We all like to see good transformations in the company and if those transformations turn out well and if we as investors are able to catch on to them at an early stage, the ensuing returns can be really good.
Well, recently we released our new long/medium term investment 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 3 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.
Few important points about the latest Stock Investment idea
The transformations that we are talking about are as below:
- Export oriented to domestic oriented
- White label to own brand driven
- Single segment to multiple segments
Export oriented to domestic oriented – Well, company already has reasonably strong presence in domestic markets; however in the overall scheme of operations the contribution from domestic sales is still low. But now the company is very aggressively focusing on domestic markets and as per our estimates in next 1-2 years the contribution from domestic sales will be larger than exports.
We believe expanding presence in India augurs well for the company because the brand is already well-established and the market potential is huge.
White label to own brands – Indian sales are completely own brand driven while exports are largely supplies for other brands i.e. white label manufacturing.
With increasing domestic sales the share of branded sales will go up and the same could be margin accretive for the company.
Single segment to multiple segments – Till now the company was focused only on one segment; however in order to reduce risk and propel the growth the company is now expanding into several segments and that too without carrying out any major CAPEX. Yes, using its well established brand and distribution network the company is largely outsourcing the new products and the initial response to the products has been really good.
We believe the above changes if executed well can lead to faster growth, margin expansion and re-rating of the valuations of the company.
As far as past performance of the company is concerned, it has been very consistent with growth recorded in each year over the last 5-10 years. Further, the company has maintained its margins in a very tight range, has reduced its debt equity ratio and maintained return ratios in the range of 15-20%.
Being a small company, we like to see high promoter holding and here again the promoters hold very good stake in the company.
Lastly, due to relatively smaller presence in India in comparison to its peers, the stock is trading at much lower valuations and we believe there’s scope for re-rating as the company carries out the above mentioned transformations.
Disclosure: 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.