R&R Initiative : Stock Idea #2) Nano Cap | Bet is on "Cultural Change (DNA)" after 6 years of difficult phase | New Gen Active | Margin Expansion Likely.
R&R is an initiative where we write 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 2nd stock idea covered under Research & Review Initiative…
Think Big Picture: - The Indian government has taken several steps to promote the food processing industry, including the establishment of food parks and the introduction of tax incentives for food processing companies. The government has also allowed 100% foreign direct investment (FDI) in the food processing sector, which has attracted several global players to invest in the sector. Overall, the food processing and export industry in India has a positive outlook, with significant growth potential in the coming years.
Well, it is clear from above description that we are working/worked on a stock idea#2 from food processing sector. Salient feature of this company is mentioned below for your exercise….
Nano Cap company, little known or discussed among social media gossip circle. From outside this company looks like a dull business / outdated website of company, but things are changing at grassroot level after 6 years of dullness.
Our bet is on "Cultural Change (DNA)" in the company - Culture, people, and money are all important factors in any organization. However, in many cases, culture can be more important than money and people. In this company, after long time cultural shift is visible (DNA change lead by next generation).
Stock is trading at reasonable valuation, Market Cap / Sales < 0.5 because market is treating this company as a “trading / commodity export company” where margins are low, but they fail to notice the margin improvement in last 4 quarters and most likely operating margin will double in next 3 years because they are cutting down the middle layer and pushing their products to developed economies.
2016-22 (lost 6 years) due to internal issue & succession planning issues, highest sales achieved in 2016 was re-gained in 2022, now sky is the limit for this company. It’s just a fresh start and FY23 will be the all time high sales & profit year.
Expect 50% YoY jump in FY24(E) Sales followed by Margin Expansion (expect 100% jump in the margin during next 2-3 years). Remember that, sales growth along with margin expansion and PE re-rating created multibagger opportunity.
Owner of few well known Brands in B2B category. Although they deal in B2B still they own and operate with their brands. Once they are able to cut-down middle layer in export, margin will improve along with better brand recognition.
Company has introduced new products, improved its manufacturing processes, and expanded its global reach.
Structural change visible : Last year they disposed off property for debt reduction and consolidated their factory and new office space.
New generation actively involved & pursuing international expansion.
Well-positioned to capitalize on the growing demand for high-quality, sustainable, and innovative food products.
Well, it’s time for you to do some brainstorming & guess this R&R Stock Idea#2. You can submit your response ONLY through WhatsApp to +91 93541 79604.