1. Multipie stock pitch competition ends tomorrow
Before we start with the weekly insights, a quick reminder that our stock pitch competition ends tomorrow. You still have the weekend to come up with your best stock pitch idea in 1000 characters/150 words and win amazon vouchers worth INR 5K-25K.
Download the app on playstore, iOS or and join with the invite code PITCH to participate. You can also use our web page with the same code (easier to create your stock pitch there). More details are in the image below:
2. Market snapshot
Markets saw signs of a correction last week, with no sector closing with significant gain. Last week, no sector closed at a major gain. Real estate, IT and Consumer discretionary merely gained by 0.5%, 0.4% and 0.4%.
Small and microcap indices saw jitters, correcting 3.6% and 3.1% against an overall dip of 0.9%, proving their high beta nature.
3. Pharma companies facing price erosion in US markets
Lately, a large majority of pharmaceutical companies such as Aurobindo, Alkem Laboratories and Laurus Labs have been suffering from price erosion in US markets especially after Q4FY21.
Even though the companies saw their best times in US markets in FY16/17, their recent revenue growth in the US has been subdued relative to the domestic markets. See below:
The quarterly trend of top companies:
Annual revenue growth trend of top companies: Domestic V/s US
Why are pharma companies struggling in US markets?
Due to covid, there was a delay in USFDA facility inspections which ultimately led to a delay in product approvals and launches. As this created a supply shortage in the industry, channels started building up the inventory i.e. distributors-retailers started accumulating the stock (stocking) with themselves.
Looking at this, many pharmaceutical companies got bullish on the demand and announced huge capex plans. As slowly the inspections got back on track, product launches took place and supply spiked.
With no supply shortage anymore and distributors/ retailers already saturated with inventories, demand reverted back to normal levels (de-stocking) leading to pricing pressure for the companies.
Currently, operating in the US business has become more like a treadmill as companies have to continuously launch products to cover up the impact of their previous price erosions.
So one should keep in mind that it’s not just commodities, all businesses/sectors have their own cycles including pharmaceuticals and dynamics largely depend on demand-supply economics.
4. Interesting Weekly Result Updates
5. Video series on identifying red flags: #Uniply Industries
We have started a new series “Deciphering the financial statements” where our Co-founder Mihir Patki will be explaining how to discover red flags with real-time case studies of different companies.
In our first episode, we covered Uniply Industries the potential multi-bagger which turned out to be a wealth destroyer and explained how one could have avoided this company in the start itself by just looking at a few line items in the financial statements reported.
6. Visuals of the week:
6.1 Daily average volumes traded on IEX declined in November YTD
The daily average volumes traded on IEX’s platform have declined in November. As the global coal supply is normalising, this is leading to declining in volatility due to which power companies are buying/selling less frequently now.
6.2 Stocks with minimum 30% correction from 52 weeks high
7. Good reads and important announcements of the week:
7.1 A good read on how investors pivot to India after China’s tech crackdown. We recommend you to read this article for an interesting perspective.
7.2 A wonderful piece on understanding the whole “D2C explosion”.
7.3 A must-read on “What makes a great investor”.
7.4 In the Reliance industries’ deal with Saudi Ramco which was signed in Aug’19, it was decided that Saudi Ramco will be acquiring a 20% stake in Reliance’s O2C business but now the deal has been called off for now.
7.5 Farm laws were repealed by the prime minister yesterday morning. You can find the details of the same in our thread.
7.6 GST rate on apparel and footwear has increased from 5% to 12% on the sale value more than Rs 1,000 whereas for some synthetic fibres and yarns have been lowered to 12% from 18%.
8. Multipie interactions of the week:
Multipie community is building stronger every day and there are many interesting interactions happening on the platform. This not just includes great insights on different companies and important announcements but also discussions on individual stock stories and personal investing experiences. Here’s the glance of the same:
That’s all for this week. Please share with your peers if you found this helpful and subscribe to start receiving the weekly digest in your mail! Happy weekend!