Ranvir's Portfolio

Q&A: Questions & Answers Portfolio Q&A
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RIL summary contd…

REFINING AND MARKETING -

Refining Products -

High speed diesel, gasoline

LPG

Feedstock for propylene

Naptha - which is a feedstock for rthylene, propylene, fertilizers and fuel in power plants

Sulphur - feedstock for fertilizers and pharmaceuticals

Petro Retail -

Retail of petrol, diesel, LPG

Fleet Management services

A1 plaza - highway hospitality services

Refresh Foods - foodcourts on Highways

Qwik Mart - retail of beverages, snacks, gifts on highways

Relstar - Lubricants

Reliance - Jet aviation fuel

LAST FOUR YRS -

Revenues - 250 lakh, 306 lakh cr, 393 lakh cr, 387 lakh cr

EBITDA - 25k cr, 24.7 k cr, 22.8 k cr, 21.3 k cr

GRM ( $/ bbl ) - 11.0, 11.6, 9.2,8.9

Refinery sales - 73 MMT

Exports - 42 MMT
Domestic - 15 MMT
Captive - 13 MMT

Petro retail network - now at 1400 outlets, avg growth across outlets at 10 pc.

RIL to pioneer - High Density Polyethylene Packs ( HDPE packs ) for doorstep delivery of fuel in the country.

ATF -

Double digit growth seen in 52 consecutive Qtrs till Dec 2019.

Market share at domestic Airports - 20 pc.

Presently RIL ATF is avlb at 30 locations, to be expanded to 45 locations.

**NEW PROJECT - Petcoke gasification - **
World’s largest project has achieved steady state operations. The project at Jamnagar has achieved iconic status in the Gasification Universe.

PETROCHEMICALS -

Last three yr petchem division data -
Revenues - 1.25 lakh cr, 1.72 lakh cr, 1.45 lakh cr
EBITDA - 21.9 k cr, 32.39 k cr, 25.5 k cr

EBITDA margins - 14.1, 18.8, 17.6

Strategic advantages -

One of the most integrated players - globally
Leading mkt postn across categories
Comissioning high purity Iso-Butylene unit

Product portfolio -

Olefins - Ethylene, Propylene, Butadiene -used in industrial chemicals, polymers

Polymers - Polyethylene, Polypropylene, PVC - used in construction, agriculture, automobile, consumer goods, packaging

Polyesters- PFY,PSF,PET - used in Textile/Apparel industries and beverages

Aromatics and Fiber intermediates - PTA, MEG, Benzene, Paraxylene - Textile industries, industrial chemicals

Elastomers ( polymers with rubber like elasticity) - Butyl rubber, Poly butadiene rubber, styrene butadiene rubber - used in typres and automobiles

Consumer facing launches -

RiELAN - next gen fabric brand made with speciality polyester fibers. RiELAN continued to grow consolidating its brand partnership with more than 50 brands and extending its value chain globally.

RELWOOD - composite material made up of natural fibers and polymers with the look and feel of wood. Advantages over wood - thermoforming, weatherability, water and termite proof, fire retartdancy.

RELINFORCE - range of carbon and glass fiber range of reinforced polymer systems for strengthening and protection of old structures and pipes.

RELX - composites solutions under the brand name Relx - to be supplied to composite material manufacturers across India.

Disc : invested

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Notes from RIL Q2 results -

Sales - 1.28 lakh cr, down 22 pc yoy, up 27 pc qoq
EBITDA - 23.3 k cr , down 9.8 pc, up 7.9 pc qoq
Finance cost - 6084 cr, up 11 pc yoy, down 9.7 pc qoq
Depreciation - 6626 cr, up 24 pc yoy, up 5 pc qoq
Tax - (-) 13 cr vs 3703 cr LY vs 260 cr LQ
NP - 10.6 k cr, down 6.6 pc yoy, up 28 pc qoq

CONDOLIDATED EBITDA CONTRIBUTORS- current qtr vs Q1

Refining and Marketing - 3002 cr vs 3818 cr
Petrochemicals - 5964 cr vs 4430 cr
Retail - 2009 cr vs 1083 cr
Digital Services - 8345 vs 7803 cr
Oil and Gas - (-) 194 cr vs (-) 32 cr
Others - 4173 vs 4383 cr

EBITDA Contribution from consumer businesses - 49 pc

Other highlights -

Added 232 new retail stores

Activity levels in retail stores likely to be back to pre COVID levels by 3Q

Total money raised - 2.5 lakh cr
Recieved till 30 Sep - 1.46 lakh cr
Balance commitments - 74 k cr

Funds being used to retire Debt

Benifits of lower interest cost to be visible from next Qtr

Jio postpaid plus - Industry first bundling of Netflix, Amazon prime and Disney plus HotstarJio - total customers - 40.56 cr, additions during the Qtr - 73 lakh, ARPU- 145 vs 127 last year, per capita wireless data per month - 12 GB vs 11.7 GB LY

New Single plan for entire family, with data rollover

Superior international services - Unlimited roaming in USA, UAE

Good growth in Digital business - led by AJIO, Jiomart and Rel Digital

Entered E-Pharmacy during the Qtr - acquired Netmeds

Acquired - Future group’s retail/wholesale, logistics and warehousing business

Jiomart - Kirana partnerships extended to 20 cities

Company to accelrate new store openings - particularly in fashion and lifestyle

Disc : invested

507

Disc :

Reduced Godrej Agrovet…due to the ongoing bird flu conditions, GAVL being a major player in the poultry feed category.

Added HDFC Bank.

Regards,
Ranvir Dehal

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Bajaj Finance Q3 highlights -

  1. NII at 4296 cr vs 4535 cr in Q3 last yr

  2. Q3 AUM at 143000 cr vs 145000 cr in Q3 last yr. Company expects core AUM growth to go back to pre COVID levels by Q4 21

  3. Consolidated cost of funds at 7.78 pc, expected to go down to 7.5 pc by Mar 21

  4. Loan loss provisions at 1352 cr vs 831 cr in Q3 last yr. Company has also done one time principal write off of 1970 cr due COVID related stress. Company holds management overlay provisions of 800 cr as on Dec 20 for COVID related stresses. From FY 22 onwards, company expects loan losses and provisions to be at pre COVID levels of 160-170 bps. If recoveries are better in FY 22, they may experience even lower loan losses in FY 22.

  5. Company had guided for total provisions of aprox 5900 cr for FY 21 - due COVID related stresses… Post this provisioning of 1352 cr in Q3, company expects a residual provisioning of 1200-1250 cr for Q4. If loan recoveries are better, there may be a downward revision.

  6. GNPA and NNPA at 0.55 pc and 0.19 pc. Adjusted for Supreme Court’s judgement, GNPA and NNPA at 2.86 pc and 1.22 pc.

  7. Capital adequacy ratio at 28.18 pc . Tier 1 at 24.7 pc

  8. PAT at 1146 cr vs 1614 cr due higher provisions of 1352 cr vs 831 cr. Profitability likely to be boosted from Q1 FY 22 onwards due normalising of provisions.

Disc- holding Bajaj Finserv

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RIL Q3 HIGHLIGHTS -

JIO PLATFORMS ( QoQ) -

Sales at 22858 cr, up 5.3 pc
EBITDA at 8483 cr, up 6.4 pc
NP at 3489 cr, up 15 pc
Total Customers at 41.08 cr, up 52 lakh
ARPU at Rs 151 vs Rs 145

Jio Meet users at 1.5 cr

Reliance Retail -

Sales at 37845 cr, down 7.9 pc
EBITDA at 3087 cr, up 53.9 pc
NP at 1830 cr, up 88 pc due - doubling of sales contribution from fashion and lifestyle segments,cost management and boost from higher investment income at 775 cr

Total operational stores - 12201, new additions at 327 cr

96 pc of the stores were open during the Qtr. However, only half of them were fully operational.

Grocery and Electronics sustained double digit growth while Fashion and Lifestyle business delivered a strong rebound, surpassing pre COVID levels.

Acquired 96 pc stake in - URBAN LADDER during the Qtr

Digital commerce - up 12 times, YoY

Jewelry sales grew in high double digits over PY and nearly doubled over previous Qtr. Launched new range of collections.

Oil to Chemicals -

Sales at 88838 cr, up 10 pc QoQ
EBITDA at 9756 cr, up 10.3 pc

MEDIA BUSINESS -

Sales - 1650 cr, up 33 pc QoQ
EBITDA - 324 cr, up 95 pc QoQ

CONSOLIDATED -

Sales at 137829 cr up 7.4 pc QoQ
EBITDA at 26094 cr, up 12 pc QoQ
PAT - 15015 cr, up 40 pc QoQ

Outstanding Debt on 31 Dec 2020 was 257412 cr. Cash and Cash Equivalents at 220524 cr

Disc - invested from 1700 levels

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Aarti Drugs Q3 concall highlights -

  1. Sales contributions - API- 87 pc, Formulations - 13 pc. Within APIs, domestic sales @ 67 pc, 33pc exports. Within formulations, Domestic sales @ 69 pc, 31 pc exports. API sales growth - 13 pc, Formulations sales growth - 5 pc.

  2. API breakdown -

Antibiotics - 44 pc
Anti Protozoal - 13 pc
Anti Inflamatory - 14 pc
Anti Diabetic -14 pc
Anti Fungal - 10 pc
Rest - 7 pc

Anti Protozoal demand affected due lesser travel due Covid.

  1. Consolidated EBITDA up 59 pc at 108 cr. PAT up 144 pc at 68 cr. EBITDA margins at 20.25 pc. Debt/Equity at 0.39 pc. Total Debt at 334 cr vs aprox annual profit of aprox 300 cr. Lower leverage provides financial headroom for expansions. Long term Debt avlb to the company at aprox 6.7 pc which is very competitive.

  2. Carried out capacity expansion in Anti Inflamatory APIs. In process of comissioning new Anti Diabetic plant. Brownfield expansion of Anti biotics in progress.

  3. Present levels of EBITDA likely to continue into Q4. Company not too sure if this can be sustained over a long time. Long term EBITDA call to be taken only after the entire globe is out of the Pandemic. Min EBITDA margins that company is aiming at is 18 pc.

  4. Current brownfield expansions can take revenues upto 2500 cr. After extra brownfield and greenfield expansions, company aims to achieve a revenue tgt of 4500 cr in 5 Yrs ( minimum ). Company aims to hit 24-25 pc EBITDA margins five yrs down the line ie with 4500 cr sales.

  5. H1 capex at 40 cr. H2 capex estimate at 40 cr. Greenfield expansion to start in next FY, taking total Capex to 600 cr. Current Net Block at aprox 650 cr. So…basically, the company intends to double its Net Block ( well almost ).

  6. Capex money to be spent on 7 projects - Metformin, 02 intermeidates for captive consumption, sulphuric acid plant for captive consumption plus chlorosulhonation product, Skin treatment API, 02 PLI projects

  7. Separate capex for Formulations over next 2-3 yrs - aprox 50 cr.

  8. Present products face competition primarily from China. With apreciating Yuan, Aarti Drugs is becoming more competitive. These 20 -21 pc kind of EBITDA margins are likely to be sustained in the near future.

Disc : invested.

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Cipla Q3 concall highlights -

  1. EBITDA margins at 24.8 …highest ever in company’s history. On ground field activity has resumed, still digital adoption and tight cost controls- continue. On track to save 400-500 cr of operating costs.

  2. Strong cash flow generation. Repaid 137 million dollars raised earlier for Inva Gen acquisition. Also repaid 300 cr of working capital loans in India. So…thats about 1300 cr of lesser debt. Sep 20 …debt was at aprox 3200 cr. Long term operating margin guidence- between 17-20 pc. This Qtr sales included Covid related sales which may signifigantly moderate going fwd.

  3. Q3 sales at 5169 cr, up 18 pc. Gross margins at 61.4 pc, down 93 bps yoy. EBITDA at 1281 cr, margins at 24.8 pc. PAT at 748 cr, margins at 14.5 pc.

  4. India presciption business grew 25 pc !!! It was aided by COVID portfolio. Without the COVID portfolio, growth would have been arounf 6-7 pc. Respiratory portfolio grew 14 pc, Urogoly grew 8 pc, Derma grew 15 pc.

India Trade generics grew 7 pc.

Consumer healthcare recorded 9 month revenue of 250 cr.

US generics sales grew 6 pc to 141 million dollars. Good traction in Albuterol. Cipla now ranks no 1 in Proventil with mkt share of 86.4 pc. Overall albuterol mkt share at aprox 14 pc. US respiratory sales have crossed $ 100 million in 9 months.

US EBITDA margins are now close to company level EBITDAs.

Two complex assets in generics space are in pipeline. Clinical trials to begin shortly. These trials to cost a lot lesser vs what was spent in case of Advair. Advair TAD ( target action date ) date expected towards end of Q4.

South Africa - flattish sales growth in Q3. SA mkt rank -03, Mkt share at 7 pc. OTC mkt share at 6 pc, mkt rank -03.

Sub Saharan region growth at 15 pc.

Africa Tender business grew by 63 pc.

EM business grew 45 pc. European business up 28 pc.

API business grew 18 pc.

  1. In the next 12 to 18 months, expect highest ever number of launches in company’s history. Expect R&D spends to go up from FY22…say around 6-7 pc of revenues.

  2. One of company’s long term objectives in India and SA - to take up the consumer and OTC business to 10-12 pc of global sales.

  3. Over next 3-4 yrs, US sales expected to go up by another 300-500 million dollars ( say 2200-3600 cr ). This range accounts for negative and positive outcomes.

  4. Company’s biosimilar play in EM is via in-licensing route, maintaining threshold margins. A lot of these are lined up for launches in next 2 yrs. This is expected to be a limited competition business and is expected to be decent in size as well.

Disc: invested.

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Portfolio Disc : Resorted to mild trimming in Bajaj Finserv today. ( sold 5 pc of my total holdings )

Added - Britannia Industries.

I think, Britannia at 3400 kind of range is worth buying. Since I had exausted all my funds, hence the trimming in Bajaj Finserv after a steep run up.

This is not a buy / sell advice.

Regards,
Ranvir Dehal

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Super good results from TTK Prestige. And hence a huge run up in the stock price today. Eagerly waiting to get my hands / ears on Q3 Concall commentary.

Disc : holding TTK Prestige from 5900 levels.

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Hi Ranvir, Any idea on Abbott concall? could not find it on the net…
Sales have remained stagnant, hear the reason as low clinic visits but not sure how this explains the stagnancy… Whats your view on Abbott, i believe you hold it in your pf? Thanks!

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Abbott prices its products at a premium, which is often quite large.

For example, Famotidine 40mg is sold as Famtac 40 by Abbott. It costs ~ 26.5 INR for 14 tablets. Sun Pharma sells the same product as Famocid 40 and it costs 8/- for 14 tablets. Intas Pharma sells it as Facid 40 for 6.75/- !!

Now you tell me why would people pay a premium on their brand unless it is endorsed by Doctors.

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Abbott India drives its strengths from Brand perception, High Quality, First to market and Innovative products.

Due to the pandemic and resulting lower OPDs / doctor visits…the business must have got some hit…thats an assumption.

Management commentary on business going fwd should be imp. With the economy and the healthcare sector opening up, one can be resonably hopeful about the future.

Key risk : Pace of Genericization of Indian pharma market / Adverse regulatory actions against branded players.

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Interesting comparison! I think people taking medicine for chronic issues, where Abbott is a considerable player and where patients need to take same medicine daily for lifetime…quality of the drug is most important to not just doctors but many patients as well. Here the brand perception and quality controls and trust comes into picture. Many times for chronic cases at the beginning of illness, doctors do not prefer generics first as getting the right dose levels is a slow process until things stabilize and here the best quality is preferred. Now, in developed world where even the affluent people cannot afford a daily dose of branded product but in India still many can for chronic issues as price difference, even though good enough, but absolute price is not in unaffordable range. Once a person get used to a particular brand for chronics, they prefer to stick to that…

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I agree. My comparison actually holds for acute diseases.

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DISC :

Major portfolio reshuffling in the last one week and today -

Reduction in the following -
Cipla
Sun Pharma
Dr Reddy
Britannia
Granules India
Nestle India
HUL

Fresh Buying -
Kotak Mahindra Bank
Asian Paints
Indusind Bank

Additions -
Laurus Labs
Divis Labs
ITC
V Guard Industries

Reasons -

Wanted to tilt my portfolio from a defensive ( Pharma + FMCG ) to a little more economy facing / growth posture.

Redued Britannia - due to the increase in Inter Company borrowing.

I feel that I may be late by a month or so in doing the above. But…if the economy’s opening up and return to normalcy continues, this may be the right thing to extract greater returns for the next 4-5 yrs.

So…with that in mind, I made the above mentioned changes.

Disc : just a portfolio update.Not a buy / sell recommendation.

Regards,
Ranvir Dehal

8 Likes
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Hi Ranvir,

I agree with your thinking to align portfolio away from defensives to growth. So Banks and AP seems to be good bet. Paints segment has been getting attention from many corporates, but still AP leads by a margin, so profitability also may continue… Corporate Banks lending activity is the key to watch for which the Govt is trying to push for by creating these PLI schemes and hence might lead to loan book growth…

Somehow pharma to me appears to be still in growth phase, If anything the pandemic has made ppl realize the importance of health and hence i see a structural growth here too…
DrReddy has been in the news for their Covid vacine Sputnik V may get approval soon for India post their Phase 3 trials. Any specific reason, why you chose to reduce the holding even then? Infact even without the Covid vaccine there seem to be some important drugs like Vascepa expected soon i believe…

Good to see you holding on to your Abbott holding for now… If the reason for the fall, as explained by @sujay85 with the economy opening up, even doctor visits will start and so will the revenues of Abbott also start lookin up North, specially with many launches planned for this year.

Cheers,
Mayank

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I see that you have taken some good opportunistic bets in between since march 20 lows, but having followed your thread closely, I still feel you have a solid long term investor mindset rather than an opportunist short/medium term trader. I feel we always have two options - one is keep building on our existing strength and other is to try new areas and build up new strength. I think you have been trying the second aspect more since march 20 lows. Would be good to know if you feel this has been successful so far and what do you feel about this journey with major learnings you acquired? (although true success will only be visible in few years down the line and 1 year is a short phase).

Personally, I feel whenever I try to reshuffle based on new trends etc., my sell decisions are most time incorrect over long term. That’s probably because investors who have a true long term mindset usually tend to buy solid companies (irrespective of market cap) and should sell them (or buy) only based on their individual business environment (unless of course an ILFS moment happens which affects entire sector, and we are in NBFCs)

Pls note my above assessment and thoughts about your style of investing may be totally incorrect (pardon me for that) and is based only on my perception after reading the thread. As always, would be good to hear your thoughts!

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@Investor_No_1 …Hi Boss…

I think my investing style and temprament in general is similar to yours ( going by your posts ).

I believe in buy, hold and monitor kind of philosophy.

However, I was forced to change my style and give up on practically everything except FMCG and Pharma during the COVID crisis. It served me well during the crisis.

However coming out of it, I thought I was taking it too far.

Before COVID, I had aprox 35 pc of my portfolio in Fin Institutions like HDFC bank, HDFC ltd, Indusind Bank etc. ( although I am gonna be far more careful this time around with IndusInd )

I wanted to go back to similar kind of portfolio wt in financials. Plus, I also wanted to keep some wt in economy facing stocks like - V Guard, TTK Prestige, Asian Paints etc

Therefore…the trimming in Pharma, FMCG names.

I hope, I dont have to do the last year like crazy churn - ever again. It ended up being useful, however I dont particularly like indulging in it.

On returns…I am up 20 pc from pre COVID levels but so is the market.

I was outperforming the market by Nov - Dec 20. However, the last 2 months rally in good quality financials and economy facing sectors has blunted the edge.

@Mayank…as brought out earlier…I made descent gains in most Pharma stocks like Dr Reddy. Plus I dont have any particular issues with them. Its just that I wanted to increase my exposure to economy facing stocks.

Plus deep down…when I ask myself - what is my depth of understanding of a Pharma business vs say a bank or a consumer facing infra play like Asian paints, V Guard… the answer is always the latter group. So thats why the trimming.

Regards,
Ranvir Dehal

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Sir!..I think I am experiencing similar situation. Mostly invested in FMCG and Life Insurance, thanks to Tata Consumer, HDFC Life and few others, I was outperforming well. Ever since budget, significantly underperforming as do not have any old economy stocks.
I got urge to reshuffle but so far decided not to. I made peace with underperformance, instead using this phase to build on my strength. Had took some pharma & banking picks as trend (as usual was late in picking trend) so weeded them out and added likes of Nestle, HUL and United Spirits. Also, entered IT & Consumer durables with decent percentage at slightly better time (as compared to entry in pharma trend). However, I am not looking at IT as a Trend but rather a core pick now. Looks like a long time under-believer in Indian IT is changed to a believer now :slight_smile:

I have no clue how this strategy would fare but have seen myself fumble whenever I chose momentum picks, reshuffle for medium term or pick old economy stocks. Guess need to learn from experts and you seem to be doing really well on the reshuffling :slight_smile: :clap:

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Portfolio update -

Complete exits from -

Sun Pharma
Cipla
Dr Reddy

Reason - I wish to pivot towards stocks / sectors that benifit from the economic recovery. In pharma space, I am more comfortable with more backward integrated / API players like Laurus, Divis etc.

Additions in -

HDFC AMC ( increased conviction - I think the bouyant equity markets would eventually suck in more SIPs. Plus the performance of HDFC Mid Cap fund, HDFC Top 100 fund is improving by the day. I am hopeful that HDFC AMC would start grwing soon )

Marico ( due to the fall in the stock price today and it is one of the FMCG company thats showing good strength in its core business )

Regards,
Ranvir Dehal

4 Likes