“While we focus on names with promising revenue growth, we think our viewers should also look at names with questionable revenue growth,” said Anshul Saigal, founder of Saigal Capital. states.
What have you been doing lately since the market has been pretty volatile? Are you stirring up your portfolio a lot or are you leaving it as is?
Anshul Saigal: It’s not really moving that much, but we think it’s a period where blue-chip stocks are correcting due to the general market movement. And if earnings hold steady and earnings growth meets expectations, these stocks will rebound. There are several stocks at such levels today that you can buy at reasonable valuations in hopes of a correction. We’ve seen an overall correction of 30% to 50% in the last 2-3 months, especially in the last 15 days. And given this valuation reset, we can find long-term investment opportunities.
Of course, we don’t know if the volatility will continue in the short term, and we may see further corrections in these stock names, and that’s okay. If you think it’s worth 2 to 3 times what’s out there now, it’s a good time to consider some of these names. While we focus on names of companies with potential for revenue growth, we think our viewers should also look at names of companies where revenue growth is not a concern.
So what does it mean to have visible earnings and a comfortable valuation?
Anshul Saigal: What has happened in the last three to four years is that individuals and households have increased their capital, primarily for reasons of necessity, in tier 2 and tier 3 towns, as well as in the middle and lower middle classes. This means that you continue to save money. They put in a lot of capital during the coronavirus outbreak because it was the only resource they had. As a result, we are now seeing a slowdown in consumption across the board, whether for essential goods or at consumer discretion. We have seen a significant correction in that segment of the market over the past two to three years.
We believe this downward cycle is indeed coming to an end. Valuations in this space have become very reasonable, even more so after the recent correction, and many companies are saying they are seeing the growth cycle bottom out. I’m posting a comment. Jewelry companies publish their SSG numbers. Let’s take a look at how value retailers present their SSG numbers. That’s clearly a sign that there’s a change of direction on the horizon. And if that happens, these companies whose valuations are actually very reasonable, and are actually at multi-year lows, will see significant risk-adjusted returns over the next two to three years. There is a possibility that In addition to this, we believe there are significant opportunities across the textile value chain for a variety of reasons. Whether it’s spinning, bed and bath linens, or clothing, there are huge opportunities in the sector for a variety of reasons.
Spinning because the prices of Indian cotton and world cotton have converged. Clothes for the problems happening in Bangladesh. And bed linens and bath linens, because there is general tailwind and demand for that sector. We also believe that China is generally exiting this sector due to the tariffs introduced with President Trump’s inauguration, which will provide further tailwinds for this sector. Therefore, textiles also look very interesting.
You mentioned fiber. Currently, textile products in India are A) cyclical. B) not globally competitive. C) Despite this rich history in textiles, it’s probably Gokalda or Raymond. Other companies haven’t really managed to break out of that realm. What makes you bullish on them?
Anshul Saigal: You are right, but times change, circumstances change and we have to respond to the conditions that exist at that time. In recent years, the headwinds in the textile industry for many textile enterprises have been very large, and as a result, only a few companies have been able to break through. But when the tide across the sector is rising, it is natural that in such an environment it is better to look for leaders. Because leaders benefit disproportionately from rising tides.
But that rising tide lifts all boats. And we can see that all of these companies are doing well. However, it must be mentioned that domestic textiles are not so trendy. Of course, we are seeing a reversal in demand here as well, but it is very noticeable when it comes to textile exporters.
As I mentioned earlier, we are seeing positive trends for that sector of the market, both in spinning and sewing. Bangladesh has its own domestic issues, and Bangladesh is a very big player in global garment production capacity, which India benefits from coming out of the system.
You can see this by looking at the month-on-month figures. A Tirupur-based apparel company saw a 27% increase in revenue month-on-month. This is a large company, one of the largest apparel companies in the country, and you can imagine how this plays out in the supply chain.
I also think that spinning home textiles is once again experiencing a tremendous tailwind. Most of that is export-oriented and to a lesser extent domestic, but overall there is a tailwind in demand, which should be reflected in valuations over the long term.
Have you ever looked at either of these two stocks, Shoppers and Sura?
Anshul Saigal: I looked at Shoppers not as a purchase, but simply to analyze the company’s performance, as I am interested in this sector, especially value retail. Looking at the numbers released by Shoppers, SSG’s numbers were very strong, but what’s even more interesting about this name is that they saw margin expansion in both gross margin and EBITDA. The expansion in gross profit margin was primarily due to private label sales increasing as a percentage of sales, which meant that more high-margin products were sold, resulting in higher profit margins. Masu.
And, pending further explanation, we believe this sector will see tailwinds in the coming quarters and years. I am positive about the value retail space, and although this company does not technically fall into the value retail space, we believe that the value retail space is a very interesting space in our judgment in the coming quarters and years. You can.
Coming back to the Adani group of stocks, what happened yesterday? Nothing new, nothing old, but the stock price rose as if new buyers were coming back.
Anshul Saigal: That’s right. Adani Group, there are a few things to keep in mind. One, if you look at the way this group executes, aside from the usual issues that are attributed to them, their execution is clinical, and this market is actually a lot more crowded with players and players where execution isn’t an issue. This means that groups and companies will be rewarded. This is a nervous market and they don’t want to participate in a name that might stall execution.
For this particular group, we are very confident that, at least in that regard, the market will not stall execution and will reward this group relative to many other stocks on the exchange as a result. Masu.
And if you look at what’s built into a lot of these companies, from green hydrogen to data centers to metals and minerals to airports and of course power and ports, these are really just the beginning, and there will be many more to come. Their growth over the years has been impressive, so they will likely be a preferred group over the long term.
Thirdly, if you just look at the presentations that the group is making and the runway that the group has shown in terms of both investment and growth, it’s really surprising that you can hardly find any institutional investors with these names. . I think that will change. Interest from domestic institutional investors will continue to grow over time, which could actually fuel the group’s next rally.
So this is a very interesting group and there’s a very interesting futuristic kind of business built into the group and the execution of it is going to make this group likeable. This is what we saw yesterday in a generally nervous market, a good but nervous market, this group really picked up.
