Slow Compounding

Homework After you watch the video, please do the calculation of ROIIC for Dmart. Answer awaited....

ROIIC Video Will go live today at 6 PM. If you are serious about investing, do watch and re-watch this video. For your homework: Calculate ROIIC of Dmart. Post the answer at the comment section after you watch the video.

Market Share Gain of Private Banks

Dear Members, You have heard me say many times.....ROCE and ROIIC are the hallmarks of great business. You will not find any youtube video on ROIIC (at least, I have not found). Very few web resources are available e that shows the step-by-step calculation of ROIIC. As promised, I will make the video on ROIIC...for the first time with a detailed video on the calculation process. Today, I recorded the video. It is nearly 50 minutes long. This is purely made for serious investors. Hope you will get enormous value from the video. Add on: how to check capex and how to justify if the capex was justified...In future, I will make on simple forensic check that you can apply to protect your capital. Hope you add more values in your investing journey!

If you like reading books, fall in the category of learners, highly recommended two books....

Portfolio Update Video will be available today at 6 PM. https://youtu.be/psjwNEqDtZU

Agrochem: Megatrend Agrochemical space is bound to grow in future. Because plant will need protection for increasing the yields. Area of Cultivation land will go down and productivity needs to go up to meet the demand. So, agrochem is a megatrend. (Govt, policy, environment... nothing can stop. Shallow cyclicality will be part of this but the megatrend won't stop. Typical Signature of megatrend) Does it mean that all the company will benefit equally. Simple answer. Big No. In a megatrend, top few players who are up in the valuechain will drive the megatrend. Here, one needs to understand the value chain very clearly. Innovators like Syngenta, Bayers Corp discovers the secret of killing different types of insects, fungus etc. Once they develop the molecule, it will be patented. Now, which company will succeed in developing most blockbuster plant medicine? Answer is not clear. But whoever cracks the maximum code, will end up riding the megatrend. If you are still reading this post, understand that these innovators won't produce these crop protection medicines and sell. Because their work is to crack the code of new secret and they have research team that specialises in cracking code. So, they outsource it to some other companies whom they can trust. These innovators will give order to make the key chemical in bulk and get it without any headache. And the best part is...this key chemical takes only 1-3% of cost. Here comes the second layers. The company which takes order and make these key chemical. Street have a fancy name for this. Customer synthesis. You don't need to be genius to figure out the success matra of these custom synthesis companies. Maintain quality. Deliver timely. Keep upgrading the chemical research capabilities to make the chemical up-to-date. Develop long-term relationship. Well, the last part was not correct. Better read... partnership. Once you have all these things set in place, you have the strongest moat. What is the chance of new company succeeding here. Very very less. Why? Answer is very simple. Why would a company like BASF will give their secret code to a company for manufacturing if they don't have any track record in thr first place? Now comes the most interesting part. Who don't need to know which team will IPL to earn money. You just need to know if which channel is broadcasting the IPL. Because secured money will be printed here. Which innovator wins....I don't know. But PI is working with all the partners. And as the time progresses, PI is strengthening its moat. A secured way to ride the megatrend with least risk. If you come down to the value chain, something like....making formulation and selling to domestic countries...they are at the worst part. They are like selling fruits on the street. Profit is normal when you sell at highest level. Especially during starting of fruit season. But as the time progresses, more fruit seller will be selling the same fruit leaving no space for high profit. Even though people will but fruit (megatrend), these street sellers won't make any fortune. This is oversimplified thesis of riding megatrend in agrochem through leading custom synthesis players! Disclosure: 12% of portfolio invested.

Nestle India Revenue up by 14% Expenses up by 17% Profit up by 27% (YoY) Last year, same quarter, Nestle India had an exception items in their income statement. Because of that profit reduced last year same quarter. When the profit of this quarter is compared with the last year same quarter, profit jumps looks optically higher. Without that items, profit growth Year-on-year basis, would have been 13% Expenses increased. You can guess the reason. Inflation has the maximum impact on food items. As raw materials, Nestle India uses edible oil, milk and milk related derivatives. Thus, raw material consumption took the overall expenses higher. Nestle India is probably the simplest business. But number must be read correctly.

Video: Portfolio Update Long awaited video on portfolio update will be go live on 6 PM, Friday. The change in investment strategy has also been discussed. Selling decision of Relaxo has been elaborated also. Stay tuned!

PI Industries Revenue up by 19% Expenses up by 13% Profit up by 58% Operating profit margin improved further. 26% now (22% last year same quarter) Overall, revenue grew 19% as mentioned. This is majorly driven by volume. Majority is driven by export (23% YoY growth). Domestic growth remained muted (2%). This is because of high channel inventory and bad weather. (Any formulation based domestic agrochem company will feel the heat) Operating cash flow tripled. Working capital also reduced, hence ROCE will start expanding. No update yet on QIP fund utilisation. Company is now drawning with cash. They should be able to do big size acquisition. Generally, Bharat Shah asks questions in concall of PI. He asks very long-oriented question. If anyone is invested in this business, do listen to the concall.

PI Industries Today, the quarterly results will be announced. Before that, try one excercise. Check what is the historical Operating Profit Margin (OPM) and recent OPM of this business If OPM falls below the recent level, you will know that price is going to take a dip. Recently, the export data of this company was not as strong as last quarter. You have seen that price has reflected that incident. If there is any positive surprise, the price may take a small cap. Risk: 1. Market is waiting for QIP func utilisation. No clarity is baking more uncertainty. 2. Agro Players are showing margin contraction. PI Industries did not suffer so far. Since sector is weak, the outlook is negative 3. Any potential sign of weak orderbook will bring more concern. Let's see what happens. Will update today.

Natural Capsules Ltd. Revenue up by 21% Expenses up by 21% Profit up by 28% Operating Margin 21% (remained flat compared to last year same quarter)

Abbott India Revenue up by 10% Expenses up by 6% Profit up by 24% (YoY) Operating Profit Margin (OPM) improved to 26% (from 23% last year same quarter) One excercise for you You can check the OPM of Abbott India over last decade. See, if you can spot the trend. Also check the number for Sun Pharma and Cipla.

Deepak Nitrite Revenue up by 16% Expenses up by 21% Profit down by 14% Operating profit margin is 16% (vs. 20% last year same quarter)