New Investment Theme: Businesses with Confirmed Order Books
Recall our prior exploration of the wind sector, which proved rewarding for companies like Inox Group, KPI Group, and Sanghvi. Following that success, I've identified a new theme: companies with confirmed order books.
In today's uncertain global environment, with numerous elections, wars and economic anxieties, secure order books offer a distinct advantage. Some of these companies are in sunrise sectors, already have the contracts and backlog which could help them weather market volatility and sector tailwinds will provide new orders for even higher growth.
Promising Industries with Secured Backlogs:
Solar EPC Players: Most major players have locked in large orders for the next 12-24 months, exceeding this year's performance. SW Solar, KPI Green, and Waaree Renewable exhibit substantial growth potential, with Waaree's recent result already proving this thesis. Additionally, SW Solar's pursuit of a negative working capital cycle signifies sector-wide potential for optimization. KPI’s CPP/IPP hybrid model fuels robust performance expectations. Websol, with its recently commissioned facility and pre-booked product sales.
Additives in Petrol/Diesel: Driven by government targets and aggressive policy, this sector presents exciting opportunities. BCL Ind's recent large ethanol order (500cr plus) and the second ethanol procurement tender point towards sustained demand. Maize-based players like Gulshan Polyol and Coastal Corp., as well as diversified sugar player DCM Shriram Ind (with its planned value-unlocking demerger and exposure to multiple hot sectors, including ethanol and defense), are particularly attractive. Kotyark Industries, with its substantial order book exceeding Rs. 1500 crore and potential to reach over Rs. 2000 crore due to large OMC biodiesel orders, could experience a significant leap in turnover next year.
Beyond Confirmed Orders:
While focusing on secured orders, we recognize other promising sectors like water EPC (Wabag and EMS), e-mobility (Olectra), pipe players (Man Industries), pumps (Shakti) and power transmission EPC/cable companies. However, further exploration of these is best saved for future discussions.
Exclusions and Considerations:
We remain cautious towards most infrastructure players due to uncertainties in order book execution over longer time frames (3-5 years) and inherent industry challenges. Similarly, while both the railway and defense sectors have yielded positive returns, most significant opportunities appear played out, apart from select exceptions. Notably, L&T remains a leader, and smaller players like JKIL (metro specialists), PNC Infra (following post-asset sale financial improvement) etc deserve individual scrutiny.
Key Takeaways:
This "Confirmed Order Books" theme offers a valuable framework for navigating market volatility and identifying compelling investment opportunities. Remember, this thesis prioritizes existing orders over management projections of future order wins, providing a layer of risk mitigation. Conduct thorough due diligence, project forward valuations, and maintain a margin of safety to optimize your investment decisions.
Good Luck and a special thanks to Bard (Google AI) for taking my write up and turning it into something more professional and formal.
A few are Maximise candidates and trades for these will be shared on the whatsapp channel.
Link: https://whatsapp.com/channel/0029VaH7AW6H5JLy41Uobm3S
