2014 was a great year for stock picking in the Indian market with the Nifty gaining 30 percent. As market heads into 2015, what are experts recommending, what are the stocks to buy and what should one avoid? In a discussion on CNBC-TV18, Niraj Dalal of 3A Capital Advisors and Manish Bhandari of Vallum Capital share their views on the same.
Q: What is the one investment philosophy or maxim that you would want to give to investors for 2015?
Dalal: There are two-three things, one is tough. One thing that you need to look out for is a company which has good management. By a good management I mean a management that understands the business, does not take undue leverage because a lot of good companies have gone down the drain due to undue leverage. The other thing is opportunity for growth. When you invest in a company you look at the growth. For me if you have these two things then the dynamics fall into place.
Q: Does Cipla fit into that category because that is one stock you have picked for 2015?
Dalal: Actually, for all the three stocks that I picked the key theme, whether it is Dish TV , Cipla or Delta Corp , they have gone through a very strong investment phase. They have all done a lot of capital expenditure (capex). So, whether it was Cipla putting up new facilities, it was Delta putting up the properties in Daman and in Goa and Dish TV the kind of subscriber acquisition that it has done now it is a matter of running the business efficiently. It is about monetising the assets that they have put in place. It also helps that all the three companies have great management in place, management that has proven its track record over the years. So, that is the recurrent theme and for Cipla, great management, you would never doubt Yusuf Hamied. He has great integrity, great understanding of the market, supreme stuff and of course after the change in management now they have the right kind of people in charge. In terms of growth you are talking of Cipla having sales of around Rs 10,000 crore. Over the next couple of years it may grow about 40-50 percent. So you are talking of sales of Rs 10,000 crore going to about Rs 14,000-15,000 crore. It is a large cap company with market cap of around Rs 45,000-50,000. Cipla is quite a stable kind of stock that you could recommend to any investor who wants a 35-40 percent Compound Annual Growth Rate (CAGR) over the next couple of years.
Q: Why would you prefer it over Sun , is it because of valuation or do you think they are more than just valuations?
Dalal: Sun has Ranbaxy acquisition on it right now. Of course, fundamentals for Sun are also great but it will take Sun a year or year and half to digest the acquisition, get the economies of scale and all that where you have Cipla which has gone through the investment phase in 2012-13, it is now looking at sales growth. All the inhalers and all will be launched across, the ARV portfolio should be doing well. The margin should expand from 20-21 percent to about 24-25 percent. When you have a large cap company which grows at about 20-25 percent sales growth with an EBITDA margin increase of 300-400 points over the next couple of years I don’t think you need to look further. The numbers just add up. You are talking of an earnings going from about Rs 16-18 to about Rs 27-28 in the next two-three years, to be that it is just good.
Q: One of the stocks that you have picked out is Shilpa Medicare in the oncology business. An article in Outlook that featured you said that since listing this stock has compounded shareholder wealth by 46 percent every year. However, we generally notice as they say catch them young and watch them grow. In the first 6-7 years you get the maximum returns and post that stock starts to compound about 15-20 percent. At what phase do you think this stock is in and what kind of returns would you expect for the next couple of years?
Bhandari: It is true that against a BSE Sensex of 13-14 percent this has compounded significantly. We are talking about the compounded average. So, there are lean periods where this stock would have remained where it has. So, you are looking at the trend between the two data points. The market cap of Shilpa Medicare is close to Rs 2000 crore today. Market cap relative to the size of opportunity they have in the global oncology research - CRAM space is significantly high. So, this would have said very well about Divi's or any other CRAMs business. As long as you can deliver a superior value to the customers on the global pool and the pool of the profit is significantly higher is where the valuation would get built in and the earnings would get built over a period of time. Having said that, I don’t see that the story has yet started and I see a very long journey for a very good and stable management. They are sitting in a very small place like Raichur in Karnataka. So, it is not so easy to build these kinds of very high IPR businesses. Definitely, the management has significant advantage and edge on their side.
Q: What was the size of the universe you looked at before zoning in on these shares? How many companies would you have looked at before coming here?
Bhandari: In our investing horizon we look at companies which has got Rs 500 crore and above sales. In my personal experience that is where I think there is enough cash flow which could be reinvested in the business and can create a size for the shareholder like us that company to become attractive enough. We would have looked at may be, at any point of time we would look at close to 200-300 companies in this space.
Q: What is the one investment philosophy or maxim that you would want to give to investors for 2015?
Dalal: There are two-three things, one is tough. One thing that you need to look out for is a company which has good management. By a good management I mean a management that understands the business, does not take undue leverage because a lot of good companies have gone down the drain due to undue leverage. The other thing is opportunity for growth. When you invest in a company you look at the growth. For me if you have these two things then the dynamics fall into place.
Q: Does Cipla fit into that category because that is one stock you have picked for 2015?
Dalal: Actually, for all the three stocks that I picked the key theme, whether it is Dish TV , Cipla or Delta Corp , they have gone through a very strong investment phase. They have all done a lot of capital expenditure (capex). So, whether it was Cipla putting up new facilities, it was Delta putting up the properties in Daman and in Goa and Dish TV the kind of subscriber acquisition that it has done now it is a matter of running the business efficiently. It is about monetising the assets that they have put in place. It also helps that all the three companies have great management in place, management that has proven its track record over the years. So, that is the recurrent theme and for Cipla, great management, you would never doubt Yusuf Hamied. He has great integrity, great understanding of the market, supreme stuff and of course after the change in management now they have the right kind of people in charge. In terms of growth you are talking of Cipla having sales of around Rs 10,000 crore. Over the next couple of years it may grow about 40-50 percent. So you are talking of sales of Rs 10,000 crore going to about Rs 14,000-15,000 crore. It is a large cap company with market cap of around Rs 45,000-50,000. Cipla is quite a stable kind of stock that you could recommend to any investor who wants a 35-40 percent Compound Annual Growth Rate (CAGR) over the next couple of years.
Q: Why would you prefer it over Sun , is it because of valuation or do you think they are more than just valuations?
Dalal: Sun has Ranbaxy acquisition on it right now. Of course, fundamentals for Sun are also great but it will take Sun a year or year and half to digest the acquisition, get the economies of scale and all that where you have Cipla which has gone through the investment phase in 2012-13, it is now looking at sales growth. All the inhalers and all will be launched across, the ARV portfolio should be doing well. The margin should expand from 20-21 percent to about 24-25 percent. When you have a large cap company which grows at about 20-25 percent sales growth with an EBITDA margin increase of 300-400 points over the next couple of years I don’t think you need to look further. The numbers just add up. You are talking of an earnings going from about Rs 16-18 to about Rs 27-28 in the next two-three years, to be that it is just good.
Q: One of the stocks that you have picked out is Shilpa Medicare in the oncology business. An article in Outlook that featured you said that since listing this stock has compounded shareholder wealth by 46 percent every year. However, we generally notice as they say catch them young and watch them grow. In the first 6-7 years you get the maximum returns and post that stock starts to compound about 15-20 percent. At what phase do you think this stock is in and what kind of returns would you expect for the next couple of years?
Bhandari: It is true that against a BSE Sensex of 13-14 percent this has compounded significantly. We are talking about the compounded average. So, there are lean periods where this stock would have remained where it has. So, you are looking at the trend between the two data points. The market cap of Shilpa Medicare is close to Rs 2000 crore today. Market cap relative to the size of opportunity they have in the global oncology research - CRAM space is significantly high. So, this would have said very well about Divi's or any other CRAMs business. As long as you can deliver a superior value to the customers on the global pool and the pool of the profit is significantly higher is where the valuation would get built in and the earnings would get built over a period of time. Having said that, I don’t see that the story has yet started and I see a very long journey for a very good and stable management. They are sitting in a very small place like Raichur in Karnataka. So, it is not so easy to build these kinds of very high IPR businesses. Definitely, the management has significant advantage and edge on their side.
Q: What was the size of the universe you looked at before zoning in on these shares? How many companies would you have looked at before coming here?
Bhandari: In our investing horizon we look at companies which has got Rs 500 crore and above sales. In my personal experience that is where I think there is enough cash flow which could be reinvested in the business and can create a size for the shareholder like us that company to become attractive enough. We would have looked at may be, at any point of time we would look at close to 200-300 companies in this space.
2014 was a great year
for stock picking in the Indian market with the Nifty gaining 30
percent. As market heads into 2015, what are experts recommending, what
are the stocks to buy and what should one avoid? In a discussion on
CNBC-TV18, Niraj Dalal of 3A Capital Advisors and Manish Bhandari of
Vallum Capital share their views on the same.
Read more at: http://www.moneycontrol.com/news/market-outlook/crystal-ball-gazing-heresto-buy2015-_1263599.html?utm_source=ref_article
Read more at: http://www.moneycontrol.com/news/market-outlook/crystal-ball-gazing-heresto-buy2015-_1263599.html?utm_source=ref_article
2014 was a great year
for stock picking in the Indian market with the Nifty gaining 30
percent. As market heads into 2015, what are experts recommending, what
are the stocks to buy and what should one avoid? In a discussion on
CNBC-TV18, Niraj Dalal of 3A Capital Advisors and Manish Bhandari of
Vallum Capital share their views on the same.
Below is verbatim transcript of the discussion:
Q: What is the one investment philosophy or maxim that you would want to
give to investors for 2015?
Dalal: There are two-three things, one is tough. One thing that you need
to look out for is a company which has good management. By a good
management I mean a management that understands the business, does not
take undue leverage because a lot of good companies have gone down the
drain due to undue leverage.
The other thing is opportunity for growth. When you invest in a company
you look at the growth. For me if you have these two things then the
dynamics fall into place.
Q: Does Cipla fit into that category because that is one stock you
have picked for 2015?
Dalal: Actually, for all the three stocks that I picked the key theme,
whether it is Dish TV , Cipla or Delta Corp , they have gone through a
very strong investment phase. They have all done a lot of capital
expenditure (capex). So, whether it was Cipla putting up new facilities,
it was Delta putting up the properties in Daman and in Goa and Dish TV
the kind of subscriber acquisition that it has done now it is a matter
of running the business efficiently. It is about monetising the assets
that they have put in place.
It also helps that all the three companies have great management in
place, management that has proven its track record over the years. So,
that is the recurrent theme and for Cipla, great management, you would
never doubt Yusuf Hamied. He has great integrity, great understanding of
the market, supreme stuff and of course after the change in management
now they have the right kind of people in charge.
In terms of growth you are talking of Cipla having sales of around Rs
10,000 crore. Over the next couple of years it may grow about 40-50
percent. So you are talking of sales of Rs 10,000 crore going to about
Rs 14,000-15,000 crore. It is a large cap company with market cap of
around Rs 45,000-50,000. Cipla is quite a stable kind of stock that you
could recommend to any investor who wants a 35-40 percent Compound
Annual Growth Rate (CAGR) over the next couple of years.
Q: Why would you prefer it over Sun , is it because of valuation or do
you think they are more than just valuations?
Dalal: Sun has Ranbaxy acquisition on it right now. Of course,
fundamentals for Sun are also great but it will take Sun a year or year
and half to digest the acquisition, get the economies of scale and all
that where you have Cipla which has gone through the investment phase in
2012-13, it is now looking at sales growth. All the inhalers and all
will be launched across, the ARV portfolio should be doing well.
The margin should expand from 20-21 percent to about 24-25 percent. When
you have a large cap company which grows at about 20-25 percent sales
growth with an EBITDA margin increase of 300-400 points over the next
couple of years I don’t think you need to look further. The numbers just
add up. You are talking of an earnings going from about Rs 16-18 to
about Rs 27-28 in the next two-three years, to be that it is just good.
Q: One of the stocks that you have picked out is Shilpa Medicare in the
oncology business. An article in Outlook that featured you said that
since listing this stock has compounded shareholder wealth by 46 percent
every year. However, we generally notice as they say catch them young
and watch them grow. In the first 6-7 years you get the maximum returns
and post that stock starts to compound about 15-20 percent. At what
phase do you think this stock is in and what kind of returns would you
expect for the next couple of years?
Bhandari: It is true that against a BSE Sensex of 13-14 percent this has
compounded significantly. We are talking about the compounded average.
So, there are lean periods where this stock would have remained where it
has. So, you are looking at the trend between the two data points.
The market cap of Shilpa Medicare is close to Rs 2000 crore today.
Market cap relative to the size of opportunity they have in the global
oncology research - CRAM space is significantly high. So, this would
have said very well about Divi's or any other CRAMs business.
As long as you can deliver a superior value to the customers on the
global pool and the pool of the profit is significantly higher is where
the valuation would get built in and the earnings would get built over a
period of time. Having said that, I don’t see that the story has yet
started and I see a very long journey for a very good and stable
management. They are sitting in a very small place like Raichur in
Karnataka. So, it is not so easy to build these kinds of very high IPR
businesses.
Definitely, the management has significant advantage and edge on their
side.
Q: What was the size of the universe you looked at before zoning in on
these shares? How many companies would you have looked at before coming
here?
Bhandari: In our investing horizon we look at companies which has got Rs
500 crore and above sales. In my personal experience that is where I
think there is enough cash flow which could be reinvested in the
business and can create a size for the shareholder like us that company
to become attractive enough. We would have looked at may be, at any
point of time we would look at close to 200-300 companies in this space.
Read more at: http://www.moneycontrol.com/news/market-outlook/crystal-ball-gazing-heresto-buy2015-_1263599.html?utm_source=ref_article
Read more at: http://www.moneycontrol.com/news/market-outlook/crystal-ball-gazing-heresto-buy2015-_1263599.html?utm_source=ref_article
2014 was a great year
for stock picking in the Indian market with the Nifty gaining 30
percent. As market heads into 2015, what are experts recommending, what
are the stocks to buy and what should one avoid? In a discussion on
CNBC-TV18, Niraj Dalal of 3A Capital Advisors and Manish Bhandari of
Vallum Capital share their views on the same.
Below is verbatim transcript of the discussion:
Q: What is the one investment philosophy or maxim that you would want to
give to investors for 2015?
Dalal: There are two-three things, one is tough. One thing that you need
to look out for is a company which has good management. By a good
management I mean a management that understands the business, does not
take undue leverage because a lot of good companies have gone down the
drain due to undue leverage.
The other thing is opportunity for growth. When you invest in a company
you look at the growth. For me if you have these two things then the
dynamics fall into place.
Q: Does Cipla fit into that category because that is one stock you
have picked for 2015?
Dalal: Actually, for all the three stocks that I picked the key theme,
whether it is Dish TV , Cipla or Delta Corp , they have gone through a
very strong investment phase. They have all done a lot of capital
expenditure (capex). So, whether it was Cipla putting up new facilities,
it was Delta putting up the properties in Daman and in Goa and Dish TV
the kind of subscriber acquisition that it has done now it is a matter
of running the business efficiently. It is about monetising the assets
that they have put in place.
It also helps that all the three companies have great management in
place, management that has proven its track record over the years. So,
that is the recurrent theme and for Cipla, great management, you would
never doubt Yusuf Hamied. He has great integrity, great understanding of
the market, supreme stuff and of course after the change in management
now they have the right kind of people in charge.
In terms of growth you are talking of Cipla having sales of around Rs
10,000 crore. Over the next couple of years it may grow about 40-50
percent. So you are talking of sales of Rs 10,000 crore going to about
Rs 14,000-15,000 crore. It is a large cap company with market cap of
around Rs 45,000-50,000. Cipla is quite a stable kind of stock that you
could recommend to any investor who wants a 35-40 percent Compound
Annual Growth Rate (CAGR) over the next couple of years.
Q: Why would you prefer it over Sun , is it because of valuation or do
you think they are more than just valuations?
Dalal: Sun has Ranbaxy acquisition on it right now. Of course,
fundamentals for Sun are also great but it will take Sun a year or year
and half to digest the acquisition, get the economies of scale and all
that where you have Cipla which has gone through the investment phase in
2012-13, it is now looking at sales growth. All the inhalers and all
will be launched across, the ARV portfolio should be doing well.
The margin should expand from 20-21 percent to about 24-25 percent. When
you have a large cap company which grows at about 20-25 percent sales
growth with an EBITDA margin increase of 300-400 points over the next
couple of years I don’t think you need to look further. The numbers just
add up. You are talking of an earnings going from about Rs 16-18 to
about Rs 27-28 in the next two-three years, to be that it is just good.
Q: One of the stocks that you have picked out is Shilpa Medicare in the
oncology business. An article in Outlook that featured you said that
since listing this stock has compounded shareholder wealth by 46 percent
every year. However, we generally notice as they say catch them young
and watch them grow. In the first 6-7 years you get the maximum returns
and post that stock starts to compound about 15-20 percent. At what
phase do you think this stock is in and what kind of returns would you
expect for the next couple of years?
Bhandari: It is true that against a BSE Sensex of 13-14 percent this has
compounded significantly. We are talking about the compounded average.
So, there are lean periods where this stock would have remained where it
has. So, you are looking at the trend between the two data points.
The market cap of Shilpa Medicare is close to Rs 2000 crore today.
Market cap relative to the size of opportunity they have in the global
oncology research - CRAM space is significantly high. So, this would
have said very well about Divi's or any other CRAMs business.
As long as you can deliver a superior value to the customers on the
global pool and the pool of the profit is significantly higher is where
the valuation would get built in and the earnings would get built over a
period of time. Having said that, I don’t see that the story has yet
started and I see a very long journey for a very good and stable
management. They are sitting in a very small place like Raichur in
Karnataka. So, it is not so easy to build these kinds of very high IPR
businesses.
Definitely, the management has significant advantage and edge on their
side.
Q: What was the size of the universe you looked at before zoning in on
these shares? How many companies would you have looked at before coming
here?
Bhandari: In our investing horizon we look at companies which has got Rs
500 crore and above sales. In my personal experience that is where I
think there is enough cash flow which could be reinvested in the
business and can create a size for the shareholder like us that company
to become attractive enough. We would have looked at may be, at any
point of time we would look at close to 200-300 companies in this space.
Read more at: http://www.moneycontrol.com/news/market-outlook/crystal-ball-gazing-heresto-buy2015-_1263599.html?utm_source=ref_article
Read more at: http://www.moneycontrol.com/news/market-outlook/crystal-ball-gazing-heresto-buy2015-_1263599.html?utm_source=ref_article
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