Hello, What is so special in Onesource. There is Neuland in CDMO space and recently listed Sai Life Sciences as well having almost equivalent capabilities. If you can kindly share your thoughts please?
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It is easy to lose oneās sanity in the current state of the markets where everyday pf moves 3% up or down for no apparent business reasons, purely due to market risk, although the mind tends to make up business issues where there are none. So purely from a business standpoint, just going over last Q results since now all results are out and also future outlook.
Ceinsys - Finally a big earnings quarter that justifies the order book. But even this is suppressed to a large extent on the consolidated side (by maybe 4-6 Crs) due to higher employee expenses on business which are yet to contribute.
Near future, with the strong order book, Q4 execution might include 150 Cr from river-linking project + 100 Cr of other order book. So Q4 numbers could be anywhere 150-250 Crs though thereās no explicit guidance
Shaily - Pretty strong growth, 6 more customer signups for pen platforms and 2 new business contracts with global retail chains. Shaily UK revenues which are high margin for platform access fee can also grow. Insulin revenues will ramp up from next quarter once they have higher production using the 8 cavity molds instead of the 4 cavity ones which should help operating leverage as well considerably.
Axiscades - Strong growth with good contribution from defence production revenue. Thereās good margin expansion in Aerospace business as well from 20% to 24%. Semicon business as well is howering around 24% margins although growth is flat.
Q4 defence revenues should be even higher as its the seasonally big quarter. Thereās a big drag in non-core EBITDA to the tune of 7 Cr (3 Cr profit vs 4 Cr loss) which when it compensates can help the core segments shine even better. I am also hopefully some actions are taken on the non-core segment soon which will augment the balance sheet and also improve the PnL
Blue Jet Healthcare - The thesis for investing is here, here and here. The preliminary signs are that the Q4 PAT of 99 Cr should be the base on which there could be 10-15% growth which could yield a 500 Cr PAT thatās more than double TTM PAT (and 3x FY24)
Wockhardt - Nice to see it become PAT +ve although its on the back of forex gains. Though thereās no concall here for future outlook, the management has guided for a 20% growth in the near future. I have covered the zaynich trial results here. It is quite optimistic and would be great if they can file NDA and get the drug to market soon.
Genesys results are very good as well and among other businesses I track closely Garware, though its not a great quarter, the management has reaffirmed its growth outlook. Holmarc being a SME has nothing to show for this Q (They declare every 6 months)
Other than this, we can indulge in macro and scare ourselves to death based on what prices are saying, but its helps to be optimistic
After being 17% down 2 weeks back and almost recovering it all in just 3-4 sessions, am now 12% down so far in this round of cuts. Its not terrible by any means but feels so purely because of the volatility.
Disc: Invested in all mentioned names
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Hey @phreakv6,
On ceinsys, any idea from when we can expect can the consolidated numbers give a positive trigger or is it still a unknown. And I believe consolidated means just VTS and Singapore datacentre, right?
On the datacentre side, I dont think it will help company as there are many/several IT companies already well versed on this side. Afraid if I didnt get the datacentre business that this company is aiming for. How do you perceive this area.
Coming to the Geneys side, are you sure the numbers are good enough. May be I am missing how to see the numbers.Reason being that the moment the result is out, I didnt like the numbers and thought it will be crashed.
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@phreakv6 If at all there comes a tariff on Pharma, according to the below mentioned article, How do you see the effect on BlueJet? Will the additional cost be passed down to customers and negligible sales and revenue impact to BlueJet. Or do you see if thatās not possible and the company may face headwinds in terms of sales and profitability. Can you please provide your views?
Thank you
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Hey! Would be appreciated if you could share your thoughts on general valuation benchmarks e.g. P/E & PEG. For instance when you entered Blue Jet the company valuation is 50+ which higher than median P/E for a pharma company so what was the thought process with respect to that. Thanks in advance
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I have no idea from when Consol will stop being a drag. As of now they are paying Rashi Mehta, John Chwallibog through Technology Associates, USA which is a wholly-owned subsidiary of wholly-owned subsidiary AllyGrow (though both of them have no business with AllyGrow) but simply because this is the US subsidiary they have. VTS as well has been acquired through this step-down entity. VTS is not profitable AFAIK and Rashi is supposedly helping with acquisitions. I think a lot of the impact is due to expensing of ESOPs
to the tune of 5.39 Cr in Q3 and 11.87 Cr in 9m FY25. This should be non-cash, so I think we should see CFO rather than PnL to see how well the company is doing. The management says the CFO for 9 months is a whopping 124 Cr.
To put this in perspective, the CFO has been ~50 Cr in last two years. The EBITDA ā CFO of this company has been stellar which was one of the things I liked about it. To have 124 Cr CFO is nothing short of stellar.
It might be the case that lot of WC got freed up in Q3 and might get locked up by end of Q4 but at least as of now, it is very, very good. Its a EPC company with a nearly an IT company sort of cash conversion and WC days. So I think we should put the consol level drag to the tune of 6 Crs in PnL aside - its probably just the ESOPs being expensed out. alongside higher pay to the two individuals.
I donāt think they are doing anything on the data center side as of now. I dont think they will rush into anything since thereās strong expertise from the investors who have come in - I have discussed it at length here
On Genesys, I think thereās lot of older investors are exiting which is putting pressure on the price. The performance as per PnL is not bad to warrant the kind of selling pressure. We should however look at the CFO here as well by end of year to see how it is since depreciation is quite high (maybe rightfully so, since its in a sector with fast evolving tech)
Tariffs may work on generics but not sure what it can do to NCEs. Blue Jet current numbers are driven by Bempedoic acid intermediates. Its not easy to put up this sort of capacity in US in short period since the exclusivity ends in 2031, so time is of the essence for Esperion. Tariffs will very likely be borne entirely by patients. I think this applies to any product where thereās pricing power across industry.
Also its not easy to put up capacities in US without cheap labour for a lot of industries (like footwear, apparel, transformers etc.) and where supply chains are highly intertwined (CDMO, specialty chemical factories etc.). We should also think if it is even wise to put up capacity and the current US govt is voted out in 4 years and policy changes then. No one is going to commit huge capital with that uncertainty hanging in front of them even where it makes sense otherwise to do so.
Blue Jet P/E was 50x and growth was 100% as per my estimates, which makes PEG 0.5 - which means its highly undervalued. But its stupid to go by simple numbers like these without understanding underlying business levers, growth, moat etc. People who do not understand underlying business strengths/weaknesses use these as shortcuts and at extremes, they do function alright - but I have seen P/E of 15 which looked cheap become a P/E of 8 as well (see Natco for eg.). In general thereās no substitute for understanding businesses - things like index P/E, number of stocks above certain DMA etc., stocks hitting highs/lows etc. kind of metrics are good for timepass and will not help you make lasting wealth as you are bound to be out of the market just as its having its best time or not buy when its having its worst time etc.
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As far as i know, you had a position in Pix Transmission. Any viewpoint after Q3 results?
The company is very miser in giving out information.
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Hi @phreakv6, I wanted your thoughts on Home schooling, your experience of consulting full time from 2007, Running, Guitar and general views like how to get into in depth analysis of any topics. Most of us are interested in PF stocks but I feel if you would like to share some other things like above topics and also how you research any stocks, tools etc
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There are so many thoughts going through my head last few days. I felt like writing them down so that its clear to me what it is I am thinking. Before I start, a disclaimer that I was 40%+ cash as of last Friday, so there might be a bearish bias, though sometimes I feel I should be 60% cash so you might even sense a bullish bias. Either way I feel I am positioned for comfort since I canāt figure out if am bullish or bearish. Also this is the first time I have gone to this level of cash since Oct '21.
Even if the tariffs are rolled back, which seems highly unlikely every passing day without a rollback - the confidence and trust of the world is going to be shaken even if not lost completely. With the way Trump has been upping the ante on China and Europe and the speeches by Canadian PM, UK PM and whatās coming out of the EU make it clear thereās going to be no rollback in the near future. Trump himself is claiming he wants reparations (!). China has already responded with steep reciprocal tariffs which only makes it impossible for him now to go back on it. He is in fact doubling down saying he would increase tariffs to 50% if China doesnāt remove tariffs. There are simply no cool heads
Even if we negotiate a good deal with Trump and few other countries do - its no victory for anyone. China produces 70% of products consumed by US. If there are tariffs of 50%, the US consumer will have very little money to consume which would defeat the purpose of our having better tariffs. We anyway cannot put up capex fast enough to capitalise. So unless China gets a good deal, we are still screwed am afraid.
The sinking feeling I was getting mid/late last week was how much this was resembling early Covid (Feb). Friday morning CNBC news anchors were brushing away the concern because GIFT Nifty wasnāt down and we even opened well - there were explanation for the price, pretty much the same way we thought in Feb '20 that the virus would do nothing to Indians as we had great immunity and summer wouldnāt allow virus to spread etc. This time the virus is a person/ideology. Unlike Covid, where everyone sat together to work on a vaccine and work on plans to contain the pandemic, this time everyone is busy protecting their own turf and vote bank. Unlike Covid, there is not going to be loose monetary conditions that created the everything bubble (for which we are probably paying for now)
The worst case scenario is what scares me the most - US refuses to remove tariffs and insists on becoming trade surplus with each trading nation. This is a comical ask which is bound to fragment the world into trading blocs. There will be near-shoring/reshoring and a breakdown of globalisation. A 10% reduction in trade would be sufficient to send logistics cost skyrocketing. Without US protection of shipping routes, expect piracy and each trading nation having its own naval fleet to escort its commercial vessels. If we canāt ship efficiently using large 22000 container ships and instead use smaller/faster ships, it will quadruple our logistics cost making lot of supply chains unviable. We are currently a global factory where intermediates are shipped to multiple places to make a finished product - expect this to go down dramatically. We will probably not have the plenty we are so used to. It is scary to think on these lines and I stop myself to not get into a negative spiral. If this situation doesnāt resolve in the next 2-3 months, this is probably where the world is headed.
The other thing we need to be wary of as investors is demand destruction, margin compression due to operating deleverage and higher shipping costs and the biggest of all - a onetime compression of p/e multiples. For all these headwinds, we are bound to trade at 10 year lows on multiples and not close to 10 yr highs. Globalisation and US deficit spending is what made all of us prosperous - if both these are gone, we are looking at going back to valuing stocks very differently (like Graham did).
I feel domestic facing businesses and defence companies might do ok, alongside pharma (I still have Bluejet, Ceinsys and Axiscades hence) but a multiple compression can get to these businesses as well. I do hope things change for the better within this week but if not, every passing day increases probability of pretty horrible outcomes.
Disc: 42% cash
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Sir,Are you still holding wockhard
Did you raise most of the cash last week only? I wasnāt in the markets that much before COVID. So I donāt have a personal experience as to what the mood was like leading up to COVID. What gave you the sense last week that this could blow up? Because most were thinking the tariffs would be based on the actual tariffs charged to the US by other countries. No one expected this ridiculous tariff calculation that the White House did.
The tariff imposed seems to be unrealistic and impractical and in all possibility it will get rolled back. In my opinion Trump has made a mockery of tariff and international relationship. Its really surprising to see president of nation like USA behaving in such a manner. Unsustainable level of US debt seems to be a bigger challenge then tariff.
How can any country sustain such high level of tariff??? Who will bear the tariff cost???
The tariff have been imposed without any process and rationality and hence in all probability it should get rolled back.
Who are biggest losers in this trade war, The United Sates and China, next in line are Japan, Korea, EU, Viatnam, Taiwan, rest of economics donāt have significant trade deficit with USA respect to their GDP. Its a global reset of world trade and world order. All countries will negotiate with USA and in parallel look for alternative markets. EU FTA, UK FTA and US FTA in line as far as India is concerned, it will hurt auto sector however it will open alternative export route for lot if goods. Becoming export oriented from import oriented country is not a switch, country need to have a low cost structure to compete world markets or even sell inside USA. If that need to happen than US wage structure need to be cut by 70-80%, at least 4-5 years to develop the scale apart from huge Govt Capex. Whatever is going on currently, everything will slowdown, especially developed countries and export oriented economies will suffer the most, WTO will become irrelevant. We are into a big chaotic situation where everyone is confused as of now.
If we leave apart liquidity infused sell off in Indian Markets by FIIās, our macroās are not so bad to go down further, US tariff dent on indian Economy is 40 B which can be covered by allowing some US zero duty imports. Though we claim to produce electronics, export dirty SW services, export low level generics, we are a major domestic economy hence impact is going to be limited. RBI rate cut, tax cuts and future GST rationalization may fuel domestic consumption, Govt Capex program will continue.
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@Dragon - I will get to your query in the near future
@abrahamappu @anjeshv4 - I had started raising cash from March. Not due to tariffs but because I was booking profits in Shaily and Wockhardt. All of Genesys and part of Wockhardt was sold in December to buy Axiscades and some in Feb to buy BlueJet. The rest of Wockhardt and almost all of Shaily was sold in March/Apr (to balance profits across FY). Shaily I was preparing for the Orforglipron risk as well, which at 100 P/E I felt was too risky. I still feel very attached to Shaily and Wockhardt and wish for both of them to do very well as a business. So yes, except for last 15%, rest were sold before tariff fears.
@VALUE2017 - The tariff is unrealistic and these are not actions of a rational person. If the idea was to use it for negotiation, the world saw right through it and that may have painted him into a corner he canāt back out of. Problem is he is crazy enough to continue to make things worse for everyone. It is not feasible for US to be doing low end manufacturing without the labour (like textiles, transformers). They cannot do pharma without the strong supply chains required for it. If you dig into it, lot of things donāt add up. We can only hope sanity prevails.
@Cshar - I donāt think its about who wins/loses. The fact that we are talking about winners/losers itself has made it a zero-sum game and trade and globalisation is a non-zero sum game. When a game changes from non-zero to zero, its a scramble for scraps. We might strike good FTAs, but US is the largest market in the world and its going to be hard to make up for it. Thereās also the risk of Chinaās idle capacities flooding the market. The world wonāt be the same place with US not buying from China in the near-term. As for domestic economy - yes we are a strong domestic economy and wonāt be affected as much as the others. This is the saving grace for us. But if thereās a worldwide demand destruction, our markets wonāt do so well either, even if its domestic facing businesses in manufacturing and services (this may however take 3-6 months to play out and is not an immediate threat).
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Stocks aside, I prefer that manufacturing gets back to USA
USA no longer can produce arms in the quantities China can
USA is not a great country for a position of world superpower but probably China will be worse
USA has one of the highest labour cost and countries still put a tariff on them. For U.S. it doesnāt seem fare
Ps: Iām neither in USA nor have any relatives and have visited only once. I donāt hold the country in any high regard. The culture is not for me but on the face of it, they should introduce reciprocal % for % tariff
China has also been manipulating the currency for too long.
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@phreakv6 do you think there are some sectors/value pockets more insulated in India vs others? Some defensive segments we can track or it makes more sense to hold cash/gold? Are you tracking something in the Indian hospital sector? Im hoping at some point for congress to intervene and reduce this madness. As and when the republican electorate starts feeling the inflation pinch, it will trickle down to the senators and therefore to trump through congress. Hopefully thereās a lot of push back. But then again, when power corrupts, history has constantly shown how this picture plays out.
Great thoughts, @phreakv6! Sharing my thoughts on this below:
- The Tariff Issue:
- The game isnāt just about tariffs; itās part of a broader strategy.
- The primary aim is to implement tariffs as a negotiation tool to secure better trade deals.
- Trumpās Economic Focus:
- Trumpās priority is lowering interest rates and cutting Fed rates to reduce bond yields.This is a short-term strategy, focusing on immediate economic outcomes. However, the medium-term strategyāespecially around debt re-financing, gold revaluation, and century bonds etc.. are some of macro analysts predict. ( I have no clue on this
)
- U.S. Manufacturing Shift:
- Itās unrealistic to expect the U.S. to quickly become a manufacturing hub.
- Trump and his team know it will take at least 5 to 10 years to see significant shifts in industries like toys, apparel, and chemicals.
- Thereās also the challenge of the aging workforce, which will slow down this transition.
- The Role of the Rest of the World:
- I believe the key opportunities lie in the rest of the worldās economies.
- The U.S. dollar will likely trend lower, as competitive exports become more crucial
- As a result, other countries will increase their spending on industrialization and defense.
- Every country will focus on becoming more self-sustaining, driving them to diversify their supply chains and build in-house production capabilities.
- This will further enhance the push towards industrialization.
- I personally donāt agree that there will be end to USA Exceptionalism, they will also play role. It will be multi lateral world.
- Being patient with the Businesses:
- In this rapidly changing landscape, entrepreneurs who can scale effectively will emerge as the big winners. They have done in the past through multiple cycles, its challenging for them to navigate this one, will be able to go through it.*
Disc - Iām 100% invested and highly optimistic- (Current PF is down more than 35% mostly into small caps- so take my thoughts with salt jar), I can be horribly wrong too. Global economic slowdown is the risk which is difficult to assume, so with that risks I am hopeful, will navigate this.(Demonitization was also one event which led economic slowdown.)
By the way @phreakv6 Your efforts are a great motivator within the VP platform community, encouraging people to work more efficiently and put in the effort to dive deeper into their research. I really appreciate how you approach this process and the level of detail you bring to it. Please write about these processes too. 
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Thank you for your insights. What are your thoughts on Trumpās fellow Republicans feeling uneasy with his actions. A few of them already sided with the Democrats to pass a resolution aiming to undo the presidentās 25% tariff on Canadian imports though it is unlikely to get passed in the House. Still there is definitely some unease and I donāt think he can operate in a total vacuum. Secondly what sort of measures/events are you looking for to start deploying some cash?
Lets assume that tariffs are rolled back against the US. Still which country would buy US products. Other than software - The big 5-6 and many many more smaller ones that are still very critical, there is no industrial good that US produces that is at a favourable price. Agriculture and Meat products are the only ones left. Even for Oil and Gas, Russia / Iran / Venezuela are cheaper.
So the US gets be become the granary of the world. But most countries would abhore but depend on the US for food security. You can live without machines and breathe without software, but you still need food.
I think the long term solution for tariffs or them going away would not solve anything. What will happen is the US would take over the weaker countries - Greenland, Panama, countries in south america, parts of Ukraine. That way US gets access to cheap labour and industrial bases from which it can profit and thereby also rely for industries in case of a global war. But most of these countries dont have the tech knowledge. So much for exploiting banana republics for decades.
The real solutions for the US are long term (20 year+) restructuring of the economy (cheaper dollar, taxes on the rich, raise wages, reduce exec pay, increase savings rate), fixing its politics (no lobbying), fixing the education and healthcare systems, fixing the racial issues, fixing of its global issues (Isreal, Ukraine, Iran, Iraq, Venezula, Cuba) etc
US will lose its way eventually. Its not possible in a democracy and when the distribution of weath is so extreme, the citizens without access to healthcare of education, you are looking at eventual riots. Is any of it doable in a 4 year democracy (aka popular - mostly stupid people voting) - No - look at UK refrendums or why Trump came to power or the rise of the far right in Germany, Italy, Hungary, Poland etc.
As a side note, all of the above apply to india too - We have no clean government, no healthcare, no free education, no control on inflation, major frauds at NSE / SEBI / Banks go unpunished, crumbling infrastructure, lack of clean water, corrupt public officials. In a democracy its not possible because the politicians reflect the mindset and attitudes of the public. We have such politicians because we are literally people of that kind.
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Question - Why cash / liquid bonds and not gold? Isint Gold the more realiable store for wealth short term even more than liquid bonds. In currency wars there is always a run up on Gold and countries like India have been moving Gold back from the UK to India for that very reason.
It would be fun to see what would happen when other countries try to get gold back from Fort Knox / UK. Trusting your gold to a morally and fiscally deficit country is a reciple for disaster.
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