Recently we released our new Investment idea for all our premium members (Alpha/Alpha +) and would like to share with you details on the same.
Our latest pick is basically a small cap company transforming itself from a commodity to a brand. The company operates in an industry which is fast moving away from unorganized players towards organized players.
Despite smaller scale of operations, the company is executing its business differently from its larger peers and as a result it has much better operating performance and balance sheet. We also like the fact that company is increasing focus on exports, increasing focus on improving share of branded sales, has high promoter holding and lastly the valuations are very reasonable.
Yes, we find the valuations of the company very reasonable and if the company is able to sustain its good performance, there’s good scope for re-rating and reduction in valuation gap with larger peers.
Most importantly, we don’t see any major impact of demonetization on the company in the near term as well.
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Few important points about the Latest Investment stock
- Over the last 5 years the company has reported more than 20% CAGR in sales and profits.
- The company has achieved growth on the back of growth in both volumes and realizations.
- Despite major fluctuations in prices of raw materials, the company has been quite consistent in terms of maintenance of EBITDA margins.
- Against industry standards, the company has carried out very low CAPEX and has also managed its working capital extremely well. As a result the company is cash rich while some of the larger peers of the company have huge amounts of debt.
- Promoters have high holding in the company and as a result their interests are directly aligned with those of minority shareholders.
- Lastly, the valuations of the company seem very reasonable with scope for re-rating in case of continued improvement in performance.
Our objective is to look for small/micro/mid cap companies with clean balance sheets (or balance sheets which are gradually improving), relatively easy to understand businesses, high promoter holding and good growth prospects and we believe that our recently selected stock scores well on the above points.
Note: This is not an investment advice. The performance data quoted at www.katalystwealth.com represents past performance and does not guarantee future results.