When you like the prospects of any particular company and find out that promoter himself is buying the shares from the open market then it’s almost always a big positive because they are the ones running the company and know the prospects better than anyone else.

And if we as investors are able to buy such stocks during periods of market correction and at prices lower than purchase price of promoters; then future returns mostly turn out to be very good.

In line with the same strategy we have recently released our new recommendation for our Alpha and Alpha + members and would like to share with you details on the same, especially if you like to invest in good companies run by good management teams.

 

Besides our latest recommendation, we also have around 10-12 active recommendations which are investment worthy around current prices as we have positive rating on those and 2 active special situation opportunities for Alpha + members.

So, for someone willing to build a portfolio or looking for good stock ideas for investment, you will have plenty to look forward to in our Alpha (for investment recommendations) and Alpha + (for both Investment and Special situation recommendations) subscriptions.

Subscribe to either of Alpha or Alpha +  on or before 15th Aug’18 for our latest recommendation. Register yourself HERE

 

Few important points about the latest Stock Investment idea

As I was describing earlier, we like several points about our latest recommendation and they are as below:

Increasing promoter holding – In the last 2 years or so the promoters have increased their holding in the company by more than 3% through open market purchases. They increased their holding in the Jun’18 quarter as well.

Most importantly, even before the increase, they already had very high holding in the company and the recent purchases indicate their supreme confidence in the prospects of the company.

Forward integration with foray into value added products – Till FY 15 the company was largely dependent on one product; however in the last 2-3 years the company has launched 3 products and developed 4 more. All the new launches are value added products and should help the company realize better margins.

Debottlenecking and capacity expansions without any strain on balance sheet – Between FY 15 and FY 17 the company carried out both debottlenecking and capacity expansions and increased the capacity by more than 40%.

What is even better is that during H2 FY 18 the company spent more than 36% of the total amount spent during the last 27 years on fixed assets and that should drive revenue growth in the years ahead; however the balance sheet of the company continues to be very strong with very low leverage.

Cyclically low earnings – For FY 18, while the company reported decent growth in sales, the profits contracted on account of sharp uptick in input cost which the company could not pass on immediately.

As per our analysis, the gross margins for FY 18 were one of the lowest in the last 8-9 years. We believe this should be temporary phenomenon and like previous instances (with an added benefit of value added products) the same may again improve by 400-500 bps in next few years. With growth in sales and expansion in margins, the growth in profitability should be much higher.

Reasonable valuations – Last but not the least, due to the recent market correction the stock is currently trading in the lower range of the valuations than what it has traded in over the last 2-3 years. Thus, in case of really bad markets, the downside might be limited at around 15-20%.

 

Post the recent correction in small and mid caps, we believe the odds are more favourable for the long term investors and the staggered purchases over the course of next 8-12 months could be the best way to capitalize both on the correction and avoid the trap of trying to time the markets.

 

Disclosure: Due to SEBIs trading period restrictions, I don’t have any investment in the stock and have not traded in it in the last 30 days. This is not an investment advice. The performance data quoted at www.katalystwealth.com represents past performance and does not guarantee future results.

 

Best Regards,

Ekansh Mittal
Research Analyst
http://www.katalystwealth.com/
Ph.: +91-727-5050062, Mob: +91-9818866676
Email: info@katalystwealth.com

 

Research Analyst Details

Name: Ekansh Mittal     Email Id: ekansh@katalystwealth.com    Ph: +91 727 5050062

Analyst ownership of the stock: No

Details of Associates: Not Applicable

Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

Disclaimer: www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to retail clients on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.

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This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.

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Disclosure (SEBI RA Regulations)

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