Hi All,
I have started investing recently and have been studying about various sectors. I would like to thanks this forum participants and some of the prominent industry experts whose explanation on the businesses has helped to understand better on how to and where to invest. My portfolio is more inclined towards pharma as I have been working with one of the innovator companies and been associated with healthcare space for a while.
| Holdings | Allocation | Moats | Risks |
|---|---|---|---|
| HDFC Bank | 4% | Banking sector consolidation and scope for increase in private banks to take up the market share from them. Also gradual shift from PSU banks to private banks - large private would first in line to benefit. Strong core team of HDFC management |
NPAs building up |
| Manappuram Fin. | 4% | Diversifying to other segments other than gold loan + strong growth + increase in presence of South (which is high gold locked) | NPA issues + regulatory risk in gold |
| C D S L | 6% | Largest depository of demat accounts + increasing in finance literacy in India + gorwth potential to other segments as depository | Regulatory risk form SEBI |
| Indian Energy Ex | 4% | Monopoly in power exchange + diverifying by allowing power trading between neighboring countries + trying to expand into gas trading | regulatory risk + shift of market to long term contracts if power prices go up substantially |
| Deepak Nitrite | 3% | Increasing in portfolio with high margin products - Phenolics good growth and plant utilization rate - New growth engine Performance Products - Managment focus on downstream integration - Products acting as import susbstitute - Moves to reduce cost (acquisition of land in Dahej where major buyers are present - reduce transportation costs) | Rally due to China ban - Environmental impact can be concern (not completely green chemistry) |
| Vinati Organics | 4% | Leader in IBP (ibruphen - Market leader globally), ATBS (market leader globally and high margin product - contributes to 50% of profits and demand to remain globally for next 5-6 years), PAP Para Amino Phenol (paracetmol intermediate - 88% for paracetemol, rest for rubber and dyes) - Indian demand can be met through import - VOL step up | IBB - single player concentration - BASF - recent FDA regulation on iBruphen. |
| Pidilite Inds. | 6% | Market leaders brands in adhestive and releated segments + aggressive management | Consturction plays major role in revenue stream (cyclical sector) |
| ITC | 6% | Cash rich + Leader in cigerette business (addiction and repeat customer value) + increasing margins in FMCG + Diversification into other business (paper, hotels) + value unlocking in case of demerger | Tax rate on cigs is higher + regulatory constraints on biggest revenue source + FMCG margins lesser than industry avg + Debt in hotel business |
| Nestle India | 6% | 97% market leader in baby powder (segment has very high entry barriers and price is not barrier) + Good margins in FMCG + invests most of the profits back into business compared to competition | Limited products in porrtfolio - in case of blackswan event (maggi fiasco) |
| Mastek | 2% | Cloud computing small cap IT company + Industry growth 25% estimated + Acquistion of evosys (niche in cloud business) + diversified services + Management integrigty (Majesco incident - dividends to all shareholders post sale) | Looked upon as services company + COVID tailwinds need not be there longer (wait and watch) + Technology disruption |
| Tata Elxsi | 4% | Technology well advance for EV + services in Media and OTT (growth segment) + EV growth - manufacturers likely to use technology rather than insouring | Competion for Western companies with advanced tech + In house capabilities for leading players + Customer concentration risk + Technology disruption |
| Jubilant Food. | 5% | Dominos = near monopoly in Pizza. Shifting towards delivery business. Also bringing in inhouse brand products. QSR - wrt Urbanization + population + target for expansion to other geographies with high population + Diversification into biryani, chinese foods | High PE/ Debt >1.45. Customer concentration risk (Dominos - 85%) |
| Praj Industries | 7% | Biofuel market leader + Hi purity manufacturer (genome, vaccine industry) + equipment manufacturer for breverage + ITC type where ethanol is highly valued and contributes to 65% of revenues + value unlocking with other 2 segments + Story of transformation in Brazil on E20 | Dependent on Govt regulations for ethanol + pharam companies can inhouse depending on the increased scope (if Praj retains its key customers its adv Praj) |
| Reliance Industr | 5% | Investing cash from petrochemical into strongly growing consumer facing business (telecom + retail) | asset heavy telecom business + PL on Oil to Chem |
| Asian Paints | 5% | Technology driven + Legacy + Distributor network + brand recall | Dependance on oil pricing (volatile) + Indigo creating presence in Tier 2-3 Cities |
| Syngene Intl. | 4% | Manufacturing plants ready to use - CDMO for top innovators like Novartis, Roche + Management + Industry tailwinds + Only CDMO with capability for Biosimilars (LV - HM) | Lot of capex underwent but the real kickoff is yet to begin - high on speculation to do great. |
| Sequent Scien. | 7% | Animal pharma in regulated markets. CDMO with leading innovators like Zoetis, Elanco - Generic API market less market barriers and consolidation of the market among existing limited players | NGL Fine chem - Threat with presence in unregulated markets |
| Laurus Labs | 6% | High volme growth in ARV API, non ARV + process chemistry expertise (only company in CDMO with Gilead Lifesciences) + Capex for expanision in non ARV, onco APIs, synthesis business + Richocre acquisition bought in expertise biotech | Dependance on raw materials with China (ARV) space - ARV penetration pleatued |
| Divi’s Lab. | 4% | Increased CDMO investment + Opportunnity in Contrast API due to limits on Iodine + Business continuty in generic API + Backward integration on API (90% market share in pain killer API + high price margin) + Managment likely to get more aggressive in expansion into synthesis | One USFDA red flag can pull back (historical reference) |
| Dr Lal Pathlabs | 2% | Limited organized players in market + aggressive management + Hub and spoke model for increased penetration + quality standards | Diagnostics is still in hold of doctors (referral and comission business) + post COVID chance of increase in unorganized players |
| Health.Global | 5% | Revenue increase + increase in insurance cover public+private + mix of specialities with better margins | Concentration risk (2-3 centers contribute to major revenue share) |
Addition to these I have invested in MFs - SBI Small cap and PPFAS Flexi Cap.
I will be increasing my allocation to Mastek and Deepak Nitrite shortly.
Thank you
