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26 Feb, 18 tweets, 7 min read
#Praj zooming. Street started to realize the potential. Skeptics turning believers!
#Praj wins its first project from HPCL for manufacturing CBG from rice husk through its proprietary technology. Image
When Supply side excellence created by credible management meets large tailwinds,

It creates a Lollapalooza effect of Earnings & Valuations.

An incredible opportunity size of 14000 crores upcoming for #PrajIndustries with praj having 2/3rd mkt share.

Also bake in the prospect of a 13 year breakout , makes for a potent Cocktail.
When we added #praj at 80 it was deemed a constant dissapointment, but tailwind when they come, ensure creation of inflection points.
Important to look into the future and assess the current general conditions rather than the disappointing past.

Much loved and talked up at 230.
Current ethanol capacity: 350 cr ltrs
New capacity to be built to achieve 20% target by 2025: 1000cr ltrs.

India needs to create almost 3x the capacity in 4 yrs as it has in its entire history.
#praj with 2/3 market share, stands to create 2x indias existing capacity.

Mammoth!
The way people are piling on in Praj now, is indicative of the herd mentality fed by borrowed conviction that works in the markets.

Little interest at 80, plenty at 240!
Ethanol was the domain of sugar manufacturers who had bolt on ethanol plants along with primary mills.
Due to favorable govt policies, few companies are getting into ethanol production who have no sugar background.

Interesting days ahead!
Stunning results from #PrajIndustries, with its highest ever quarterly Profit and Sales. Juggernaut keeps rolling!
A 4x growth in pat yoy. and a 2x growth qoq. Image
#Prajindustries close to 4x for our portfolios, a demonstration of What happens when a Supply Side excellence built with persevarence over long periods meets gusty favorable industry tailwinds.
We mentioned how the universe was aligning for #Praj to finally benefit from its supply side excellence in our Webinar towards the end on Small Cap Dominance with @Finvents.
Hopefully our followers who stuck till the end took away something from it & also benefitted financially.
Conservative managements do not give guidance. Thats where reading between the lines helps gauge their Optimism.

Following is an excerpt from transcript of Q3 of #Prajindustries.

Price was trading at 120 odd. Image
While it's great that #Prajindustries is working on remarkable stuff like Bioplastics etc, but we didnot invest anything based on these projects in our thesis, It was always about the ethanol capex story for us.

Misattribution leads to errors.

Other things are bonus.
Not that the bitumen news yesterday isn't important, but if that news would have been published a year back, it would not have got half as many eye balls as its getting today because price is dictating perception.

Thats how the markets are

As investors we have to stay rational.
A big opportunity for #Prajindustries could emerge in biofuel ethanol for aviation in next decade. Constraints make it impossible for airplanes to run on electric batteries, with hydrogen fuel cells or ethanol the only alternative.

Boeing intends to go biofuel by 2030.
In a country where deadlines keep getting pushed, it is stunning that government has again brought forward the implementation timeline for ethanol blending to 2023 for 20%. This in combination with allowing standalone ethanol factories is big for #PrajIndustries,

Very very Big!
Seems quite a Statement from official government notification released today. #PrajIndustries Image
In other news today, government today appointed GAIL as coordinator for implementation of CBG-CGD sync scheme, meaning that biogas generated from new CBG plants can now be ingested into the City gas distribution network in turn ensuring offtake.
Another biggy for Praj

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More from @CapitalSapling

Saplings Capital Profile picture
25 May
Great thread. #Garwaretechfilms is one of the few small caps, thats able create a brand in advanced markets. They compete with the likes of 3m in the US and while it gets valued as a commodity company, it deserves to be trading as a speciality consumer company.

Disc: Invested
A barometer of company's brand strength is it gross margins & Payment terms. GM% are at a great 65% at present( vs 38% for the commodity film companies) and the company offers no credit and works on a cash & Carry model.
Hard to find an Indian company that sells in the US in cash
One of the best models is for the company to sell to many small customers & that too in retail. Garware Hitech's customers are the 4000 paint tinters in the US. Their existing brand recognition amongst the tinters for the window films will work well for it paints film business.
Read 5 tweets
Saplings Capital Profile picture
13 May
Even for a small cap investor a large % of his PF should be optimized for "Capacity to suffer & durability" rather than for pure upside.

In country like India, if one stays invested long enough the demographics & its upwardly mobile percapita income will take care of the upside.
This calls for a supply side excellence which creates a capacity of suffer through difficult periods or actually demonstrates antifragility and thrives under stress through the strength of its reputation and balance sheet by acquiring assets in distress.
A classic ex of this is APL apollo, over the last decade where most metal convertors have struggled, APL has demonstrated anti fragility thrived by using its superior balance sheet to acquire assets from companies that were in distress like the plant bought from Shankara.
Read 6 tweets
Saplings Capital Profile picture
6 May
#PixTransmission is a dominant small cap in its duopolistic market of V-Belts, essential in all manufacturing sectors.
Company due to robust demand has recently approved further capex of 60 crores.
Promoter increasing stake.

Disc: invested from 300 levels.

Much more to come!
Indian Market is dominated by Pix & Fenner, V-Belts has repeatable purchase as the product wears out after a limited time.
Due to its use in every industry, it is required that the manufacturer have v belts in 1000's of sizes and every size has a different mold.
This inventory of molds calls for a significant investment, which acts as a moat for the incumbent.
Since v belts are used across India, the vendor is required to have most of its variants stocked with dealers across the country.Pix has a significant distribution moat in India.
Read 15 tweets
Saplings Capital Profile picture
4 May
Investing in Small cap domination eventually leads to big wealth creation, Don't overoptimise for valuations here, in-fact optimize for Moat, if the company's business Castle is well moated, the long runway of opportunity will ensure you make a hell of a lot of money regardless.
The likes of Astral and Page hardly ever traded at conventionally cheap valuations since the beginning of last decade, but have still generated immense wealth for investors who have held it with the scarce commodity called "Patience".
While one might think that we chose the likes of astral and page selectively in hindsight, but the truth is truly moated small caps are hard to come by.
And being lenient with valuations is an act to be committed only with a select few.
When in doubt skip!
Read 5 tweets
Saplings Capital Profile picture
15 Mar
A successful consumer tech company should always be valued significantly higher than a normal consumer company.
Opportunity size is large for both but the digital distribution of the tech company services allows it traverse the opp landscape faster than a normal consumer company.
Since capex is not a challenge in setting up a tech business, therefore a tech company has to create alternate barriers, thus the need to drive business velocity as network effect is true barrier to entry.
To get to that scale, tech companies have to sacrifice near term eps.
If public market doesnot agree with this, its the markets' loss, these companies will either stay private or raise equity from Nasdaq.

So in true tech if the public market participants want the alpha, they have to devise alternate methods to assess a company and its valuations.
Read 7 tweets
Saplings Capital Profile picture
6 Mar
#Nazara's gamified early learning app, Kiddopia, subscriber base grew from 115,220 paying subscribers in January 2020 at the time of acquisition to 290,508 as of Oct 2020.

Stunning growth!

Another #Nazara subsidiary has 80% market share of Indian industry in esports segment.
#Nazara's annualised Advertisement & Promotion spends has gone from 27 cr in Fy19 to 238 crores this year. They can easily show significantly higher profits by cutting this marginally but its more about land grab at this point. Market should recognise that and value accordingly.
Gaming Vs Movies vs Music, although Movies get most attention due to glamour. But Gaming is bigger than movies and Music combined. Image
Read 27 tweets

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