Sudharshan Chemicals

Hi Guys, I have this particular question nagging me always. Whenever I do analysis and there is lot of question , which are sometimes, critical for which we dont have answer in the public domain. I have recently completed my analysis on Sudharshan Chemicals and I have posted my questions. There could be similar question in other stocks you guys analyse. How do we tackle this information shortage. And how do we decide whether to invest or not. I have gone through all the material available AR, Presentation, Concall, interviews, etc

I have come across this doubts in case of Analysis of Sudharsan Chemicals. We retail do not have all info on hand. One cannot drill past AR, Investment Presentation, conference calls etc . In my view, key data is available beyond what is available in public domain. If that is case, how big investors take decision is it due to scuttlebutt I open this for discussion/comments

We dont have access to all the info examples below how to overcome this in Investment analysis

  1.  Capex Rs 500 crs - split of capex between growth and margin expansion
  2.  Pigment is a major manufacturing cost for automotive/industrial coating which ultimately targets price sensitive consumers So earnings have to come thru more market share rather than price increase
  3.  Major market $5 bn is in organic and major players also there
  4.  How to find whether pass thru of cost is there with paint manufacturers
  5.  Split between organic/inorganic/specialties for Sudharshan
  6.  In my opinion, there are 2 phases in a good investment stock Phase 1 where one can see huge untapped market (like Infy of 1990 - huge untapped market or HDFC bank of 1990 - inefficient PSU banks) Phase 2 where they are steady compounders. Both are steady compounders now not growth. In a stock good wealth creation is possible if one enters at Phase 1. Phase 2 the compounding stage may not create such a wealth as it is Phase I.
  7.  How to identify such stocks i think it is possible only in hindsight
  8.  How to find the phase in this case of Sudharshan

But past data is very good and management has walked the talk. Now it is available at an attractive valuation I feel Sudharshan is going to more of a wealth creation by compounding rather than HDFC/Infy of 1990.

Please give your comments. For me financials come last and business comes first. I am not interested in DCF valuation, P/e, EV/EBITDA, etc. I invest based on a single financial metric.

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there is no VP thread as i see for Sudarshan Chemical. so better you create one (or edit this one) with your analysis and put forth your questions.

if not referred, you can check below report

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My questions are beyond this report and the problems we face generally. I took Sudharshan for example. I have gone through the report and there were concalls after this report dated Nov 20. We are in Feb. I have started the analysis straightaway as guys can get the introduction and financial Analysis from this report

I am not an expert here, but below is my understanding:
You will not get all data of a company in one place, need to read a lot – annual reports, credit rating reports, earnings conf calls, follow forums like this one and any other available in public domain like research reports.
Read about other companies in this sector also sometimes helps.
you will not get all details but if you get 70-80% that should be enough to make a decision. One can join earnings call and try asking the questions.

Refer “trendlyne” you may find lot of research reports.
But one should not follow blindly as most of the time I observed the recommendation is for short term and they give details to justify their recommendations.
When you read all these- you can gather some useful information –
look at Dyes and Pigments section in below link where analysis are there on some companies. Sudarshan also referred in some.

Even though there is no VP thread on Sudarshan but this is referred in several other threads. You can search.

One need to create their own thesis why they want to invest in a company, start with small tracking position – follow quarter results, earnings call etc and create conviction that you invested in right company. Add more as you gain confidence on the company.

There are several factors that influence a stock performance like Management quality , capital allocation, sector that a company operates, raw materials, competition, current market situation etc
Has to do lot of reading on good books to understand the industry, sectors, markets.

You can check below link which give some insights. There are lot of other articles like this one.
Each one have their own style of research on a company.

on your first question below is data.
Capex Rs 500 crs - split of capex between growth and margin expansion

Below is info from earnings call transcript : 70% is for growth capex while the rest is going into back end infra or integration,
Nilkanth Natu: Currently, what we are referring to in terms of capex is 585 Crores and as I mentioned, the
composition 70% is for growth, so that 2 to 2.5 will be asset turn and as I mentioned earlier
that it will also depend on scaling up process, which normally will take around 2 to 3 years
*for any projects post commissioning and that can be taken as a basis. *

Ankur: Great and another question on the capex side, Mr. Natu did mention that almost 70% of the
capex that you are doing is, is towards growth capex while the rest is going into back end
infra or integration, but does that mean that the margin profile of the incremental revenue
will also be superior given most of the capex that we are spending on is on the high
performance side, which in any case will be margin accretive?

Rajesh Rathi: Yes, absolutely right. We are spending some money to on effect pigments also amongst
that, so yes, but you are right, Sir.

Disclosure: not invested in Sudarshan. but have small position in ultramarine & pigments ltd

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