Ravi's Portfolio - Long Term Alpha - Seeking Feedback!

Q&A: Questions & Answers Portfolio Q&A
1

Hi VP community,

Sharing my portfolio below, let me know your thoughts on the overall PF allocation and zoomed out thematic views :slight_smile:

Instrument Sector Rationale Investment % Current Value % P&L %
CREATIVE-BE Licensing Honeywell brand licensing would have 2x current EBITDA margins and share of brand licensing slated to go upto 25% in next 2 years. More brand licensing arrangements / extended Honeywell agreement a possibility post successful execution of Honeywell arrangement 7.30% 14.02% 159.59%
MASTEK IT Evosys / Mastek integration and x-sell resulting in increased ticket size of deals and greater deal momentum; New CEO bringing new direction and energy for US business and overall a massive digitisation investment by companies and governments across the world 7.25% 8.97% 67.29%
BORORENEW Rnewables Only listed solar glass manufacturer in India. Doing a 4x capacity expansion and may announce further capex in coming times. Possibility of RIL strategic acquisition. Strong R&D capability demonstrated in antimony free glasses, fully tempered 2mm glass. Strong strong focus on solar to meet 50% renewable goals by 2030. China plus one 7.54% 6.72% 20.48%
MFL Chemicals Got as part of demerger. See it as a co trying to emulate Deepak Nitrite. Current commodity but moving quickly into value added products. Low cost producer due to huge land parcel, leading to lower cost of capex -->higher asset turns —> higher ROCE. New generation wants to prove itself. R&D center announced. Official revenue guidance of 30% CAGR until 2025 6.31% 6.61% 41.55%
IDFCFIRSTB Banking Banking on V Vaidyanathan. Strong execution in last 2 years in terms of cleaning up the wholesale book, raising CASA to 50%, QIP at 2.5x book value. Well placed to ride the retail wave. Strong tieup with startups to enhance distribution. Voda is near / medium term risk. 9.20% 6.44% -5.34%
ACRYSIL Real Estate Beneficiary of global / Indian RE boom. Announced 2x capex in last 1 year. Went from 500k sink capacity to 1.2mn by Q2FY23. Plan to expand into adjacent products. Well placed to cater to rising premium demand in India and low cost contract mfg for global giants. 5.78% 6.40% 49.60%
PRINCEPIPE Real Estate Beneficiary of Jal Jeewan Mission and increased RE activity. Aggressive management. Only 2nd tie up of Flowguard in India. Near Pan India presence. 6.60% 5.12% 4.94%
GLOBUSSPR Consumption Premiumisation. Ethanol contracts. Significant capacity. 2.88% 4.77% 124.20%
INTELLECT IT IT products play. Platform company. Relatively immune from wage pressures as highlighted by management. Attractive valuations to global peer Temanos. Large opportunity size as banks have least IT penetration across the world. Also sticky customers once you sell the product. 6.51% 4.49% -6.76%
CLEAN Chemicals Process research focussed co exemplified in 70% consistent gross margins and 50% OPM. Current annualised PAT of 200crs. Spending 300crs on capex in next 2 years. Asset turn guidance of roughly 2.5 to 3x with similar margin profile. Peak annualised profits can more than double from here. Co focussed on clean science, targets higher wallet share and market leadership. One of the few cos exporting to China 4.96% 4.44% 20.99%
NEOGEN Chemicals Speciality in lithium chemistry. Potential EV play. Large capex (3x) on the organic side has come on steam and CSM contracts revenue may come on steam in future. R&D driven co. 4.21% 4.02% 29.29%
ESCORTS Automotive Beneficiary of agri growth. Special situation candidate with Kubota taking in majority stake. 0.20% 3.94% 2537.36%
EASEMYTRIP-BE Aviation Proxy to Aviation growth. Low cost model allowing the co to remain profitable. Profits to show a higher CAGR compared to sales due to relative fixed nature of costs. Has narrowed the gap to MMT (market leader) in recent years. Buy price is at attractive valuations. 5.75% 3.63% -14.73%
SSWL Automotive Attractive valuations. Benefitting from China plus one diversification of vendor base. Capex in past 2/3 years coming on steam and op leverage kicking in. Further 60% increase in capacity via NCLT acquisition. Has the potential to double profits in FY23 from FY22 base, which is already high. Has pass through contracts so no RM inflation risk. 4.37% 3.56% 10.13%
JUBLINGREA Chemicals Attractive valuations. Focus on moving up the value chain into more downstream value added products (Diketes, etc.). Cumulative capex to double revenue to around 2.5bn USD by FY25 from current levels. 5.42% 3.49% -12.93%
TATVA Chemicals Similar to clean science. Focus on niche products and dominating market share in them. PTC used in supercapacitors may benefit from the larger green energy push as battery storage becomes more and more common. Q2 commentary indicated that future capex would be on products that could generate 50% ROCEs. 4.54% 3.26% -2.95%
LAURUSLABS Pharma Typical RIL story of pharma. Make money from commodity (ARV APIs) to enter into new age businesses (CDMO, Fermentation Science, Diabetes and other therapies, etc.). Potential to offer multiple demergers in future. Good momentum in CDMO. 3.28% 2.76% 13.51%
NEULANDLAB Pharma Focus on complex molecules. Innovator CDMO. Growing CMS molecule pipeline. Unit 3 was commissioned in Q3FY21, to fully operationalise yet. Growing Teva prescriptions and CMS momentum has been strong. Commercial revenues may flow in H2FY22. 2.75% 2.45% 20.49%
BSOFT IT Beneficiary of IT supercycle. Diversifying away from Mastek. 1.21% 1.65% 84.19%
HEROMOTOCO Automotive Rationale hasn’t played out yet (growing focus on exports) due to semiconductor shortage and Hero’s entry level segment being targetted by EV players. Might exit this soon and consolidate into one of the other holdings. 2.22% 1.19% -27.86%
SBIN Banking Might consolidate soon. Old holding. 0.43% 0.99% 210.23%
SHREDIGCEM Cement Tracking Position 0.68% 0.80% 58.29%
UJJIVANSFB Banking Tracking Position 0.54% 0.20% -49.34%
KOPRAN Pharma Tracking Position 0.05% 0.05% 54.42%
SEQUENT Pharma Tracking Position 0.03% 0.02% -7.41%

From a thematic / sectoral point of view - the construction is as under:-

Theme Investment CMP%
Automotive 7% 9%
Aviation 6% 4%
Banking 10% 8%
Cement 1% 1%
Chemicals 25% 22%
Consumption 3% 5%
IT 15% 15%
Licensing / Consumption 7% 14%
Pharma 6% 5%
Real Estate 12% 12%
Rnewables 8% 7%

Feedback welcome. Since i’m not yet 30, the goal is obviously to create a long term alpha, beating indices and getting financial freedom :slight_smile:

12 Likes
2

easemytrip is not in aviation sector, it is called as platform companies.
my feedback: almost all the companies are good at this moment even 65% of them i own them.
you can have some large cap companies on the safer side along with you had played real estate theme very well.
suggestion : you must add insurance company as well.

3

So my logic of playing EMT is a proxy play on Aviation since I find owning airlines as too risky (high fuel and direct first casualty in case of another lockdowns). I agree with you otherwise.

I don’t know Insurance as a sector too much - may have to study it. Would it be too much to expect IDFC to obtain a IRDA someday lol :slight_smile:

4

it looks good, really like the diversification part but, I realize there is a sound buzz around new age business nowadays, adding a portion of allocation may be not exactly today may be in near future will give much comfort in long run. few examples could think of saas business (mapmyindia, rategain, intellect etc…), hydrogen fuel technology (MTAR etc.), technology driven space(matrimony, tciexpress, nykaa etc…) and I’m sure many of us around avoiding with the valuations they put in however adding a 10% of portfolio weightage is n’t the bad idea.

5

I actually rejigged this. Exited EMT, SSWL, Ujjivan SFB. Reduced allocations to Prince Pipes. Bought Mirza International. Increased allocations to other positions and most significantly to Kopran. I will post an update soon.

MedPlus Health is on my radar - which I feel is a mix of new age tech in a very fast growing space.

1 Like
6

The returns on Escorts is extrra-ordinary. Congratulations! However the allocation, even after such huge returns, is miniscule. Is there a reason why you never averaged it up? Was it price anchoring or your lack of conviction in its fundamentals?

7

It was a gift from my father. He held it from I don’t know how long. When he gifted me, the stock was at around 1300. I’ve considered it as it is in the PF for the sake of simplicity.

Infact Escort’s presence actually hides performance of other stocks that have also done well (Acrysil for example).

Anyways, there will be an update on Monday because I probably plan to sell Escorts and some others and enter MedPlus.

Also, I sold Creative Newtech at 602. Made 3x from original investment. Entered Poonawalla Fincorp. I think an update is due here.

8

image

Fresh Entries

  1. Poonawalla Fincorp - Strong parent. Effect already seen in reduction in cost of borrowings. Barely 2/3x leverage at now which indicates huge runway for growth. The addressable market for credit is very significant. Retail focussed franchise. Targeting 45k cr AUM by FY25 with 2%+ RoAs. Will monitor the asset quality and loan growth closely but from a medium term perspective (1 to 2 years), looking extremely cheap given the guidance.

  2. MedPlus - I think i’ve written about this on valuepickr. My reasons for bullishness are multifold. First, I feel that in the longer run omni channel players will have a leg up over pure play e-pharmacies. Second, MedPlus is back onto the growth track with a planned 2000 store expansion over 2 years which will approx double its store count. Third, it is profit making despite 20% discount. With the credit situation to be monitored / resolved in following quarters, I expect MedPlus to turn into a FCF machines similar to other retail franchises. Fourth, valuation comfort at around 3 to 4x FY22E sales (expecting 4k cr)

  3. MapMyIndia - Hasn’t grown in last three years courtesy automobile slowdown. Orderbook of around 350 to 400crs based on guidance by automotive players. Revival of auto industry is on cards in FY23 and I do expect the orderbook to convert into revenues with minimal incremental cost. I like their relationship with Ola and Hyundai for their N-CASE product. I am quite bullish on Ola going global and with them a lot of their Indian vendor partners and I do expect MapMyIndia to be a beneficiary. Also many other use cases such as drones are currently in infancy. Expect them to increase in future. Lastly valuation comfort. My buy price implies around 70x FY22E PAT (extrapolating H1FY22 numbers), A nominal 30 to 40% growth in revenues could see this PE contract to around 30/35 which is rare for a SaaS company. I like their regulatory moat too - though it remains to be seen how the lack of 3D and 4D mapping by players like Google Maps affects Google’s own customer relationship.

  4. Mirza International - Special Situation. RedTape is trading at around 3x sales when Metro is >10x sales. Further, RedTape itself is growing 20%+ which provides valuation comfort. I see historical CG issues getting resolved and hence like the bet.

  5. GreavesCotton - Pure play on budget. Expect further rampup in Fame subsidies, which will in the short-to-medium term benefit all players in the EV industry given the low base. Also the company has plans to hive off the e-mobility segment and do a fund raise. Volumes are ramping up nicely. Will closely track and monitor.

Exits

  1. Creative NewTech - Exited at around 700crs of mcap. Ran up too much for me in the near term. Booked 3x gains from my buy price and exited. May re-look again if it corrects significantly.

  2. EaseMyTrip - Omicron led to dampening sentiment in Jan. So exited since there’s an opportunity cost. Booked a loss here since my initial entry was at around 600.

  3. Ujjivan SFB / Shree Dig Cement - Sold to free up cash.

  4. SBI / Hero MotoCorp - Nothing exciting. So sold and held onto cash which I later used to buy MapMyIndia during the recent fall (avg price is 1510)

  5. Mastek - Personally didn’t like the Q3 results. Felt the growth was really subdued given the demand environment. Also opportunities are there in plenty. So exited. Used cash to beef up position in Kopran.

  6. SSWL - December sales update wasn’t strong and I was generally not very optimistic on Auto / Auto ancillary in the near term.

2 Likes
9

Nice diversified portfolio…

But few questions…

Why no large cap Banks ?
Why none stocks from these future themes : 5G , Digitization , Ethanol ?

& Don’t you think Borosil Renewable is into utility sector , so any policy changes can effect the high margins…

10

I prefer to stick with small / midcaps. I like stories which can go 2/3x in 2 years. I feel the scope for that is less to non-existent in mainstream banks (ICICI, HDFC, Kotak and SBI). IDFC on the other hand has all the ingredients of a mainstream bank (credibility, +ve unit economics, low incremental NPAs) but is battling legacy issues, most of which are behind it. In such a situation and given the discounted price at which IDFC FB trades, I feel IDFC FB especially after reverse merger can give a nice 35 to 40% plus CAGR to me in terms of returns

5G - Well i don’t know much of this tech. But I do know that digitisation and increasing disposable incomes, better edu infra and software boom in India will mean higher SaaS plays. So I am invested in MapMyIndia (exited post Q3 - might reenter if it falls further on Monday).

Ethanol - Globus Spirits is there. And as % of my current value, it is quite significant.

Borosil Renewable - It’s not into utility sector. Its a less regulated proxy to the highly regulated utility (distribution, generation, transmission) sector. Plus it has many things going for it. Also I entered very early so I have margin of safety here.

1 Like