VALUE PICK FROM INDIAN STOCK MARKETS

MAX INDIA - IN THE FOREFRONT OF AN UPCOMING MEGA TREND.

2022-10-23T10:06:00.007+05:30

During last two Diwalis we have discussed two stocks that supports two different mega trends. This year also let us discuss one such stock , that I believe will lead in the forefront of an emerging mega trend .

Ageing is a reality and nobody can escape from this . Nowadays rhythm of life changed a lot and everyone is running behind something that we can’t even define. In our society, even if people making more than enough money, lot of people facing the issue of finding enough time to care their parents. This is where the potential of Senior Care business lies. The senior care market is still at a nascent stage India. As per a 2019 report by consultancy firm McKinsey ,17% of the seniors in India are living alone and I believe this number will increase drastically going forward considering the changing socio-economic situation, increase in the number of nuclear families , improving life expectancy that results in increasing senior population in the country etc. Migration of younger generation to foreign countries and unwillingness of their parents to follow the same adding fuel to the loneliness of elders in these days. All these are increasing the business potential of senior care business here . As per Industry analysis, “out of the 20,000 senior living units in India, about 55% are operational, while the rest are at various stages of construction. The demand – pegged at about 240,000 units – is almost 12 times the available capacity” . On the basis of this background let us look into the only listed company operating in this sector – MAX INDIA – through its subsidiary ANTARA .

ABOUT THE COMPANY

MAX INDIA evolved through an organizational restructuring in Max group during 2020. It is now the holding company of Max Group’s Senior Care business Antara. Antara operating in two verticals - Antara Senior living and Antara assisted Care .

Antara Senior living is offering independent Residences for seniors. First Senior residential community of this division started functioning in a 14 Acre facility at Dehradun with 180 apartments in 2020. Its second facility is under construction at Noida with 340 apartments that is expected to ready for possession by 2025.As per latest update ,Company already sold out 300 units out of 340.

Under the Assisted care division ,it operates Care Homes, Care at Home, MedCare and Memory care homes .This division cater to seniors over the age of 55, who need more frequent interventions in their daily lives due to medical or age-related issues. I strongly believe there is immense scope for these verticals due to more than one reasons like the increase in seniors who are attaining an age where they are in dire need of any type of home care due to increasing life expectancy .

Care homes are specialized residential facilities meant for short- and long-term care, pre & post-operative care and memory care for seniors. These assisted living facilities provide primary health care and emergency response services.

Care at home providing personalised care and attention under the guidance and supervision of reputed clinicians. A team of highly trained professionals provides care in the comfort of elder’s home itself Instead of taking the sick and elderly people out for their homes for meeting appointments and treatment. This is bringing the much needed care and services to the home which is more convenient both for elders and those who are responsible to provide care to them. In addition to the above it is a fact that senior home care is a rather affordable route for giving people the help that they need compared with treating them in a hospital. This division’s service includes diagnostics, nursing care , physiotherapy ..etc

MedCare division providing a range of medical products and equipments on rent/ sale for the recovery and well-being of elderly people .

Under the Memory Care homes division Antara takes care of Dementia patients and assists them in carrying out their everyday tasks. Recently company opened its first dedicated residential Memory Care Home in Gurugram for Dementia patients. Max now planning to add 35-40 more care homes/ memory care homes with a bed capacity of approximately 2000 .

This is the brief business profile of the company. Since more details are available in company’s website, I am not going in-depth. ( Link of Investor presentation and latest Conference call provided at the bottom which will help you to understand more about the Industry and specific to the company )

Why MAX INDIA ?

It is a fact that few other business groups are keenly looking to tap the opportunities in this sector .But I strongly believe , MAX group is one of the most eligible business group to run such a business because of their experience in running hospital/medical business for decades. In addition to this, company having a treasury Corpus of around Rs.300 Cr (after recent buy back) and other monetizable assets of worth Rs 160 crore to fuel its growth going forward and its current market cap is even below the combined figure of these liquid resources. Promoters didn't participate in the just concluded buy back ,hence their stake in the company increased from 40 % to above 51% .

Conclusion

According to the Global Health and Aging Report by the World Health Organization, people aged 65 and above is projected to grow from an estimated 524 million in 2010 to nearly 1.5 billion in 2050. In the US alone, senior care is an established industry valued around $750 Billion at present and growing at 6% per year. As per available statistics, percentage of senior citizens in India to total population is about 8% which is expected to increase to 20% by 2050 . Considering the huge population of India, changing life style and way of thinking, more disposable income in the hands of citizens, possible government aid for senior care etc., I believe this industry having huge potential going forward. In last FY company reported a turnover of Rs.230 Cr .Since this business is just taking off and company is now in the investment phase ,this is not a stock who are looking for historic data like ROE,ROCE, P/E ..etc at this stage and this company may not report any commendable numbers for another few quarters . But I strongly believe they are in a sweet spot with enough resources and experience, management bandwidth, huge business potential ..etc and able to deliver good return to share holders in the years to come. Max India is currently trading around Rs.80 in both exchanges.

Once again wishing a Happy Diwali to all my dear friends ...

For more details and Reports , go through the following links.

Antara Company Website Link HERE

Antara Senior living Apartment Video Tour HERE

Max India Investor presentation HERE

Max India Q1 FY 2022-23 Conference call Audio link HERE

Article on Senior Care business LINK1 , LINK2

Discl:

P Above note is prepared only for educational purpose .Part of data used in the above note taken from publicly available sources and credit of the same goes to the original owner . Few sentences are copy pasted without any editing . Personally holding shares of Max India , hence views expressed here may be biased , do own due diligence before taking any investment decision.

COSMO FERRITES LTD - BENEFICIARY OF CHANGING TRENDS ...

2021-10-30T10:45:00.011+05:30

As we are aware, long-term investors always searching for early signs of emerging trends and try to make benefit out of it. Since our government already declared their aim to make India as a manufacturing hub and taking lot of efforts in this direction. We all know, without developing Electronic Manufacturing, it is not easy to convert India as a manufacturing hub to the world and recent issues related with semi-conductor shortage underlining this fact. With this background let us look into a company that may benefit immensely from India’s efforts to become an electronic manufacturing hub and increasing Electric Vehicle (EV) penetration.

Government support with incentives is the major attraction of common man to shift to EV for the time being. But factors like skyrocketing fossil fuel prices, increasing awareness about environment protection may result in a natural shift though it may take some time. Still there is lot of experiments happening in the energy saving space and personally I am expecting emergence of a breakthrough technology in this field which can revolutionize the EV usage. It may happen in the form of quick charging- long lasting batteries that will reduce the effective cost and positively impact ease of usage. Because of this reason, I am not very enthused in the highly proclaimed ‘Lithium Ion Battery stories’ and not aggressively betting on such companies at least till this industry show widespread acceptance even with the current limitations of Li-Ion batteries. In this situation , let us look into a company that is expected to benefit from electronic manufacturing as well as EV penetration in spite of the battery we are going to embrace in future.

THE INDUSTRY

Whatever be the battery pack, ‘Ferrites’ are unavoidable part of an EV and more than that for the electronics industry. Ferrite can be defined as “Any of a class of metal oxides which show ferrimagnetism; used in transformers, inductors, antennas, recording heads, microwave devices, motors, chargers ,loudspeakers (copied from publicly available sources). Ferrites are generally divided into two - Hard Ferrites and Soft Ferrites. Hard ferrites have high coercivity, so are difficult to demagnetize. They are used to make permanent magnets for applications such as refrigerator magnets, loudspeakers, and small electric motors. Ferrites that are used in transformer or electromagnetic cores contain nickel, zinc, and/or manganese compounds with low coercivity are called Soft Ferrites or Temporary magnets which activate and work only under and electric field. The low coercivity means the material's magnetization can easily reverse direction without dissipating much energy. Out of these, soft ferrite is more complicated both in terms of manufacturing process and characteristic requirements hence we have limited manufactures in India for this and demand for rest is met by imports.

Let us look into the application of soft ferries in various fields. In automotive electronics soft ferrites find applications in Battery Management system, DC-DC converter, Car security, Keyless entry system, Auto start/stop, Battery Charger, Lighting ..etc. Another emerging opportunity is in the field of Solar inverter that is gaining wide acceptability in recent times. LED lighting is another big opportunity for ferrites. Smart Energy meter is another big emerging business opportunity for this industry. Among these let us look into EV opportunities specifically. Since magnetic systems used in many components like transformers PCB ..etc., this product is critical for an EV .It is used mainly in EV charger and conversion units as part of Line filters, Inductors, transformers..etc .Ferrite core transformers are present in PCB also that find applications not only in EV but electronic industry as a whole. This clearly means demand for ferrites will increase in tandem with the EV penetration and India’s efforts to make our country a manufacturing hub going forward.

THE COMPANY

The company we are trying to study is BSE listed Cosmo Ferrites . Yes , the same company covered in this blog about 10 years back around Rs.13 .Few of my old readers may doubt why it is again now after more than 10 fold rise in its price. Changed business potential is my only answer for this question. This company belongs to the same business group that owned another listed company Cosmo Films (market cap of around Rs.2800 Cr) which is operating in packaging related business. This business group is perceived as clean and minority shareholder friendly one. Manufacturing plant of Cosmo ferrites located at Solan, Himachal Pradesh. Alisha Coils and transformers – a division of Cosmo Ferrites- manufacturing SMPS Transformers from 10W to 250W as forward integration. Citing better business prospects on account of emerging trends in user industries, company now enhancing its production capacity by 50% from 2400 MT to 3600 MT at a cost of Rs.30 Cr. As per company estimate contribution from enhanced capacity will start to reflect from first quarter of FY 2022-23. It is a fact that, so far company’s performance was erratic. Only in recent times it started to show improved performance with good profit margins that indicating changing fortunes of the company due to emerging business potential.

Cosmo EV Video Link HERE

In latest September quarter, Cosmo Ferrites reported a top line of around Rs.27 Cr, bottom line of Rs.3.51 and an EPS of Rs.3. Considering management’s confidence to enhance capacity by 50%, robust prospects of user industries like Electric Vehicle, Solar Inverters, Energy meters, Battery Chargers, Transformers ..etc it is expected to perform well going forward. At present company exporting its products to more than 50 countries. Company is a government recognized export house and as a testimony of increasing export opportunities, Cosmo's export turnover reported a robust 48% growth in latest quarter.

CMP. Rs.168

Discl:

Part of data used in the above note are taken from publicly available sources and credit of the same goes to the original owner . Personally holding shares of Cosmo Ferrites , hence views expressed here may be biased , do own due diligence before taking any investment decision.

EKI - A NICHE PLAY ON ENVIRONMENT PROTECTION

2021-04-10T08:36:00.003+05:30

EKI Energy Services - EnKing International - ( EKI ) is a company listed in BSE ( Scrip Code-543284) just three days back. I am aware about the fact that there is many additional risks in buying a stock just after IPO and listing . So please take this note only as an introduction to a company that is operating in a niche sector which I feel there is very big opportunity existing in the years to come . Enking claiming that they are the ‘ World largest Carbon Credit Developer and Supplier’ . I have no statistics with me to verify and ascertain this claim but it is a fact that company generating more than 90% of its income from overseas markets.

The Sector and Scope

Global warming is a threat in these days and all countries around the globe realized the seriousness of the same and necessity to fight against it. It is widely accepted that Green House Gases ( GHG) is the major reason for global warming . Kyoto Protocol was a landmark development in the history of world for the fight against global warming. The Kyoto Protocol is an international treaty which extends the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions, based on the scientific consensus that global warming is occurring and human-made CO₂ emissions are driving it. The Kyoto Protocol implemented the objective of the UNFCCC to reduce the onset of global warming by reducing greenhouse gas concentrations in the atmosphere to 'a level that would prevent dangerous anthropogenic interference with the climate system'. The Protocol's first commitment period started in 2008 and ended in 2012. All 36 countries that fully participated in the first commitment period complied with the Protocol. However, nine countries had to resort to the flexibility mechanisms by funding emission reductions in other countries because their national emissions were greater than their targets. A second commitment period was agreed in 2012, known as the Doha Amendment to the Kyoto Protocol, in which 37 countries have binding targets. Negotiations were held in the framework of the yearly UNFCCC Climate Change Conferences on measures to be taken after the second commitment period ends in 2020. The Protocol defines three "flexibility mechanisms" that can be used by Parties in meeting their emission limitation commitments. The flexibility mechanisms are International Emissions Trading (IET), the Clean Development Mechanism (CDM), and Joint Implementation (JI). IET allows Parties to "trade" their emissions that held in digital form (Assigned Amount Units, AAUs, or "allowances").

Next to Kyoto Protocol, another important event in the same direction was ‘The Paris Agreement’ which is an agreement within the UNFCCC on climate change mitigation, adaptation, and finance, signed in 2016. As of March 2021, 191 members of the UNFCCC are parties to the agreement. The Paris Agreement's long-term temperature goal is to keep the rise in global average temperature to well below 2 °C (3.6 °F) above pre-industrial levels; and to pursue efforts to limit the increase to 1.5 °C (2.7 °F), recognizing that this would substantially reduce the risks and impacts of climate change. This should be done by reducing emissions as soon as possible, in order to 'achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases' in the second half of the 21st century.

The concept of carbon credit and its trading.

A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas. ( Courtesy : Wikipedia)

Let me explain the concept in layman’s language , as per the agreements approved by the participant countries in UNFCCC a fixed level of GHC emission is permitted for each countries, that in turn divided among the industries/companies operating in that country. Suppose you own a polluting industry that generates 100 units of greenhouse gases beyond the level permitted to you . On the other side , suppose one of your friend own a large area of plantation or a large solar farm that generating pollutants 100 units less than the permitted level to him. If you have no option left to reduce pollution( gas emission) below the permitted level or it is uneconomical for you, you can buy your friend’s 100 units available with him to offset your excess generation and comply with the rule . Ultimately this resulted in transfer of some money from your pockets ( assume the seller is someone you don’t know and sitting somewhere in the world ) to the seller . Such an earning will help and encourage the seller to plant more trees or establish another power plant using non fossil fuel unit . This is the basic concept of carbon credit trading .The tradable carbon credits are held in digital form.

There are two types of Carbon credit market , one is mandatory by law of each countries and the other is voluntary . The voluntary market is driven by companies and individuals that take responsibility for offsetting their own emissions, and entities that purchase offsets before emissions reductions are required by regulation. Buyers are driven by corporate social responsibility, ethics, a desire to enhance their reputation and so on.

As per reports by 'Reuters' , based on 2020 statistics ,The turnover in global emissions trading hit a record high last year of $214 billion as prices rose on current or expected stricter regulation. The turnover was up 34% from previous year and marked a third consecutive year of growth. It is a fact that ,not even 25% of countries in the world started carbon credit trading and we can imagine the potential opportunity size from this statistics.

Role of Company

EKI - acting as an advisor, facilitator and solution provider in environment protection initiatives of corporates ,NGO.s ,individuals..etc. . They are providing end to end solution to achieve carbon neutrality. Their business activities can be broadly classified into :

* Carbon Credits management.

* Climate Change Advisory Services.

* Business Excellence Advisory & Training Services.

* Electrical Safety Audits.

They are assisting in completing all formalities for earning carbon credits that involved various inspections, certification ..etc. and helping the buyers and sellers of the same to find their genuine counter parties and smooth completion of transaction. Though they are operating in these four verticals, more than 90% of income coming from carbon credit trading and that itself from overseas customers. Company’s client list includes various firms from countries like Australia, USA, Germany, Europe ..etc. and its Indian client list includes Airport Authority of India, World Bank, Azure Power, National Thermal Power Corporation (NTPC), GAIL, GMR Energy Limited, NHPC, Indian Railways, etc.

Financial Performance.

Company reported a topline of Rs. 66.02 cr and a bottom line of Rs. 4.47 cr in FY 2019-20. For the first half of FY2020 -21 ended in September 30. 2020, it reported a turnover of Rs. 59.96 Cr. and a net profit of Rs. 5.39 cr. Post IPO company’s equity will be Rs. 6.87 Cr ( FV.10) and promoter holding will be close to 73%

Particulars	For the year/period ended (₹ in lakh)
	30-Sep-20 (Six Months)	31-Mar-20	31-Mar-19	31-Mar-18
Total Assets	2,186.19	1,609.68	412.31	276.60
Total Revenue	5,996.34	6,601.90	1,988.13	701.01
Profit After Tax	538.58	447.45	68.04	26.91

Conclusion

Having said, at present company generating more than 90% of income from overseas .It is not a surprise ,considering the fact that still the rules prevailing in India is not strict in case of environment protection and Greenhouse Gas ( GHG) emissions. . If we consider only the local opportunities at present, this company may termed as one 'came ahead of its time ' as it started in 2011 but at present they concentrating in developed countries where rules are stricter. Nowadays we are in an effort to make our country a manufacturing hub . When the percentage of agriculture reduces and that of Industry increases, we have no other choice but implementing stricter rules to stay within global standards .We can’t unilaterally move without adhering global treaties and other norms in future and this situation will open up exciting opportunities for companies like EKI .Even in the present situation, many Indian firms who are eligible to get carbon credit not utilizing the opportunity due to their ignorance about it. Company is planning to utilize majority of the IPO proceeds for working capital requirements including strengthening the sales force both in India and abroad. I believe this will surely bring better business going forward provided the promoters are capable to execute. Company expecting market for carbon offsets is set to boom, especially once a solution arrived in the issue of rulemaking for the operation of international carbon markets sorted out among the countries that have signed the Paris Agreement. This is expected to happen at the upcoming conference of Parties scheduled to occur in November 2021. The meeting should have happened in November 2020, but postponed by a year due to pandemic. If there is no consensus in this meeting mainly about the trading of carbon credits earned during Kyoto Protocol regime ,that may affect the entire reliability of this mechanism. The question to be answered is whether the carbon credits earned between Kyoto Protocol and Paris agreement is valid or not for trading. Whether it is valid or not, an early ultimate decision on it will end the uncertainty on this subject that is expected to bring new direction for carbon credit trading worldwide.

It is a niche company in this sector and a pioneer in the industry that started operations more than ten years back. The only (somewhat) similar pure play company I could find in India is Emergent Ventures India that is an unlisted firm . If my understanding is correct this is the first listed company from carbon trading space not only in India but in the entire world. Current price Rs.162

Company Website link HERE

Points to Note :

Company is a newly listed one and came to my attention only recently , so I have no clear idea about its promoter’s credentials and their attitude towards minority share holders. In few IPO’s ,companies' shown sharply improved financial performance in just previous year of IPO through window dressing to attract potential IPO investors , only time will tell what the case here in these above points. Since it is listed in BSE SME with a market lot of 1200 shares , liquidity may be less compared with main board listed stocks. Prepared this short notes on EKI purely to introduce a niche company listed in a futuristic space , no need to take it as a recommendation to BUY or SELL the stock.

The above note prepared based on the information taken from publicly available documents like Wikipedia, Company IPO prospectus and other sources, few sentences reproduced without editing.

You can refer the below links for more info :

https://carbon-pulse.com/90631/

https://www.indiancarbon.org/the-carbon-credit-market/

https://www.thehindubusinessline.com/news/in-a-world-first-indian-carbon-trader-to-come-out-with-ipo/article33109195.ece

Discl: Holding tracking qty shares