Class 4

Market Capitalization> 1000 Cr-

How much to spend to buy all shares at CMP

Asian Paints -Market cap 276000 cr (in 2000 cr in yr 2000 market cap)

Share price -Frm 2000 (Rs22)-,Rs2882 2022-137 times increase

Indigo paints -Multi Bagger

-Zero debt,FA growth sales and proft grow 5 th largest co.High Paint consumption and demand also.Brand Value also

Car paints -no of car per 1000-22rural areas -schools highways ofcs all will be painted

Market cap 5408 cr

CMP 30 in 2003 -to 2023 -100

In 15 yrs max-can become 250000 . 50 times growth

India in self growth mode

World -SE Asia ruled by China, India and Middle east includes Russia small areas, Europe and America

Middle East,Australia and Japan need India’s help

Britinnia-104000(30 times ) -in 20 yrs gave 60 times return

Mrs Bector-3500 .Next 10 yrs same position as Britinnia

same products Same reputation

5paisa-MCap 900 cr -discount broker. Now NP 34 cr Revenue 367cr(Multi Bagger)- in 6 yrs same as Angel 11 times

Angel MCap 10200 cr 11 times -NP 34 cr in 2017 revenue 400 cr

Per share

CMP- Market cap/no of shares -MRF 36k cr

BV- ( Share capital +Reserves)/no of shares-or Shareholders funds or Equity-No co will sell co at BV-Actual worth

Generally appears less as Brand value not incorporated and Land appreciation also not there

FV - Share capital/no of shares -Initial amt used to start co .MRF-4 cr-

MCap 1800 cr,(1/10) of value of land) Land 3713 cr total plants—14 in most fertile land in India-Current value of land 20Kcr

No competitors -Entry Barrier

Debt- 5400cr -can recover by selling 3 plants, Hidden BV -But not required as revival will come

2025 target to mix ethanol-

Current Scenario-problem

Sugar industry -more production of sugar less consumption .And cannot export also .as price decided at international level is
less.But production cost is same even if price declined in intt market

Farmers need MSP -MSP decided by state govt -Govt will not come in power if price not increase.So Suagrcane price has to
increase.

Farmers produce more sugarcane but 100 % has to be utilized by govt -even though consumption is less and cannot be
exported also.

Soln-

Produce ethanol +Sugar < demand price will increase

Govt will pay premium for ethanol and buy all

Next 5 yrs – price will increase

PNB-Lot of properties all over India -to recover NPAS

Paper cos revived due to resturants-Amazon Flipkart Blinkit-etc Entry Barrier-Big size land, Bamboo jungle,Enviornment
clearance required

JK Paper- 700 cr own funds 4 times borrowing earlier-Now reduced

2014 loss making now profit 1000 cr

PE Ratio –Payback period(MCap Price /Net Profit)(CMP/EPS)

1589000-MCAP ,74000 NP,Will recover in 24 yrs if same NP every yr ,

But NP will increase every yr so 24 yrs will not take

Britinnia

2011-to 2023 22 times ,2023 -104000 cr

2011-MCap-4727 cr in 2011,NP 134 cr PE -35 ,, 35 yrs to recover

But actual 8 yrs to earn 5400 cr

PE ratio depends at what speed NP increases

Indigo Paints -PE 46 - From 2016 – Current -600 times increase in profit(considering negative factor) ,last 3 yrs – 2.5 times
profit increase
Asian Paints –PE 72 From -2016- to Current -profit double in 7 yrs

Rate of increase in NP higher than Asian Paints even though it is smaller.-Higher PE of Indigo is justifiable

US

Industrialization

A -100 cr 20 cr NP- we will buy A -5 yrs to recover , B-100 cr 10 cr NP-

Profit did not increase every yr as no loan system. Entire profit distributed as dividend -PE less the better .

PSUs and Govt cos in India same concept – so low PE ratio .No growth-profit distributed as dividends

Pvt cos -Hold NP for growth -Trade at higher PE.

Practical Use

PSU invest PE Ratio important ,Pvt companies PE ratio not required..

For Trading PE ratio not at all important

Multi Baggers- PE ratio not important as huge scope for growth

Alembic Pharma

10000 MCAP 220 cr NP 48 PE ratio but this is not actual PE

Last 2 yrs profit reduced frm 1140 to 220 cr due high inflation Ukraine and Russia war

Once Inflation cools off -PE ratio again 10 as profit will be 1140 cr

Current -FA-1745 cr and CWIP 2357 cr when complete-total capacity 4000cr +Inflation cool then NP double -2200 cr

PE 4.5 times, Appears-48.Share price 3 times atleast

1100 cr NP -Op capacity 1700 cr

Example

Co 100 cr 10 cr profit PE 10 for any reason Next yr -2 cr NP – PE 50 temporary basis

Example

5 paisa -MCAP 903 cr , will take 5 yrs to become Angel Broking ,After 5 yrs -Payback period -1,Angel Broking -NP 900 cr

Balrampur chini-NP -500 cr ,10 plants . NP 1000 -2000 cr-if sugar supply reduce

Bajaj Hindustan -Mcap 1800 cr 14 plants- if 14 plants then 700 cr NP as per Balaram chini.PE 2/3 if debt free or same
condition

As soon as ethanol production starts

Indigo MCAP 5400 cr =Asian Paints NP

PE ratio for trader not important -if less expensive pvt co good ,high also good
Share price < BV -good

Share price > BV – not bad as BV hidden value also

PE ratio < 10 -+ve

PE ratio > 10 -not bad

Dividend yield

Large cap 1.5 -2% div yield

PSUs cos -7.-8 % eg PFCs when stock price high-7.6%

Right level to Buy high dividend paying cos-

If price comes 20 % below 200 day MA-then Buy and goes down further then buy again .. And sell at the same high level

26% return + 10 % dividend

ROCE-non banking and non financial cos -

If ROCE> 30% -Great co -earning on available funds

If ROCE 15-30% Above avg

If ROCE < 20% ignore

ROE Banking cos

<10% -ignore

Promoter’s Holding

Strong hands=Promotor ,FIIS DII,HNIs Weak hands-Public-HNIS

If retail > 30 % -ignore. Strong hands should have more than 70%

Pledged % -related to promoters only->10 % pledging % Avoid

Vedanta

100 % shares pledged-they purchased 20 % shares from public,DIIS and FIIS -they pledged own co shares(55%) and bought
20 % shares, Kept pledging shares and buy more shares, Started paying high dividend and repaid the loan taken

Same Harshad Mehta

Business Model Vedanta-Linked to metal prices if fall then in intt market- profit wiped -no div-will not be able to repay loan-
share price fall ,pledged parties will sell shares

Adani Ports– never become loss making own cartlel not linked to intt market

Adani Green – RM cost is zero -only sunlight required

D/E Ratio > 25 % then ignore(NA in banking and NBFCs)

Quarterly results

-Compare same CY Q to same PY Q because seasonal business

-Operating profit margin-don’t compare with other cos as business nature is different

-Other income and tax-all manipulation done here

-Ad tax pay every Q-

delay in paying ad tax- as RM is cheap now .NP profit will increase.only extra interest burden.

Say 100 cr Ad tax due .But RM next yr 15% exp .So buy RM extra interest 4.5% ..NP will look inflated.

Qtrly results manipulated to increase/decrease stock price -not important

So Check long term track record

Depreciation-

FA-Operational

CWIP-once it becomes operational -sales and NP will increase

Cash flows of no use

Read Concalls

Multi Baggers-Indigo Paints, Bector 5 paisa, Bajaj Hind Sugar,Alembic Pharma