Green Portfolio Rebalance Update: Making the Best of Market Corrections! – 15th March.2024

The indices have had a good run over the last few weeks but as anticipated, we’re now witnessing steep corrections. One cannot of course time the markets but we have pushed rebalances earlier than the April due date to make the best of prevailing market conditions. 

We know that the current market conditions might seem scary. However, it’s the turbulent markets that pose the greatest opportunities and test investor patience and discipline. We have only one piece of advice for now – Don’t step away from the markets and continue buying fundamentally strong companies with patience and discipline. It’s a sale, get your hands on the best stuff at the best prices!

Now, with this short blog, we are updating you with a thesis for some of the recommendations made in our smallcases to make sure you’re aware of what you’re investing in.

Note: This is a combined report for all Green Portfolio smallcases. Detailed, smallcase-specific rebalance notes have been shared with invested users with the detailed thesis of all buys and sells. 

ADDITIONS

1. Granite Production

This company being added to the smallcap compounders smallcase exports raw and processed granites from its quarries in Andhra Pradesh, Telangana, and Tamil Nadu and two granite processing facilities around Hyderabad. The majority of finished granite products are exported to the U.S. and raw granite blocks are exported to China. Management is targeting Rs.1,000 crore in the topline and at least Rs.100 crore from the Indian market in the next 3 years. 

2. Construction  

This company with a market cap of less than 1000 cr works in Infrastructure Development and Operation. The company has been a consistent performer with healthy double-digit margins and topline growth. The company’s prospects look bright with expansion in key geographies, private capex from players like Adani Gas, and tailwinds from government policies.

3. Textiles 

This one’s a large cap with current major verticals being textiles and chemicals. It has recently added a paints vertical where we foresee good potential. The company spent Rs. 4900 crores on investments in FY24. Nearly half of this amount, 49%, was dedicated to the paint business. The company is expected to experience high revenue growth in the coming years by venturing into the paint industry with huge capacity.

4. Private Bank

This private bank has successfully managed to leverage its fin-tech partnership to enhance its customer base resulting in increased loan growth. We believe all these factors will improve growth and profitability, leading to enhanced return ratios in the future.

The recommendation draws strength from a pick-up in growth for deposits along with strong growth in loan book, decrease in cost-to-income ratio, lowered proportion of stressed assets as well as slippage and adequate coverage on existing NPA portfolio will ensure improvement in asset quality moving ahead.

We’re also adding: Pharmaceuticals, Steel, Casting and Forgings, and Cables.

DELETIONS

We’re humbled to share that we’re booking healthy profits in all the stocks that we’re selling. Find the details below.

Note: The percentage of returns mentioned is since our first day of entry. The date of entry may differ for every investor, thus an individual portfolio’s return is likely to vary from the returns mentioned here. 

SP Apparels Limited (152% Gains since June 2021)

Our selling decision comes from achieving our target and foreseeing limited growth prospects in the future. Past quarters have been hit by lowered export demand led by inventory pile from retailers, rising interest rates, and geopolitical disturbances. The retail segment reported weak performance with de-growth in revenue, attributed to subdued demand prevailing in the retail industry.

India Nippon Electricals Limited (73% Gains since September 2021)

India Nippon Electricals is a manufacturer of Ignition Systems for two-wheelers, three-wheelers, and portable engines. Our decision to sell is driven by reaching our target and anticipating limited growth potential in the future. The substantial rise in steel and copper prices has significantly impacted margins. Despite efforts, the company struggles to fully mitigate commodity inflation through operational efficiencies.

KPR Mill Limited (317% Gains since February 2021)

K.P.R. Mill Limited is a vertically integrated apparel manufacturer based in Coimbatore, India. The sharp decline in cotton prices, plummeting from INR 1 lakh to INR 60,000 per candy, has resulted in reduced selling prices for yarn, posing a significant challenge for the company. Moreover, the government’s ban on sugarcane juice-based ethanol production presents a notable obstacle for the company. As a result of the bearish near-term outlook, and considering the valuations we entered this business at, we are booking complete profits in this stock.

Caplin Point Laboratories Limited (290% Gains since May 2020)

Caplin Point Laboratories Ltd is engaged in the manufacturing and sourcing of APIs, finished formulations, R&D, and clinical research. Delays in approvals/launches may impact the US business. Inability to scale up highly competitive US business which is likely to be a growth driver for the company.

JSW Energy Limited (445% Gains since April 2021)

Incorporated in 1994, JSW Energy is a part of the JSW group headed by Mr. Sajjan Jindal. Our selling decision comes from achieving our target and the expensive valuations. The company has delivered poor sales growth recently. Promoter holding has been reduced from 74.66% to 73.39%.

Gujarat Pipavov (96% Gains since February 2023)

Gujarat Pipavav Port is India’s first private sector port located on the southwest coast of Gujarat near Bhavnagar. The port is strategically placed on the International Maritime Trade route which connects India with the US, Europe, Africa, Middle East on one side and the Far East on the other side. Our selling decision comes from achieving our target and foreseeing limited growth prospects in the future.

For details of other companies we recommend selling, please refer to the rebalance note shared over the mail. 

Happy Investing!

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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use.