Praveen's Portfolio

Q&A: Questions & Answers Portfolio Q&A
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Hello
I’m Praveen, Mechanical Engineer working in an MNC in automobile field. I’ve been investing since 2017/18 with small amounts out of my stipend from M. Tech. I’ve made enough mistakes as beginner including averaging down on stocks like Yes Bank and DHFL which consisted of major portion of my portfolio (no diversification). I slowly started learning about markets via Zerodha Varsity, SOIC, Moneypurse, Scientific Investing (Suru bhai) and Sahil_vi among others.
I’ve decided to start this thread on my portfolio, wherein I could discuss about the allocation, thesis, exit framework etc. I believe this would help me and others learn better from each other at the same time putting things in writing will give more insights into my PF and strategy
Below is my PF as of today 14th Aug 2023 and I’d share my entry thesis and exit plan atleast for my major holdings
Praveen PF.xlsx (10.9 KB)

Instrument Avg. cost % invested LTP % Curr Val Net chg. %
FINOPB 227.03 7.0% 350.8 7.4% 54.52
REDTAPE-BE 101.43 2.1% 487 7.0% 380.12
UJJIVAN 263.26 5.1% 521.5 7.0% 98.1
TANLA 1010.93 8.7% 1109.9 6.5% 9.79
KRSNAA 415.5 7.9% 492.95 6.4% 18.64
PITTIENG 271.03 4.9% 505.8 6.3% 86.62
EQUITASBNK 56.41 6.0% 85.95 6.2% 52.37
XPROINDIA 614.53 6.3% 852 6.0% 38.64
KERNEX 249.03 4.8% 414.5 5.5% 66.45
ANGELONE 1308.05 5.4% 1769.75 5.0% 35.3
LAURUSLABS 299.84 5.2% 384.05 4.6% 28.09
MTARTECH 1556.09 4.5% 2218.1 4.4% 42.54
NIITMTS-BE 227.71 3.8% 368 4.2% 61.61
SJS 487.59 3.2% 642.5 2.9% 31.77
DODLA 472.46 2.7% 735.95 2.8% 55.77
FEDERALBNK 124.83 3.8% 132.7 2.7% 6.31
MANAPPURAM 111.08 2.6% 147.9 2.4% 33.15
VENUSPIPES 1155 2.3% 1383.8 1.9% 19.81
IIFL 439.99 1.9% 561.05 1.6% 27.51
SUNTECK 281.4 1.8% 363.55 1.6% 29.19
ULTRAMAR 335.95 1.7% 396.95 1.4% 18.16
MOLDTEK 336.61 2.0% 311 1.3% -7.61
GLS 518.65 1.3% 650 1.1% 25.33
COSMOFIRST 616.6 1.5% 632 1.1% 2.5
MPHASIS 2188.55 1.4% 2349.9 1.0% 7.37
AJANTPHARM 1444.25 1.2% 1715 1.0% 18.75
AARTIDRUGS 480.23 0.9% 557.85 0.7% 16.16
WIPRO 404 0.1% 412.35 0.1% 2.07

Few Improvements needed for PF:

  1. Reduce the no. of stocks to 15-20
  2. Get rid of tail stocks (too many to track), mostly bought when money is in hand, without a planned entry and exit strategy)

TANLA: Buying thesis was that CPaas businesses are projected to grow at a CAGR north of 20% across the world. Bought it in 2021 at price of ~850 and then it went to 2000+. Bought more while it’s falling, which is proved to be a mistake. Sold some in buyback and bought little quantity at around 700-800 range. The allocation is on the higher side (which I think is a mistake). But upcoming ILD price increase would prove to be good for company in next quarter and Q3 would be bigger being festive season. Plan to trim my allocation if the P/E goes to around 35 or higher or Euphoric market

Krsnaa: Being one of the cheapest and fast growing Diagnostic co. with good growth prospects. Leader when it comes to PPP model. Recent contract wins give some growth visibility, with chance for operating leverage. Plan to exit when the valuations catch up with peers

FinoPB: A payments bank which relies on Fee income. CASA and CMS (Cash management services) businesses are the growth drivers, and that’s where the co is executing well. CASA is annuity in nature and subscription revenue is going to be bigger part with each passing quarter and is more profitable. They can SFB license with 99% probability and they don’t plan to change the business model significantly, but enhancce the existing one. For ex. CASA limit increases to 2 lakh from current 1 lakh. Overall the management has done well among the surviving PBs and delivering on guidance, which instill confidence. May use any Euphoria during listing of Airtel payments bank listing to trim the allocation. Otherwise a longterm play for me

XPRO Inda: Proxy to EMS cos, as the company manufactures BIAX films, which finds applications in Capacitors (EV, BMS, Electronics, etc.). Only player in India with 35% market share with rest being imported. Good visibility for ongoing capex (to triple the capacity), as they are only player in India with good growth for the products. The future revenue is margin accretive in nature. Planning to Hold the co, for upcoming 2.5 - 3.5 years atleast till the capacity gets fully utilized. Management is exploring further capacity expansion

Equitas: An SFB with growth rate of SFB, but asset quality and Loan Book of a Mainstream bank. Good management with excellent track record. Plan partially exit when the P/B reached 2.5-3.5 range

Angel One: A stock broker, that’s grabbing market share fast. (25% in FnO). Execution has been on spot. Upcoming AMC license is a trigger for valuation rerating (optionality). Current valuation is cheap 13x Fy24 earning, for co growing at 15-20 % CAGR, and optionalities. Divident yield of 2.5-3% gives added comfort. May exit when the valuation reached 22-25x or loss in market share lead by recent SEBI restriction on adding new sub-brokers

Laurus Labs: Pharma co. with good management that has faltered at guidance, which coincided with Severe headwinds in the industry and a big base effect (Paxlovid revenue). Co, expected to do well in next 18-24 months with new opportunities in Animal pharma CDMO and Agri CDMO, combined with expected improvement in ARV API and formulations and other API/Formulation. Will exit once the Valuations reaches above histroric means (Peak P/B or P/S acheived in 2021 is too optimistic to reach). May increase the allocation

Ujjivan: Was available at criminal undervaluation when I added, with the merger arbitrage giving added advantage/comfort. Industry is going good. Too high provisioning done will help keep the Credit cost low, which would keep the ROA, ROE higher in near future. Slowly started exiting

Pitti: Purchased at around 270 (which was 12-13 PE). Is a benificiary of Capex cycle (Railways, Hydro power, Industrial) and so a proxy for Infra. Gradual Capex at company, which is coming online would help take advantage of the demand. Approx 30-33 crs of incentives coming from Maharashtra govt gives some stability of cashflows. Current valuations are not cheap, but relatively cheaper when compared to other cos benifiting from Infra theme

Kernex: One of the 3 players working on TCAS. The industry outlook is good with lot of tracks/trains to be installed with TCAS. Co is loss making currently, but I expect the future to be good. Had Margin of Safety at my purchase price. No exit thesis at the moment and need to plan as the future unfolds for the co and industry (in terms of both order book, execution and profitability)

Views Invited

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RedTape: Bought as it was going to be demerged from Mirza Int, and the valuation was reasonable. Redtape is growing well with corporate governance in improving trend. Growth is topclass among the peers and recent focus on apparel ensures that the growth doesn’t slowdown. Plan to exit using technicals (on break down from 20/30 WMA) or if and when the industry reaches historical high valuations

MTAR Tech: Only hyper growth co in the PF, with high valuations. The management targets to achievve 3000cr revenue by FY28, which I believe is possible as the management always delivered on revenue growth. Diversification of revenues from Bloom Energy takes out one of the risks.Things to look out for include Working Capital days, Cashflows and execution of future international plants (for Fluence energy). May need fundraise via QIP or rights issue, which won’t be a problem as long as it’s done at higher valuations. No exit framework at the moment and plan to add more on dips or bear market if any in next 1-2 years

NIIT MTS: One of the largest companies operating in CLG business. Short to medium term outlook is bleak, but 3-5 term outlook is good, with management giving more than 25% profit growth target. Personally don’t expecting a div yield of 2-3% or a probable Buyback. However all the cash may be used for Inorganic growth

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I’m planning to make some changes to the portfolio. Some thoughts

  1. Fluoro chem space is attractive now thanks to short term headwinds. Nibbling into Kama holdings and Gujarat Fluorochem
  2. Even agro chem is going through headwinds. Started building position in Sharda Cropchem. Valuations are reasonable. Recovery of business may take upto 3 years or may happen in next 9 months itself (Agrochem demand in target markers and strengthening of Euro vs USD). Downside is limited as per my assessment

Exits : Exited Federal bank to build above positions. Bought little qty of Manappuram finance as well.

No exit in near term : From my PF Angel One seems to be at very good valuation combined with good prospects. May add in near-term

Other than this, GAEL and Arti Pharma labs seems attractive at the moment.
Just a thought on how the following would play out from now onwards:
*1) Buying Angel and holding for next 1 year (valuation comfort) *
2) Buying manappuram (based on momentum and valuation comfort)

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**Few Interesting Opportunites **

  1. Gravita India : the positives include sunrise industry, First mover advantage in recycling, profit growth guidance of 30% cagr for next 4-5 years, PEG of 1
  2. Cigniti tech: targets 1bn USD Revenue by 2028, translating to growth of above 30% Cagr. Last 10 yr growth has been 27% CAGR, PE reasonable at 12x

Disc: No holding as of now

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Hi Praveen,
Your portfolio looks great, but on the agrochemical side, I feel that BestAgroLife might be a better option than generic ones like Sharda and UPL. Despite the current headwinds in the Agrochemical industry, BestAgroLife performed well in quarter 1, thanks to their proficiency in developing and patenting unique product blends.

Furthermore, the management has provided guidance of a 30% compound annual growth rate (CAGR) for the next year. The only downside appears to be the high inventory and receivables, which are common issues among agrochemical companies but are more pronounced in the case of BestAgroLife. However, the management has indicated that these issues will be addressed by the second half of this financial year. Also, BestAgroLife has not yet initiated any exports. Currently, all of their revenue is generated domestically. However, the management has stated that they anticipate an increase in exports starting from the second half of the current financial year.

I would appreciate hearing your perspective on BestAgroLife.

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Hello Uday. Thanks for your comments. First of all I wanted to buy something in Agro chemical space as it’s going through headwinds. I’ve looked at Best agro life as well, and am aware of the growth targets from the management. I’m my opinion it’s investible and I may buy soon. I’m still building position in Agro chemical and chemical space.

My thesis for sharda Cropchem is that I’m buying close to cycle low ( would buy more if it falls). It has long listing history and my research was easy as some PMS (Stalwarts PMS) have already done research on this and had positions in this Co earlier. For me this gives comfort regd the quality of the Co, as compared to the present valuation. With this being said, even Best Agro has investments from Ashish Kacholia ji.

So, as per me investment in Best agro needed higher due deligence and research which I couldn’t do yet.

Summary : Best agro is one of the best options right now, but gave priority to Sharda Cropchem becoz of its longer listing history

The cos I may buy soon include BEST AGRO and IPL.

Thanks for taking time to read through the post and quizzing on my investment thesis. Appreciate it

Diac: Holding Sharda Cropchem in small quantity. No recommendation

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It’s been only few days since my last PF update. But there’s been significant churn in the PF, mostly from selling the holdings in the tail with lower weightage and shifting money to attractive stocks

Instrument Avg. cost LTP Inv % Curr % Net chg. In %
PITTIENG 299.2 654.7 6.0 8.7 118.8
KRSNAA 419.3 643.6 8.3 8.5 53.5
ANGELONE 1474.5 1915.3 9.0 7.8 29.9
FINOPB 227.0 355.6 7.1 7.4 56.6
REDTAPE 101.4 460.2 2.1 6.5 353.7
XPROINDIA 614.5 927.1 6.3 6.4 50.9
KERNEX-BE 249.0 431.2 4.8 5.5 73.2
MTARTECH 1556.1 2724.0 4.5 5.2 75.1
CONFIPET 87.7 94.5 6.6 4.7 7.8
NIITMTS 227.7 386.6 3.8 4.3 69.8
EQUITASBNK 56.4 88.8 3.7 3.9 57.4
SJS 524.6 700.1 4.2 3.8 33.5
MANAPPURAM 125.0 151.8 4.7 3.8 21.5
DODLA 522.4 740.0 3.6 3.4 41.7
CIGNITITEC 786.8 803.8 4.9 3.3 2.2
UJJIVAN 280.1 478.7 2.4 2.8 70.9
SANGHVIMOV 626.8 744.3 3.2 2.5 18.7
MOLDTECH 332.0 378.3 2.9 2.2 13.9
VENUSPIPES 1183.6 1536.0 2.5 2.2 29.8
KAMAHOLD 12569.4 14945.3 2.7 2.2 18.9
ULTRAMAR 336.0 443.0 1.8 1.5 31.9
SHARDACROP 419.8 449.7 1.8 1.3 7.1
DEEPAKFERT 600.1 603.8 1.6 1.1 0.6
SBCL 560.8 576.5 1.5 1.0 2.8
WIPRO 404.0 416.0 0.1 0.1 3.0

Major changes and Thesis
1: Added Angel One: Valuation comfort with 16x FY24 P/E. FnO growth for the Aug month is 26% (MoM) for NSE. expect Angel One to perform same. Plan to exit when the P/E crosses 20x. Stock broke out of 52 week high recently.
2: Bough little qty of MTAR: Still doesn’t reflect in above data as I bought just today. Company targets to make 3000cr revenue by 2028. Fluence energy business could scale similar to Bloom business. Revenue growth would be 340 % CAGR for FY23-28 as per me and expect the valuation to sustain. Can make 30% CAGR if thesis plays out. Stock broke out of ATH recently.
3: Bought Confidence Petro: Management growth guidance of 40% for FY24. Stock at ATH. Valuations are reasonable if the co. can scale revenues and improve upon margins. Scale up of LPG fueling stations in Banglore and other similar opportunities that the management is working on forms part of my thesis
4: SJS and Manappuram: Added some quantity as the momentum is good with valuation comfort
5: Bought SBCL: Old GTT order got triggered. I feel that it’s a good opportunity after recent fall. But my allocation is too small for me to care. I prefer to scale it up or sell completely rather than holding a co. with very small allocation.
6: added very small qty of Venus pipes: Just slow and steady uptrend is the reason for me to add this. Future outlook for the co. is good with recent capex coming online (If memory serves correct, the capex can 2-5-3x the revenue at full utilization). But valuation is expensive. May sell if the trend reverses (and shift to cos with better risk reward)
7: Cigniti Tech: Management aims 1bn USD revenue by FY28 via organic and inorganic growth. Cash on books of ~230 cr will fund any Acquistion and adds valuation comfort as it’s 10% of the Co’s market cap. May scale up the allocation in future (either by averaging up or down)
8: Sold IIFL Finance, GLS, CosmoFIrst, MPHASIS, AARTI Drugs, AJANTAPHARM: As I feel that the allocation is small and used the money to add/buy other cos
9: Sold Laurus labs and Federal bank: I found better opportunities elsewhere (all the stocks added and bought freshly)
10: Bought ShardaCropchem: Want to play the possible turnaround in Agrochem business with this co. may add in future.
11: IGPL: It doesn’t show in my PF, as I bought just today. This is a proxy to Pigment space. I see that the historical performance of the co mimics Pigment cos like Ultramarine pigments and Sudarshan Chem.
12: Sold Tanla: Sold Tanla which was previously my biggest investment at purchase price as the stock is seeing severe downtrend (from 1300 to below 1000in last few months) shifted to other cos
12: Bought Deepakfert: It’s play in anticipated uptick in commodity chemical price in China and so globally. The stock is in stage 1 as per me, so the downside is limited.
13: Others: Sold some qty of Ujjivan and bought Pitti, SJS in addition to other stocks. I plan to exit Ujjivan and Equitas gradually and shift to cos with better valuation.

Funding for all the new buys was from selling existing holdings and by adding some fresh funds.

Few thoughts:

  1. From this recent churn in PF I’ve cut some holding in the tail of PF but added some cos, but the tail is thicker with only 5 cos with weightage below 2%
  2. Really went ahead and added Angel one and Manappuram as per my previous post.
  1. Would’ve loved to add more of Kama Holding before. Will look for opportunities to add Fluorochem and Kama Holding (Probably by selling Ujjivan and/or Equitas)

Things I’d like to improve:

  1. Reduce the no. of stock by ranking them based on both Fundamentals and Technicals.
  2. Build the mindset to average up on existing holdings.

Please feel free to quiz me or share opinion on my post or PF. Hope to improve and at the same time add value to the community.

Disc: There are lot of transaction in the PF recently. I may have added/reduced/bought/sold other stocks that I didn’t mention here. No recommendation to buy or sell

Thanks for your patience in going through this long post.

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Roughly two weeks have passes since my last update. Have made following changes to my PF

Sold: Fino Payments Bank, Ujjivan Financial Services, SJS enterprises

Bought: MCX, PDSL

This is how my PF looks at the moment

Instrument Avg. cost LTP Current % Net chg.
KRSNAA 419 652.7 8.1% 55.66
PITTIENG 299 616 7.6% 105.88
ANGELONE 1474 1893.55 7.2% 28.42
REDTAPE 149 446.85 6.9% 199.06
XPROINDIA 635 993.55 6.8% 56.39
KERNEX-BE 274 466.7 6.3% 70.3
MTARTECH 1785 2602.45 5.8% 45.79
CIGNITITEC 802 810.15 4.8% 1
KAMAHOLD 14305 15601.65 4.6% 9.07
NIITMTS 228 434 4.5% 90.6
MANAPPURAM 131 141.7 4.4% 7.85
CONFIPET 88 89.9 4.2% 2.49
PDSL 372 448.65 3.7% 20.48
EQUITASBNK 64 85.65 3.5% 33.24
DODLA 536 698.9 3.3% 30.38
MOLDTEK 353 340.45 2.8% -3.42
MCX 1819 1780.05 2.7% -2.15
IGPL 507 533.6 2.6% 5.32
SANGHVIMOV 627 706.4 2.3% 12.7
VENUSPIPES 1184 1538.5 2.0% 29.98
ULTRAMAR 364 407.75 1.9% 12.05
SHBCLQ 572 547 1.9% -4.3
SHARDACROP 420 440.25 1.2% 4.88
DEEPAKFERT 600 637.3 1.0% 6.2
WIPRO 404 441.1 0.1% 9.18

In addition to above changes, I’ve some qty in existing PF including but not limited to PDSL, Kernex, REDTAPE, XPRO INDIA, Moldtek Tech, Shivalik Bimetal Control, Manappuram, Kamaholding, Ultramarine Pigments

Sold FIno, Ujjivan and SJS as I see better opportunities in the PF and newly added stocks
Bouhgt PDSL: PDSL is one of it’s kind business model. It’s kind of a platform that connects Garment Brands and Retailers to Manufacturers. The collects some percentage of the mecrchandise value as commision which acts as Revenue of the co (Gross margin in the financial statements). The Co. is winning new businesses and scaling up the existing ones. Read post on VP here
Co targets to 18-20k cr sales by FY27 and 5-5.5% Net profit margin. Co, is clocking ROCE of ~40% which will only improve going forward with developed market economy comes out of inflationary pressures. So, expect the co. to maintain same or higher ROCE. Market could be 20-35k cr by FY27 (may be FY28-29, if delay in executions) and offers very good return

MCX: Currently earnings are depressed as the co. is paying abnormally high software charges to 63Moons. With own software expected to deployed soon, the profits of the co may earn ~350cr net profit in FY25. I assign a 35x PE multiple to the co, as it’s growing at more than 25% in FY23-FY25 and a platform business that generates good cash. Expect ~20% cagr returns by FY25 end

Few more things I plan to do:
As I don’t have any Large cap in the PF and Valuations in the small and mid cap are in frothy territory, Plan to allocate some of the PF to HDFC bank, as it’ll give 17-20% kind of returns (even without valuation rerating to historical means) and provides stability to the PF if small/mid caps correct. However I need to sell some of the existing cos in the PF to do this

Other co.s that I’m considering that would limit the downside are Gujarat Fluorochem, Kama Holding

I’m considering HDFC bank as it’s a co that has shown consistent growth and the chances of valuation derating are limited. I’m open to members of VP suggeting other cos that would add cushion to the PF in turbulence
Thanks for reading this post
Views and Opinions welcome

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The reason for me to write about my PF is to note what all changes I’m making in my PF and how my thesis plays out. It would be good for me to go through this topic every few months.
In addition to this, I believe this would improve by objective thinking. For example, after summaizing my PF with current weightage of each co in my PF, I got following insights

  1. The allocation to PDS ltd is very low, whereas in my mind this is one of the highest conviction bet. So, I’ll improve allocation to 6-8% depending on the opportunity the market provides
  2. I believe Kama holding and Fluorochem has relatively lower downside compared to other cos in my PF. So, I need to shift some allocation to Kama holding and fresh buy in Fluorochem. I must try to make these cos around 10% of my PF ateast
  3. I believe even CIgniti Tech also has smaller downside risk, as the co trades at lower double digits PE and has cash = approx 10% of marketcap. I may increase allocation by 1% to around 6%
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As I think of limiting the downside I believe a portofolio of following cos that I’m tracking would offer limited downside as per my estimates
PF for limited downside risk: HDFC Bank, Sharda Cropchem, Ultramarine pigments, Deepak Fertilizer, PDS ltd, SRF/Kama Holding, Gujarat Fluorochem, Goldiam International, Cigniti, SIS

In addition to this I expect reasonable upside also in these cos if market performs well

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Around 6 months ago I’ve shared with fellow members of VP regd the existing opportunities at that time (better opportunities than Rupa) link here . Because of my efforts and luck I turned out to be right on all the cos I’ve mentioned. I’d try and do the same for cos in my PF, i.e. Weighing available opportunities. It’s a process