Hi Malkd,
I understand that valuation is a yardstick that you use while investing. Just wanted to check if you had ever looked at BASF India / Bayer Crop sciences any time from an investment perspective?
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@MarketYogi
All the companies I invest in have to have this in common:
Fantastic promoters with good capital allocation/potentially good allocation, a good business model with clear visibility in sector, growth drivers that havenāt been priced in yet and can be tracked, long term plans which give me something to aim for over 5+ years and invest in them when they are out of markets favor(hence why Iām eyeing rites/astec now even though I want vaibhav global for eg) but close to an inflection point when their sector has obvious tailwinds.
They are then divided into buckets
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Bucket 1 are companies like ITC. Safe large blue chips with a huge safety net with cash/dividends and history. Keep investing in SIP format until the growth driver story plays out. Once FMCG margins are high and when rerating is underway(approx 30x profits) il stop buying and just hold on and let the money compound. Donāt mind averaging up or down here since long term I know Iām safe.
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Bucket 2 are companies like Laurus Labs/Deepak Nitrite. Obvious inflection points in a sector with very visible tailwinds. I bet big straight away and keep adding as long as valuations are comfortable and story is intact initial few quarters. Il move on to another company and let my money compound once market prices the change within the company for eg with deepak nitrite and not worry too much if I donāt get a chance to invest more since Iād have enough in it anyway
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Bucket 3 are turn around risky companies like Expleo/Muthoot capital. I divide my capital into tranches and invest as the story improves every quarter. Get them super cheap so donāt mind averaging upwards here since I donāt want to risk too much on a thesis that may not play out and need more information every quarter to ensure it is.
I donāt think id sell any until a story breaks down or if promoter integrity comes into question. However, if a crazy re rating like with Dixon etc occurs Id probably sell around 20 to 30 percent and use the money elsewhere since if it does happen it would mean my money wouldāve gone up quadruple+ times so I could run on house money for the long run.
@Shankar
Deepak Nitrite Is my favorite chemical company if not my favorite company in the stock market. Iāve allocated enough there at lower levels and will add in deepak itself if there are huge dips over the years. so apart from briefly checking basf/bayer back in May when I was looking at the chemical industry i dont have much too add regards them
However, Since Iāve sold Kaveri Iām considering astec as my agro play with the benefit of high margjns and benefit of the chem sector tailwinds and the fact itās slowly coming into a buying zone post Hiremath selling and bad Q3. So Iāve not really looked closely at those other companies and Iām just looking at deepak and now astec
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Good parameters of picking stocks.
It seems youāre into more value investing. Great
Astec life science even Iām tracking n it corrected well from all time high.
In agro chemical even Dhanuka Agri has lots of positives .
Do share your views on both after analysis
Not a recommendation. Donāt hold both
@Aniesh7
Dhanuka looks good too. However, I like astec due to the potential in high margin crams and the godrej parent. Dhanuka looks like they have good promoters too but godrej gives me comfort and is worth paying higher valuations for me. Regards godrej, I know They did a few questionable things early 2000s but have since been reputed promoters since and I can sleep well at night trusting them. Also, the fact that we have seperate concalls for astec now is the icing on the cakeā¦ which coupled with the recent vote by shareholders shows that worries about a merger with agrovet is a non issue for now
Also,
I donāt think thereās a difference between value investing and growth investing. We all want growth. Iām just willing to wait a few years for it. For eg with alembicā¦ itās probably a wait until FY23 until growth really, really kicks in when drugs go off patent and capex kicks inā¦ so it will be a growth stock soon enough and was a growth stock a few years ago but itās just taking a breather and letting us buy during consolidation now.
Basically, I just prefer picking growth companies when theyāve stalled a bit and valuations soften so I can enjoy growth when it kicks in rather than pay a high price now and watch them eventually slow down anyway as all companies do due to the way the economic cycle works. I want the likes of Vaibhav Global, Apollo tricoat and maybe even Dixonā¦ but Iām willing to wait until they cool off a bit even if it takes a loooong time. In the meanwhile there are plenty of fish in the sea. If I miss one il just invest in another or in one I currently own 
ā¦
Btw, Iām not talking about PE. For eg I did pay a high price relatively for borosil renewablesā¦ but thatās purely because it was cheap regards what it could do the next 12 months(let alone next 24 months!)ā¦ so itās not anything to do regards PEā¦ which in isolation isnāt a good indicator and isnāt the point of my posts.
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Yes even Iām currently looking for and tracking such companies . Few quality ones I feel
Alembic pharmaceutical
Dhanuka agri
Sudarshan chemicals
@Malkd are u not interested in infra companies? Stocks like Dilip buildcon, KNR or PNC or smallcap like HG infra which may benefit huge by infra push?
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If you looking at something in the agrochemicals space, Natco Pharma is moving in there too. With their unique business model of focussing on niche products. And with Lenalidomide coming in next year, Natco could be a great bet going forward. Any thoughts on Natco?
@PraveenKG
I have no interest in infra. My wife is already dependant on that cycle for her business (architect/interiors) and Iām a bit wary about owning businesses that we already get our bread and butter from since a down cycle gets amplified further . In theory it gives me insights on kajaria etc but Iāve chosen to stay away. The only proxy play Iād consider for that industry is apollo tricoat if I get it at a discount(with selling by ex promoter Iām hoping that happens here). Rites should benefit from the infra push too anyway(albeit in railways)and il be investing in it soonā¦ maybe even tmrw
@anjeshv4
My head will probably explode if I invest in natco. Iāve tried understanding it but itās a bit too complicated for me to wrap my head around all the molecules even though Iāve gotten comfortable with pharma. Currently Iām a bit too overweight on pharma too(nearly 70 percent!) So Iām looking at other sectors now. So for those reasons Iām overlooking it. The potential is huge from what I have understood though.
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If interested n comfortable try tracking financials banks, Quality Nbfc , insurance or Gold finance
Banks NPA can be a concern in short run
Insurance sector is richly valued so as quality Nbfc like Bajaj financeā¦
HFC I donāt track.
But as India is on growth track, financial sector will play a prominent role .
Disclosure: invested in Hdfc bank / life , bajaj finance and AU
So sectoral views might be biased
Even I like Deepak Nitrite. I entered a bit late . By the time I picked up my first lot, it rallied. I am.not able to figure out whether I should increase the allocation or wait
Any how Iām looking into invest in HG infraā¦not much baggage behind itā¦so if rally happens in infra, especially in road construction, Iām expecting it to shine and become midcap sooner than laterā¦!! Looking for some dip, but itās not coming 
IRCTC had 205 crs NP for quarter ended Dec 2020. Extrapolating the same over 4 quarters in normal circumstances would mean a yearly NP of about 800 crs. At current valuations it would be discounted at around 35 times. Considering the moats that the company enjoys, it surely doesnāt seems to be over priced. Views welcome!
Maybe. Itās just a personal choice. Youād need to assume irctc will match itās best Ever quarter every quarter for that to work and that theyāll grow their business from that base every year. Youād also need to assume theyāll continue being a monopoly for the next decade and all it takes is one change in policy for that to change. Government monopolies donāt last forever and even if they do investing a large amount here with the fear that it wonāt last forever is tricky. A government monopoly without pricing power isnt a very big moat. The one area where they do have competition ie tourism has seen them see de growth if Iām not mistakenā¦ thatās a lot of risks at 35x their best quarterā¦ but I could be wrong.
With rites most fears are priced in so I would feel more comfortable investing there especially when both of them have government holding as a negative and since both will benefit as the sector ie railways grows.
As per latest concall RITES should hit around 670 to 700 crores PAT next year ā¦ considering they have about 1200 crores of cash available(not including advances) that values their core business at under 7 times forward FY22 PE. Even assuming 40 percent dividend distribution instead of their 50 to 65 of the last 2 years that would take the returns via dividend alone at approx 4.5 to 5 percent. Considering Rites usually trails at median PE of around 13 that would lead to a capital appreciation of around 50 to 60 percent which would be a fantastic return and gives me good safety buffer at cmp.
Considering all of that Id rather punt on rites and hope they match/go above that figure considering the medium term tailwinds in railway infra and not worry too much if they donāt hit it at these current valuations since il have a juicy dividend as a failsafe and not too high a chance of a significant derating from current valuations.
Bonus is their orderbook makes it easy to calculate future returns and their core business is high margin consultancy which has good visibility so margins look like theyll stay intact .
IRCTC may grow faster than rites but as an investment I prefer rites at cmp and feel I have a chance of similar returns with the risk of being a PSU(ish) priced in but with the benefit of capital protection which will lead me to hold with conviction when the inevitable downs come alongside the ups.
That being said I just have a cursory understanding about irctc so Iām not an expert regards the company. The flavour of my post was just about how I prefer upside surprises and capital protection rather than worry about downsides and bad results and de ratings due to regulatory changes.
Disc: not a sebi advisor.
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As I said if you are keeping view of 1 year or so ,itās richly valued. N has run up a lot.
But if u r in for 4-5 years time its a good bet in railways.
Itās wonāt give u multi bagger returns but 25-30 compounding returns can b generated . When selecting Higher valued stocks ur time frame and return expectations matters .
Stocks like berger, pidilite, Asian paints, dmart , jubilant food, PI , most FMCG stocks all are richly valued n they generate consistent returns.
N market value them high for a reason.
Hi
The basic difference between Rites and IRCTC is former is a B2B company while later is a B2C monopoly (as of now).
Further what prevents government (given the financial state) to reduce the margins of Rites ā¦e.g. BEL.
These two factors IMO are the reason for vast valuation gap between the two companies
Regards
Management turned down the Dedicated freight Carrier order because they dint want to compromise on margins. So they are pretty savvy in that manner which is refreshing to see. They also plan on keeping low margin turnkey projects under 30 to 35 percent of revenues. So management is very wary about margins and based on the concalls Iāve heard and interviews Iāve watched they are in a different league to most PSUs.
However, If they keep having to turn down orders then it could become an issue but it wonāt be one for a couple years considering their order book is currently 3x sales.
With the infra push thereāll be plenty of orders for the taking however so they do have the luxury to pick and choose for some time.
The main issue would be delay in payments by the government for current ordersā¦ and the debtor days is something to keep an eye onā¦ but this should lead to delayed rather than missed payments. They may also be forced to pay out a huge dividend for a bit so any capex they need may get slowed down.
IRCTC will always grow faster due to it being a B2C company and will always be valued higher than RITESā¦ Until thereās a whiff of threat of its monopoly disappearing which atleast for me is an overhang at these valuations that just wouldnt let me invest a large amount here. Again, itās just my personal decision and I find it too risky. The monopoly may last for a decade and irctc may end up being a 1000000 MCAP company in 5 years but Iād rather keep my money elsewhere.
And even if growth is slower, if RITES clocks low double digit returns for the next few years from current levels(which is very much possible) and maintains an ok dividend payout il be more than happy.
Again, I am biased since I will be investing. And my aim is to de risk my portfolio so I find RITES a safe haven at present.
Edit: invested approx 4 percent of my portfolio.
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Thanks for mentioning Acrysil @ankit_tripathi
Started studying it again after your comment(couldnāt help it) and also Gone through the forum thread on it and this fantastic piece https://financialmonk.in/acrysil-an-undisputed-leader-in-quartz-kitchen-sink/
And Iām hooked. Even after the run up from 183(locked in upper circuit) itās still not that overpriced. If it does fall a bit more(itās taking a nice lower circuit breather so hoping it corrects further and cools down to around 50 RSI) I will definitely buy my first tranche. Itās a long term story so il be investing in a planned 5 tranches as and when the story improves. Visibility looks good for 5 to 10 years and itās just a matter of buying and making sure the story is on track. Thanks again. The VP forums are the ultimate place for finding gems.
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Itās on my watchlist as well . Reasonable valuations.
Contract manufacturing theme.
Btw did u ever came across Bajaj health care ?
Or anyone here. On VP thread is there but not active
Never heard of them @Aniesh7 . Just checked and they seem to be involved in api/ formulations etc. Iāve mentioned before in this thread that when it comes to the pharma industry you need as much information as possible and the threat of usfda/losing market share etc can happen overnight.
So I prefer sticking to the larger companies like granules/laurus/alembic with stellar track record.
In this industry, especially for smaller players, closures of plants etc may be for a temporary period or may be for a long timeā¦ and when it does happen itās difficult to figure out the impact it will have until itās too late and deciding whether to sell on/average down is near impossible.
Itās a very tricky sector and navigating the usfda closures/approvals/api pricing/the supply chain/us markets for generic/domestic for brand etc is very very difficult and you need to have full faith in the management quality and need them to be as open to you as possible via their concalls/annual reports/interviews.
So while smaller companies in this sector ie sub 1000 MCAP may prove to lucrative it will be a huge challenge staying invested when things inevitably start going south.
My heart goes in my mouth for a few days even now owning alembic with its amazing track record when they have an inspection coming up and cheer every anda approved.
I canāt imagine the tension owning a sub 1000 crore company whose very existence would depend on a few factories/products
Regards Bajaj Health, I donāt know of the company at all, and they may be the next divis as far as I know, but My 2 cents are that if you are struggling to find much info about them right now then it doesnāt bode well for later when youāll really need it
Disc: not a sebi advisor
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Thank you for info. As ur portfolio consists of API stocks thought of getting your view on this.
Even I play safe on pharma . Granules/Aarti/ Laurus
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