Interviews Archives | Dalal-Street

Alembic Pharma Q&A and other updates

Alembic Pharma Management Q&A

We have an US CEO who has been with us for last 5 years and assembled together a top Team in International Generics business. Success has come because of Product Identification ability. Year-wise market-wise plans are drawn up till 2024

We have built a strong IP Culture/Team over last 5 years or so.

We have been following Alembic Pharma for last few quarters. We mentioned about the company in our Diwali post.

Alembic Pharma is among the oldest companies in the Indian pharma industry. But no major developments took place over the last decade as the company was more into the domestic markets, and limited to the anti-infectives, cough and cold segment which are highly competitive and matured. Over last 2-3 years there has been a contrasting change in the company. The revenues are growing (earlier the growth was 10% now it is 20-25%), the margins are expanding (earlier margins were 13-15% now it is 18-20%) and the balance sheet is getting stronger and efficient.

Reason for the change is the shift towards the international generics. This segment is expanding quite quickly for the company – from about 100 odd Cr in 2010 to 235 Cr in 2013 to 450 Cr in 2014 (expected). This segment has a potential to scale up to 1000 Cr turnover over the next 2-3 years given a strong product pipeline prepared by the company. Alembic Pharma has filed 60 ANDAs (just 18 five years back and 31 are approved till date). On the domestic side, the company has been entering the specialty segments such as Ophthalmology, Cardio, Anti-Diabetic etc, which have a higher growth and a better margin. Continue reading Alembic Pharma Q&A and other updates

Gurus Speak – The road ahead

With the markets delivering a fantastic performance over last 1 month, there is a lot of debate whether the markets have started a new bull market or is it a sort term dead cat bounce. Here are some very important and useful articles from Gurus:

Warren Buffett on why stocks beat gold and bonds

In the article, Warren Buffett shows using past data that bonds usually don’t deliver returns more than the inflation. Over a long term, they cause a serious loss in purchasing power to the holder of the instrument. The above chart shows the fate of $100 and how equities deliver a much superior returns compared to any other asset class.

For unproductive investments in Gold, he says that for total value of Gold in World:

…we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money…

Continue reading Gurus Speak – The road ahead

Atul Auto–Management Interview

We have discussed about Atul Auto a couple of times and to go in-depth and get a much better understanding of the company, we interacted with Mr. J V Adhia, Vice President, Finance – Atul Auto.

The company seems to be in a sweet spot with a very comfortable balance sheet and a good opportunity to maintain growth rate of about 25-30% for at least next couple of years. The co has been a leader in its existing territory – Gujarat (approx. 45% market share) & Rajasthan (approx. 30% market share), the company is now trying to go Pan India by entering new territories.

Here are the highlights from the management interview:

During the period 2001-06 the company had been growing at about 70% p.a. Till then we were a front-engine 3-wheeler company. In 2007 we decided to go pan India and introduced the more predominant rear-engine 3-wheeler segment. Some things went wrong and the company faced a rough patch, and that is the reason you notice stagnant sales for the period 2007-10. However in June 2009 period we introduced Atul Gem the rear-engine vehicle and it has been received very well in the market. The growth is back on track.

Overall about 91% of the total autos are rear-engine vehicles.

We are No #1 in Gujarat with about 44% market share & No #2 in Rajasthan with about 30% market share. Kerala & Assam are our next big markets.

We are gradually entering new territories and ramping up dealer network.

Current dealer network is about 120 dealers. A year back we had 100 dealers but only 30-40% were active! Now more than 80% are active. Plan to have 140-150 dealers by this year end and 250 in 2 years.

As of now the company is seeing a very strong demand and there is a waiting period of about 10 days. As per policy the company is taking orders on advance basis only. Hence the high advances on Balance Sheet

We are in process of doubling our capacity from 24,000 to 48,000 vehicles p.a. This expansion is being done at our existing plant and we have sufficient space.

We are expanding capacities by ongoing de-bottlenecking exercises. We are already at 20-25% higher production and the rest of the de-bottlenecking increases should happen over next 3-6 months. We have options of introducing a double shift, as and when deemed necessary.

We do envision to be 1000 Cr company by 2015-16. (Co did 203 Cr turnover in 2011 and 275 Cr is expected for FY 12)

Please check out the complete management interview (requires free login)

Management Meet–Indag Rubber

We discussed Indag Rubber recently and the stock has done quite well in a challenging environment.

We recently visited 3 companies to get a better understanding of them – 1. Indag Rubber 2. P I Industries 3. MBL Infra. The meetings went on well and all the three companies are optimistic. Here are the key highlights of our meeting with Mr. J K Jain (CFO), Indag Rubber:

Indag as a brand has got fairly established. A certain segment of quality conscious customers do ask for Indag brand.

Our quality has stood out over the years. For example we are the only retreader who can collect advance payment from some State Transport Units (STU) like the UP STU.

We have introduced newer materials and more effective tread patterns that have started paying off in the last couple of years. We have started growing at a much faster pace now.

If a new CV tyre costs Rs. 18000 then retreads usually sell at 4500-4800 range and a good retread runs approx. 80-85% of a new tyre. Hence it’s a logical cost saving proposition and the business will continue growing.

Roughly 40% of tyres come for retreading at the end of useful life.

Demand is robust, we have not seen any slowdown in demand of retreads.

Please check out the complete management interview (requires free login)

One of the key take away from the meet is that the company is being professionally managed and management is quite conscious on the quality of earnings rather than just growth. Company maintains strict control on debtors and inventories and hence it has good free cash flows.

Company is confident of maintaining the volume growth seen in first two quarters of FY 2012 and we expect an EPS of Rs.30-35 for current year.

Balkrishna Ind–Management Meet

Friends, we had posted about Balkrishna Ind (BKT) and highlighted about their superior business model when compared to the regular tire industry. The story has only become stronger and there is much more visibility on the growth ahead. Our friend Donald Francis visited BKT to get in-depth understanding on the company and get answers to some of the queries. Few highlights:

Co targets to be a $ 1 Bln turnover company by 2015

Co targets to capture about 10% global market share by then

We have grown sales in FY 11 at over 40%. If we had capacities, we could had sold much more

Order book is there for 5 months and the margins are protected at about 18-20%

Please check out the complete management interview (requires free login).

Key Takeaways from the interview:

The co seems to be on track to continue its spectacular track record of growing at a CAGR of 29% for last 13 years. Their target of $ 1 Bln turnover and 10% market share seems quite achievable.
For FY 12, BKT may be able to do a 25-30% growth resulting into a turnover of 2500-2700 Cr.
There were concerns on the growing competition and we asked the management about the same. It seems the market is big enough for 2-3 players to operate like BKT and take away the market share from biggies. Other players will take quite some time to catch up.
So if the company is able to do a turnover of about 2500 Cr with 18.5% OPM, it may post a NP of about 240 Cr, resulting into an EPS of about 25 for FY 2012. CMP of 156 discounts it by just 6.5 times.

We feel that as BKT is entering the big league and making its presence felt in the global OTR space, the stock deserves a re-rating also. It would be tough to find companies having a consistent growth of about 30% for last 13 years with good margins, ROCE etc available in single digit PE multiples.

Meeting with Warren Buffett

"When somebody buys gold, or a painting, they are betting on someone else finding it more attractive in the future. That is investing in the price of an asset versus investing in the productivity of the asset. After all, what can you do with a giant cube of gold? You can stare at it, fondle it, may be sit on top of it…" – Warren Buffett at meeting with policyholders in Delhi.

Continue reading Meeting with Warren Buffett

Good articles

“Dumbo could fly because he was a baby elephant. Adult elephants are aerodynamically unsound.” – Ralph Wanger in reference to preferring Small Cap Stocks over the Large Caps in “A Zebra in a Lion Country”

Here we are again to share some newspaper articles and blog posts we liked specifically.

1) When – How – What of Small Cap Stocks (Economic Times):

Finding the right small cap is one of the best way to wealth creation. The reasons is simple – they are usually available at 1/3rd the valuations of large caps with better to double growth rates. Also like the hugely successful small cap fund manager Ralph Wanger says – “Chances are, things have changed enough so that whatever made you a success thirty years ago doesn’t work anymore. I think that by concentrating on smaller companies, you improve your chances of catching the next wave.”

2) Investing in stocks is the best bet to beat inflation (Business Line):

A nice comparison of the returns provided Sensex, Gold Bonds and Fixed deposits and as expected, investing in stocks proves to be the best way to beat the inflation.

For over 25 years we have been working on this concept with a continuous effort towards finding a good undervalued small/mid cap stock ideas with strong fundamentals. We share about such ideas to have healthy discussions and connect to people with the similar approach.

Online links to both the above articles are – ET article & Business Line article.

3) Alice Schroeder (author of Snowball – the authorized biography of Warren Buffett) discusses Buffett’s approach towards investment

In the video Alice Schroeder takes us to a journey using a specific case study which was not discussed in the book.

Thanks to Pradeep for sharing the above video on his wonderful blog.

Do share your favorite articles through comments.

Best articles during the week

“I read about eight newspapers in a day. When I’m in a town with only one newspaper, I read it eight times”. – Will Rogers

Most of our investment ideas come small corners of the daily newspapers or the weekly magazines (or some interesting blogs). We often come across some interesting articles feeling an urge share with our readers too. So we will often compile (mostly weekly) these interesting articles and share the same here.

1. Gas Sector – Huge Potential ahead

It was an interesting article in Business World magazine on the Gas Troubles in India and the potential ahead. “9% Energy needs met by gas in India, while 24% is the world average”.

Arundhati Prasad, 36, who lives in the outskirts of Patna, has to queue up in front of a liquefied petroleum gas (LPG) agency’s office to get a cylinder of gas. Now compare Prasad to Mohammad Ali Bhatti of Dera Baba Bhuman Shah village in Pakistan’s Okara district: in addition to the gas used for cooking in his kitchen, everything from the refrigerator to lamps in the Bhatti home run on natural gas.

Read complete article here.

There are various charts, tables which provide a lot of understanding on this sector.

2. India’s Best Market Minds (19th March ‘ 10 Issue of Outlook Profit)

It was a really good compilation by Outlook Profit with the warm interviews of the “India’s Best Market Minds” including Jhunjhunwala, Sanjoy Bhattacharya, Prof. Sanjay Bakshi and many more .

While all the interviews are not available online, you can read the interview of Prof. Sanjay Bakshi and Abhay Aima online.

3. Poly Medicure Media Updates (in Business Standard, Hindu & Financial Chronicle)

We have discussed on this company couple of times here and here. The stock has been doing well and getting attention of investors.

The company has provided some updates in the media recently about the expansion plans.

4. India Motor Parts & Accessories Ltd (IMPAL) – by Siddharth Shukla

Siddharth has done a good detailed work on the stock. IMPAL has come out with good Q4 numbers and the stock shot up by 20%.

We will be sharing more interesting articles and blog posts regularly.

Also, we have come upon with a new commenting system powered by Disqus to have more better conversations. So, do leave a comment and feel free to share your favorite articles.

Our stocks in Media

Usually most of our discussed stocks are mid-caps whose merits are generally unknown to the masses. Whenever there is coverage of these stocks by Media…they get due attention and often do well. Some of our stocks got wide coverage in last few days:

1. Asian Hotels:

Will Asian Hotels’ shareholders gain after its demerger into three separate companies? Recently, the company split into three different entities — Asian Hotels (North), Asian Hotels (West) and the Asian Hotels (East). Right now, only Asian Hotels (North) is being traded on stock exchanges, and going by its current market capitalisation, the gains to shareholders look uncertain. The other companies are awaiting regulatory approvals to list next month

http://economictimes.indiatimes.com/articleshow/5829815.cms?frm=mailtofriend

We had covered the demerger story at our blog here and covered the demerger impact here. One of the demerged company – Asian Hotels (N) has already got listed and given better than expected returns.

Our View: The above economic times article is very well highlighting the reasons why this demerger is creating value. We do expect the other to companies to list well and provide better gains than the calculations done at our blog earlier.

2. Shilpa Medicare:

The bulls have taken fancy to the Shilpa Medicare — a small-sized pharma company. Its price made a record intra-day high of Rs 362.50 on Tuesday after rising by more than eight times over the past one year. News of financial institutions buying a small stake in the company along with a dilution by the promoters has fuelled the recent rally in the stock.

http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/Shilpa-Med-appears-fully-priced/articleshow/5814072.cms

We have covered Shilpa Medicare several times at our blog. Initially it was covered at Rs 80 here.

Our View: As the article points out – the stock is not cheap, yes we agree but we also believe that good stocks don’t trade cheap 🙂 It would be tough to find a company having leadership position in Oncology segment, having operating margins of 30%+, growing at 45% CAGR available at less than 20 times PE. Infact if one takes a close look at last two quarterly nos of the company, the stock is trading at just 15-16 times annualised earnings.

Also if one increases the outlook to more than 1-2 years, the company has a good future. They are putting up new capacities and plan to double their turnover in 2 years.

3. Jaihind Projects:

We had first covered this company at our blog at about Rs 90 here. The stock has done exceeding well and has created a new all time high of 265 today. The company has been getting coverage on various business channels and people our discovering the underlying story.

4. Balkrishna Industries (Update):

Balkrishna Industries Limited (BKT) specialises in the production of tyres for off-road applications, including agriculture, industry & construction, earthmoving equipment, ATV and lawn & garden vehicles. http://www.tyrepress.com/News/77/19257.html

Our View: This is one company which has a fantastic track record and aims to be a 1 billion dollar company by 2015, which is quite possible looking at the business model of this company. In long run, the stock can give superb returns if they continue to grow as per their plans.

We believe that for better wealth creation investors should keep looking for undervalued and growth oriented stocks and invest in them at an early stage. This is the place where maximum wealth is created. We have been continuously working on this area. Would request the readers to keep exchanging ideas and keep spreading the logics to other investors.

5 Great People – 50 Spectacular “Quotes”

It is my belief that nearly any invented quotation, played with confidence, stands a good chance to deceive.

– Following the Equator

Warren Buffett –

The guru to almost every investor. The Chairman of Berkshire Hathaway, and also ranked by Forbes as the second richest person in the world.

I buy expensive suits. They just look cheap on me.

[The perfect amount of money to leave children is] enough money so that they would feel they could do anything, but not so much that they could do nothing.

Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.

Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.

You only have to do a very few things right in your life so long as you don’t do too many things wrong.

Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.

Only when the tide goes out do you discover who’s been swimming naked.

Keeping liquidity and not investing in such a low market is like saving up for sex in your old age.

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.

If you don’t know jewellery, know the jeweller.

Continue reading 5 Great People – 50 Spectacular “Quotes”