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Analysing companies in a sector

Discussion in 'Technical Analysis' started by laveshdixit, Nov 8, 2021.

  1. laveshdixit

    laveshdixit Responder

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    Hi,
    I wanted to start investing in specialized chemical sector, and I selected these 4 companies in which I would like to invest.
    1. Fine Organics 2. Vinati Organics 3. Aarti Industries 4. PI Industries

    Now I would like to get inputs on how to narrow down to one company out of these four.

    I am doing my analysis on primarily factors now, will publish them in a couple of days.
    (CMP, MCAP , P/E , P/B , Revenue , Revenue Growth , Profit , Profit Growth , OPM% NPM% D/E ROCE ROE Promoters holdings)
    Corporate governance, growth projections in Annual reports, market leadership etc

    I would like to get feedback on what else should be done.

    @shabbir

    Regards
     
    laveshdixit, Nov 8, 2021
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  2. shabbir

    shabbir Administrator Staff Member

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    I would do a little different. I will prefer to invest in a company that has done much better in building specialized expertise in products. Much like Divis Lab is in pharma.
     
    shabbir, Nov 8, 2021
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  3. laveshdixit

    laveshdixit Responder

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    I did not understand much here of what you said. All of these companies are into differentiated product suites, have a good history of delivering quality products, good management, revenue and profit growth.

    If I take an example of PI Ind, it has a variety of products in Insecticides, Fungicides, Herbicides (Indian and International presence). But how do I know if the other competitors do not have similar products, and what sort of pricing power does PI have which they do not have.

    Going through their website in details, specially July 21 Investor PPT. (https://www.piindustries.com/Media/Documents/Investor_Presentation.pdf)
    What I was able to find out is below.
    1. Good volume growth
    2. Great focus on R&D
    3. 10% projected CAGR till 2025
    4. Extensive distribution network in India

    But how do I analyse the moats for PI? I actually do not know even who are real competitors?
     
    laveshdixit, Nov 9, 2021
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  4. shabbir

    shabbir Administrator Staff Member

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    These are basics for investing. Consider you want to do a business of what your companies does. Will these info be enough?

    Glad you took the example of PI. You see my analysis here. https://shabbir.in/business-analysis-pi-industries/

    You will see that investment is based on understanding of the business and not on some ratios.

    That is what your circle of competence comes into picture. Analyze the business that you can understand. It can be related to what you do in job.

    I am an IT engineer and so I can understand INFY business much easily than a PI Ind.
     
    shabbir, Nov 10, 2021
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  5. ravishankar12

    ravishankar12 New Member

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    Hi Shabbir
    Thank you for the excellent analysis on PI Industries. After looking at peers of PI, I see UPL is among the world leaders in this sector, with a higher market cap than PI. UPL is also having a good set of numbers in financials . It also looks undervalued currently, on basis of "PE vs historical PE" and PEG ratio. I could see that UPL has done an all-cash acquisition of Arysta Life science, which could have contributed to elevated debt levels. UPL has Debt-to-equity ratio of 1.17. But PI has very low debt. Is this one of the reason why you chose PI over UPL Ltd? Your thoughts on this could help us understand how you pick among peers.
    Thank you
    Ravi Shankar
     
    ravishankar12, Nov 11, 2021
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  6. shabbir

    shabbir Administrator Staff Member

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    Nope. Yes the debt is high and promoter holding is low but that is not the reason for me to avoid UPL.

    The big reason for me to avoid UPL was for the related party transaction issue that surfaced. There were some management concerns that made me to pass the company even before considering it. There are companies that I pass if I have 0.01% doubt on the management. Auro Pharma is one more.

    I was out of Jubilant Foodworks when they wanted a royalty for naming their companies as Jubilant. These are some red flags that makes me to not consider the company anymore.
     
    shabbir, Nov 12, 2021
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  7. ravishankar12

    ravishankar12 New Member

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    Thank you Shabbir, for explaining the thought process behind these decisions. Really helpful.
     
    ravishankar12, Nov 12, 2021
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  8. shabbir

    shabbir Administrator Staff Member

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    The pleasure is all mine.
     
    shabbir, Nov 12, 2021
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  9. laveshdixit

    laveshdixit Responder

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    Reagarding Fine Organics, I have being accumulating at various levels, and my average price is 2900. I currently have done 50% of allocation to it.
    I wanted to add more of the stock. (remaining half). The stock haven't given much of an opportunity lately.

    What do you guys should be a good level to accumulate?
     
    laveshdixit, Dec 8, 2021
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  10. shabbir

    shabbir Administrator Staff Member

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    Lower is better but then it gives a correction of 20% from the top often and keep that in mind.
     
    shabbir, Dec 9, 2021
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  11. laveshdixit

    laveshdixit Responder

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    Fine Organics has been rocking of late. What is going on in the counter?
    I have 100 quantity,wanted to add more, but I think now is not a good time.
     
    laveshdixit, Apr 29, 2022
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  12. shabbir

    shabbir Administrator Staff Member

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    Not too sure about such a price movement but business is expected to be doing good. Last quarter had awesome results and before the price could react, I entered. Lets wait for the results and hope it is able to meet the expectations or else the stock will tank.
     
    shabbir, Apr 29, 2022
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