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Intrinsic Compounding

28 May, 8 tweets, 2 min read

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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Intrinsic Compounding

@soicfinance

27 May

In the business world, the rearview mirror is always clearer than the windshield. Be forward-looking as an investor. Read everything about the industry, peers, new products, new methods of distribution, etc.

My go-to resources📝📝

1)Concalls
2)DRHPs
3)QIP docs
4)Annual Reports

5)Magazines like contract pharma, chemical weekly, Forbes, Outlook Business, etc

6)Better to know as much before you are investing. Only annual reports won't cut in today's investing world due to the increasing amount of change that is taking place

7)Read about international

players as much as possible. Looking at what has happened in the international industry can you give you some insight what can happen in the Indian industry :)

The key to it all is consistency- just read for 90mins a day for the next 3 years. The only way to get ahead is reading

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3 Nov 20

Some Questions on Laurus (I totally respect everyone else's view, these are just mine, not arguing but engaging in civilized debate like humans used to do)

Watson: Laurus has been using aggressive accounting policies and in the H1FY21 bunching of inventories has led to CFO/EBITDA deteriorating

Sherlock: Such a question was expected from you, Watson! (mockingly) Let's take a longer time horizon and check the CFO/PAT & CFO/EBITDA

CFO/EBITDA for the past years

2016: 55%
2017: 75%
2018: 77%
2019: 80%
2020: 61%

in the first half of 2020, this has fallen to somewhere around 50%. A bystander would consider this to be a red flag, however in growing companies (whenever the growth is rapid and especially

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31 Oct 20

Suven Pharmaceuticals Concall Updates:

Suven Pharma Concall Updates Q2FY21

I attended it live, there could be a mistake or two

Comparison of our business should be done yearly and not quarterly as we have said before (Due to lumpiness)

Growth guidance of 15-20% remains intact, expecting H2FY21 to be much stronger.

Product mix has also led to a decline in margins also environment-related costs have gone up.

Categorically denied the rumours of selling the business, stated that such news was there 9 months ago

and 1 year ago as well. No plans to sell.

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30 Oct 20

Pi Industries Concall Update *Q2 FY20*

Industries Q2FY21 Concall

I will be dividing this concall into 3 parts: Business, Risk and Management

Business

Both the existing molecules and the recently commercialized molecules have seen a good uptick.

More than 10 products in the

R&D pipeline in pharma. Commentary of Global Agri Innovators has shown robust strength.

Domestic Business improved by 33% and the export business grew by 25%. Topline grew by 28%.ISAGRO forms 11% of the consolidated topline.

Utilization levels are heading back to Pre-covid levels. Going forward, focusing more to improve the asset utilization levels.

EBITDA margins expanded by 293 bps due to better product mix and operating leverage. Capex done till H1FY21 is 116 crores, target for the entire year

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Q2FY21 Concall Updates: Business, Risk and Management

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-Credit Rating has been upgraded by ICRA on back of the upgrade by Crisil in the last quarter.

-Topline was up by 12% (YOY) and 23% on QoQ basis.

-Margins remained at 32% and experienced 150BPS reduction in expenses primarily due to power cost and RM cost coming down,

and change in mix of the business.
-Staff cost increased by 22% to 161 crores as compared to 132 Crores last year, which led to a 15% increase in employee cost.

-Currently we have 5200 employees as compared to 4700 employees last year

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