Host – Mr Kamal Manocha, Chief Strategist and Advisor, PMS AIF World Speaker– Mr Rakshit Ranjan, Fund Manager, Marcellus Investment Managers. Highlights : - 1) What are the Insights on Page Industries and Dr Lal Path Labs and what makes the suitable for wealth creation? Page : - – Page has also not approached the industry in a straight forward manner – 80% sales of competitors are from uppers. For Page, it is from lowers. – Price point against the quality of product offered is lowest in the industry – Jockey (Page Industries’ Brand) has always been perceived as an International brand. – Consistent Availability brings stickiness of customer base for the product – Page Industries has reinvented Kotler’s 3 Ps -Product, Price and Promotion – ROCE Pre tax vs Post Tax for page industries is 50-55% vs 40-45% respectively – Page redeploys at least 70% of operating cash flow – Earnings growth is the outcome of ROCE and Reinvestment of capital. – Last 10 years earnings growth is more than 30% compounding Dr Lal Path Lab : - – Dr Lal Path Labs has also not approached the industry in a straight forward manner. – Dr Lal Path labs is more of a Retailer – Diagnostic industry is around 40,000 crores in size – Dr Lal Path labs is playing the volume game as they have not raised the price for last 2 years – Not burning capital in in-experienced areas is very important. – Last 10 years earnings growth is more than 25 % compounding 2) Marcellus portfolio is considered to be Low risk road to stupendous wealth, but it is high on valuations. Whats Your take on this? – Low risk comes from strong fundamentals. – Compounding will be inherit-ably be healthy with relative low volatility – Most people look at valuations are looked at by P/E multiple only, But P/E does not capture the longevity of growth. – Please understand, P/E multiple either doubles of halves over a period of time – In 10 years, if P/E becoming double it means 7% CAGR ( rule no 72 ) – So, Halving of P/E means negative 7% CAGR in 10 years ( rule no 72 ) – Earnings Compounding for Unilever – 8%, Maruti – 13%, Sensex – 11-12%. – Doubling of PE of Maruti adds 7% return and gives you 20%, halving will be 13-7=6%. – Page industries last 10 years earnings growth is more than 30% compounding – Doubling of P/E will go to 30+7% 37% and halving will be 15-20% if not 30 - 7% – Thus, a very powerful earnings compounding engine makes P/E a very small contributor to the performance of the stock – P/E can bring a difference of only 7% in long term – P/E never compounds, Earning Compounds – Chase Earnings, and not PE – Since Earnings are the Key, companies with strong earnings seldom command less PE – If earning are consistently high, and PE is low, for some external market reasons, it's time to invest.