As of today, I have switched out of Heranba and replaced it with Caplin Point Laboratories. Cash remains zero.
Heranba reported a howler in this quarter which was due to pricing pressure in pyrethroids. We have gone through a very good agchem cycle in past few years, so mean reversion is likely to occur. In my experience, when earnings start dropping at such rates, it takes quite sometime for things to fall in place. With this in mind and due to many more available opportunities, I booked my losses despite valuations being very cheap.
Caplin Point has been one of the most consistent growth companies over the last decade. In the past few years, they have started building their US business which is scaling rapidly. One of the most common playbook to build US generic business is to get into products with small market size, some niche and grab large market shares. In the past few years, this playbook has been successfully implemented by Ajanta Pharma and Unichem Lab. With this strategy, companies scale to $100mn annual run rate in 3-5 years. Caplin is adopting the same playbook, lets see how well they can execute. Its available at 15x PE and I expect earnings to grow at 15%+ over the medium term. Historically, they have grown earnings at 25%+.
Other than this, I am building positions in RKEC projects and Propequity. Once I have built my positions, I will add them to the model portfolio. Currently, I am facing the problem of too many opportunities, its hard to decide what to sell.
Core compounder (42%)
| Companies | Weightage |
|---|---|
| I T C Ltd. | 4.00% |
| Housing Development Finance Corporation Ltd. | 4.00% |
| NESCO Ltd. | 4.00% |
| Eris Lifesciences Ltd. | 4.00% |
| Ajanta Pharmaceuticals Ltd. | 4.00% |
| HDFC Asset Management Company Ltd | 4.00% |
| Aegis Logistics Ltd. | 4.00% |
| Gufic Biosciences | 4.00% |
| HDFC Bank Ltd. | 2.00% |
| PI Industries Ltd. | 2.00% |
| LINCOLN PHARMACEUTICALS LTD. | 2.00% |
| Godfrey Phillips | 2.00% |
| Caplin Point Laboratories Ltd. | 2.00% |
Cyclical (48%)
| Companies | Weightage |
|---|---|
| Kolte-Patil Developers Ltd. | 4.00% |
| Sharda Cropchem Ltd. | 4.00% |
| Avanti Feeds Ltd. | 4.00% |
| Aditya Birla Sun Life AMC Ltd | 4.00% |
| Alembic Pharmaceuticals Ltd. | 4.00% |
| Amara Raja Batteries Ltd. | 4.00% |
| Chaman Lal Setia Exp | 4.00% |
| Stylam Industries Limited | 4.00% |
| Ashiana Housing Ltd. | 2.00% |
| Ashok Leyland Ltd. | 2.00% |
| Kaveri Seed Company Ltd. | 2.00% |
| Control Print Limited | 2.00% |
| Sundaram Finance Ltd. | 2.00% |
| Time Technoplast Ltd. | 2.00% |
| RACL Geartech Ltd | 2.00% |
| Manappuram Finance Ltd. | 2.00% |
Turnaround (4%)
| Companies | Weightage |
|---|---|
| Punjab Chem. & Corp | 4.00% |
Deep value (6%)
| Companies | Weightage |
|---|---|
| Geekay Wires | 1.00% |
| Jagran Prakashan Ltd. | 1.00% |
| D.B.Corp Ltd. | 1.00% |
| Shemaroo Entertainment Ltd. | 1.00% |
| Modison Metals | 1.00% |
| Suyog Telematics | 1.00% |