Here’s a mega thread on what we like and what we see as the key risks for 22 Indian listed companies in India.
Feel free to let me know what your thoughts are!
This week I completed doing a deep dive on 22+ companies from almost various sectors as a part of the weekly webinar series for the Beta to Alpha cohort.
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
This was also coupled with 10+ premium reads with extensive deep dive on research.
Here's a mega thread 👇 (1/n)
#001 – Solara Active Pharma Sciences & API
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we liked:
– Structural shift in manufacturing from China to India
– Clean and strong promoter track record
– TPG Capital entering early at a heavy premium
Risks:
– Commodity Business
– Regulatory Compliance (2/n)
#002 – FMCG & Britannia
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Strong dominance in biscuits space
– Stellar execution capability in improving distribution
– Berry and Company culture rejig post '15
Risks:
– ICDs and Capital Allocation
– New diversification not paying off (3/n)
#003 – Internet & Info Edge
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– All internet verticals are cash cows with Naukri generating 130% of EBIT
– Impeccable Promoter and management team
– Info Edge Ventures + Temasek: Match made in heaven
Risks:
– Competition
– Next Zomato & Policy Bazaar? (4/n)
#004 – Pharma & Abbott India
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Stellar track record of market leading brands
– Pure play focus on Indian domestic business
– Superior ROCEs and clean regulatory compliance
Risks:
– Innovation linked to Parent
– Pricing Power capped with NELM & DPCO
(5/n)
#005 – Paper Industry Overview
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Per Capita Paper Consumption very low in India compared to peers
– Paper growth drivers is agnostic to digitization, linked to GDP growth
– Ban on Plastic
Risks:
– Competition
– Low pricing power
– No barriers to entry (6/n)
#006 – Platform and IndiaMart
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Network effects played to full effect
– 0 spend on advertising, very low CAC
– Revenue visibility of 1-2 years in advance
Risks:
– Competition of deeply funded tech start-ups
– Google & Amazon taking this space seriously
(7/n)
#007 – Hotel Industry Overview
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– High Operating Leverage Business (we did a detailed deep dive on understanding what this is)
– ARRs of India yet to be at pre-2008 levels
– Increasing organization towards being asset-light
Risks:
– Low occupancy
(8/n)
#008 – Titan Industries
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Ability to raise CP at 3.3%
– Indians don't love gold, they have a lust for gold @poddarajeev2000
– Success of diversification has been phenomenal
Risks:
– New businesses might not take off like jewellery did
(9/n)
#009 – Asset Management and HDFC AMC
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Incentive Structure – Fixed Fee + Carry (we did a deep dive in understanding what carry is)
– Asset Light business
– Playing HDFC strength to the fullest
– New CIO
Risks:
– ETFs
– Vanguard in USA (repeat in India)
(10/n)
#012 – Banking & IDFC First
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– V. Vaidyanathan + his skin in the game
– Focus on delivering on CASA ahead of timelines promised
– Asset side being made granular and diversified
– Understood the nuances of the Banking business – CASA, NIM, NPA etc.
(11/n)
#013 – CV & Ashok Leyland
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– India at cusp of economic recovery: CV cycle directly linked
– Consolidated business includes HLF books (their in-house NBFC) making the debt optically look bigger
– Available at deep value discount
Risks:
– Delay in recovery
(12/n)
#014 – ITC Limited
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Cigarette Business – untouchable
– FMCG Investments over – should see ICMLs churn out cash flows
– Increase in Dividend Payout
Risks:
– FMCG business takes higher time to expand margins
– Cigarette volumes
– Corporate Reorg. delay
(13/n)
#015 – Dabur India
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Ayush Ministry mentioned 39 times in 2020 AR
– Diversified product portfolio with professional management
– Increasing trend of consuming supplements
Risks:
– Where is the focus?
– Distribution strength getting weak
– New products
(14/n)
#016 – Zydus Wellness
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Kraft India acquisition using Leverage
– Paying down debt in a Covid year to remove Debt servicing obligations by infusing equity + QIP
– Market leading brands in niche categories
Risks:
– Tax Impact due to changes in budget '21
(15/n)
#017 – Tata Consumer Products
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Chandra + Sunil D'Souza: Aggressive approach
– Sampann: Pulses & Spices
– Starbucks India
– Global Business
Risks:
– Competition
– Global Business Execution
(16/n)
#018 – Sequent Scientific
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Carlyle entering last year with no mgmt. change
– One of a kind global Animal Pharma company
– Huge tailwinds in Pet Care + Cattle / Herd
Risks:
– Competition
– Regulatory Execution
(17/n)
#019 – Tata Motors
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Leader in CV Space
– 74% business value derived from JLR – clear vision roadmap laid out
– First mover on the EV ecosystem in India
Risks:
– Non – execution as per plan for JLR
– Delay in EV adoption & economic recovery (for CV)
(18/n)
#020 – Saregama
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Licensing revenue from streaming growing at 40% y-o-y
– Short form video apps increasing number of streams
– Piracy lowering in the industry
Risks:
– Capital Allocation
– Unrelated diversification
– Bargaining power shifting to apps
(19/n)
#021 – Pidilite
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– Troika of Bharat Puri, AB and Piyush Pandey executing ad campaigns
– Success of diversifying into newer products
– The will to not do certain activities to protect the brand
Risks:
– Execution of diversification
(20/n)
#022 – Laurus Labs
— Saket Mehrotra | Long India 🇮🇳 (@mehrotra_saket) April 14, 2021
What we Liked:
– ARV API leader, used for treatment of AIDS
– successful in diversifying from API to FDFs in less than 3 years
– Strong backward and forward linkages
– Recent foray into Biologics
Risks:
– Execution + Regulatory risks
(21/n)
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