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Consumer Implied Growth Rates

This is a followup to our previous blog where we had presented the implied growth rates in some companies stock prices. Given the good response that we got, we have decided to run a small screen on implied growth rates every week on Thursdays. Please do send in your requests if there is a specific company/space where you want us to run this. The only rule for this screen is Same macro assumptions for all – WACC of 12%, terminal growth 3% and 10 years of growth. In the last blog, we used 15% WACC, but that seems high in the current context. Nonetheless we want to treat all companies to a similar discount rate and macros for sake of simplicity. One can obviously go back to our site and use it to test for more company specific Cost of Capital and other parameters to assess the fair values. For this blog we have chosen a mix of consumer companies, showing the variations between various segments there.

Priyanka Gandhi

Published on 31/05/2022 04:41 PM

Enhanced Screen

Elections got announced few days back, yet will remain as The News on every channel for the next two months. An event like that will allow media to generate more news everyday – opinion polls, voter surveys, panel discussions just to create derivative content and milk every event to its fullest. In our context, the primary event of interest is quarterly results, which provides us with a glance into the performance of our companies. So the problem we are trying to help resolve with this blog is – Are we making the most out of the information the results season provides us? To help process this, we had prepared the quarterly results screen. Based on user feedback, we have improved the screen now. In this iteration of the screen we have improved it broadly on two counts: Increased the data fields in the screen – included EBITDA growth, CMP/M.Cap, More valuation parameters and target price set by users. We also added a row on average of the universe selected. Enhanced UX – User defined color coding of key fields as Green and Red to highlight and identify strong and weak performers across large company sets. I have been positive on the chemicals sector in India over the past year or so. So I checked the screen below – and interestingly companies which beat our forecasts (see YTD% achieved, green cells v/s red cells) actually saw better share price performance than others.

Udit Garg

Published on 04/04/2019 12:00 AM

Quarterly Results , A Chore That Is Now Easy To Do

Another results season and another set of broker downgrades of Nifty EPS have gone by. I thought the downgrades came a month too late. The markets had already fallen, and the downgrades were only a post-facto reporting of what had already happened. To most informed investors it would not have been any news. Even now I think just following the headlines maybe misleading. For one, while at aggregate level PAT growth maybe missing, the revenues for most players have actually been good, so in some sense it is the margins that have taken a hit and not core growth. Secondly, as is usually the case, there is significant divergence in performances of individual companies – Most commodity companies have benefited from better prices, yet Vedanta’s performance has been weak. Reliance has seen nearly 50%!!! revenue growth (y/y) and telcos have been hurt.

Udit Garg

Published on 21/11/2018 12:00 AM

It Is The Commodities We Need To Worry About

I have been thinking a lot about this – if as an economy we (as in India!) benefited from the low commodity prices over the past 5 years, would it not be an issue for us if commodity prices sustain at the current levels. For example, Oil prices broadly averaged US$50/barrel in 2015/16/17, Aluminium averaged US$1700/ton and similarly for other commodities. Both these commodities have now significantly higher prices (Oil at US$75/barrel and Aluminium at US$2100/ton).

Udit Garg

Published on 26/10/2018 12:00 AM

BRIGHT PROSPECTS FOR SPECIALITY CHEMICALS

Indian Speciality Chemicals industry is worth USD 30 billion and forms 20% of the Chemicals Industry. Indian speciality chemicals grew 2x global speciality chemicals at CAGR of 13% over FY10-18 and is likely to grow at 14% per annum. It is expected to accelerate to 17% driven by domestic growth and stable exports. The growth drivers of Speciality Chemicals are 1. Increased End use Domestic Demand, 2.Strong Export Demand, 3. Mergers and Acquisitions on rise, 4. Cost Competitiveness, 5. Availability of skilled labour and 6. Investments in R&D. INR depreciation is also driving developed nations to shift/ start their operations in India.

Priyanka Gandhi

Published on 15/10/2018 12:00 AM

FILTER THE NOISE AND REANALYZE YOUR PORTFOLIO

Seeing the massive drop in markets over the past few days, I wondered if this situation presented any opportunities. While India story remains still strong for me, Investing has been tough over the past couple of years, simply because I feel that valuations are irrationally high, which has forced analysts to justify unduly high earnings expectations. Hence a correction like this presents a good opportunity to revisit the stocks. So I fired up my DistrictD account and looked up models on my portfolio companies. I adjusted the business drivers to reflect any changes to the recent developments. Checked if the quarterly performance was in any way different from my full year expectations. Did my fair valuations and even did DCFs for some. I avoided companies where Fuel Costs or Cost of Funds is important part of cost structure. Did a simple exercise where you detach yourself from all the market hullaballoo and just see how the core business is doing and what is the fair value for it under reasonable and achievable expectations. At the end of this simple exercise, I built a screen with my upsides and valuations that gave me insights into which stocks to hold onto, which ones could be sold off for better opportunities, or where there were irrational moves which I do not necessarily agree with. Overall, it helped me de-clutter my mind and focus on certain key stocks withing my portfolio in these uncertain times.

Udit Garg

Published on 26/09/2018 12:00 AM