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Sectors in Focus

Major Corporate Developments This Week

1. CE Info Systems bagged order worth Rs. 400 cr for Hyundai and Kia Cars OEM business in India.
2. Glenmark Life Sciences announced the signing of a Master Supply Agreement(MSA) with a Japanese innovator pharmaceutical company with global presence in Europe, United States and Asia.
3. Ashok Leyland bagged orders from the Karnataka State Transport Undertakings for 1225 nos. fully built Viking buses to be delivered by April 2024.
4. Zydus Lifesciences announced that its wholly owned subsidiary, Zydus Worldwide DMCC, has entered into an exclusive licensing and supply agreement with Synthon BV for Palbociclib Tablets for the US market.
5. Coal India: Company’s units get cabinet nod for equity investment in thermal power plants.
6. Mahindra Holidays: Company to invest Rs 800 crore in Tamil Nadu to build three Greenfield resorts.
7. Shalby: Company to acquire 87.26% stake in PK Healthcare for Rs 102 crore.
8. EMS Limited: Company has emerged as the L1 in a tender at Vikas Nagar, Dehradun, Uttarakhand, with an estimated order value of approximately Rs. 478.93 Crores.
9. Uniparts: Secures a USD 1.2 million order from Doosan Bobcat North America Inc. for construction equipment parts.
10. Welspun Corp: Company wins order worth of Rs 3000 crore.
11. JSW Energy: JSW Neo Energy has announced setting up a pumped storage project with a generation capacity of 1,500 MW, at a cost of ₹9,000 crore in Telangana.
12. Nazara Technologies: Company to raise funds up to ₹250 crore by issuance of 28.66 lakh equity shares at ₹872.15/share.
13. Indiabulls Housing: Company approves raising up to Rs 5,000 crore via equity issue.
14. IREDA: The Company has signed MoU with Indian Overseas Bank for Co-lending in Green Energy Financing.
15. Adani Energy Solutions: Company's smart-metering contracts include 8 projects with a contract value of Rs 25,100 crore.
16. GR Infraprojects: Company executes concession agreement with NHAI for Rs 1085.5 crore four-laning project in Uttar Pradesh.
17. PNC Infratech: Company gets Letter of Acceptance for road construction project worth Rs 1,174 crore.

TechnoFunda Investing Quote from Legends -

Seth Klarman's investment philosophy champions loss avoidance as its cornerstone, which stands in contrast to a common market sentiment that high returns necessitate high risks. Klarman argues instead for a disciplined, value-oriented strategy that identifies and hedges against risk. This approach hinges on the understanding that enduring investment success does not stem from frequent high-risk plays which may lead to outsized gains, but from a consistent application of a margin of safety that protects against substantial losses. The rationale is that safeguarding the investment principal over time is essential to compounding wealth, though this may often run against the grain of speculative market behavior that chases short-term returns at the expense of long-term security.

📚 Book I'm Reading This Week ​​​​​​The Most Important Thing by Howard Marks "The Most Important Thing: Uncommon Sense for The Thoughtful Investor" by Howard Marks is a guide for investors seeking to enhance their approach. Marks underscores the need for "second-level thinking," advocating for adaptive and perceptive strategies. He challenges the efficient market hypothesis, emphasizing the importance of a unique viewpoint. The book covers key concepts like value, risk management, contrarianism, and the impact of market cycles. Marks highlights the role of luck, defensive investing, and adding value to investments. Ultimately, the book urges investors to understand value, approach investments analytically, and make decisions based on solid facts. List of All Books I have Shared →

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How to Use Efficiency Ratios to Assess a Company’s Financial Health?

What is the Efficiency Ratio?

The Efficiency Ratio offers a good comparison between different companies in the same sector. There is a high correlation between efficiency ratios and profitability ratios. When companies efficiently allocate their resources, they become profitable.

Let’s understand how to use efficiency ratio, what are efficiency ratio formula and how it can help assess a company’s financial health.

Inventory Turnover Ratio: The Inventory Turnover Ratio measures how quickly a business sells and replenishes its stock during a specific period. A high ratio indicates fast sales, while a low ratio signals sluggish sales and excess inventory, posing challenges for the business.

Formula: Inventory Turnover Ratio = Average Inventory/Cost of Goods Sold

Example: Suppose a company has a Cost of Goods Sold (COGS) of $50 million and an average inventory of $5 million. The Inventory Turnover Ratio would be 50 million​/5 million. This implies the company turns over its inventory ten times a year.

Asset Turnover Ratio: The Asset Turnover Ratio gauges a company's ability to generate sales from its assets, comparing net sales to average total assets. Higher ratios indicate efficient asset utilization, while lower ratios suggest inefficiency, possibly linked to management or production issues.

Formula: Asset Turnover Ratio= Average Total Assets/Net Sales

Accounts Payable Turnover Ratio: Also known as Payables or Creditor's Turnover Ratio, it measures how often a company pays its creditors over an accounting period. A declining ratio may signify slower payments and a deteriorating financial condition.

Formula: Accounts Payables Turnover Ratio = Average Accounts Payables/Net Credit Purchases​

Accounts Receivable Turnover Ratio: This ratio indicates how frequently a business collects its average accounts receivable in a year. A high turnover suggests a prudent credit policy, an effective collections department, and high-quality customers, while a low turnover may signal issues like bad debt or a lax credit policy.

Formula: Accounts Receivables Turnover Ratio = Average Accounts Receivables/Net Credit Sales​

Monitoring these efficiency ratios helps in making informed investment decisions.

Happy investing!

🚀 My Content For This Week 🎬 YouTube: RAILWAY SECTOR ANALYSIS​ ​ 📋 Twitter: Vivek Mashrani, CFA @MashraniVivek Psychology of Investing: A Thread Ever wondered why sometimes our feelings can mess with our investment decisions? Today, we're on a fun ride through the stock market using examples you totally can relate with! Let's explore some common biases with simple examples (1/n) https://twitter.com/i/web/status/1748645185473404970 3:24 PM • Jan 20, 2024 1 Retweets 10 Likes Read 3 replies ​

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Vivek Mashrani, CFA Founder, TechnoFunda Investing

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