What do you think the upside potential for this. There is a shift of company towards green business which will be essential part of any ESG portfolio.
Pragnesh Bhai [@Pragnesh]: Have a look at - GPT Healthcare Ltd share price | About GPT Healthcare | Key Insights - Screener. This seems to be from your circle of competence. Ground level feedback (about the management and work culture) using your connects in the medical field will be extremely valuable. TIA.
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Sure.
Give me some time.
Thanks
Added kaka ind and ice make in last 2 months.
Now each of them make @ 5.5% of total portfolio.
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hi sir very interesting and awesome transformation .I have a small suggestion try to reduce the number of stocks less than 10 (5 is far better ).then only you can easily double your Portfolio (always remember stocks will not create u wealth only portfolio )the game is how fast you can double your Portfolio not stocks
and remember after covid Index itself given you 3.5X (7.5 to 25K).hope u got my point
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Hi Pragnesh, could you please share your analysis about Kaka industrires ?
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Pragnesh Bhai: Any update on this?
My strategy is :
1 …Maximum stocks of my portfolio should hit >20% cagr over period of 5 yrs.
=If they continue to perform well, i will hold them for next 5-10 yrs or more.
2…Those stocks who have given less than 20% cagr over 5 yrs duration, i will reassess them .I will give them atleast 3-5 yrs before exiting.
As on may 2024, my XIRR return was 31.22%(dividend is not calaculated).
A…12 stocks had given 30-60% cagr return
-Kei
-L t foods
-Grauer
-Pitti
-Beta
-carysil
-ion exchange
-Ganesha
-Anup eng
-Kpr mill
-Ice make
-kaka ind
B…3 stocks had given 20-22% cagr return
-Pix
-Racl
-Stylam
C…5 stocks had given less than 20% cagr return.
-Hindware
-Mold tek pack
-Astec
-Apcotex
-Paushak
A…Astec, Apcotex and Paushak
Out of 5 stocks, 3 stocks(astec, apcotex and paushak) are down due to chemical industry headwinds.So i will wait for industry turnaround.
B…Moldtek pack
-Here ,i will wait for next 1-2 yrs for its pharma and ABG meight work for growth triggers
C…Hindware
I may wait for 1-2 yrs for
-Pipe business
-Restructuring
-Exiting from few loss making business lines
-Frankly speaking, i dont know, should i still trust this management about their continuous guidance about exiting from loss making businesses and good performance ahead.
-Hindware is worst performer of my portfolio but i am still invested due to its brand image “hindware”.
-I am firm believer of long term investment(5-10-15 yrs)
-Uptil now, i stayed invested in most of stocks since 2017
-Let’s see, whether my strategy remains same or change in future.
-I know, 31% XIRR is not sustainable return.
As market will correct, long term return will be 15-20% xirr.
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Accumulated jyoti resins in last 3 months.
It is now among highest % allocation of my portfolio.
I will shortly share about my views
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Hi @Pragnesh ji, any suggestions on what can be accumulated in this fall?
Kaka?
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I think, all above mentioned stocks having pe ratio<35 are good candidates for long term perspective.
Pragnesh bhai, awaiting your views on this company.
I came across Euro 7000 in Delhi NCR region when one of our operations manager mentioned that their sales team are visiting sites in Gurugram and pitching their products and schemes.
What was your thought process while you invested in Jyoti Resins?
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Sorry to update
Give me 2 days
Thanks
Jyoti resins
MOATS
=I think, their business model(focused on hardware shops and carpenter) is the reason for their excellent past track record
=Customer first@Main strategy
(No middle man)
1…Investment in working capital(receivables)
(Advantage to retailers-Hardware shops)
=Increased debtor days in new states and stable debtor days in mature states-That is growth strategy of company
=These will increase receivables and debtor days.As per company, they have nil debt and dont need major capex in near future. So, they are growing by investing in working capital(increasing receivables)
=Due to new software, they are able to identify bad loans.
=New big companies ask retailer for early payment. Today, we are not working in that strategy. Today, we are working in Delhi and UP with120 days cycle.The reason is that
we cannot ask for that payment till the time our product does not
penetrate there and we don’t get repeat orders.
2…Discount/scheme to customers
(Advantage to retailers-Hardware shops)
=All the companies push the material to the retailers, there is no scheme, meaning no discounts.Then with
the company’s the retailation will be spoiled.
=We are passing extra profit to custumers (hardware shops)when margin is high .
3…Carpenter reward model
(Advantage to carpenter)
-We have one of the best and highest rewarding carpenter rewarding model in the industry
- Reward & loyalty programs are devised state wise
- Company app provided to carpenters for claiming and redeeming points. Slab systems created on usage basis
- 3.5 lac carpenters currently registered under this programme
4…Network
-Presence in 14 states
- Operating through 60 distributors for smaller cities
- Operating through 35 branches for bigger cities (metros)
- Selling to 12,000 active retailers & working with 3.5 lac carpenters
- 400 sales executives & business development executives
5…Low cost manufacturing;
(Asset light)
-Overall manpower costs is limited to 15-16% of revenues
- Selling and Distribution expenses maintained under 12%
- Asset turnover is at 8x
- Amongst the highest EBITDA per tonne vis-à-vis peers
- Working capital efficient hence No Debt and OCF & FCF positive
6…Diversified product portfolio
-The company offers a wide range of products with several features and catering to different substrates such as :
- Anti Termite -Water proof -Fast drying
- Wider coverage -Fungal resistance -Heat resistance
- Weather proof -High fixing strength
- Cold and hot press applications
- Multi purpose uses for Wood, PVC and Acrylic
Disc…invested
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FUTURE GROWTH TRIGGERS(Jyoti resins)
1…HEAVY INVESTMENT IN WORKING CAPITAL
=Its requirement for fixed assets has been low, but heavy investments have been done in Working Capital (mainly receivables and inventory) to grow the business
2…SALES PROMOTION BY DISCOUNTS/SCHEME
=We had run many sales promotion programmes through, which
we got a good push. That is the reason why we have a discount structure.
Like our margins are quite handsome and raw material is also down.
So, we have acquired many customers with those sales promotion offers
in this quarter. (2024)
=That is not only for this quarter. That is for the entire four quarters. Like
that, the prices of raw material, which were there two years ago, have
been reduced and we have passed that advantage to acquire customers.
But for the quarter four, we have increased the aggression in sales.
3…EXPAND IN NEW STATES AND MATURE STATES
=Today it services 14 states in India through 35 branches and 60 distributors, catering to 12,000 active retailers and 3.5 lac carpenters
=We added two new states last year, that is, including Delhi and UP.
=We are looking to expand and increase our penetration in existing states with increase in branches and distributors with an eye on improving
our market share.
= Foray into new states & increase efficiencies in established states.
4…ENHANCE PRODUCTION CAPACITY FURTHER
=The company has steadily increased its plant (at Santej, Ahmedabad) capacity to 1000 Tonnes per month, expanded capacity to 2000 TPM (24,000 TPA) in Aug’22.
= Company is in the process of setting up a warehouse for enhancing storage of raw materials and finished goods.
5…GROWTH OVER NEXT 3-5 YEARS
=Over the last 5 years, we have grown at CAGR of 38%, 103%, 113% on Revenue, EBIDTA, PAT.
=We are targeting 20-25% Volume CAGR over the next 3 years (Base Year: FY2024)
6…ERP SYSTEM
=We have introduced ERP, CRF systems in this year, which has created very good data.
=So we can go with the detail, which customers are using which product, how much growth or de-growth they have given us, what is the satisfaction and what is the dissatisfaction. So, we have improved a lot on this data
as well.
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Dear sir,
I just have one concern regarding the poor past governance factors of the company?
What are your views on that, basically the accounting shenanigans performed by the company in the past?
It would be really helpful if you could throw some light on it.
Thank You
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Pragnesh Bhai, what’s your take on the muted growth of the company in recent quarters.
Sorry for late reply
I will post my views within short time
Jyoti resins
(My views on financial shenanigans)
There are many negatives points and accountant shenanigans raised against jyoti resins in this forum
Even in one previous post, i have also raised doubt about its cash flow. However when we go deeper, picture looks something different.
I have done few scruttlebutts from my architec and carpenter. As per them product has difinately grown in last 5 yrs.One of my relative is employee at santej plant of jyoti resins.He also told good growth story.That means growth is not fake(most probably!)
I am giving my views as per management commentry and from my few scruttlebutts.
1…Cash Flow from operation
Concern raised here is that the company has generated very low cash flow in the past 10 years.
Ans:
A…Company has posted reconcillation slide in its june 2024 investor presentation
Post Reconcillation, we can see good operating cash flow in f.y 2023 and f.y 2024
=After reconcillation, OCF changed from 1 cr to 37 cr(in 2023) and
26cr to 82 cr(in 2024)
B…A closer review of the Cash Flow Statement reveals that the company has been investing its earnings heavily into working capital and that is main strtegy of company for its growth.
As company does not require to invest heavily in fix assets and it is zero debt company, it invest that money in working capital.
2… High Receivables
Querry:
Other problem is of higher receivables.
Ans:
As per Utkarsh Patel: I believe that is our strength.We are comfortable with that debtor days, but the reason if we want to penetrate the market, we have to give comfort to the retailers .
=As we have mature states as an example Gujarat, Rajasthan, MP. These states already have a good response to our product, and we have penetrated well and also become profitable. So here our terms and conditions are 75 to 80 days
=We have started penetrating UP and Delhi we launched this last year. So that is a newer market for us. So we cannot do any terms and conditions, because my product is not familiar. There is no strong consumption there. So our goal is that the existing dealers in UP and Delhi how to place the
material of the Euro.
How to promote our product there, so in that condition we cannot ask
for the payment terms and conditions. Our priority, is to focus more to
grab the market first. So how can we take the market share? So there our credit period increases.
When we compare receivables with sales , there is defintely improvement over last 10 yrs
(Although jyoti has higher receivables as compare to industry peers)
Receivables % of sales is better indicator
Receivable% sales
2013@70%
2015@57%
2017@90%
2019@78%
2021@51%
2022@52%
2023@35%
2024@36%
Receivable days
2013@245 days
2017@333 days
2019@288 days
2021@188 days
2022@129 days
2023@128 days
2024@133 days
3…Company has created unpaid expenses reserves on liabilities side in their balance sheet.
=Liabilities have grown from 1.45cr in FY14 to 46.7cr in FY18 . It is 95 cr by 2024
=It’s steep jump in unpaid expenses
Ans:
=These unpaid expenses on liability side represent incentives to carpenter.
Company has repetatedly told about incentives .This has always been in ₹80 crores to ₹90 crores range against that we have cash and cash equivalents of around ₹112 crores.
=The company has an efficient carpenter reward model system which is a loyalty program for
carpenters. On every bucket / drums purchased by carpenters, their receive certain amount of points,
which are then recorded by downloading and logging into the app designed by the company. Post a
certain threshold, the carpenters can then redeem these points in return for gifts in several forms.
=As and when the carpenter will redeem the points, right. This
liability goes down. And against whatever he redeems, he gets given
the gift against that the cash goes down proportionately. And whenever
there is any new point created, this liability goes up.
4…Gross block
=There was sharp rise in gross block from 1 Crs. in 2017 to 40 Crs (a 40x climb in less than 5 years)
=Their increase in Fixed assets was predominantly based on reevaluation of land and not much purchases.
Ans:
=Passing the revaluation reserve entry through cash flow was an error which has been corrected later.
5…Raw material cost
=One querry raised in valuepicker was about raw material cost and i found answer from valuepicker only
=Their raw material cost has just went down from 60%+ to less than 30%. This just doesn’t make sense.
Ans:
= It is an industry wide phenomena. Look at the quarterly material cost of Pidilite, HP Adhesives etc. and you will see a declining trend. Since Pidilite is well diversified, the trend is not as deep as it is in case of Jyoti Resins.
=Someone on value picker has checked the price history .
The price has dropped from a peak of Rs.194/Kg in July 2022 to current levels of Rs.68/Kg which is a 65% drop. Hence a 50% drop in material cost is in line with this data.
6…Stock manipulation
A= 1997-98, SEBI investigated the unnatural increase in the price of Jyoti Resins and concluded that it was indeed a case of price rigging:
=The SEBI concluded that the share price of the company was manipulated and the main promoter of the company in collusion did the manipulation with an operator
B=In 2003, there was once again a case: Sebi vs Jyoti Resins & Adhesives Ltd. on 10 April, 2003
=Investigations by SEBI prima facie revealed that Shri Devendra Kantilal Dalal in connivance with the promoters of JRAL heavily dealt in the scrip to manipulate the price of the scrip.
C…In 2015-16 once again, the price was supposedly rigged. Related MoneyLife article
7…Auditor resign
Up until FY17, Statutory Auditors were Raman M. Jain & Co. Per Annual Report for FY17, Raman M. Jain & Co. “expressed their unwillingness to hold office from the conclusion of this Annual General Meeting till the conclusion of next Annual General Meeting”.
Disc…Invested since last 4 months
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