R&R Initiative : Stock Idea #1) A Nano Cap | Emerging Affordable Brand | B2B Focused | Capex Ongoing | Debt & Cash Flow Concerns.
R&R is an initiative where we talk about the stock ideas which are under research. We will be writing about it without disclosing the stock name.
R&R (Research & Review) Initiative: Our well established “research network” comprises of young & energetic analysts, journalists, scuttlebutt experts spread across the country, headed by people with more than 2 decades of experience in the market & having successful track record as a long term investor. We are engaged in doing deep research across various sectors & companies (bottom up approach). We scan thru ~20 stocks per month, do a brief investigation report on each of these stocks followed by brainstorming sessions (primary & secondary research plus scuttlebutt). Only if a stock idea is convincing we do detailed research work. Normally out of 20 stocks in a month on which we do brief research, approx. 5-6 stocks qualify for detailed research. So far we never use to showcase our internal research work in public domain due to confidentiality, but we have decided to share a brief note (without disclosing the stock name) on these ~20 stocks per month on which we do brief research work. We request readers “not to ask the stock name” rather treat these brief notes as a study material, do some mental exercise and try to find out the stock by yourself.
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Let’s know more about the 1st stock idea covered under Research & Review Initiative…
"The brands that will thrive in the coming years are the ones that have a purpose beyond profit." - Richard Branson, The Virgin Group.
In today's growing market, the profit takers are the one who identifies the brand builder and not just playing with numbers.
We are doing research on a company that is working persistently to build its brand and be next big player. Let’s see few salient features of this company…
Experienced and professional management team with well suited backgrounds and ambitious.
They are into business of manufacturing, marketing and selling a suite of products sold under one brand.
Esteem clientele includes leaders operating in this broader sector. But majority revenue comes from top 5 customers.
Big Capex done. Capacity utilization ~60% in FY23. Continuously expanding its distribution networks and manufacturing units.
In-house R&D facility, created few innovative products in the few years.
Company’s debt is increasing due to increasing requirement of working capital. This need to be monitored and must remain under control.
Company have experienced negative cash flows in the past. At present high cash outflow is attributed to additions in Property, Plant and Equipment and investments in Capital Work-in-progress.
Uptrend in ROCE and ROE seen. Debtor days have improved. PAT increased significantly in last 3 years.
Huge competition and Geo political tensions did bring some slowdown in the company but that remains temporary as upcoming big projects and government initiatives are a big strength to the company.
With its efficient management focused on building brand and potential industry growth, we believe that this stock will deliver good returns in the coming years but the valuation at which it is trading seems to be on the higher side. Debt and cash flow need to be monitored.
Well, it’s time for you to do some brainstorming & guess this R&R Stock Idea#1. You can submit your response ONLY through WhatsApp to +91 93541 79604.