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Intrinsic Compounding Profile picture
@soicfinance
May 28, 2021 • 8 tweets • 2 min read • Read on X
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Markets reward businesses that display the ability to diversify into adjacencies while at the same time maintaining their return ratios.Signals expanding size of opportunity and managements ability to identify more profit pools

Time for a thread with examples 🧵
Astralpoly🚰 isn't just a pipes company anymore. It is a water solutions provider dealing in Adhesives, Tanks, Valves, and Pipes. Homework for everyone: check the CFO compounding of the last decade
Divis Labs💊-again another API Champion which is entering Contrast Media API's which a very concentrated segment. They believe they have the process chemistry advantage over here as well!
Pidilite 🖼️which has displayed similar characteristics by getting into the waterproofing business
Another successful story has been Navin Fluorine⚗️,which has taken the cashflows from commodity chemical business and successfully diversified into CRAMS, HPP&Speciality Chemicals
Laurus Labs🧬 is another candidate which is still not truly appreciated by the markets. Given majority of the returns have come from Earnings growth and not re-rating
Truly Antifragile managements have the ability to spot opportunities without diluting their incremental returns. This is when management recognizes the importance of intrinsic compounding🤝🤝

Disclosure: not SEBI Registered. Been through the journey with Navin&Laurus.
Remain invested and not a buy/sell. Only time will tell if this story plays out in Pi Industries successfully or not 🤞

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More from @soicfinance

Intrinsic Compounding Profile picture
Oct 20
3 Key Learnings about the Solar Industry from a visit to a Renewables Exhibition ☀️

We recently visited the Renewables Exhibition in Noida. We had three distinct observations post meeting the industry participants there: Image
1) Massive Oversupply

A massive oversupply is going to come in Solar Modules two years down the line. There is an Anti-Dumping Duty of 40%+ on import of solar modules, this has led to a lot of domestic production.

In the next 2 years, the industry will cross 100 GW of production capacity; out of which 60% can be produced. The annual demand in India is 40 GW, industry participants are betting that the rest can be exported.
2) Abnormal Profitability

Due to domestic content requirements, players in solar cells are making abnormal profits. Abnormal profitability means EBITDA margins of more than 50-60%.

Cell manufacturing is technologically intensive and India still imports 95% of its solar cell requirements.

Many module players like Goldi Solar, Waaree, Vikram, Solex, etc have announced plans to manufacture solar cells.

Cell breakage will be a big factor in determining the quality and eventual margins when this cycle of abnormal profitability ends.

Cells from China are imported at 4 cents per cell and cells made in India are selling at 14 cents right now; such is the level of difference.

Technology in cells keeps changing every 2-3 years, one has to be very careful with assessing players here if the technology they have is old.Image
Read 4 tweets
Intrinsic Compounding Profile picture
Feb 14
Decoding the Sovereign Gold Bond Saga: A Comprehensive Thread on India's Gold Investment Evolution🪙

Launched in 2015 by the Government of India, the Sovereign Gold Bond (SGB) scheme provides a novel way for investors to own gold without the hassle of physical possession. The scheme aims to channelize idle gold into productive avenues and reduce the dependency on physical gold. #sgb

If you're looking for a comprehensive comparison of various gold investments (GOLD ETFs vs PHYSICAL GOLD vs SGB) before delving into this detailed thread on Sovereign Gold Bonds, you can check out the previous post on - GOLD INVESTMENT OPTIONS () Let’s unroll the thread 🧵🧵

🌟 Key Features of SGB:⭐

1. Issued by RBI for the Government of India :
SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India, ensuring credibility and government backing.

2. Denominated in Grams, Flexible Investment :
SGBs are denominated in grams of gold, allowing investors to start with a minimum investment of 1 gram and go up to a maximum of 4 kg per fiscal year for individuals and Hindu Undivided Families (HUFs).

3. Fixed Interest Rate - 2.5% Per Annum 📈:
SGBs carry a fixed annual interest rate of 2.5%, payable semi-annually on the nominal value of the bond. Taxable as the slab rate of individuals.

4. Maturity and Exit Options 📅:
SGBs have a maturity period of 8 years, but investors can opt to exit after the fifth year on the interest payment dates.

5. Secondary Market Trading and Loan Collateral :
SGBs can be traded in the secondary market through stock exchanges, providing liquidity. Additionally, they can be used as collateral for loans, offering a unique dimension to their utility.Image
Let's dive into the performance of SGB (Sovereign Gold Bonds) over the years! 📈 The inaugural SGB came into existence in 2015, reaching maturity in 2023, completing a 8-year cycle. 🎉

When it was first issued in 2015, the rate stood at ₹2684/1gm. Fast forward to November 2023, and the issue rate had climbed to ₹6199/1gm. As an illustrative example, let's consider a gold purchase of 5 grams, equivalent to an investment of ₹13,420 at the time of the initial issue. Fast forward to the present, and with the current issue rate, that same 5 grams of gold is now valued at ₹30,995.0. 💰

Now we will calculate XIRR for the whole 8 yrs and surprising revelation as we calculate the for 8-year period, considering the semi-annual interest of 2.5%( which was ₹167.75 every 6 months) 🔄. See Below ⬇️⬇️

The XIRR for this period comes out to be 12.81%! ✨
We have attached the excel sheet for your calculation and also for future XIRR calculation of your SGB returns - docs.google.com/spreadsheets/d…Image
To simplify tracking of Sovereign Gold Bond (SGB) prices, we've created an Excel sheet that gets updated with each new issue. ✨ Save this sheet for future reference to easily monitor and stay informed about SGB prices. docs.google.com/spreadsheets/d…Image
Read 6 tweets
Intrinsic Compounding Profile picture
Jun 29, 2023
If you are new to the markets. You must watch these 7 videos to accelerate your Journey!!

🧵🧵🧵🧵🧵
Learn about the basics of the markets and how compounding works here:-

Learn All about Passive and Active Mutual Funds from here:-

Read 9 tweets
Intrinsic Compounding Profile picture
Apr 26, 2023
Many people are confused about Elecon's results, and don't know what caused the sudden fall in stock price.

In this thread I will teach you how to read results correctly with the example of Elecon.

🧵🧵🧵🧵🧵
There are two ways to look at Quarterly results:-

1. YoY= Year on year comparison means that we are comparing Q4FY23 with Q4FY22

2. QoQ= Quarter on Quarter comparison means that we are comparing Q4FY23 with Q3FY23. This is also known as sequential growth.
Second thing to be careful of while looking at the results of the company:-

1. Always prefer to look at Consolidated results, as this will include all the subsidiaries of the business. And give the correct overall picture of the business performance.

Eg:- Image
Read 21 tweets
Intrinsic Compounding Profile picture
Feb 22, 2023
Investors beware! Companies are getting crafty with their financial statements.

Let's understand how companies fool investors with terms like we achieved profitability*

*T&C apply

Who knew accounting could be so much fun?

Retweet for Maximum Reach!!
#EBITDA #AdjustedEBITDA
Do you know what Adjusted EBITDA is?

It's like a financial game of Jenga - you take out one-time, irregular & non-recurring items to get a normalized number!

The purpose of adjusting EBITDA is to get a normalized number that is not distorted by irregular items or one time cost.
Let's get one thing straight - investors love profits.

We are investing in companies that we believe would go on to earn handsome profits in the long run.

Higher profits will lead to higher stock prices as well.

Companies know it & hence they do all practice to show adj EBITDA
Read 25 tweets
Intrinsic Compounding Profile picture
Feb 8, 2023
Do you know why the Debt to Equity of companies like Titan, Jubilant Food Works, Apollo Hospitals, has gone up significantly in the last few years?

This is due to the accounting change in leases which a retail investor must know.

Let's delve deeper to understand the cause 👇👇
It is due to Ind AS 116, which defines the accounting treatment for leases

Previously leases were treated as monthly rent expenses and charged to P&L in other expenses but post the applicability of Ind AS 116 there has been a drastic change in the books of accounts for companies
Leases now have to be shown in a company's balance sheet as both an asset and a liability. This affects the company's debt-to-equity ratio.

The liability for the lease is calculated as the current value of all the payments the company will make during the lease.
🏨🏥🏬🏙️
Read 20 tweets

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