Once in a while one should study the company which lacked the execution, which always over-promised and under delivered. Check how market valued it over the period of time. As it gives us the framework to avoid potential capital allocation mistakes i future. 🧪⚗️

#Neogen Chemicals - Niche Bromine & Lithium Manufacturer ?

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CMP - ₹1596

1. Introduction

Neogen chemicals ltd. was founded in 1991 by technocrat Harish Kanani.The company has expertise in bromine and lithium chemistries.
The products manufactured are served for pharmaceuticals, agrochemicals, engineering industries,

speciality chemicals companies in India, Europe, Usa, and Japan.
Increasing the revenue contribution from Custom Synthesis and Contract Manufacturing segments.

2. Promoters
IIT graduate and technocrat promoter Mr Haridas Kanani had set up India's first bromine plant in 1968, but it failed as the plant was hit by floods caused by Morbi dam. Lack of knowledge in business kept him away from insuring the plants.

Later years he worked as an engineering consultant for manufacturers to set up the bromine plants for others.
In 1989 the technocrat decided to set up Neogen chemicals Pvt. Ltd. and started the manufacturing of bromine compounds.

Unique Business Model
#Tipsindustries

CMP- Rs 1296

A Thread 🧵

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@NeilBahal

Topis covered:
1. Tips Industries Overview
2.Music Segment
3.Monetization
4. Tips Business Model
5.Acquisition Cost
6. Tips Film Business
7. Tips YouTube

8. Why Should Artists Choose Tips Over Other Labels?
9.Financials
10.Future Growth
11.Content Acquisition
12. Conclusion

1. Tips Industries Overview
It was founded by Kumar S. Taurani and Ramesh S. Taurani in 1975.
In 1975, the Taurani brothers used to trade

in LP’s (Long Playing Phonograph Records) for three of the biggest companies in India – HMV, Music India & CBS. By 1977, they had become the biggest dealers for these companies in Western India.
Driven by the ambition of both the brothers started their own record label.

TIPS Industries Limited is a leading Indian music label which creates and monetises music. Apart from music segment it is also into Film Production,Film Distribution & Film Promotion

2. Music Segment
Tips has an extensive catalog of film, non-film, devotional, pop & remixes

Tips has a library with more than 29,000 songs, Tips has a very fresh catalog with songs released in 2000 and most major hits of the 90s. Tips has a major Atif Aslam Library.

3. Monetization
Tips monetizes its songs just like other music labels i.e through distribution deals

Net Profit vs Cash Flow from operations (CFO) - What is more important?

A short thread with examples

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1. Net income is the profit a company has earned for a period, while cash flow from operations measures the cash going in and out during a company's day-to-day operations i.e., the cash which is generated through its core business.

2. Net income is calculated by subtracting the cost of goods sold, operating expenses, depreciation & amortization, interest expense and taxes from total revenue.

3. Cash flow from operations is calculated by adding the non-cash expenses such as depreciation and amortization to the net profit and then subtracting the changes in working capital.

Now lets understand few differences between Net Profit and Cash Flow from operations (CFO)

1. Net profit is recorded on an accrual basis whereas CFO deals with only cash items. Income earned is recorded in the net profit even if cash is not received

#MTAR Technologies - Leader in Niche Precision Engineering 🛩️🛩️

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CMP - ₹ 1803

1. Company Overview

MTAR Technologies is a leader in the precision engineering industry. They serve clients in the Defence, Space, Nuclear and Clean Energy industries. The company is engaged in the manufacture of

mission-critical precision assemblies and components with close tolerance levels of 5-10 microns.

2. Business Segments

The company operates in 4 segments: Nuclear, Defence, Space and Clean Energy.

Nuclear: In the Nuclear Segment, the company is partnered with Nuclear

Power Corporation of India Limited (NPCIL) which controls all operational, under construction and planned reactors in the country given India does not allow private participation. They manufacture products which are highly critical to the functioning of nuclear reactors.

They have 14 kinds of products with a wide range of applications.

Defence: In this segment, the company has undertaken complex assemblies for the DRDO, such as the base shroud assembly for Agni missiles and the assembly of Secondary Injection Thrust Vector Control (SITVC)

@hindsightcapllp @mjmauboussin It still has some life, but will go extinct on the day you see "Adjusted Book Value" in Qtrly Con Calls :)

A thread: How to value? 🏦💰❓

Sharing my learnings from my journey so far.

Initially when I started out I used to ignore what anybody would have to say about their style of valuing a business and I would blindly copy what Benjamin Graham’s book, The Intelligent Investor had to say.

Later came a stage where I realized Benjamin style was not working.

Before we get into the learning, here is the background to it:

If you have been following me for the past 1 year you would have noticed how my valuation method has changed.

I used to struggle a lot with valuation and it would be at the back of my mind the whole day thinking what are these investors doing to value. I tried DCF but that didn’t work for me. (Don’t hate me for that, its my personal choice)

I used to attend Bloomberg Quint’s talk on Zoom, message investors, read books, etc. to figure out: How to value? (The frustration had got to a level that I took break from investing for 3-4 weeks)

Accidents happens when one doesn't look at valuations.

A supposedly platform stock listed in 2019. OFS price was 320 Rs. High of 6396 made yesterday.

Mcap crossed 1 lac crore.

Company was affected by CoVid so will talk a bit on pre-CoVid nos.

1/3

Sales of 2300 cr in FY20. NP 730 cr. Company has a monopoly given by the govt. Business is good and many extensions taking place, which will take time to bear fruit, if at all. But valuation-wise it had gone bonkers.

2/3

Stock corrected 40%+ in 2 days. This is what can happen when one doesn't heed valuations. And ignores the risks to the business. And only looks at blue sky scenario.

A good company may not be a good investment, at any price.

3/3

One of the best debates I have seen in recent history between @SunilBSinghania and Saurabh Mukherjea.

TOPIC: Has P/E lost its relevance?

I resonate more with Sunil’s side. Here’s a thread 🧵 on the main points made by him:

@varinder_bansal @safiranand @myvaluepicks

1/ Importance of PE

PE is not the only factor but an important factor.

Ultimately the growth has to justify how much PE are you paying for the company.

There cannot be an unlimited PE multiple based on some xyz parameters.

2/ Hindsight Bias:

In hindsight we can say that from 2001 to 2021, a company grew at 25 % and we should have given a very high PE to it.

But on the day when you buy, you don’t know that the company is going to grow at 25% for the next 20 years.

3/ Millennial preference:

Things have become more competitive.

New generation don’t really care much about legacy.

Convenience and affordability matters more.

The longevity and sustainability of growth has changed dramatically.

4/ Company that require a big investment - There is opportunity to invest big.

Company 1: Mkt Cap of 50 cr
Company 2: Mkt cap of 1 lakh cr

50c r company can become 3x, 1 lakh cr company cannot become 2x.

On absolute basis you end up making 5 cr vs 5k cr in 1lakh cr company.

VALUATION MULTIPLES FROM FIRST PRINCIPLES

• There is a lot of misunderstanding & misapplication of valuation multiples, both among retail and institutional investors
• Get clarity on this by revisiting the 1st principles here

Prerequisites:
• Finance 101 knowledge

THREAD 👇

KEY CONCEPT: VALUE STAKEHOLDERS
"Beauty is in the eye of the beholder"
"Value is in the rights of the user"
So it is important to ask, "VALUE TO WHOM?"

There are 2 main types of stakeholders in a company:
1. Equity holders
2. Lenders

KEY CONCEPTS: MCAP and EV

Value to equity holders is represented by the Market Capitalization (MCAP).

Value to equity AND lenders is represented by Enterprise Value (EV):

Notice how you can convert between Enterprise Value to Market Capitalization easily

KEY CONCEPT: FCFF

Free cash flow to the firm (FCFF) = Cash flows available for distribution to both equity holders AND lenders

Related:
Free cash flow to equity (FCFE) = Cash flows available for distribution to ONLY the equity holders

We will focus on EV & FCFF in the examples

KEY CONCEPT: FUNDAMENTAL VALUE OF A COMPANY

The fundamental/intrinsic value of a company is equal to the present value of the cash flows it would generate in future.

The growing perpetuity expression of value is shown below: