Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Q2 – Sep 30th FY11 – Photoquip Result Analysis and Buffett Munger quips

with 9 comments

In two words, exceeded expectations. It is going to make co-owners of this business wait for lesser duration than I had anticipated.

If one does not know the “whys” of trends in revenues and profits, its tantamount to gambling. Reasons behind rise and fall need to be validated and proven, whether they are temporary or sustainable. That was the reason that despite Photoquip having grown revenues 3x+ times between 2006 and 2010, it was not such a high conviction bet compared to Relaxo, TTK Prestige, Hawkins, even though latter have not grown revenues with similar scorching pace.

With my expectations set low enough I was looking for 25%+ topline growth and did not care much for bottomline this year nor do I still. Companies have to resort to all sorts of measures, experiments, ads, promotions to establish market place. You know that Microsoft sells XBox console at less than cost price to the company, actually making a loss only with hope of making profits later in distributing gaming titles. Its very much applicable to Elinchrom, sell the kit, to create sizeable userbase and make tonnes on accessories. One needs solid base, money will come eventually. Microsoft prefers piracy in India as long as it helps beat Linux and opensource flavours, so that users contributing zero to bottomline stay familiar with Windows atleast. Earn mind space if not wallet share.

Actual September results can be downloaded from BSE website or here ( Q2 2011 Photoquip )

Topline trend continues, 46% up.

Encouraging to see depreciation for this quarter at 0.5 crores higher than whole of last year, more new products underway !

Economies of scale yet to reflect on bottomline. One will have to wait. Raw materials have risen in tandem with revenues. Xbox factor ? maybe.

Hirings up, employee cost 45% up. Useful parameter I learnt from S&P Global Challengers study (,2,2,0,1148443919038.html) that uses two extrinsic and two intrinsic factors, one of them being increase in number of employees.

Wont make much into profits, operating efficiencies are a wee while away.

Two interesting quips from Buffett and Charlie Munger:

Student: What are they teaching us wrong in business schools ?
Munger: How can you answer it only in one hour ? [laughter]

Interviewer: Are you overspending on GEICO advertising ?
Buffett: Quotes another successful CEO, “Half of our Ad revenues is going waste, I don’t know which half.”

We need to learn from others mistakes, as the quote goes, “Its an honour to die for ones country, make sure other guys get the honour.”

I continue to accumulate.


Written by amitdipsite

October 25, 2010 at 9:30 am

Posted in Uncategorized

9 Responses

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  1. Very good numbers. Although I am more into fundamentals, I am waiting for this one to take out its high of 44.90.


    October 25, 2010 at 1:44 pm

  2. Hi Amit,

    If at all one wants to put a price target (considering sufficient time frame) what do you think would that be for photoquip?

    Where do you see it going….hmm let's say 2-3-4 years?



    October 25, 2010 at 3:18 pm

  3. Hey MG,

    Correct me if I am wrong. Doesn't fundamental say that if a stock keeps falling, keep buying as long as company is growing topline and bottomline, also maintaining market leading position.

    The technicals study works on price, chart pattern for entry and exit ?



    October 25, 2010 at 9:15 pm

  4. Hi Elton,

    Difficult to say how markets react to it but its not cool to jump in an out of your favourite stocks. I jumped in and out 3 times from TTK Prestige on its journey from 90 Rs to 1000 Rs coz I was new to this whole small cap world.

    As long as future is bright keep increasing position if sales/profits and future prospects keep pace. People have bought HDFC shares from 10 rs to 500 Rs all the way from 1990-2003. Ditto for Axis Bank.

    I have learnt to buy shares even after they rise 10 times in a year. Relaxo from 20-200 I bought, symphony up from 20-200 I kept buying. RJ bought Praj Industries after it ran up 10 times in previous few months. As the story keeps evolving we need to make calls. Yes, we can jump in and out, finally its our wish. Buffett bought 50% of GEICO for 40 million $ in 1970s and second half of GEICO for 2 billion $ in 1990s (50 times the original price for first half).

    This is an iconic brand, should not wipe your out. If sales keep growing at this pace for 3-4 years then it can be in 4 digit stock. But its too early to make a call, we need to watch for equity dilution if any, positive and negative developments.




    October 25, 2010 at 9:43 pm

  5. Thanks Amit for sharing your thoughts.



    October 26, 2010 at 8:26 am

  6. You are right Amit. I am looking at technicals only from the point of view of adding more. Now this is a clear buy for me (especially after the good results and subsequent breakout). Increased its weightage in my portfolio. I am just a small investor, so don't think my actions will impact the market.


    October 26, 2010 at 1:27 pm

  7. Hi Amit,

    The numbers surely looks good… The future seems bright (is bright) but how about the management.. Are they actually investor friendly or just interested in filling their own pockets?



    October 26, 2010 at 2:08 pm

  8. Thanks a lot Amit. I was about to post a question but your reply answered it well. I have had a few stocks where I've entered at rock bottom and when its risen i haven't been able to get in.
    Anyways will keep Buffet example of GEICO in mind next time round and will buy photoquip tom again
    bought a few at 34 and 36 now will add a few more. Same was the case with GIDL. My target of it was at Rs90. I was able to just buy a few at 97 and then i saw it rising to 270+ but could never buy it again

    Thanks a lot for sharing your thoughts and analysis with us



    October 26, 2010 at 5:06 pm

  9. Hi Abhay,

    Management is subjective and hard to guess. People decipher from dividends alone, that would immensely reduce your stock universe. I don't. Infact some people go farther than I do don't mind management evading taxes, getting jailed too.

    From whatever communication I have had, and I have extrapolated I trust in abilities of management. With good brand management becomes less important too.

    On the whole, I see no red flags.




    October 26, 2010 at 7:18 pm

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