My Name is Samarth and here I’ll try to share my portfolio picks, rationale behind investing and my learning’s to start with my portfolio as on today consist of:
- Macpower CNC Machines
- Transformers & Rectifiers India Ltd
- Hi-green Carbon Ltd.
- Time Technoplast Limited
- Swelect Energy System Ltd.
- Netweb Technologies Ltd
- E2E Networks
I’ll try to share my learning’s and rationale behind making my investments in this companies through this medium and it will also help me articulate my thought process ad constantly push me to do better and make more efforts…
As I believe that we can work, work, work, work and just hope to have few insights as luck and probability plays a very big role in investing…
Hi Samarth,
It would be good if you could also share other details like holding period of these stocks, your rationale, the type of investor you are; etc.
To begin with I’ll try to share my investing rationale for investing in Hi-green carbon ltd.
The company is engaged in recycling of end of use tires to produce pyrolysis oil, recovered carbon black, and sodium silicate (raw glass)
Hi – Green Carbon Limited Report (1).pdf (735.9 KB)
Above I have attached a note regarding my understanding of the business and my learning’s from the company I hope you all derive some value from it.
secondly, the economics of the company’s business is what attracted me let me explain that to you:
Company on its max can generate a revenue of INR 70-80 Crores from one plant and currently it operates only one plant but two plants one in MP & Another one in Dhule, Maharashtra are under construction so after setting up three plants the company will able to generate a revenue in line of 200-250 crores at an EBITDA margin of 22-25% and PAT Margins of 15-18% which will give company enough revenue to setup another plant from internal accruals only and they will need just 10-12 crores in working capital.
Plus, they are getting 80% GST subsidy on capex done in Maharashtra which will lower there capex cost and are getting 40% subsidy on capex done in MP so again that will lead to decrease in capex cost leading to higher ROIC.
The company is not only certified from Indian govt. but also from ISCC and REACH which further indicates good operating standard as it a highly regulated industry so it gives a boost to them.
Secondly, the company is able to establish plant at a cost of 40-50 crores which is the main advantage that they have as to setup similar plant outside India it takes 200-300 crores in capex and it gets confirm while looking at its global peers.
The company is able to pass on the increase in cost to its customer and company if it matches the input and ouput cost, with increase in capacity and expansion in EBITDA margins that will be massive.
I can be biased as well and as a student i would always like to here the feedback from all of you…
Disc - it is not a buy or sell call it is just for educational purpose
Thanks for sharing your writeup, seeking your view on below,
- Its highly capital intensive business, debt & dilution going to increase as they are planning for 4 new plants
- isn’t their end products commodity in nature? margin’s will oscillate?
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Through this exercise i would love to learn from you people and share my journey as well because one person cannot lift the mountain but a group of people can surely do…
so collaborative investing is what i have faith in and try to do…
As far as portfolio allocation is concerned I prefer to have concentrated bets and this has evolved over time for me… and with the guidance of my few mentor cum friends…
The holding period for my portfolio is:
Macpower CNC Machines 1.8 years
Swelect Energy Systems Limited is 9.2 Months
Transformers & Rectifiers India Limited is 2.2 Years
Hi-green Carbon Limited is 2.5 Months
Time Technoplast Limited is 1.2 Months
Netweb Technologies Limited is 7 Months
E2E Networks Limited is 10 Months
That’s my portfolio holding period…
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Regarding that the business economics is quite favorable as the capex cost is 40-50 crores for dhule plant for which they came with an IPO so it will be taken care from it and also on this capex they will get a 80% GST subsidy over 10 year period that will boost it.
Secondly, Once two plants come on board they will have 130-150 crores in topline at optimum capacity utilisation they will be able to generate 18-20 crores in cashflow and gor the working capital requirement of Maharashtra plant they already have set aside 10 crores in FD so that won’t be a issue and from that situation if we see then it won’t be a much of problem to setup plant 3 in MP as they will have sufficient cashflow plus, have money in reserves as well.
And as far as the commodity product is concerned we can understand that the sodium silicate plant is setup at 3/4 crores at Max and for the production of sodium silicate major cost component is power and that they are getting for free due to excess production of pyrolysis oil which they uses to produce it so theya re able to provide it at lower cost while realising similar realisations for it.
And rCB is increasingly used in industry for cost cutting purpose and is mixed in proportion along with the Virgin Carbon black for cost reduction and yes they will get affected due to price fluctuations but what i could understand is that if they are able to meet the input price and realisation price with expansion in capacity that will lead to reasonably good growth.
Plus, for them there only raw material is end of life tyre which they get at Rs. 13-16 per kg and with the increased awareness among tyre company they will also get the benefit of charging offtake comission that is price paid to get tyres recycled as it happens in US and EU and eventually India will follow the pack as far as i could understand it will majorly solve the issue.
Plus, till now End of life tyres were directly burnt into the cement furnace but CPCB has become quite vigilant regarding it so the cement players have started looking for alternative and pyrolysis oil produces more BTU heat per kg consumed as compared to other alternatives so that will further aid them.
PS: Right now they have just one plant and all this is what can happen in future so will have to keep close track of the developments going on and the industry as well…
I may be biased as i am invested but this is not a big or sell call…
I hope I was able to answer…
