Q3 numbers, something not done before. It could well be an effort at catching investor fancy/ interest for the stock & following on in the same vein, a decent final dividend could very much be on the cards. Besides, the Co. has invested enormous efforts & time at the ongoing de-merger exercise. A pre-curser to the value unlocking going forward?!
Disc: Invested.
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Thanks for putting out your analysis sir, would like to ask few questions.
First revenue of CPL hasn’t grown over the period of 12 years, in 2012 It did around 80 cr and last year revenue was 85 cr, Hardly any growth over such a long duration when there was a boom in edtech in last 4-5 years during and after COVID.
And i see huge short term loans given by them which is far more than their revenue which I am not able to understand.
Would like to know your view and how you read such financials ?
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@ca.rishab
The issues raised by you are valid. One of the problems of small cap investing is that info is always scarce & is perhaps one of the reasons for low market caps for small caps. Another factor that I personally follow for small caps is not to go back more than five years, usually not beyond 2 to 3 years. That’s my style, not necessarily the correct one! Of course the more historical info one has, the better equipped one is in taking a call. Ultimately, it is always a trade off & the investing decision at the end of the day is largely a gut call. If after weighing the pros/ cons, I’m not comfortable with the story for any reason, I too will refrain from investing.
It is perhaps for this very reason that the education business is being hived off. It will probably have no legacy issues in the balance sheet & so would be lean. I feel that the education business itself could value about the same, if not more, than the current market cap, given it high operating margins over the last 6-7 qtrs of over 50% (Stand alone numbers as the NBFC is in a 100% owned subsidiary). A lean balance sheet would also means attractive return ratios. All this if backed by a decent dividend payout ratio, would mean sending positive signals to investors. That said, we have to wait & watch closely, how the story unfolds over the next 3-4 qtrs as nothing is a given.
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Redtape at 720 seems richly valued & I have been reducing my position upwards of 700. Its a great Co./brand & can surely continue to perform well, but as profit booking is a part of the game, I am happy with the returns. It (Redtape) has been an awesome two year ride!!
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The Career Point investment thesis is playing out well. The stock hit a new high of Rs. 422 today, taking its current market cap to about 763 Crs. Even though the stock is up about 70% in the last two months, the demerger leading to two focussed entities should create more vale going forward. Besides, if the Co. can do profits of about 58 crs as mentioned in the investment thesis above, it will be still available at about 13 times its trailing earnings.
The NCLT date for demerger is due on May 17th. It’s just a matter of time & should go through in the next few months. It will be very interesting to see how the markets value a focussed profit making, asset light education entity with decent financials in terms of return ratios & a lean balance sheet.
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MPS is clearly struggling with its margins. The OPM for Q4’24 had fallen to about 29%. This has further fallen to 23% in Q1’25, the lowest for many qtrs. I think it makes sense to switch from this one at current levels.
Aditya Birla Money (CMP 160/-) has been growing aggressively (both Sales & profits) for the last many quarters & looks good to continue on this journey going forward. Perhaps the leverage in the Co. maybe a touch high, but it should be kept in mind that is a subsidiary of Aditya Birla Capital Ltd., which has a market cap in excess of 55,000 crs & surely knows a thing or two about risk mgt.!! I see this as a multi year hold. There are huge tailwinds in the financial services sector/ wealth mgt./ funding aggressive equity investors- a tribe, which is growing by the day.
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Thank you so much Sir for this insightful thread. Looking forward to learn more from your knowledge through this community.
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Good update, wealth management is a decadal theme sir . Have a query , since you played last camphor cycle , currently looks like same thing happening. Gum terpene price is constant rise. What’s your take on this sir.
Looking back on my last four years as a small-cap investor, I’ve learned a lot through both successes and setbacks. I’ve been focusing on small-cap companies with market caps between 100-2000 Cr and have avoided SMEs for now because of my portfolio size. During this time, I’ve seen some great returns, including a couple of 10-baggers, several 5-baggers, and a few stocks that have tripled from my buying price. I’ve held on to most of these, but I’ve also reduced or exited a few positions along the way, and in some cases, I’ve taken losses of up to 60%.
One thing that’s become clear to me is the need to know whether you’re approaching the market as a trader or an investor. If you’re trading, you might want to sell or cut back once you hit your target price. But if you’re investing, it’s important to really understand the company and believe in its story. If that story stays solid, it’s often best to hold on. However, when things start to change, you have to reevaluate and decide if it’s time to sell or reduce your stake.
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Godawari Power (GPIL) has done wonderfully well over the last 15 odd months, having appreciated roughly about 150% in this period. The current China slow down if prolonged, could be a big cause of concern for the steel sector in general, & by extension to the iron ore sector as well. This is already evident with continuous fall in the iron ore prices, now having fallen below 100$/T for a high of 140$/T in January this year. As of now, with the GPIL numbers for the June qtr being good, could provide a bottom to the stock, but if September Qtr numbers show any stress on margins, things could change very fast. Sitting on large gains on the counter, I decided to play safe & book profits. Theoretically, any talk by the Chinese Govt. of any stimulus could reverse the scenario very quickly, but that would be living in hope. Besides, like I said, gains have to be preserved!! Six months ago I had planned to hold the stock for 3-5 years. Such are markets!
Due to the Chinese slowdown, Goldman Sachs has just cut the 2025 target price for Copper by 33%!!
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Iron ore prices have fallen another about 9% in the last 5 days & are now hovering around the 91$/T.
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Rightly said. It is foolish to be sentimental about stocks. After all, we are investing for gains. So it is essential to take timely action. All around us we see commodities are in downtrend in general and iron/steel in particular. So to protect profit is essential. You will live another day to take advantage of the situation.
GPIL is certainly best among all iron ore companies, but it can not remain untouched by turbulence in the sector. In my opinion, it is high time to trim own’s exposure to this sector and if there is not any suitable sector available for investment, it is better to sit on cash .
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Sir, want to know how your portfolio looks like. Seems mostly you are into smallcaps microcaps only. And you take deep value bets. Is there any thread containing your portfolio.
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@Baratam_Srinivas
My current top holdings include Va Tech Wabag, Aditya Birla Money, Career Point, Vedanta, Lincoln Pharma, JM Financial amongst others
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Good afternoon sir, can you share your investing thesis for Aditya Birla Money? Thank you.
@DrHarshilRohit
The data below would explain the investment thesis for Aditya Birla Money!
As is evident, the Co. has been growing aggressively, both in Sales & profits, for the last several qtrs. I expect it to continue in much the same way qtr. after qtr. for the foreseeable future. With the economy booming, & a burgeoning young middle class looking to multiply its wealth, the share broking/ wealth mgt. business has never been better.
It is a subsidiary of Aditya Birla Capital, a company with a market cap of over 60K crs., & is being closely monitored by it. Credit rating agency Crisil’s report of August 7 highlights this proximity to the parent Co.
The business model is such that it is pretty much risk free using the latest technologies for risk mgt. The Co. is not into any wholesale funding of Corporates/builders etc., which has been the achilles heel for many finance companies.
As things stand, it seems to be a multi year hold for now. As the stock is currently in Trade-To-Trade category, it seems to be a good time to accumulate as I too am doing!
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Good Morning, sir. With the recent sharp price appreciation and amalgamation of Aditya Birla Finance into ABC, has there been any change in your investing thesis for Aditya Birla Money?
Love reading your insights.
Regards
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@RajeevJ sir at the outset thank you for educating young investors like me by starting this informative thread. I wanted to know about your view on VA tech wabag against the backdrop of the recent cancellation pf 2700cr order by saudi arabia client
@RajeevJ sir do you track sandur manganese? do you have any view about impact of new state imposed tax recently?