I have huge regret for missing out on Acrysil. I had liked the stock at Rs 80. But somehow out of laziness forgot to do the final checks and purchase the stock. I suppose when you feel disbelief that a certain company is at the current price that is a good indication to buy it despite not being sure about the exact future of the company.
Having said that have you looked at Pokarna? Senior VPers seem to be interested in it and it seems cheap compared to growth expectations. Margin contraction is the main concern in my view.
I tried looking at pokarna but I donāt like how difficult it is to get information. Quarter presentations stopped in FY 19 and no concalls either. Itās basically the annual report and the forum here on VPā¦ and I find the thread to complicated for me to understand if Iām being honest ā¦ I tried but gave up half way and decided it wasnt for me. Currently tracking Apollo tricoat and Acrysil as my plays as a proxy for the sector and I wouldnāt want to get overweight in there anyway so doubt il look back. Acrysil looks like their margins will stay steady, their capacity plan bodes well and the quality of the carysil sinks are brilliant. My wife is an architect/interior designer and she holds them in my very high regard. Was the icing on the cake for me. Same with apollo Tricoat and their products(and I do believe designer steel over wood wherever possible in the future will be a necessity but she absolutely hates that thought ).
Sometimes a business and a business model just clicks and blows me away the first time I see it(acrysil and apollo tricoat) and sometimes it just disappears alongside the other 100 companies Iāve seen and that happened with pokarnaā¦ though Iām sure itās a fantastic company and I could be making a mistake overlooking it(and I do like management babysitting me with atleast a presentation if not a concall)
Fair enough. I think that is one of the main reasons for the basement prices in Pokarna. They used to do concalls earlier but after stopped abruptly at one point, my assumption is they want to focus purely on the business and not get distracted with analysts and their expectations. With Acrysil I am learning how big the anchoring bias can be. I still have Acrysil - 80 Rs in my mind so difficult to buy at current prices psychologically
Could you share your projections for investing in Apollo Tricoat? What kind of growth, margins are you expecting?
In the short to medium term Iām not expecting anything dramatic in tricoat. Ebidta/ton of last few quarters will go down soon enough so there could be pain here. Also, want to check what capex/volume plans the company comes up with next few quarters for post FY23. What I suspect is even they dint expect their new products to be such a huge success in such a short time period.
What I like is that their products are disruptive and have been accepted by the market. The growth in these products could be fantastic but just need to wait to see how management plans on capturing this growth now. I donāt doubt them at all though considering the apl groups history.
Considering the wait until ebitda slows down and the lack of expansion plans post FY23 it seems a bit too overvalued at present and Iām willing to wait for the price to come down to less elevated levels before investing and donāt mind waiting a couple quarters if needed. Tracking intently though.
Acrysil will take priority firstā¦ clear capex plans and targets for the next 5 and even 10 years and doesnāt look to overvalued even after the run up and there could be a good entry point soon enough(also, Iāve got Vaibhav global on my priority list for whenever I get a discountā¦ plus I still have to add to borosil Renewables and make it 10 percent of my portfolio so I may not have enough cash for tricoat even if I wanted to for sometime)
Ever since I invested in Expleo Iāve been studying this IT Bfsi space intently. When looking at products offered I started with Oracle and then moved to intellect later. From what Iāve understood intellect looks the best bet in the IT Bfsi product space regards growth which covers literally every vertical but oracle could be the safer one albeit with slow growth. The previous few years with intellect need to be ingnored since they were losing cash in development but have now finally reached monetization phase. Theyāve monetized 6 out of 12 products/will monetize 2 more soon and So they look well set to have a good 2 to 3 years (management called for 30 percent eps increase cage uptil FY 23). What happens after is what Iām unclear on. Ideally next few years leads to operating leverage and easier customer acquisitions which will lead to greater cash flows leads to cash being spent on development post FY 23 without affecting the balance sheet/debt etc too much. They are trying to make inroads in the usa too and as mentioned by rshankv the usa is the place to be for bfsi. If they are as successful there as in Europe then the potential is huge. Valuations look good considering the next few years. Arun Jain seems to be a trusted name from what Iāve read.
On the bear side, management had issues communicating with investors a few years ago and expenses last few years were painful so I dunno how things will pan out over a decade and if there will be pain in the future similar to last few years at some point. Ideally this is the start of a virtuous cycle and the incoming cash over next few years will help this and the stock has broken through a multiyear resistance too so things look like they are changing for the better.
I have considered adding it alongside expleo to complete by IT Bfsi suite of Product + testing but I havenāt got the conviction yet since Iāve realised Iām only just scratching the surface of IT/Tech and have a long way to go. I donāt have a very large holding in Expleo and donāt want to add more and I canāt figure the valuations of any other it/tech companies so I may consider adding intellect alongside expleo since it does look like it has potential, the valuations considering the next 3 years isnāt too high and management commentary is very bullish but Iāve not taken even a tracking position yet so I have no skin in this game. Maybe in a few months when Iām more comfortable with this sector and if valuations are still reasonable.
Same here . In IT only Infosy I hold . And Affle and Route mobile in technology .both are ipo bets
But due to sectoral Tailwinds in IT sector I thought of digging deep.
Intellect design seems interesting.
Along with Persistent system
Thank you @Malkd for keeping this thread lively. Lots of wisdom!
Here is my thought, there are many exciting stories available and many of these stories should ideally take few years to play out (like multi-season TV series). However, the price action and rush to be a part in these stories made it look like few seasons are already over. Congratulation to those who found success in the ongoing wave. May be this wave will continue and prove the doubters wrong and there are some strong points supporting this.
Still small % of retail participation in equity markets w.r.to the retail savings, consensus is that the retail participation would continue to increase in future
Influence of freely available information/VP/Twitter/etc., evolution of new age brokers / Zerodha / payTM etc.
Let us wish the wave to continue but I am very happy with boring stories for now.
@jintocd
Personally, Iām hoping for a long bear market and Iām a bit fed up of this bull market since itās not letting me build substantial positions in certain companiesā¦ the runups are so huge that apart from pharma and deepak Iām not happy with my allocations elsewhere since I wouldāve liked a lot more ā¦
there are also certain companies I want that are just asking for too high a price right now.
Since I plan on holding for as long as possible bull markets are my enemy since all I my realised gains years down the line will be lower if I donāt get allocations in now at reasonable prices but thereās also a danger of building positions in a bubble and hence will again compromise my long term earnings.
Itās getting harder and harder to find good companies with low valuations and Hence, why my buys of late are turning into undervalued(Expleo, Muthoot capital) or low risk bets(itc, rites).
Atleast Iām not in fear of a prolonged crash now since it will let me SIP and build a position in my current companies and in companies I am tracking (though Iām betting on the pharma/chemical rally continuing for the foreseeable hence why Iām overweight there. Plus I donāt have room for any more allocation in there anywayā¦ so that bull run hopefully continues )
Edit: Vaibhav Global finally crashed from its high for a minute and I managed to initiate my SIP in it at 2755. Waiting and pouncing via small sips during random crashes like this could be the way forward. Will keep SIPing whenever I get a chance. Donāt mind risking averaging down either
The whole of pharma has been in a slump. The bull run in other sectors have just made it more noticeable and painful to watch. Itās just been a few months thoughā¦ which is nothing.
Just a few months ago the other sectors were underperforming and pharma was risingā¦ and most companies rose from 2x to even 5x(marksans).
Right now itās just out of fashion since there are just too many sectors blowing up at the same time.
Once a few sectors show weakness and once the valuations of some companies going far past their earnings potential becomes obvious and when the fears of pharma doing a 2016 to 2019 phase slowly dissapateā¦ Iām pretty sure pharma will get back on track.
Earnings just canāt be ignored in the long runā¦ as long as they continue to post good results YoY(ignoring short term supply chain issues and less cough and cold etc due to covid which will normalise in time) then we ll see a Lollapalooza effect in this sector though for the entire story to play out it may take a few years of patience.
I firmly believe that the pharma bull run will continue for the better part of the next decade due to multiple reasons including:
China+1, Api boom, increased healtcare spends, drugs going off patent, low cost manufacturing, crams being adopted successfully by many indian companies, companies learning and getting better at clearing usfda, backward integration, forward integration, general undervaluationā¦
Just make sure the companies you pick(I donāt really follow marksans) is benefitting from the above factors(or make a basket to cover all of them) and has a low likelyhood of hitting a speed bump going forward when the rerating of sector does occur (usfda and government shutdowns) and Iām willing to bet we ll see huge wealth creation here.
Extend your timeframe to 5 to 10 years and it will seem like the past few months have given us a giftā¦ ie
A chance to accumulate amazing companies in a sector with huge runway for growth at cheap valuations in the middle of a huge bull market.
Personally, Iāve spent nearly 70 percent of my networth accumulating pharma over the past half year and Iām glad the prices havent run-up too high to prevent me from doing so. Itās darkest before dawn and while it is a bit frustrating(and sometimes scary) I honestly feel the chips are loaded in our favour as investors in this sector.
If you have the same conviction for marksans you could use this time to accumulate.
Note: it took me 3 months to understand pharma. So while I managed to get in on laurus earlyā¦ alembic and granules are still close to my average price. Iāve not spent a moment worrying too much about them though since the story is very much in tact. However, I have been investing in other sectors since December and have stopped putting more money into pharma since it was literally my whole portfolio (+deepak) a few months ago
Disc: not a sebi advisor. If pharma doesnāt explode please donāt send death threats
Marksans has reported good quarterly numbers. the company is a net cash company.
The only thing is poor dividend payout . It has free cash of 195cr with zero debt . No major acquisitions or capex
Still buyback , bonus or divided was not announced. Thatās y I guess after such good results itās not movingā¦
But itās to also b noted marksans already moving 5x in pharma bull run recently. Might be taking a breather .
Summary from Gartner reports, The āIDAā evaluation is based on gartnerās 2018 analysis of this company, so things would have improved since then.
Intellect Design Arena
Intellect Design Arena is a Challenger in this Magic Quadrant; in the last iteration of this research, it was a Challenger. The company is headquartered in Chennai, India, and its CBS product, Intellect Digital Core, was launched in 2005. The surveyed version as of the cutoff date, v.19.1, was released in July 2018. Gartner estimates that Intellect Digital Core has more than 100 installations worldwide, of which about a dozen are in progress. India is the country with the most installations. Intellect Design Arenaās customer base is mainly universal banks in the small-to-midsize-bank tiers, including a few global clients for which it provides selected components of its CBS. These installations are prevalent across the emerging APAC region, followed by Western Europe and the Middle East and North Africa (MENA).
Intellect Digital Core is coded in Java and runs over UNIX (HP, IBM and Sun), Linux and Windows on Oracle Databases. Along with on-premises implementation, the product has been deployed via SaaS and in hosted environments. Intellect Design Arena partnered with AWS for public cloud services.
Intellect Design Arenaās go-to-market strategy is hub-based. The company has a direct presence in 24 countries, but sells in more than 80 countries worldwide.
As of the cutoff date, Intellect Design Arena featured an embryonic app marketplace and keeps investing in that.
Strengths
The Gartner Financial Rating improved from Caution to Variable in 2019.
Operations are another bright spot for Intellect, as maintenance fees are the lowest across the examined vendors in this Magic Quadrant, and minor releases (issued twice a year) consolidate patches and services packs.
Intellect Digital Core shows a greater than the average number of exposed microservices, according to the list provided to Gartner, and a moderate commitment to microservices architecture.
Cautions
Intellect Design Arena had the highest decline in overall customer experience across the examined vendors in the evaluation of 2018 through 2019 project deliveries, with a significant drop in the implementation experience.
The cloud offering is very limited for this vendor, which has previously installed its product on some private clouds and a few installations in public cloud.
Intellectās deployment ecosystem is considered weak by Gartner. The company delivers projects largely autonomously by consultants traveling from its few hubs to clientsā sites and supports them from India.
@rshankv
Was tempted to take a small position today when it fell to around 425 but then noticed the tax rate. Itās been jumping between 3 to 7 to 11 percent last 4 quarters.
Even assuming they have a bumper next 2 years I got scared wondering if their tax rate would go to the standard 25+ and how that would mean that the company is valued a lot higher than it appears to be.
The likes of expleo have been paying 25 to 30% every year. Any idea why IDA has such a low and fluctuating tax rate?
@Malkd this question was answered by the management in the last section of Q&A 1:08:25 , and they did mention that they are carrying forward the losses of upto 450 crores
Thanks. Assuming management has factored everything in including tax coming back to normal when talking about eps cagr of 30 percent then. Even though relatively expensive Their valuations make sense to me considering theyāll be creating cash cows with their products after years of pain in the development cycle. Very interesting bet. I wish Iād looked at it earlier since I definitely wouldve taken the plunge at a cheaper price. But Iām still tempted even now. Will go through the concall and notesā¦ had only gone through the concall summaries, forum and annual report earlier so have some homework now. Thanks @rshankv. Btw have you taken a position here yet or is still hcl your only IT/tech company?
@Malkd as you pointed out rightly, they have gone through the pain of building the product, the second leg to this, is to market it, i think this is what they lack and hence they are not confident of giving higher growth projection.
Few weeks back it could have been a tempting proposition now it has run up well ahead. having said that there is no harm in getting started small and I am planning to open my bets on this , Yes HCL is still my only hold in IT sector
Thanks for the links @rshankv . Slowly gaining conviction here and in the the IT/Tech space too thanks to you. Btw expleo may have turned out to be a good bet purely by accident.
They managed to bag a huge global deal(including USA) and are on a hiring spree for it with 120 people planned. They are now expecting similar deals in the future. They are also getting projects in auto now so not just bfsi. Got a cushion to work with here since Iād bought in before the news broke out via concall but considering the new developments maybe there is some meat in this expleo story.
Visibility looks good for the next few years thanks to the deals theyāve bagged. Hopefully the inroads generated by this along with the cash they get manages to set them on a virtuous cycle too. At single digit PE considering the news they look risk free and worth a punt purely accidentally
Overall a combo of Expleo+IDA looks like it allows a bfsi play without the npas and tech/IT plays at low/reasonable valuations
Edit: opened a small position in IDA(approx 1 percent of portfolio) during this minor dip so that I have some skin in the game and Iām forced to study more and will add as I understand more and the story unfolds.
Made a mistake with my portfolio when setting it up and ignored all IT and Tech stocks since I couldnāt understand valuations and felt the task of studying the sector was too daunting ā¦ but now after Iāve begun studying the sector Iām slowly beginning to realise why many of them were considered cheap a few months ago(IndiaMART/infoedge/Tata elxsi/LTI/LTTS/Happiest minds/Affle etc) even though they looked expensive on paper(no debt or capex/high margins/free cash flows and cash cow products/ability to do acquisitions with cash generated/stick clients etc) and hoping that I can rectify that now slowly.
ā¦ I tried but gave up half way and decided it wasnt for me. Currently tracking Apollo tricoat and Acrysil as my plays as a proxy for the sector and I wouldnāt want to get overweight in there anyway so doubt il look back. Acrysil looks like their margins will stay steady, their capacity plan bodes well and the quality of the carysil sinks are brilliant. My wife is an architect/interior designer and she holds them in my very high regard. Was the icing on the cake for me. Same with apollo Tricoat and their products(and I do believe designer steel over wood wherever possible in the future will be a necessity but she absolutely hates that thought 
