Managing Partner, Ampersand Investment Advisors

Rahul Singh

Managing Partner

Ampersand Investment Advisors

Thematic (Sector/Industry)

We will soon hit the 1QFY17 results season in July and we expect earnings to hold ground in FY17 thus breaking the downward revision cycle.  Our preferences continue to be in domestic centric and bottom-up sectors like NBFCs, Cement &amp; Speciality Chemicals and themes such as structural spend on irrigation and roads.Cement has traditionally been viewed as a relatively safer proxy to the impending revival in Infrastructure capex. This also explained the valuation premium sector has commanded in recent years despite marginal earnings support. With earnings recovery, the sector is now beginning to justify that premium. Consensus forecasts a 25%+ EBITDA CAGR for FY16-18E for the large cement companies and we think that all the ingredients are in place for earnings to deliver. We prefer Shree Cement and Dalmia Bharat. The strong performance in NBFC universe over the past few weeks almost makes us say 'we told you so'. But clearly, the positive trends were evident for a while, and it was just that the participation became more broad based to include NBFCs offering micro finance, gold loans etc. We would therefore hold to existing positions and even use a correction to increase allocation to this space.

We will soon hit the 1QFY17 results season in July and we expect earnings to hold ground in FY17 thus breaking the downward revision cycle.  Our preferences continue to be in domestic centric and bottom-up sectors like NBFCs, Cement &amp; Speciality Chemicals and themes such as structural spend on irrigation and roads.Cement has traditionally been viewed as a relatively safer proxy to the impending revival in Infrastructure capex. This also explained the valuation premium sector has commanded in recent years despite marginal earnings support. With earnings recovery, the sector is now beginning to justify that premium. Consensus forecasts a 25%+ EBITDA CAGR for FY16-18E for the large cement companies and we think that all the ingredients are in place for earnings to deliver. We prefer Shree Cement and Dalmia Bharat. The strong performance in NBFC universe over the past few weeks almost makes us say 'we told you so'. But clearly, the positive trends were evident for a while, and it was just that the participation became more broad based to include NBFCs offering micro finance, gold loans etc. We would therefore hold to existing positions and even use a correction to increase allocation to this space. 

Concrete Gains - Buy Cement, Hold on to NBFCs

In our second newsletter, we highlight some of the key trends/observations from the host of meetings, calls and analyst meets we attended in the last month –<ol><li>High growth in NBFCs targeting bottom-of-the-pyramid,</li><li>Recovery in Hotels, and</li><li>Perceptible progress in Government’s flagship schemes.</li></ol>We also do a quick update of the specialty chemicals picks (Navin Fluorine and SRF) covered in the April edition. Finally, we take a closer look at the risk-reward across the various Non-Banking Financial Company (NBFC) segments. From a 6-12 month perspective, we see greater valuation upside in (i) gold loan NBFCs (viz. Muthoot , Manappuram) and (ii) embedded value plays (viz. ABNL) compared to the (i) cyclical recovery &amp; monsoon beneficiaries (viz. M&amp;M Financial, Shriram Transport) and (ii) the newly-listed MFI-to-be-small banks (Equitas, Ujjivan).

In our second newsletter, we highlight some of the key trends/observations from the host of meetings, calls and analyst meets we attended in the last month –High growth in NBFCs targeting bottom-of-the-pyramid,Recovery in Hotels, andPerceptible progress in Government’s flagship schemes.We also do a quick update of the specialty chemicals picks (Navin Fluorine and SRF) covered in the April edition. Finally, we take a closer look at the risk-reward across the various Non-Banking Financial Company (NBFC) segments. From a 6-12 month perspective, we see greater valuation upside in (i) gold loan NBFCs (viz. Muthoot , Manappuram) and (ii) embedded value plays (viz. ABNL) compared to the (i) cyclical recovery &amp; monsoon beneficiaries (viz. M&amp;M Financial, Shriram Transport) and (ii) the newly-listed MFI-to-be-small banks (Equitas, Ujjivan).

India

JK Cement Limited produces and manufactures Portland and White cement products.

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JK Cement Ltd (JKCE IN)

Concrete Gains - Buy Cement, Hold on to NBFCs

We will soon hit the 1QFY17 results season in July and we expect earnings to hold ground in FY17 thus breaking the downward revision cycle. Our...

Ampersand Investment Advisors

Ear to the Ground - May 2016

In our second newsletter, we highlight some of the key trends/observations from the host of meetings, calls and analyst meets we attended in the...

Ampersand Investment Advisors

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