MANYAVAR : Took an entry for about 1.25% of the net capital

1 Feb

Overview:

This small-cap stock operates in the textile sector and holds the largest market share in men's wedding attire in India. Additionally, it has expanded into women's and children's clothing under the sub-brands Mohey and Mebaz. The business boasts a consistently high gross margin of around 60%.

Reason for Recent Stock Decline:

The recent crash in the stock can be attributed to its overvaluation. Despite favorable price, revenue, and earnings forecasts by analysts, the market corrected the stock's price to align with its intrinsic value.

Financial Outlook:

The company's financials remain attractive, with analysts forecasting positive growth. Institutional investors, both Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs), have been increasing their holdings consistently over the past few quarters, indicating strong institutional interest. Although mutual funds have reduced their stake, the decline is not significant.

Shareholding Pattern Analysis:

While the increase in retailer stake might raise concerns about weak-handed involvement, considering other factors, it appears manageable. Moreover, my entry price is lower than the price where these acquisitions are made and it gives me a better margin of safety over them.

Investment Strategy:

Took an entry for about 1.25% of the net capital, with a target upside move of 48% on the invested capital. Acknowledging the downside risk of around 21% to all-time low levels, further additions to the position will be considered if the price consolidates or exhibits signs of reversal in the coming weeks.

Will update if any changes are made, underneath this post.