Month: July 2020

CERA Sanityware – All’s well?

In my last update to you in 2017, I had pointed out that the Important variables to track for this company are

  1. Topline growth
  2. Return on Capital not impacted due to tiles expansion – Currently, it is about 30%
  3. New business growth
  4. No further declines in PAT margins (Somany’s margins are low – Pure Tiles player)
  5. Continued investment in branding and promotions

Let’s revisit all of them

  1. Topline growth has de-grown for the first time in many years in Mar 2020, management indicated in call that this was due to COVID lockdown in the last few days in March, the overall quarterly trend for last 2-3 years is also not inspiring

2. ROCE is steadily declining from ~30% to ~25%, part of the blame is tiles division, the other part is excess cash retained in the business (INR 230 crores)

3. Tiles business has grown from INR 170 cr topline to INR 265 Cr from 2017 to 2020 and they have added a new category called Wellness which caters to high margin audience

4. PBT margins are stable as per the above graph

5. These expense has been trimmed down and the company indicated in concall that  they can save … Read the rest

Why I like ETFs

I have been an active stock picker since 2008-9 and this is the first year I have got my hands-on ETFs

So what are ETFs?

An exchange-traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index

Lars Krojier has written an excellent book (Investing Demystified) on ETFs and you can get a good summary from this video series, I encourage you to spend 30 mins to go through them.

Like always I like a theory but I wanted to see numbers and once numbers stacked in favor of ETFs I got sold and started adding them to my portfolio.

How did I do the numbers?

I compared returns from Jan-2018 to Jul-2020 on a momentum portfolio, large indexes and active stock decisions I took between those dates

Why Jan-2018 as a starting date?

In Jan-2018 I had subscribed to a very well respected momentum service for their sake it will remain unnamed

What were results

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Granules India – A Value Migration Story

According to Adrian J. Slywotzky, “value migration” is the flow of economic and shareholder value away from an increasingly outmoded business design toward others that are better equipped to create utility for customers and profit for the company.

Mr. C Krishna Prasad, Chairman of Granules India gave us a glimpse into the future of the company and their aspiration to move into the upper echelon of the industry

Our Company is in the midst of an evolution. We have built a strong base business that will continue to grow as it gains defensible market share while expanding profit margins as more of the business comes from formulations and quality conscious customers.

While we are currently synonymous with large-volume products, we have taken several steps to move into more complex offerings. We have leveraged our existing capabilities to turnaround Auctus’ API operations which will be vital as we file ANDAs to expand our FD portfolio.

Annual report 2015

It’s one thing saying and its completely different thing delivering it, the below chart depicts their 10-year transformation journey

Many were willing buy generic viagra visit for more to pay because of the high cost of … Read the rest

Ajanta Pharma – Pivoting its fortunes

Let me refresh your memory from this 2015 chart on how Ajanta pharma, Granules India and Suven Life Sciences were operating in different sections of the industry

Five years and things have turned on their head in 2020

  • Ajanta Pharma – Started selling in regulated markets
  • Granules – Set upfront retail shop in the US
  • Suven – Has moved into API manufacturing at scale

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each of them had their own niche and slowly build complementary capabilities. Nothing depicts the pivot made by Ajanta pharma better than below chart

 

from no presence to getting 1/5th of their is sales … Read the rest

Bajaj Finserv – Markings from Annual Report FY20

In March 2020 we got an opportunity to add to scorecard a rock-solid franchise at about ~20 times earnings growing operations in high double digits run by an extremely smart management team with a long runway for growth.

Here are some of my highlights from their annual report

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NB – FY21 and numbers going forward for 12-18 months will not be great so caution before you jump to buy this one
… Read the rest