Imagine two scenarios...

1. A $35bn company with $8bn revenue that has 5000 active patents, works with 3000 suppliers worldwide, carries the highest market share (18-20%) in it's segment in the world, sets up JV with a < $1bn company with $232m revenue and even before operations got into full scale for that JV, requests an expansion of the facility!

Yes, I am talking about Givaudan and Privi.

2. And, in their latest concall, Privi said this

"...As part of our business expansion strategy, we have initiated dialogue with some of our competitors to work with them as coproducers…"

You don't come across these scenarios everyday!

Hence, it makes sense to check out what's happening here!

1/n First things first

📌Privi is one of the leading Indian players in the Flavour & Fragrance (F&F) market.

📌They supply to the World’s 15 largest fragrance companies which control 80% of the global fragrance market and also to many leading FMCG companies.

📌 They were an INR 100 Cr company back in FY05 grown to INR 500 Cr by FY14 and became an INR 1000 Cr company by FY19 and now it's FY25 revenue should comfortably cross INR 2000 Cr.

📌We are essentially talking about a company that has grown 20x in last 20 years! Great! But is there anymore juice left?

📌 Well, global Flavour & Fragrance (F&F) market is estimated about USD 30bn and it continues to grow at 5% CAGR and it should keep doing this for a long time

📌But then you would say, "It's just 5% CAGR, what's the big deal? There should be many other sectors."

📌Then, I would say "Fair point. But what if the company is growing at 20%, carries 20% plus EBITDA margins, and aims to reach a topline of INR 5,000 Cr in the next 4-5 years (TTM revenue is INR 1972 Cr)"

📌Then, you would say "Okay, tell me about it"!

📌BTW, before I tell you about Privi, let me tell you that even at this high scale, Givaudan grew 14% in CY2024!

2/n

Value Research Online has updated their portal with February Mutual Fund changes and here are the major changes.

Note: Data considered is only of the top 25 names in the respect fund's portfolios. There could have been allocation changes in the rest of the stocks, so, please take these observations and changes with pinch of salt.

With that caveat, lets dig into the changes

📌Axis Small Cap Fund - No changes in top 25 names

📌Nippon India Small Cap Fund - Adani Wilmar, Elantas Beck India, eClerx Services, Pfizer, Balrampur Mills, Zydus Wellness and Emami (Increase); Reliance Ind (Decrease)

📌HDFC Small Cap Fund - eClerx Services, Eris Lifesciences, Sonata Software, Suprajit Eng, Power Mech Project, Home First Fin, Kalpataru Project, Aditya Vision, Transport, Blue Dart Express (Increase); Firstsource, Great Eastern Ship (Decrease)

📌ICICI Prudential Smallcap Fund - Larsen & Toubro, Gujarat Pipavav, Atul, Gillette India, Tata Chemicals, Cummins India, GNFC, Pfizer, EIH, Gujarat Alkalies, CESC,JK Lakshmi Cement and GFSC (Increase); Gujarat State Petronet, Shree Cement and Brigade Enterprises (Decrease) 📌Motilal Oswal Small Cap Fund - Dr. Agarwal's Health Care, Karur Vysya Bank, Styrenix, Vijaya Diagno, V-Guard, Shaily Eng Plastics, Campus Activewear, Pricol, Cholamandalam Financial, CCL Products, Chalet Hotels, Rainbow Children's, V-Mart Retail, Gokaldas, Five-Star, P N Gadgil Jewellers, Pitti Engineering, Blue Star (Increase); No reductions

📌SBI Small Cap Fund - Deepak Fertilisers (Increase); Blue Star, City Union Bank and Lemon Tree Hotels (Decrease)

📌Quant Small Cap Fund - HFCL, Ventive Hospitality & Welspun Ent (Increase); Reliance Industries (Decrease)

📌Tata Small Cap Fund - Sudarshan Chemical, Kirloskar Pneumatic, Graphite India, Wockhardt and Usha Martin (Increase); Suven Pharma (Decrease)

A thread for all 2024 Diwali Picks

JM Financial Diwali Picks 2024

Reliance Industries - 28% UPSIDE
Power Grid - 17% UPSIDE
Bajaj Finance - 18% UPSIDE
ICICI Lombard General Insurance - 17% UPSIDE
Jindal Steel & Power - 19% UPSIDE
National Aluminium Company - 17% UPSIDE
Gravita India - 21% UPSIDE
Macrotech Developers - 23% UPSIDE
Olectra Greentech - 27%
Ashoka Buildcon - 15% Share India Diwali Picks 2024

Adani Ports - 30% UPSIDE
HG Infra - 27% UPSIDE
Granules - 26% UPSIDE
Jindal Saw - 30% UPSIDE
Lemon Tree Hotels - 29% UPSIDE
Nippon Life AMC - 22% UPSIDE
Sharda Motor - 22% UPSIDE
Tata Power - 22% UPSIDE
Yatharth - 25% UPSIDE
Zen Technologies - 20% UPSIDE

TIA 20-20 IDEAS SUMMIT

Session 1 - G Maran Govindasamy, Unifi - Eicher Motors

1. 17% our economy is exports, 83% is domestic
2. ⁠Upper mid population will be 44% by 2030 (from 21% in 2018)
3. Eicher has reinvented itself
4. 8-9 years of tailwinds are visible Session 2 - Balaji Vaidyanath, NAFA Asset - Castrol

1. Low MNC slowly waking up
2. ⁠Market share of 39% in cars
3. ⁠1200 cr cash on the books
4. ⁠New Segments in EV fluids (TaMo, MG) & liquid immersion for Data Centers (Submer) PLUS JIO-BP JV
5. Upside - 52%

A thread for Diwali Picks: If you come across any Diwali Picks, feel free to add to this thread for the benefit of everyone!

1. SBI Securities Diwali Picks

📌ICICI Bank CMP: ₹ 915 Target: ₹ 1,081 Upside: 18%

📌Maruti Suzuki CMP: ₹ 10,391 Target: ₹ 12,000 Upside: 15%

📌UltraTech Cement CMP:₹ 8,422 Target: ₹ 9,800 Upside: 16%

📌Polycab India CMP: ₹ 4,922 Target: ₹ 5,877 Upside: 19%

📌Kalyan Jewellers CMP: ₹ 289 Target: ₹ 364 Upside: 26%

📌Praj Industries CMP: ₹ 536 Target: ₹ 633 Upside: 18%

📌Titagarh Rail CMP: ₹ 762 Target: ₹ 988 Upside: 30%

📌Mrs Bectors CMP: ₹ 1,120 Target: ₹ 1,358 Upside: 21%

📌Kolte Patil CMP: ₹ 479 Target: ₹ 570 Upside: 19%

📌Goodluck India CMP: ₹ 850 Target: ₹ 1,072 Upside: 26%
2. Sharekhan Diwali Picks

📌Bank of India
📌Bharat Forge
📌Kirloskar Oil Engines
📌Hindustan Aeronautics
📌IndusInd Bank
📌Gokaldas Exports
📌Kolte-Patil Developers
📌BSE Limited
📌Birlasoft
📌DLF
📌Garware Hi-Tech Films
📌Sanofi India
📌Larsen & Toubro
📌Tata Motors
📌WonderlaHolidays

Day 2 IAS Summit @ias_summit

Session 8 - Puneet Khurana, Stoic Investing - Insights, Evidences & Multibaggers

1. Number of companies that did 25% CAGR in a 5 year period in their trading history?

Most of us would guess it would be a single digit or single number percentage, but!

Correct answer is 3077 (47%)

622 companies gives such 25% cagr every year for the previous 5 year period!

Message: opportunities are in front of us, we are just not looking

2. How to improve? Reduce mistakes, errors, and uncertainty PLUS increase insights

3. How to generate insights?

Knowledge funnel - market wisdom, strategy of allocation, personal epiphanies, folklore etc. (all noise around you, books, WB’s letters etc.)

a) Take all the noise, then look at source (should be authoritative) and proof behind that narrative and/or stories and then differentiate the story whether it’s global or domestic.

b) Then test the thesis, formulation of hypothesis. For ex, quality stocks makes money, then do back testing, or cyclicalities gives great returns etc, makes sure there data backed hypothesis and then it becomes part of your belief system

c) now, translate these hypothesis into ideas thru screeners or filters start defining if and what if scenarios

d) Pillars (quality, financials, valuations, turnarounds, market caps, industry/sector) that help in identification process

2003 alone had given 1500 multibagger and even 2008 had given 150 such opportunities!!

About 50% of multibaggers come from 0-50 cr market cap

But then we need to remove the junk because there will be lot of volatility

What is junk!?
Companies that have not traded consistently and those that are extremely volatile

70% of multibaggers come from 0 to 250 crores. 11% from 250-1000 crores bracket.

Very rarely you will find a multibagger after it crosses 10 market cap, mind you definition is 25% cagr for a 5 year window.

Good zone to find multibagger is 100 to 10,000 crore.

Why!? Because, post 10K, hardly any and less than 100, too many failures plus volatility.

Once you apply quality checks, 50% of the multibaggers can be found from 100 to 1000 cr market cap.

Quality checks (profitability, cash flows, cash conversion, capital structure, incremental ROICs, valuations)

75% multibaggers weren’t actually fundamentally strong!! That’s why perhaps Vijay Kedia once said don’t look at ROE and ROCE!!

At lower level market cap, historical fundamentals had no role in they becoming multibaggers!

At higher market cap, Fundamentals have a role to play in identifying multibaggers.

So, based on which market cap you are playing, you need discount the fundamentals. But then, lack of fundamentals might also hurt you bad!

Welcome to catch 22!

Out of 37 sectors, only 7 contributed to 60% of the multibaggers (Chemicals, Financials, Auto ancillaries, Healthcare, Textiles, FMCG, Construction)

Bigger driver that ends multibagger journey is valuations.

So, identify the “genuine” stories before they become fundamentally good and exit when valuations become expensive

Ignore too small and too large - sweet spot
Be in profitable industries where profit pool is high
Starting valuation and growth are paramount

1/n Session 9 - Aashish Somaiyaa , WhiteOak Capital - Why Do Winners Rotate

1. Generally, retail money flows into the sector/theme that was popular an year ago. But chasing recent performance leads to accidents!

2. The best performing fund from 2009-2011 was ranked at 162 between 2012-14. Likewise, number 1 fund from 2012-14 ended up at 20 between 2015-17.

Past performance is not an indication of future performance fund. It’s a fact!

Remember, the title - Winners rotate!

3. It’s not possible to forecast macros and even if we did, we can’t forecast how markets will perform. Look at last 4-5 years, anything that had to go wrong, had gone wrong. Yet, most made decent returns!

4. Best way to filter is a) superior ROIC, b) scalable opportunities and c) strong execution and governance

5. Number of unique stocks in mutual funds now is at all time high!

6. If we look at past 20 years, Best performing sectors and best performing market caps, domestic vs exports, defensive vs growth, no matter which characteristic you look, they rotate.

7. Play rotation, that’s emphatically true!

@ias_summit

9/n

IAS Summit @ias_summit

Session 1 - Arvind Kothari, Niveshaay - Key message, remove biases that low valuations are better or renewables is just a fancy story isn’t here to stay or digitals stories will replace everything etc.

1. Stocks that gave huge returns, usually, are under owned by fund houses

2. Attractive valuation multiple tempt us to buy but, usually, results in low returns. Make investing simple. Look for promoters skin in the game

3. Why Business Predictability over Investing Observations - if industrial turnaround is happening, would you invest in industrials or would you invest in banks who are lending them?

4. Understanding Predictability of the Economics of a Business is key

5. We tend to Underestimate Large Changes in Business Environment. Ex: Renewable or New Energy

6. Waaree (unlisted) - bet on India’s largest Solar Group. Module manufacturing capacity - 2GW in Mar’ 21 to 25 GW in 2025

7. Waaree Renewables Technologies - PAT -2 in FY21 to 55cr in FY23

8. After years of slow down, Wind Sector is reviving. Wind installations capacity going to be 2.5x between FY23 and FY30

9. Sanghvi - India’s ambitious wind targets augurs well for this crane supplier. To supply 750 tonnage cranes. Capex dove at right time to acquire market share

10. Castle and Moats created over the years - Ex: Avantel. Promoters are technocrats. Amazing R&D capability. Positioned in a category where a minimum of 50% indigenous content required. 100% market share in satcom supplies to Navy

11. KDDL - Digital watches didn’t affect luxury watches. Both Ethos and watch component businesses are doing well.

1/n Session 2 - Ravi Jain, Strategies for wealth creation and how to identify opportunities

1. Forced selling post Spin Off - once forced selling by Institutions is done usually becomes multibagger (assuming quality company)

2. PEAD : Post Earnings Announcement Drift - when you notice a turn around in the earnings in a given quarter (for measurable reasons), it’s a good time to take position as it will be on up move. Write a screener and run it every evening during results season, you will be able to identify few opportunities. WPIL, Apar etc few examples,

3. Management change - Companies that are taken over thru NCLT process or thru other means. Ex, APL Apollo took over Amulya Leasing snd SG Finserve. HK trade which is now known as Waaree Renewable Tech. CG Power another example. Other examples include next generation taking over the business or a new Chairman comes in (Tatas). Typically, in most cases, first re-rating happens immediately and second re-rating happens when execution happens well after a quarter or two

4. Management signalling - Insider buying or when investor relations start (first concall) or appoints a big four auditor or a big star is appointed as brand ambassador

5. Other factors - Exclusive licensing or JV with a world leader

6. Operating leverage - Fixed assets going by 2x or 3x but facing sectoral headwinds. When headwinds go away, operating leverage will kick in. Himatsingka, a case study.

7. Quantitative Momentum Strategy - 52 week high breakouts and ATH Breakouts. Setup a process on chartink, get the alerts to buy. When alert kicks in, buy certain % on the alert, but if it falls below 21 DMA, exit it. Also observe if most names are coming from a single sector. If yes, then it’s time to play a basket in that sector.

@ias_summit

2/n

Focus Lighting & Fixtures

The new FOMO kid on the block.

It is up by 250% in last one year!

Philips in their marketing pitch says "We can match the quality of Focus"!!

Others give 1-2 year warranty but Focus gives 5-8 years!

Who are these guys really!?

1/n I have uploaded my notes on the Telegram channel today, so, you can read the detailed version there & hence, I am limiting the current thread to

10 reasons why I like Focus Lighting
3 reasons why I will be cautious
and
10 point summary

So, lets get started!

2/n

Sudarshan Chemical: Q3 Concall

1) Among end users, coatings industries contribute highest followed by plastics, inks, cosmetics & others

2) SCL expects decent Q4 demand from the coating segment. Market share of the company is well maintained in coatings & plastics segment

1/n 3) The plastics segment was especially impacted due to volatility in overall prices, which remained till November 2022. From December, 2022 onwards the company witnessed some demand from the plastic industry

4) Logistics cost coming off from peak level

2/n

Ten reasons why I like Solar Industries

As you might already know, Solar Industries is a leading manufacturer of bulk explosives, packaged explosives and initiating systems for mining, infrastructure and construction industries plus venturing into Aerospace

1/n In this mini-thread, I won't get into detailing the company, rather, want to share the reasons that have excited me and if you also happen to like those reasons, please do your own study.

So, lets get started!

2/n

Notes from Solar Industries Q3FY23 Concall

Overall Orderbook is at Rs 3390cr of which defense share is Rs 820cr. The next order from Coal India is due in Oct’23 & from Singareni in Apr’24. So, next Qtr's OB may not show major additions from their largest customers.

1/n Revenue Split (Year-on-Year)

Revenue from Coal India (CIL) was up by 64%
Revenue from non-CIL Institutions was up by 133%
Revenue from housing & infra was up by 41%
Export and overseas revenue grew by 93%
Defense revenue was up by 51%

2/n

Nifty Small Cap 100 Index is on a downhill for the last 6 days and that got me do some work on the index

Timeframe: Jan 1 2018 to Jan 27 2023

Here is the summary:

1) Nifty was green on 56% days
2) Highest fall: 13.19% on Mar 23, 2020
3) Highest Gain: 5.44% on Sep 14, 2020

1/n Remember, 2018, 2019 and most of 2020 were the worst years for small caps and yet 56% of the times, it was green!

It means, when it fell, it fell really bad! Let's see that data!

Since 2018, on 12 occasions, Small cap index fell for 6 or more consecutive days.

2/n

Small Cap Funds - Analysis and Insights of last one years' Performance

Nifty Small Cap 100 index has given a return of -18% hence can't expect bumper results from any funds.

Let's look at top performing funds, some duds, popular sectors and stocks PLUS some contra bets

1/n Let's look at the duds fist - The bottom 5

ABSL Small Cap Fund: -7.92
ICICI Pru Nifty Smallcap 250 Index Fund: -8.40
Motilal Oswal Nifty Smallcap 250 Index Fund: -8.61
Nippon India Nifty Smallcap 250 Index Fund: -8.70
ABSL Nifty Smallcap 50 Index Fund: -21.10

2/n

The 2023 themes

Motilal Oswal 2023 Picks
Money Control Pro 2023 Picks
Axis Securities 2023 Themes
Citi 2023 themes
Sharekhan 2023 Picks
ICICI Direct: Techno-Funda Top Picks for 2023
Kotak 2023 themes

1/9 Motilal Oswal 2023 Picks

Infosys, Ultratech
SBI, Apollo Hospitals
ITC, PI Industries
L&T, Macrotech Developers
Axis Bank, India Hotels
Maruti, Bharat Forge
Titan, Westlife Foodworks

2/9

Lets learn 5 things about Fluoropolymers

1. First things first: The first fluoropolymer was polytetrafluoroethylene, better known by its abbreviation, PTFE, and by its brand name “Teflon.” It was discovered accidentally by a scientist at DuPont in 1938.

1/n 2. Fluoropolymers are plastics used in specific applications where other materials simply cannot hold up.

3. Fluoropolymers are used to protect and insulate wires in order to prevent overheating and potential fires.

2/n

Fairchem Organics, Manufacturer of Oleo Chemicals, is one of the stocks where I am playing "Buy Pessimism".

Will it work, I don't know. Could it work, I believe so!

Name to fame: Leading manufacturers of Linoleic Acid & Dimer Acid in India

1/4 Latest Quarter OPM: 5.53%
General range of Quarterly OPM: 12% to 17%
Reason for the fall: Sales price went down & RM prices went up

Could Q3 be also slow and low? May be. I am not looking for instant returns!

2/4

Five companies where margins have fallen for many reasons and could potential revert a some stage.

It could take 2 qtrs or 2 years and hence don't jump!

But definitely worth studying to see if there is value

These are not recommendations, sharing for study purposes

1/6 Chemplast Sanmar: Specialty Paste PVC resin & Caustic Soda
Name to fame: One of the top manufacturers in Specialty paste PVC & Caustic soda in India
Latest Quarter OPM: 8%
General range of Quarterly OPM: 14% to 24%
Reason for the fall: Price collapse of PVC & inventory

2/6

Last 12 months have been painful for small cap stocks and last 2 months, the index and many stocks have recovered a bit (just a bit).

I was just comparing how the small cap funds that I track have done during these period within the pack.

Here is the summary:

1/5 Caveat: It's absolutely not prudent to review the performance on the basis of few months or a year's performance and come to any conclusion.

So, this summary is not for any conclusion but just for kicks!

You may ask why one year's performance can't be an yardstick?

2/5

Engineers India:

FY23 order inflow guidance was maintained at Rs40bn out of which Rs16‐17bn would be from consultancy segment. The company expects order inflows of Rs50bn each year for both FY24 and FY25

1/4 Engineers India:

The company is working towards expanding its export footprint and has received a PMC job from Guyana and is also trying to make inroads in Middle East. The Guyana project will have a margin profile similar to domestic projects

2/4

Few stocks that I am SIPing!

I do SIP in MFs because I believe the funds will do well over a few years.

Likewise, I do SIPs in stocks as well when I believe they are 3-4 quarters away from a bounce back (sometimes, the bounce back period might take longer).

1/n But why to do SIP for a company that might take 3-4 quarters to bounce back?

1) Most of us have limited monthly free cashflows
2) We don't know when the stock may make bottom
3) Allows us to build position slowly so in the worst case scenario, we exit with lesser loss

2/n

What a 10 hour session!!! Excellent hosting by @MashraniVivek and Brilliant organization by @cautkarshpandey.

Right from word go, not a single boring moment. Different styles, different ideas but one common theme! Invest right!!

1/n

@ias_summit #IASummit2022 It's difficult to chose which session I personally liked because every session taught me something!

So, I am not gonna chose few speakers and not do justice.

Here is my learning

2/n

@ias_summit #IASummit2022