As of today, I switched out of Godfrey Phillips and added Transpek to the model portfolio. Godfrey trade played out very well, with market recognizing change in operating margins and resumption of growth in tobacco. While margin benefit is likely permanent in nature, the huge jump in revenue growth came because of tobacco exports which has now normalized. Although valuations are not demanding in Godfrey, I prefer playing tobacco sector with ITC as they have multiple value drivers.
Transpek has got back to pre-covid revenue run rate in their core business and are now getting more aggressive in growth, as shown in launch of five new products this fiscal. Margins have also shown a clear revival trend, in good times Transpek can do 20% EBITDA margins.
In the last concall, Transpek management guided that they have clear order visibility for CY23 and are working on reaching 1000 cr. of sales in a couple of years. At 20% EBITDA margin, this can translate into 200 cr. EBITDA and potential enterprise value of 2000 cr. (basically a doubler with good visibility).
I like the setup where a conservative management becomes more aggressive in pursuing growth (another e.g. is Sundaram Finance). Lets see how Transpek works out. Updated portfolio is below and cash stays at zero.
Core compounder (40%)
| 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% |
| Caplin Point Laboratories Ltd. | 2.00% |
Cyclical (50%)
| 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% |
| Transpek Industry 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% |