Telling the Truth – We did not recommended it!
Lot of Investors are happy about Choosing Adani Green in their Portfolio – I am happy for them too!
Note: This is NOT A MULTIBAGGER Recommendation
What triggered the Spike?
Adani Group was declared Top Solar Power Provider in the World! It is really a Good News for Adani Group & I hope it may help the Group to grow bigger.
Why Futurecaps did not recommended it?
We were analyzing this stock 6 months back but did not recommended it for the following reasons:
- Company is Loss Making
- Very High PE Ratio
- High Book Value Ratio
- Huge Debt Accumulated
- NO Intrinsic Value Discount
Art of Valuation
Now let us evaluate the company one-by-one in our Futurecaps way.
Remember the first rule of investing.
PROFIT IS MADE IN THE BUY!
For example, If I am selling a Maruthi 800 Car at Rs. 1 Crore, Will you Buy It?
NO! As you know the market value is Rs. 2 Lakh – you would expect to buy below it to make profits on re-sale.
Similarly, In Stock Market we calculate the Past EPS Growth, Project It to the Future EPS, Discount Back to Present, Compare with the NO Risk FD Returns to Arrive at the Intrinsic Value based Buy Decision.
More on Intrinsic Value here.
PROBLEM #1 Company is Loss Making
Company is loss making per the 2020 P&L. The Operating Profit Margin is 57% but Net Profit is Loss.
It may turnaround in the upcoming years.
PROBLEM #2 Very High PE Ratio
If you consider the Trailing QR results, still the PE Ratio is Very High at 2000!
PROBLEM #3 Too High Book Value Ratio
As of today the PB Ratio is 80 which is TOO High!
(even Reliance Industries does not have such high valuation)
PROBLEM #4 Huge Debt Accumulated
The Debt/Equity Ratio is at 9 which means the company raised debts more than Banks & Financial Institutions.
The Trailing Interest Coverage Ratio is at 1 which means company can just pay off debts & no profits.
Pledged Shares exists too.
(currently it is paying off interest using lion share of operating profits)
PROBLEM #5 NO Intrinsic Value Discount
We cannot calculate any Intrinsic Value Discount on this.
PROBLEM #6 Sector is NOT Profitable
Solar Sector is NOT Profitable as of today – very few companies operate & the competition from Oil & Battery sectors are huge. At the current debt & interest payment the company requires 100 years to pay-off the debts. Also, the Innovation of Super Charge Batteries (Tesla) are a Huge Threat for Solar Sector. (subscriber knowledge)
What is the Impact of News?
The news made the price go high & making the valuations even higher!
When to sell it?
We cannot have a Clear Path of Selling It as there was No Clear Path on Buying!
One can hold some more time for more amateurs to enter the band wagon Or till the peak of bull market Or sell 50% to hold remaining free of cost for Infinite returns. Decision up to you.
Did anybody became Rich?
90% Investors of Adani Green did not become Rich because: They lacked the Confidence to invest heavily in such a loss making company with huge debts. People were just playing with Rs. 10 Thousand kind of investments on this.
That is what I said before – You need Confidence to Invest Big Money!
More Confidence > More Investment > More Returns > YOU BECOME RICH!
What will happen to the Profit Makers?
They eventually trust the advisor who gave such an over-valued scrip & continue with other recommendations to eventually make losses.
Gambling are Short-cuts which will NOT make you Rich as You invested ONLY less money & You cannot REPEAT the success!
However these price hikes will definitely help the Promoters Group as they can use the extra money to release the Pledged shares.
Back to Value Investing
DON’T BE GREEDY – there will be lot of random multibaggers like this – but they seldom make investors rich.
Instead I would recommend you the following:
- FOCUS on value investing
- BUY with heavy confidence + capital
- HOLD for long term
- GAIN multibagger returns
- REPEAT the process
MASTER MIND TRAINING be the pro-investor in 3-months | weekly 1-2 hour effort only