Kalpesh's Portfolio

NO, not happy with promoters

Time Technoplast Ltd my views -

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Time technoplast ltd

https://www.financialexpress.com/business/express-mobility-confidence-group-expands-auto-industry-presence-invests-rs-350-crore-for-type-4-cylinders-andnbsptargets-rs-10000-crore-revenue-by-fy2026-3393554/

Confidence petroleum one of the customer of Time techno setting up own manufacturing plant of Type 4 cylinders

Add Shop Retail Ltd

Sold most of the position

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Exited add shop e retail complete position in loss.
Thanks @Nimit for keep hammering over my dumb head.

Found serious corporate governance issues with company.

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Exited Time Technoplast today at 270/-
price ran up quickly and I feel good investment opportunities will emerge soon.

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Hi Kalpesh,
Thank you for informing us - booking profits is always a good feeling.
Been following your thread & postings since beginning.

Bit surprised about you booking out of Time Techno though - I’ve been invested since 2019 (in hindsight didn’t buy as much as I could have during Covid lows), but kept buying even at 110 till 70 or so in March 2023 for a ~68 average cost.

While there’s news about competition for CNG Type 4 cascades (exclusive growth driver for next 3 years), I’m thinking:

  1. Competition is ~2 years away from commercializing, as they need to be certified
  2. Market is probably (or will get) large enough to accommodate another player.

LPG Type 4 has potential, but has visibly stagnated - going by last 2 years, best case scenario is repeat of current IOC orders split between Supreme & Time Techno.

I’d think Cascade business carries a bigger potential risk than any recent price action which I think is still lagging FY24 growth (assuming a 4-4.3 EPS for Q4).

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I’m still bullish on this business, positive developments are happening and portion of value added business will keep growing for next few years.
reason I exited are:

  1. I don’t know how much more PE can expand
  2. Most probably now it will capture growth only
  3. If anything go wrong in execution, market can punish the stock price
  4. Geo-political events, wars, recession in US can cause worldwide market collapse including Indian markets, So I wanted to be liquid.

In simple words, more risk is now embedded in price than it was for last few years.

You are right, I don’t emphasize much on competition as market will grow rapidly for Type IV CNG, so demand will outpace supply.

I think main triggers are divestment, growth in CNG Cascade & Hydrogen cylinder going forward. (while some of it already reflecting in stock price)

I think more re-rating is possible but I’m not sure when and how much.

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Prime fresh ltd

Business model:
They have tie up with farmers, buy the entire produce, sort, grade, store and distribute it.
they have tie up with food processing units, modern e-commerce players, and F&V outlets.

its simple trading business, but not everyone can do, important part is they have built relationship with modern e-commerce players and F&V outlets.

farmers get peace of mind, customer get reliable supply, its a win-win for entire ecosystem.

Its not easy to be in this business, there is only one way, you have to be asset light, run it so ruthlessly cutting costs wherever possible.
They run the business without much tangible assets, as they grow they will be more efficient, it will further push unorganised players out of the game.

Growth:
Their business model support 15% growth CAGR from internal accruals, but they are targeting 30-35% CAGR due to which they will have to keep diluting some equity every few years.

Growth avenues:

  1. Modern trade is growing like 20-25% CAGR
  2. They can form JV with food processing units( They will supply raw material and also sale finished good by leveraging their existing relationships)(Asset light model)
  3. Planning to cater to export market
  4. They can lease the farms and produce in bulk
  5. can add more cold storage facilities
  6. can grow number of customers
  7. can increase number of items etc

there are many growth avenues and management is smart enough to do everything within their means (asset light model)

Their collection and distribution centers are recently expanded and are highly underutilised, so as utilisation increase there is possibility of margin expansion in near future.

They hardly have any organised competitor, its mostly unorganised market and they have opportunity to gain from it, which they are already doing( Growing at 30-35% CAGR by gaining market share from unorganised players).
Huge scope of growth for many-many years ahead.

Risks:

  1. I don’t see much risk from competition
  2. New age cash burning deep pocket players can come, but building this entire ecosystem from scratch is difficult and they would not want to burn cash in such a low margin business.
  3. Customer concentration risk is there
  4. Change is business model is biggest risk, if promoter decide to go from asset light to asset heavy model then its a sell for me.

Notes :
Promoters are rational people and really understand how to run such a business.
Taking out reasonable salaries and not much related party transactions found.
Promoter have past experience in FMCG sector.

They are talking about setting culture, employing right people and need of a head for each department as business grow.

I really do think they can achieve their target of 2000cr revenue if they keep walking the rational path.

Disc: Invested, not SEBI registered, not a recommendation, I use this forum as personal notes, please do your due diligence.

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Portfolio update

NAME OF COMPANY CMP 01-07-2024 Allocation UNREALISED GAIN
AVG INVST PRICE
SRG Housing Finance 204.28 338.30 27.8% 65.6%
Punjab Chemicals 772.45 1,436.75 24.3% 86.0%
Mitsu 150.23 141.90 6.2% -5.5%
Innova Captab 499.09 506.15 6.6% 1.4%
IRM Energy 537.21 463.20 5.7% -13.8%
Prevest Denpro 377.47 550.00 4.3% 45.7%
Prime Fresh 202.82 203.00 5.0% 0.1%
CASH - 20.1% 0.0%

Planning to sell IRM Energy as promoter is not minority investor friendly

Planning to reduce Mitsu to half as I’m not sure about promoter capability

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Hello Kalpesh!

An interesting read. Can you throw some light on recent promoter holding reduction by 5%. Is this due to equity dilution? My guess is for some personal reason promoter is selling to someone Kapil Mahesh Kumar Jhaveri.

Dear Kalpesh,

What was your thesis on IRM? Looks undervalued compared to IGL, plus the growth trajectory they are on makes their valuation attractive.

Thanks

ya it’s due to equity dilution.

where did you find about Kapil Mahesh Kumar Jhaveri? I’m not aware about that.

Thesis for IRM was simple Fast growth and valuations,
but governance issues appearing and margins may not go to previous levels that’s the reason I’m willing to sell.

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@kalpesh4430 Have you studied Kronox Lab Sciences. Looks like they have some kind of moat, they are able to hold their profit margins along with high ROCE during the painful periods for pharma and chemicals.

Not yet studied but looks interesting business

Equity Portfolio
NAME OF COMPANY CMP 10-07-2024 Allocation UNREALISED GAIN
AVG INVST PRICE
SRG Housing Finance 204.28 367.00 29.3% 79.7%
Punjab Chemicals 772.45 1,358.00 22.3% 75.8%
Mitsu 150.23 151.70 6.4% 1.0%
Innova Captab 499.09 504.40 6.4% 1.1%
IRM Energy 537.21 457.90 5.5% -14.8%
Prevest Denpro 377.47 623.90 4.8% 65.3%
Prime Fresh 202.82 195.00 4.6% -3.9%
India Pesticides 216.50 212.10 9.3% -2.0%
CASH - 11.3% 0.0%
EQUITY 100.0%

Added India pesticides yesterday

Hi. India Pesticide seems to be one among Agrochemical that is yet to show any kind of recovery. Rest of the agrochemical companies shown good recovery atleast in share price.Recovery in pricing of their products are yet to be seen.can you please share rationale behind your addition. Is it buying the pessimism or just chasing the odd one left in the sector?

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India Pesticides Ltd

Hi @Denny_David ,
Generally I look for a businesses that are going through headwinds, that are temporary.
India pesticides fits into that criteria.
actually 80% of Agrochem sector is fitting into this criteria currently :wink:

  • Managements molecule selection is really good
  • They go for molecules which has no or limited competition in India
  • Present in entire value chain (Intermediates—>Technicals—>Formulation) where focus is mostly on technicals, they are also open to contract manufacturing.
  • That is the reason they are able to make high gross margins and OPM’s.
  • whenever sector go into good times, they can easily double their revenues with present manufacturing capacity, and in next few years doing really big capex.

If I boil down everything I’m getting great business and great management at reasonable price.

Risks :

  • inventory destocking might not be over
  • China is dumping at low cost worldwide
  • many Indian Ag-Chem players recently done or doing large capex’s (This includes for some of companies key products)

I don’t know when the good days will come, may be in 1 yr or 2 yr, but I’m willing to wait.

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Kronox Lab Sciences Ltd

IPO proceeds
Entire proceeds went to promoter shareholders(3 main promoters), nothing gone into company.

Competitors -
Canton Laboratories
Private Limited (India),
Jost Chemicals, USA,
Budenheim (Germany),
Jiangsu Kolod Food
Ingredients Co. Ltd. (China),
CFL Chemische Fabrik Lehrte GmbH & Co. KG (Germany) and
Ichimaru Co. Ltd. (Japan)

Proposed Unit
Plot No. D-2/17/1, Dahej-II Industrial Estate, Taluka -Vagra, District -Bharuch, Gujarat, India
(20,470.99 Sq.mtrs for 10.73cr)

Existing Units
Unit - I is located at Block No. 284, Village Dabhasa, Padra, Vadodara, Gujarat - 2400TPA
Unit – II is located at located at Block No. 138, Village Ekalbara, Padra, Vadodara, Gujarat - 3744TPA
Unit – III is located at Block No. 353, Village Ekalbara, Padra, Vadodara, Gujarat. - 1098TPA

Red flags -

  1. Now the problem is all 3 units are located near Padra, and their Unit-III is banned from manufacturing certain products due to water contamination in that particular area.

  2. Other Units may also get banned - this is a big red flag.

  3. Company acquired land along with factory shed of Unit I for a total consideration of ₹ 20.00 million by way of sale deed dated February 14, 2022 from M/s. P. K. Capital & Investment in which our Promoter Group members, Rupal Ramani and Dipali Ramani are partners

  4. Company also acquired land along with factory shed of Unit III for a total consideration of ₹ 66.50 million by way of sale deed dated May 27, 2022 from Chemsol Specialities LLP in which our Promoters, Jogindersingh Jaswal, Ketan Ramani and Pritesh Ramani are partners.

Unit I & Unit III plot’s were owned by promoters and given on rent to company, I suspect they sold those plots to company after knowing that GPCB will send notice due to water contamination in that particular area.
If company is banned from production activities in Unit-III what is the use of buying that plot ? company could have use those resources at some other place.

While the business look robust and have pricing power, Investing at this point of time is highly risky as other units can get GPCB notice anytime, business may get hampered upto 50-100%.

They have recently bought plot at Dahej which is the need of an hour.

will re-look at this company next year when Dahej unit will be near commissioning phase.

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