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π Market Kya Lagta Hai
Nifty 50 π’ +0.12%
Midcap 150 π» -2.29%
Smallcap 250 π» -2.92%
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Sectors in Focus
Major Corporate Developments This Week
- PowerMech: Company gets Rs 210 crore order from Hindustan Zinc for operation and maintenance work.
- LTIMindtree: Company gets mutli-million dollar contract extension from Absa Bank
- GPT Infra: NHAI and Eastern Railway enhance existing contract with company to Rs 103 crore.
- Dr. Reddyβs: Company signs non-exclusive patent licensing agreement with Takeda to commercialise Vonoprazan, a novel gastrointestinal drug, in India.
- HAL: Company has signed an amendment to MoU with Aeronautical Development Agency for completion of LCA AF Mk-2 development for a value of Rs 2970 Crores
- TVS Motor: Company appoints new management at Norton Motorcycles and plans six new motorcycles launches under brand in next three years.
- Triveni Engineering: Company starts commercial operations of its Indian-made foreign liquor business.
- K&R Rail Engineering: Company Gets Order Worth 450m Rs for Rail Connectivity in Andhra Pradesh.
- KEC International: Company gets new orders worth Rs 1,100 crore for transmission and distribution projects in India and overseas.
- Tata Steel: Company plans to double manufacturing capacity to 40 MTPA.
- Sanofi India: Company Announces Expansion of Its Global Capacity Centre in Hyderabad, Company Plans Euro 400m Investment by 2030, With Euro 100m By 2025
- Jyoti Structures: Company has received an order from Adani Energy Solutions for construction and part supply of 765kV D/C KPSIII-AP44 Transmission Line
- Century Textiles: Company's arm, Birla Estates, buys 5-acre land parcel in Gurugram, with estimated revenue potential of Rs 1,400 crore
- Hindustan Unilever: Company approves sale & divestment of companyβs water purification business to A.O. Smith India for $72 m
- Elecon Engineering: Company Limited has announced a sub-division/split of existing equity shares from 1 to 2 shares with a face value of Re. 1 each, fully paid-up.
- NLC India: Company has emerged as the successful bidder for the Machhakata in the 8th round of commercial coal block e-auction held recently by the Ministry of Coal, Gol.
- RVNL: Company receives letter of acceptance from East Coast Railway for a project worth Rs 160 crore.
- Balakrishna Industries: Company completes setting up of mould manufacturing plant at its Bhuj unit with a capex of Rs 300 crore
- Zee Entertainment: Company receives shareholder approval with requisite majority to raise Rs 2,000 crore
TechnoFunda Investing Quote from Legends -
Mark Minervini's quote highlights the distinction between intrinsic value and market dynamics in determining stock prices. While a stock's inherent value is crucial, it alone does not drive price movements. Instead, it is the actions of investorsβspecifically, the buy orders they placeβthat ultimately affect a stock's price. Even if a stock is fundamentally undervalued, without sufficient demand from buyers, its price won't rise. Therefore, understanding market psychology and demand dynamics is as important as evaluating the intrinsic value of a stock for successful investing.
π Book I'm Reading This Week
Trade Like a Stock Market Wizard" by Mark Minervini is a comprehensive guide that delves into the techniques and strategies used by successful traders to achieve exceptional returns in the stock market. Drawing from his own experience as a top trader, Minervini shares insights into his SEPA (Specific Entry Point Analysis) methodology, which combines technical analysis, risk management, and disciplined trading principles. The book covers topics such as identifying high-potential stocks, timing market entries and exits, and managing risk, all aimed at helping traders develop a robust and profitable trading approach.
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TechnoFunda 101 - Power Capsules
Learn technical as well as fundamental concept in a simple way
Operating Leverage: Simplifying the Concept for Better Understanding
Operating leverage is a crucial concept in the business world, especially when it comes to understanding profitability. In essence, it's about the relationship between a company's fixed costs and its profits. But let's break that down into something more digestible.
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Imagine running a lemonade stand. You pay a certain amount to set up your stand (let's say for the table, pitcher, and initial stock of lemons and sugar) β these are your fixed costs, expenses that don't change no matter how many glasses of lemonade you sell. Now, if you sell enough lemonade to cover these costs, every additional glass you sell mostly contributes to profit (apart from the small cost of the lemons and sugar for that extra glass, which are your variable costs).
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In a business, this scenario plays out on a larger scale. Operating leverage captures how a boost in sales can lead to an even more significant increase in profits due to these fixed costs. Companies with higher fixed costs (like factories with expensive machinery) have higher operating leverage because once they cover the fixed costs, additional sales don't require much additional expense, leading to larger profits.
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However, this leverage cuts both ways. If sales fall, profits can plummet, because those fixed costs remain constant even if less is sold. Thus, while a company with high operating leverage can see substantial profit growth with an increase in sales, the risk is that a drop in sales can lead to a steep decline in profits.
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This relationship is measured by the degree of operating leverage (DOL), which is essentially a way to quantify how much earnings can change with a given change in sales. The formula for DOL is the percentage change in operating income (EBIT) divided by the percentage change in sales. It's a handy indicator of the sensitivity of a company's profits to its sales.
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Businesses (particularly those that are asset-heavy) experience the advantages of operating leverage differently. Companies like airlines, with lots of fixed costs (think planes and hangars), are prime examples. If an airline fills more seats, the additional revenue from those filled seats goes mostly to profits because the cost of flying the plane is the same irrespective of the number of passengers.
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In conclusion, understanding operating leverage is like understanding the weight a financial seesaw can bear. It explains why a small tweak in sales volume can lift a company's profits to impressive heightsβor drop them down to losses if sales falter. It's a foundational concept laden with potential but also risks, offering a powerful lens through which to view a company's financial structure and future earnings potential
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Keep Compounding...
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Vivek Mashrani, CFA
Founder, TechnoFunda Investing
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