@Lajja_Shah wrote:

Greenpanel Products:

1. Medium Density Fireboard
2. Wood Floors
3. Plywood & Blockboard
4. Veeners
5. Doors
   Manufacturing Facilities:
6. Rudrapur, Uttarakhand
7. Chittoor, Andhra Pradesh (MDF Plant)

• Greenpanel is a focused MDF entity with some presence in the plywood space. We have 3 world-class plants; two for MDF and one for plywood. A plant in Uttarakhand has both plywood and MDF and we have another MDF plant in Andhra Pradesh. We are targeting increased capacity utilization in future quarters to increase revenues and improve margins in MDF.
• As you are aware, the sector is constrained by overcapacity and imports have a significant share. We are hopeful that the government takes cognizance of this and ensures a level playing field. We also expect that there will be sustained efforts by the government on improving GST compliance which in turn will help reduce the price gap between organized MDF and non-organized plywood.
• Dispatches for plywood stood at 2.23 million square meters with capacity utilization at 84%. MDF sales volumes were 62,561 cubic meters with blended capacity utilization of both plants at 52%. For the quarter for MDF, export sales were 16,490 cubic meters with a realization of 12,285 per cubic meter and domestic sales were 46,071 cubic meters with a realization of Rs. 23,147 per cubic meter.
• Anti-Dumping Duty request: We had provided all the data to the government to initiate the investigation into anti-dumping. The government vide a notification issued on 5th November has notified commencement of the investigation and concerned parties will be requested to provide any data in support that anti-dumping should not be imposed within a period of 45 days. I think, probably the government will complete the investigations and take a final decision on the matter within the current financial year.

Q1: With this kind of utilization also, we were able to end the quarter with a positive EBITDA and also even at PBT level. At least, MDF segment also reported profit. So, just wanted to understand that this increased realization in domestic market – because I think export realization which you gave Rs. 12,000 still remains very low – Rs. 23,000 domestic realization has it helped, or has it increased significantly. I just wanted to understand how this EBIT positive number in MDF is coming at 56% and 50% utilization?

A1: When we look at the fact that domestic realizations have fallen substantially over a period of 1 year, yes, we have undertaken a lot of activities to reduce the raw material cost and power cost and those activities are continuing. We are taking further steps to ensure optimization of resin consumption, and as capacity utilization scales up, we should also see further reduction in power cost. I think once capacity utilizations ramp.

• Uttarakhand plant should achieve 80% utilization from Q4 FY20 or Q1 FY21. To achieve the above, we have clarity on one point that we will not be taking any price cuts to increase the volumes. We are targeting to increase the distribution network which will provide access to more markets than we are present in currently. The second part is, we have also strengthened the team and also some new members have been brought on-board to ensure coverage of a larger area than we are doing presently. I think that will help us to achieve increased volumes in the next few quarters.
• Our target for Andhra plant is 60% this year. We would aim to reach 70% by the end of Q4.

Q2. Sir, my first question is, could you also please spell out what your plans are for the plywood segment? After the demerger, how do we plan to take this business forward in the plywood segment?

A2. After the demerger, we saw a substantial fall in plywood sales last year primarily because we did not have the infrastructure, we did not have a separate sales team for plywood, and also as per the terms of demerger, we were required to sell our plywood under a new brand. So, we started building up the infrastructure and also the brand from around November last year, and over a period of now almost 1 year, we have been able to make substantial progress in plywood. We have had a capacity utilization of around 80% in 6 months of the current year and we are targeting 100% capacity utilization in the next financial year.

• Overview of MDF industry: We have about 13 lakh cubic meters of domestic MDF capacity, and over and above that, imports would be in the range of about 2,50,000 to about 3,00,000 cubic meters per annum. So, including imports, the total capacity is about 15.5 to 16 lakh cubic meters and the domestic market currently would be of around about 9 lakh cubic meters.
• We are doing exports. I would not say it is nonviable, but it is a low-margin business. We are currently doing exports to have a higher capacity utilisation which enables us to reduce our fixed overheads and secondly, we also have some pending export obligations for project imports. So, exports is helping us to fulfill those obligations. If you look at the current half year, out of our total MDF volumes, about 35% comes from exports.
• Competition Landscape: As I mentioned, India has surplus MDF capacities currently because of three big capacity additions in the recent past; Century’s 2,00,000 cubic meter capacity, Action’s 2,25,000 cubic meter capacity, and our Andhra Pradesh capacity of 3,60,000 cubic meters came on board within a period of about 9 months. So, capacities in the country went up by about 2-1/2 times. That has created surplus capacity in India and it will probably take about 2-1/2 to 3 years before we see a normal demand-supply ratio. The major manufacturers are Greenpanel, Action, Century, and Rushil. Rushil has a small capacity currently of 90,000 cubic meters but they have been projecting to start their new plant in Q1 FY21 which would probably be another 2,00,000 cubic meters capacity. That’s the broad competition landscape.

Q3. What would you expect the top line growth going forward over the next 3 years let’s say? And range of EBITDA margin if you can.

A3. Like I mentioned, we are targeting about 62% to 63% capacity utilization in the current year and we would be targeting a capacity utilization of about 80% in FY21 and full capacity utilization in FY22, although in the MDF space, it would be a mix of both domestic and exports as far as the mix is concerned. For the capacities we are targeting, we would be expecting EBITDA margin of about 16% in the current year, about 18.5% in the next financial year, and about 21% in FY22. This is for the MDF space.

Q4. What domestic-international mix you are comfortable with? 50:50, 40:60?

A4. We are targeting about 65% domestic and about 35% exports.

• Raw Materials: The major raw materials are wood and chemical resins for both plywood and MDF. The only difference is in the ratio of wood and chemicals for both these product segments. In plywood, the ratio of wood and chemicals would be in the range of about 80% wood and 20% chemical resins, and in MDF, it would be 65% wood and about 35% chemical resins.
• The government has started the process with e-way bill which definitely has helped some improvement. Earlier, a lot of unorganized plywood sales used to happen without any invoices. I think that has come to an almost complete stop, although a lot of invoicing is still happening in the range of about 30% to 50% of the actual material value. We are hoping that with the government concentrating on revenues from GST, there would be cracking down on the unorganized plywood segment so that they improve their invoicing levels and consequently provide a more level playing field for the organized manufacturers both in MDF and plywood.
• Export Markets: Currently, our major volumes of exports are going to the Middle East which would be Dubai, Oman, countries like that, and we are also doing a fairly substantial volume to Sri Lanka as well considering its own market size and then we have a certain amount of exports going to the Southeast Asian markets. These would be the primary focus areas for us.

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@ankitgupta wrote:

Birla Corporation (CMP: 642; MCap: Rs.4944 crore)
About the company
Birla Corporation Ltd is the flagship company of MP Birla Group which also runs companies including Universal Cables Ltd., Vindhya Telelinks Ltd., Birla Cables Ltd., Birla Furukawa Fibre Optics Pvt Ltd and Hindustan Gum & Chemicals Ltd. Post the demise of Mrs. Priyamvadaji Birla, as per her will, Mr. Rajendra Lodha and his son Mr. Harsh Lodha, were made the promoters of the group companies. However, the ownership of Birla Corp Ltd is under legal dispute, being contested by Mr. Harsh Vardhan Lodha and the descendants of the Birla family Birla Corp’s installed capacity post acquisition of Reliance Cement Company Private Limited (RCCPL) in August, 2016 has increased to 15.58 million tonne (MT). It has seven plants located in states including Rajasthan, Madhya Pradesh, Uttar Pradesh, West Bengal and Maharashtra. It has presence largely in North and Central India. The company is the second largest cement players in Central India after Ultratech Ltd. The group sells its products under well established brands viz MP Birla Perfect Plus, MP Birla Unique, MP Birla Samrat, MP Birla Ultimate, MP Birla Ultimate Ultra, MP Birla Chetak, MP Birla Concrecem, MP Birla Multicem, MP Birla PSC, etc. Apart from cement, the company also manufactures jute and runs a steel foundry but their contribution is less than 5% of revenue and profitability.

What is interesting about the company?
• Increase in aggressiveness of the group and induction of professional management: From being a sleepy management running decade old plants, promoter group and management has become aggressive with buyout of RCCPL and then announcement of brownfield and green field capex at Kundanganj (UP; 1.2 MT grinding unit) and Mukutban (Maharashtra; 3.9 MT integrated unit with 40 MW captive power plant & 10.60 MW waste heat recovery system [WHRS]) respectively. Kundanganj capex is around Rs.250 crore while the one at Mukutban is of Rs.2450 and expected to be completed in FY22. Post expansion, company’s total cement capacity will expand to 20.68 MT.

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Furthermore, acquisition of RCCPL was a well thought out decision as RCCPL’s cement unit commenced operations only in 2014 and are based on European technology with high operating efficiencies. Post take over by Birla Corporation, RCCPL has become the most efficient player in the central India with highest EBITDA/tonne. RCCPL also has mineral concessions in Maharashtra, Karnataka, Andhra Pradesh and Himachal Pradesh which can help the company in future expansions.

• Favorable demand-supply dynamics in central and north India: In cement, it is very difficult to forecast the demand and price dynamics. But one thing which can be analyzed is the new supply coming in the region. In terms of new capacity, not much new capacity is expected to be added and capacity utilization is expected to remain healthy going forward also for the plants located in the region.

(source: Shree Cement presentation)

Various measures taken for improvement in operating efficiency: Over the past few years, the company has been taking various measures to improve its operating efficiency. These include setting up of waste heat recovery system (WHRS) at Maihar of 12.25 MW, setting up of solar plants at Chanderia, Satna and Maihar aggregating 16 MW, setting up of railway sidings at Kundanganj amongst others. All these measures are expected to improve the operating efficiencies further and increase the EBITDA/tonne. Furthermore, the company has one of the highest shares of blended cement in its total sales at 94% while share of trade channel was at 83% during H1FY20, amongst the highest in the industry. The company has hired experienced professionals from large companies including Ultratech, Lafarge, Holcim etc and they have taken various steps to improve the operations. During H1FY20, the company’s sales volume increased by 3.9% while the industry along with the large players saw de-growth in volumes. The company has been taking various steps to improve efficiency in logistics also including reduction in lead distances, judicious rail-road mix, improvement in turn-around time, increase in direct dispatches, better freight negotiations and digital initiatives. There has been significant improvement in performance of standalone company (which had much lower EBITDA per tonne at around Rs.500 – 600) driven by higher capacity utilization of Chanderia plant & increase in mechanical mining there (the operations of the plant have been impacted due to ban on regular mining of limestone at its Chanderia mines due to its vicinity to Jaisalmer fort). Furthermore, the mining capacity of coal mines feeding Maihar plant are being doubled.

Valuations

• The company has done EBITDA of Rs.698 crore during H1FY20. EBITDA per tonne improved to Rs.1003 in H1FY20 as compared to Rs.684 during FY19 on account of increase in realization and various efficiency improvement measures that the company has taken over the past 2 – 3 years. Furthermore, the impact of installation of WHRS at Maihar, doubling of coal mining capacity there along with installation of 16 MW solar plants across plants in the company is expected to have full impact only from FY21 onwards.
• The Kundanganj grinding plant is expected to be operational from FY21 while the Mukutban plant will commence operations from FY22. The installed capacity will reach 20.68 MT by March – April, 2021. During FY23, I expect the volumes to touch 19.06 MT and assuming EBITDA of 1000 per tonne (factoring in withdrawal of GST refunds in RCCPL’s old plants at Maharashtra and Madhya Pradesh, increasing efficiency and GST refunds in new plants at Kundanganj and Mukutban), enterprise value is expected to touch around Rs.18,000 – 19,000 crore (assuming 9 times EV/EBITDA). The net debt is expected to peak at Rs.4,500 crore in FY21 and then reduce. Birla Corp’s peers having capacity of 10 MT and above (haven’t considered industry leaders like Ultratech, ACC, Ambuja and Shree Cement) including Ramco Cement, Dalmia Bharat & JK Cement trade at EV/EBITDA between 8.5 – 15 times. Other peers like JK Lakshmi Cement and India Cement trade at lower valuations primarily due to various issues.

Key Risks

High Debt: The company’s net debt will peak at Rs.4500 crore next year and has higher EV/EBITDA compared to its peers. However, most of these debt is long term debt and even the new debt the company is taking for Mukutban greenfield project is for 12 years. Furthermore, the company has a rating of ‘AA’ from all the rating agencies and the company has been able to raise new debt at lower rate of interest of less than 9%. In addition, some financial flexibility is derived from it being part of MP Birla Group.

On-going litigation over the promoter: There is an ongoing litigation about the appointment of Mr. Harsh Lodha as the promoter from the Birla family. This can pose a risk in case of transfer of ownership to Birla family. However, the company is run by professionals.

Key Financials

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Peer Comparison

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Excel File for the working: Birla Corporation Financial Working.xlsx (29.8 KB)

(Disclosure: Invested. This is not a recommendation or advice to purchase the stock)

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@lsubs wrote:

I see Genus Power being mentioned in many peoples PF, but there is no dedicated thread on this company. I started looking into this company 2 months back and below is the summary of my findings… I am new to this and request seniors to provide their inputs.

Company Background

Genus Power is a leading player in the domestic electric metering market. It was incorporated in 1992 for manufacturing PCB Assemblies. Production of tamper-proof meters started in 1996 and since then, the company has installed more than 60 million meters.

In the course of 20 years, the company has expanded it’s range of metering products to include Pre-payment meters, smart meters, Smart Street Light Management Systems, Smart Distribution Transformer Meters etc. The company has a 27% market share in the Meter Industry and 70% market share in Smart Meters specifically.

Genus Power has two business verticals

• Smart Metering Solutions
  • Contributes 87.5% revenue
  • Diversified product mix for Residential, Commercial, Industrial consumers
  • Provides Smart Metering Solutions, Prepayment Metering Solutions, Audit Metering Solution and Calibration Equipment.
• Engineering, Constructions and Contracts (ECC)
  • Contributes 12.5% revenue
  • Offers design-to-end-turnkey power solutions for power T&D sector
  • Ongoing/completed projects in Karnataka, UP, Rajasthan, Maharashtra, WB, TN etc.

The company gets it’s revenues only from domestic market.

Financials

Company Financials

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Sales	653.84	714.18	705.48	652.33	765.53	915	858.14	642.38	835.05	1055.47
Sales Growth		9.23%	-1.22%	-7.53%	17.35%	19.53%	-6.21%	-25.14%	29.99%	26.40%
Operating Profit	90.69	100.21	98.59	71.32	98.12	119.16	123.57	86.64	94.25	128.51
Operating Profit Growth		10.50%	-1.62%	-27.66%	37.58%	21.44%	3.70%	-29.89%	8.78%	36.35%
OPM	13.87%	14.03%	13.97%	10.93%	12.82%	13.02%	14.40%	13.49%	11.29%	12.18%
Profit before tax	31.04	75.57	45.41	46.84	61.3	70.8	100.55	70.37	75.09	92.54
Tax	4.65	14.49	-20.69	2.27	0.82	17.67	20.46	12.46	23.55	20.17
Net profit	26.39	61.08	66.1	44.57	60.47	53.12	80.08	57.91	51.54	72.37
NPM	4.04%	8.55%	9.37%	6.83%	7.90%	5.81%	9.33%	9.01%	6.17%	6.86%

There are 3 years when the revenue growth was negative

• 2017 - Disagreements between central and state governments on procurement of meters resulted in slower offtake of tenders. Since the issues were resolved towards the end of the year, the order book reflects higher orders.
• 2016 - The revenue drop of -6.21% was due to discontinuation of the power backup solutions business during that year. Post adjustment, the revenue growth was actually +5.77%
• 2012~2013 - Attributed to ow government spending on infrastructure

OPM and NPM has been steady during all this period.

Segment Revenues and Margins

I was not able to find breakup between the two divisions in the annual reports. So revenue, margin breakup is not available

Thoughts

Market position: Genus is fairly well known and large player in a very competitive market. Competitors include companies like L&T, ITI, Keonics, JnJ.
EESL is currently handling the deployment of Smart Meters (About Smart Meters). The contracts are awarded through tendering process. Often larger infra companies like L&T participate. However, the actual supply of meters get further sub-contracted and end up with companies like Genus. Having all the necessary certifications helps Genus.
Examples

• L&T, two other bag Uttar Pradesh power meter deal - Genus quoted the lowest price and won 50% of the 10 million meters order.
• L&T loses government order to supply 2.5m smart meters in reverse bid - Genus was the second lowest bidder behind ITI. (I think they got 30% of the order)
• Companies upset over smart meter tender - ITI won this bid but later subcontracted to 4 companies, one of which is Genus.

The order book has seen healthy growth over the past 4 years

2016	2017	2018	2019
386	685	1276	1498

The process is also prone to corruption and consequently bad press
Examples where Genus has been quoted

• Electricity meter procurement scam: Probe is underway
• Discoms’ meters defective, oil quality inferior: CAG

Imports, especially Chinese imports, are a constant threat as mentioned by Jitendra Agarwal of Genus Power in this interview - “Chinese imports have led to closure of many businesses”. However, in the last earnings call, he clarifies that no Chinese company has bagged a EESL tender

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However, this seems to be a constant threat.
Margins and Pricing: Being fixed price contracts, pricing is important during the bidding process. Raw material availability and cost form a big portion of the costs. The OPM and NPM has been steady (as shown above) at 12% and 6% respectively. The last two quarters has seen a sudden jump in these two to 15% and 8.5%. The conference call has some pointers on this improvement

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Receivables: The receivable days is high for obvious reasons. It’s consistently around 6 months. CCC too is similarly high

2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
197.56	190.32	206.75	217.05	164.15	146.94	170.95	208.32	182.99	186.99
159.48	155.40	180.53	198.79	154.34	144.98	167.46	201.19	165.10	158.01

Debt Levels: Debt to Equity has been reducing consistently over the years

2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
0.84	0.82	0.73	0.58	0.72	0.74	0.36	0.31	0.32	0.34

Related Party Transactions: The company had a Joint Venture in Brazil Genus SA, Brazil. This was divested in FY 2016. There was another subsidiary Genus Paper and Boards which was transferred to Genus Shareholders Trust. However there two associate companies and a few companies where Key Management Personnel are in position of influence. The concerning issue is that Genus Power has extended unsecured loans and guarantees to these unlisted companies. There are also transactions with these companies and KMP

Calling out some of the items from the AR (all values in lakhs)

	2016	2017	2018	2019
MKJ Manufacturing - Loan Balance	373	44	133	96
Greentech Mega Food Park - Investments	132	215	304	174
Yajur Commodities - Balance Receivables	2284	2490	2753	0
Yajur Commodities - Guarantee Given	16388	12205	7868	6855
Genus Consortium - Advances	9.85	10.4	1.7	3.4
Genus Innovation - Balance Receivables	1384	3525	3302	3591

Pledge
Another concern is that the promoters have pledged shares starting Dec 2017. The pledge is creeping up steadily

Dec 17	Mar 18	Jun 18	Sep 18	Dec 18	Mar 19	Jun 19	Sep 19
3.08%	3.31%	4.43%	4.43%	5.27%	5.27%	5.27%	6.51%

Valuations

Historical valuation

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Price	15.3	16.93	9.91	10.41	11	24.35	52.8	40.5	51	28.8
EPS	1.78	4.02	4.16	2.80	2.36	2.07	3.12	2.25	2.00	2.81
Price to earning	8.58	4.21	2.38	3.71	4.67	11.77	16.93	17.99	25.45	10.24
Book Value	19.86	24.15	28.04	30.71	16.90	18.98	25.51	27.38	29.09	31.48

Current valuation

Price: 23
P:E: 6.59
P:BV: 0.71

Thoughts

There is no doubt that the Smart Meter market is going to grow at a decent clip in the coming years. Department of Science and Technology’s report on Smart Grids clearly details the future direction. The section on Smart Metering mentions a CAGR of 8~10% in the next 4~5 years.

There is intense competition but Genus seems to be well placed to ride the Smart Meter wave over the next three years. It has the required R&D infra to handle the technological shifts. The management is confident of maintaining margins going forward. Looking at history, Genus seems to have managed the Receivables and CCC well.

The related party transactions and pledged shares is one of the major concerns. The market seems to have factored this into the 5-year low PE of 6.59. With two good quarters and improving margins, if the company can build on the momentum, we should see some improvement in market valuation.

Refer:

• Corporate Presentation Oct 2019
• Earnings Call Transcript Oct 2019

Disc: Started tracking a couple of months back. Invested less than 5% of PF as a tracking amount.

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@BSEGems wrote:

Anyone Invested or tracking this microcap - PG Electroplast, please do share more info…Thanks

PG Electro899×860 313 KB

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@NNaik wrote:

I found this stock while looking for Micro-Caps (< 50 crore market cap) which show good returns and growth with zero debt. It is currently trading below its recent IPO price of Rs 56 (Current Price - 38, Market Cap 10.36 Cr.)

Company is in the business of manufacture and installation of high end speaker systems in multiplexes and studios in corporate setup. It supplies to likes of PVR, Cinemax, UFO and INOX as well as corporates like Reliance, Hindujas as well as Government to Army, Navy, Airports etc. It installs the audio systems on project basis and also undertakes AMCs which forms a small portion of its current revenue.

They have a plant near Mumbai and also a warehouse. They import from OEMs in Europe. I am still trying to understand the value addition that Pulz does as well as what is the competition to the company. This will be key to understand the sustainability of the growth.

The growth numbers are strong with 3 year Sales CAGR of 23% with around 10% NPM. Key numbers

	Mar-13	Mar-14	Mar-15	Mar-16	Mar-17	Mar-18	Mar-19
Sales	5.28	9.21	11.77	12.98	13.76	18.04	24.00
Operating Profit	0.39	0.48	0.46	0.67	2.21	2.33	3.40
Net profit	0.21	0.10	0.01	0.30	1.34	1.62	2.46
EPS	4.20	2.00	0.20	6.00	6.70	5.94	9.02
Price to earning						6.49	4.42
Price	-	-	-	-	-	38.57	39.87
RATIOS:
Dividend Payout	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	5.69%
OPM	7.39%	5.21%	3.91%	5.16%	16.06%	12.92%	14.17%

IT has paid dividend for the first time this year.

While the Returns are good Inventory has been building up which is sometimes seen in growing business but is a definite watchout as it has been increasing.

PULZ ELECTRONICS LTD	Mar-13	Mar-14	Mar-15	Mar-16	Mar-17	Mar-18	Mar-19
Sales	5.28	9.21	11.77	12.98	13.76	18.04	24.00
Debtors	0.30	0.35	0.69	1.01	3.11	1.07	1.26
Inventory	2.78	4.61	4.54	3.80	4.46	7.25	10.56
Debtor Days	20.74	13.87	21.40	28.40	82.50	21.65	19.16
Inventory Turnover	1.90	2.00	2.59	3.42	3.09	2.49	2.27
Number of days of Inventory	192	183	141	107	118	147	161
Return on Equity	11%	5%	0%	12%	35%	18%	21%
Return on Capital Emp		11%	10%	14%	48%	32%	34%

Management Quality

Overall information about this group is little hard to come by and the promoters seem to be well qualified for the industry

Mr. Ramakrishnan Krishnaraju Manden Kattilaged 69 years, is the Promoter and Executive Director of our Company.He holds graduation in Science. His Key Competencies includes designing amplifiers, speaker system, Acoustical measurements and calibration for cinemas, auditoriums and studios. He plays a vital role in the management of the Company.

Mr.Anirvan Partha Ghose aged 43 years is the Promoter and Managing Director of the Company. He has done his graduation in Bachelor of Science from St. Xavier’s College, Kolkata and also completed a course in Computer Hardware from Institute of Electronics and Hardware Technology, Kolkata in 1994. He has done specialized audio video training from Dolby Laboratories, Sim2, Sound Engineering and Sound recording Course from Film & Television Institute of Pune in 1997. His Key Competencies includes designing Auditoriums, Cinemas and Recording Studios, Designing and Manufacturing of Audio Equipment, Installation, Calibration and Maintenance of Audio and Projection Equipment in Cinemas He is member of SMPTE, IFFI Technical Committee and NFDC Technical Committee.

Management compensation at 57 Lakh (23% of Net Profit) is on higher side and is another watchout for coming years

Valuation at current levels seem very attractive at PE of 4.2 and should provide good margin of safety.

Overall seems like a good business to be in as companies like PVR have been growing in investing in new multiplexes especially in smaller towns. There should be a good runway for growth in medium term as mix of single screen vs. multiplexes continues to change.

Still researching the company and few things I want to understand are -

1. How much of value addition is Pulz doing?
2. Understand the competition and power that suppliers have in Multiplex infrastructure
3. Understand the audio technology and find out what kind of OEMs are supplying to Pulz and is there any edge due to these relationships.
4. Understand the management track record more as this is a recent IPO and there is not much of historical data
5. Understand the nuances of investing in a microcap space and even a small investment will be illiquid with Just 10 Crore market cap of which promoters hold 70% +

Disc: Interested but not yet invested.

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@cabunny wrote:

Hi Everyone,

I am attaching my working on Beekay Steel Industries Limited. Please share your views.

I am new to investing, suggestions are welcome for further improvement.

Regards,
Abhinav

submission.docx (1.3 MB)

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@msbedi89 wrote:

Shree Digvijay Cement is a Gujarat Based cement company tookover by Truenorth PE last year from Brazilian Promoters at a price of INR16 per share. Truenorth has now put in Anil Singhvi as the Executive Chairman of the Company (Ex CEO Ambuja Cements). Anil Singhvi through his firm Anagha Advisors also bought around 5% stake in the company post his appointment as Executive Chairman. Further ESOP plan has been started for the employees to align their interests with the management.

Last 2 quarters have seen phenomenal changes in the company financials. Snapshot below explains the improvement in the financials. EBITDA margins has zoomed to 20-25% as the company has taken steps to reduce costs. Company has announced a rights issue to raise money which after 2 quarters has been cancelled. Within 2 quarters company has become debt free as the free cash flows from improved margins have been used to pay off debts

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Sustainability of performance is critical for the company going forward. Would be great to hear views of others

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@bhaskarbora67 wrote:

TCNS Clothing Co. Limited is India’s leading women’s branded apparel company in terms of total number of exclusive brand outlets as of May 2018, according to Technopak. The Company designs, manufactures, markets and retails a wide portfolio of women’s branded apparel across multiple brands. The Company sells its products across India and through multiple distribution channels. As of March 31, 2018, the company sold its products through 465 exclusive brand outlets, 1,469 large format store outlets and 1,522 multi-brand outlets, located in 31 states and union territories in India. As of March 31, 2018, the company also sold its products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka. In addition, the company sold its products through their own website and online retailers.

The company’s product portfolio includes top-wear, bottom-wear, drapes, combination-sets and accessories that cater to a wide variety of the wardrobe requirements of the Indian woman, including every-day wear, casual wear, work wear and occasion wear.

Mr. Onkar Singh Pasricha and Mr. Arvinder Singh Pasricha are promoters of the company, each have over 40 years of experience in the apparel industry, and the Managing Director, Anant Kumar Daga, leads an experienced and professional management team. The Management team, including Anant Kumar Daga currently has a significant ownership stake in the Company. The shareholders also include a fund affiliated with TA Associates, a marquee private equity group.

Mainly 3 brands

a). Brand “W”: “ W” is a premium fusion wear brand, which merges Indian and western sensibilities with an emphasis on distinctive design and styling. This brand is targeted primarily at the modern Indian woman’s work and casual wear requirements. “ W” has been recognized as the ‘ IMAGES Most Admired Fashion Brand of the Year : by India Fashion Forum consecutively for past three years between 2015 to 2017 . “W” had 258 exclusive brand outlets and 676 large format store outlets located across 148 cities in India and five outlets outside India.

b). Brand “Aurelia”: Aurelia is a contemporary ethnic wear brand targeted at women looking for great design, fit and quality for their casual and work wear requirements. “Aurelia” had 159 exclusive brand outlets and 629 large format store outlets located across 149 cities in India and one outlet outside India.

c) Brand “Wishful”. Wishful is a premium occasion wear brand, with elegant designs catering to women’s apparel requirements for evening wear and occasions such as weddings, events and festivals. The Company is leveraging their “W” store network for selling Wishful products, however, they recently launched first exclusive brand outlet for Wishful, in September 2017.

Revenue from sales of products under brand “W” , “Aurelia” & “Wishfulgrew” is growing at a CAGR of 48.67 %, 70.82 % & 66.66 % respectively during FY13 to FY17 . Moreover, in FY17 the revenue from “W” , “Aurelia” & “Wishfulgrew” accounted for 61.23% , 30.35 % & 8.41% respectively.

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Risks:
Slowdown in demand for TCNS’ products due to change in customer preferences and lower
brand appeal are key risks. Competition from other brands, including from private labels
retailed by channels such as large format stores and e-tailers are also risks. F

Disclosure: Not invested

looking for views from everyone
It is a good play on branded ethnic wear of ladies, good growth in past and looking for better growth ahead

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@saketmehrotra wrote:

A company engaged in Staffing and providing HR related services. Led by Manish Sabharwal who is on the RBI board alongside N Chandrasekaran (the Chairman of Tata Sons).

Here’s a link to my Quora Post: https://qr.ae/TSjzEJ

Kindly feel free to discuss and take this further.

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@bhaskarbora67 wrote:

TCNS Clothing Co. Limited is India’s leading women’s branded apparel company in terms of total number of exclusive brand outlets as of May 2018, according to Technopak. The Company designs, manufactures, markets and retails a wide portfolio of women’s branded apparel across multiple brands. The Company sells its products across India and through multiple distribution channels. As of March 31, 2018, the company sold its products through 465 exclusive brand outlets, 1,469 large format store outlets and 1,522 multi-brand outlets, located in 31 states and union territories in India. As of March 31, 2018, the company also sold its products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka. In addition, the company sold its products through their own website and online retailers.

The company’s product portfolio includes top-wear, bottom-wear, drapes, combination-sets and accessories that cater to a wide variety of the wardrobe requirements of the Indian woman, including every-day wear, casual wear, work wear and occasion wear.

Mr. Onkar Singh Pasricha and Mr. Arvinder Singh Pasricha are promoters of the company, each have over 40 years of experience in the apparel industry, and the Managing Director, Anant Kumar Daga, leads an experienced and professional management team. The Management team, including Anant Kumar Daga currently has a significant ownership stake in the Company. The shareholders also include a fund affiliated with TA Associates, a marquee private equity group.

Mainly 3 brands

a). Brand “W”: “ W” is a premium fusion wear brand, which merges Indian and western sensibilities with an emphasis on distinctive design and styling. This brand is targeted primarily at the modern Indian woman’s work and casual wear requirements. “ W” has been recognized as the ‘ IMAGES Most Admired Fashion Brand of the Year : by India Fashion Forum consecutively for past three years between 2015 to 2017 . “W” had 258 exclusive brand outlets and 676 large format store outlets located across 148 cities in India and five outlets outside India.

b). Brand “Aurelia”: Aurelia is a contemporary ethnic wear brand targeted at women looking for great design, fit and quality for their casual and work wear requirements. “Aurelia” had 159 exclusive brand outlets and 629 large format store outlets located across 149 cities in India and one outlet outside India.

c) Brand “Wishful”. Wishful is a premium occasion wear brand, with elegant designs catering to women’s apparel requirements for evening wear and occasions such as weddings, events and festivals. The Company is leveraging their “W” store network for selling Wishful products, however, they recently launched first exclusive brand outlet for Wishful, in September 2017.

Revenue from sales of products under brand “W” , “Aurelia” & “Wishfulgrew” is growing at a CAGR of 48.67 %, 70.82 % & 66.66 % respectively during FY13 to FY17 . Moreover, in FY17 the revenue from “W” , “Aurelia” & “Wishfulgrew” accounted for 61.23% , 30.35 % & 8.41% respectively.

image.jpg1517×887 261 KB

image.jpg1159×630 196 KB

image.jpg1540×688 299 KB

image.jpg1359×430 197 KB

Risks:
Slowdown in demand for TCNS’ products due to change in customer preferences and lower
brand appeal are key risks. Competition from other brands, including from private labels
retailed by channels such as large format stores and e-tailers are also risks. F

Disclosure: Not invested

looking for views from everyone
It is a good play on branded ethnic wear of ladies, good growth in past and looking for better growth ahead

Posts: 10

Participants: 7

Read full topic

@yourraj wrote:

About the Company
MIDHANI (Mishra Datum Nigam Ltd) is majorly owned by the government and manufactures a variety of super alloys, titanium and titanium alloys, special-purpose steels, controlled-expansion alloys, soft magnetic alloys, electrical-resistance alloys, molybdenum products, and other special products made according to customer specifications. The company also offers metallurgical testing, evaluation, and consultancy services. Its quality control is recognised by the National Accreditation Board of Laboratories. MIDHANI is under the administrative control of the Ministry of Defence’s Department of Defence Production
Mile stones
• 1983-1984 First commercial production started
• 1987-1988 Entered into the field of fabrication of special armour panels
• 2000-2001 Development of bio implants from Titanium alloys
• 2001-2002 Development Niobium alloy required for critical space applications
• 2002-2003 Supply of indigenized special fasteners commenced
• 2005-2006 Development of large forgings of Chromium -Molybdenum steel in the form of weld neck flanges, blind flanges etc.
• 2006-2007 Development of gun barrel forgings.
• 2008-2009 Achieved Mini Ratna category-1 status from MoD
• 2009-2010 Commencement of commercial production of 6.5 metric tonnes vacuum induction melting furnace
• 2010-2011 Commissioning of critical equipment like 10 tonnes vacuum arc re-melting furnace
• 2011-2012 Implementation of the e-Procurement portal for publishing and processing tenders online. Signatory to UN Global Compact Initiative
• 2014-2015 Commissioning of 6000 tonnes forge press and electron beam melting furnace
• 2015-2016 Commissioning of in-house designed 20 tonnes electro slag refining furnace and 10 tonnes vacuum arc re-melting furnace Awarded “Excellent” rating with a score of 97.06%, which is the best amongst all the defence PSUs and ranks among top 5% of all companies signing such MoUs with the Department of Defence Production
• 2016-2017 Commissioning of 20 tonnes electric arc furnace
Plant locations
• Hyderabad
• Nellore
• Rohtak
Products
• High Value Specialty Steel
• Super-alloys
• Titanium Based Alloys
Ultra High Strength Steel: Ultra High Strength Steel has yield strength between 1400 and 2400 MPa with high strength, excellent toughness and weldability without losing their malleable nature, and it belongs to the ultra-high strength materials category.
Armor Grade Steel Plates: Armor grade steel plates are used for bullet proof application to ensure the safety of individuals and/or contents transported from one place to another. It possesses excellent hardness and toughness along with high velocity projectile protection for vehicles in combat situation. The key end user application includes both defence vehicles and commercial vehicles. Generally the walls, doors, and the ceiling of these vehicles use armour grade steel to increase the ballistic resistance of the vehicle. The functional components of the vehicles such as engine components are made of superior quality to withstand load and excess weight.
Ferritic Stainless Steel: Ferritic steel contains high content of chromium, magnetic stainless steel with less than 0.12% carbon content. Ferritic steel have good resistance to corrosion along with excellent surface finish and stress corrosion cracking. This material finds application with thinner material and reduced weight with strength.
Martensitic Stainless Steel: Martensitic steel has carbon content of upto 0.75%, with chromium from 12.5% to 18%. Tempered martensite steel provides increased hardness and high toughness. Improved group of martensitic stainless steels are the super martensitic stainless steels that provide high strength with low-temperature toughness having acceptable corrosion resistance.
Austenitic Stainless Steel: Austenitic steel are non-magnetic stainless steel grade with high level of chromium (upto 28%) and nickel (36%) along with low level of carbon. Austenitic steel grades have enhanced corrosion resistance with modified structure from ferritic to austenitic. These types of grades are categorized with 200, 300 series and are most commonly used type among other types of stainless steel.
Precipitation Hardening Steel: Precipitation hardening steel is classified as martensitic or semi austenitic steel grade that can be strengthened and hardened by heat treatment. This material is ideal for applications that requires high strength-to-weight ratio such as aerospace.
Process :
Company’s manufacturing facilities includes primary and secondary melting furnaces such as electric arc furnace with ladlle refining furnace, vacuum degassing/ vacuum oxygen decarburisation, vacuum induction melting, vacuum induction refining, vacuum arc re-melting, electro slag re-melting and electron beam melting. Subsequent operations are carried out with 6000T/1500T forge press, ring rolling mill, hot rolling and cold rolling, bar and wire drawing based on the output sizes required. The auxiliary supporting services like conditioning, heat treatment, machining, pickling, quality control also form part of our manufacturing processes.
The primary raw materials used by Company for manufacturing our products are: (a) nickel metal to various specifications; (b) cobalt metal to various specifications; © various master alloys; (d) pure iron; (e) titanium sponge of various grades; (f) chromium metal to various specifications; (g) mild steel scrap/stainless steel scrap; (h) high carbon/low carbon ferro chrome; (i) aluminium metal in various forms; (j) manganese metals; and (k) different ferroalloys
It is good to mention that the by-products produced during the production process are not hazardous to the environment. Different forms of by-products generated during the process of manufacturing are reused by the Company at different stages of the manufacturing process.
People / management / Skill enhancement:
• The value added per employee in the last five years has seen a growth from ₹ 3.7 million in Fiscal 2013 to ₹ 7.2 million in Fiscal 2017.Compnay have undertaken following steps to motivate talent : Dr. Tamhankar’s trophy for young managers below 35 years for encouraging new ideas. They have Employee suggestion scheme along with Best employee of the year award in each category executive, non-unionised supervisor, worker and woman.
• As of January 31, 2018, company have 852 employees, comprising 268 executives, 71 non-unionised supervisors and 513 nonexecutives. Of these non-executives, 271 are skilled workers, 201 are semi-skilled and the balance of the employees consists of unskilled labour and administrative staff.
for management brief back ground one may look at Mangment of MIDANI.docx (14.3 KB)
Intellectual Property :
business under the name and brand of MIDHANI. Our logo has been registered in the name of Company as a word mark and label under class 6 and 35.Company have been issued the trademark registration certificate on May 18, 2017 in respect of advertising, business, administration, office, functions, demonstration of goods, dissemination of advertising matter publicity services, promotional services, all being in relation to special metals and alloys. Company have been issued the trademark registration certificate on May 26, 2017 in respect of common metals and their alloys, design, development and equipment made out of special metals and alloy sheets. Company use the brands MDN, SUPERNI, SUPERFER, SUPERCO and TITAN which are not registered.

Niche Space:

Competitive advantages:

Most advanced and unique facilities

• Company is the only facility in India to carry out vacuum based melting and refining through world class vacuum melting furnace such as vacuum induction melting, vacuum arc remelting, vacuum degassing/ vacuum oxygen decarburisation, electro slag remelting and electron- beam melting. It enables our Company to venture new markets with innovative and advanced products.
• Company has successfully produced Hafnium metal having vital application in the space sector for the first time in the country using state of the art electron beam melting furnace. Also, we have manufactured large nickel super-alloy based casting through air induction melting route.
• Thus the wide spectrum of advanced melting facilities enables company with the flexibility to provide it’s customers with high quality products which meet their stringent quality requirements.

Capability to manufacture wide range of advanced products

MIDHANI is a manufacturer of special steels and stainless steels, Superalloys (nickel base, iron base and cobalt base), commercially pure titanium and titanium alloys, soft magnetic alloys, controlled expansion alloys, heat resistance alloys, special purpose alloys, refractory metals and other alloys in different shapes, properties and sizes.

MIDHANI have process capabilities across the product manufacturing value chain, including melting, forging, rolling, wire drawing, investment casting, machining and quality testing. We are a modern and integrated metallurgical plant for manufacturing a wide spectrum of critical alloys in variety of forms such as ingots, forged bars, rings hot rolled sheets and bars, cold rolled sheets, strips and foils, wires, castings, fasteners and tubes using state of the art production facilities for defence, space, aeronautics, power and thermal power, electronics, tele-communications and engineering industries and other sectors in India. Compnay monitor all its processes, right from the receipt of raw materials, manufacturing to packaging of products. In addition, we also use high quality/pure form of raw materials to manufacture alloys. This helps MIDHANI to ensure high quality of it’s manufactured products and control our production costs. MIDHANI’s variety based capacities also allow it to service customer requirements in a timely and efficient process with the flexibility to produce different ranges of customised products to our customers. MIDHANI is in a unique position to leverage both economies of scale and scope as we are capable of processing different alloys. Some of the alloys that MIDHANI manufacture have properties higher than international standards to meet specific requirements of our customers.

MIDHANI’s wide range of products and ability to meet the specific customer needs enable us to successfully service core strategic sectors such as defence, nuclear/ power and aerospace.

• Strong long term customer relationships
• Company have a strong and an established relationship with it’s customers. Company have partnered with many of it’s key customers in the product development process, enabling it’s products to meet the exact specifications provided by the customers and to ensure repeat orders. MIDHANI’s relationships with it’s major customers, especially in core strategic sectors, have existed for more than three decades. MIDHANI undertakes an in house survey for customer satisfaction. The results of customer satisfaction index during 2012 to 2015 is more than 3.5 on the scale of 1 to 5.
• Going forward, it’s believed that there is likely to be an increase in demand for special metals and alloys on account of government initiatives such as Make in India that will boost defence production and heavy equipment manufacturing in India, which will indirectly lead to an increase in demand of it’s products. Company intended to continue to leverage these long standing relationships and continue to grow it’s business operations in line with these expectations.
• MIDHANI’s quality is exemplified through the ISO 9001:2008, AS 9100C and NABL certifications that it have obtained with respect to it’s manufacturing processes. Company is committed to enhancement of customer satisfaction by continually improving the effectiveness of quality management system to drive organisational performance. Company intend to strive to exceed client expectations during every stage of the project life cycle. This, coupled with it’s flexibility in setting prices for it’s products, is a significant advantage to our business. The trust of it’s customers is manifested through customer funded capital investments at the Company. As on September 30, 2017, customer funded assets constitute ₹ 660 million out of the total gross block of our Company of ₹ 3,653.94 million.
• Research and development based technology development

MIDHANI keep abreast with the latest developments in related fields of science and technology. To be at par with the global technological progress, it place strong emphasis on technology of products, technology of process and technology of equipment. In it’s in-house research and development team works towards improvement of product quality and processes innovation. e.g it has reused titanium scrap to make ferro titanium for Indian market . It has manufactured the adour engine disc through isothermal forging process for aerospace sector under Make in India programme .

Company has team comprising of 14 officers who have in-depth knowledge of the design and engineering of special metals and alloys. In 2016, we have established a new melt shop with electric arc furnace, ladle refining furnace, vacuum degassing facility, new ring rolling mill and higher capacity forge press apart from echo system of making value added products like tubes, fasteners, etc. MIDHANI has in-house metallurgical laboratories to cater to the testing required for it’s products. Given the strategic and sensitive nature of our customers’ operations, it is vital for company to ensure delivery of high quality products to customers…

Highly Qualified and Experienced Management and Management Systems

Risks :

• Significant dependence on single or few customers
• Significant economic changes that materially affect or are likely to affect income from continuing operations.
• Portion of business relating to our import of raw materials and other capital equipment are in other currencies. Our exchange rate risk primarily arises from our foreign currency revenues, costs and other foreign currency assets and liabilities to the extent that there is no natural hedge. We may be affected by significant fluctuations in the exchange rates between the Indian Rupee and other currencies.
• The proposed 100% foreign direct investment in defence services with full technology transfer may result in private companies manufacturing superalloys

Indian Industry Out look:

Overview of the Defence Sector

India’s defence industry continues to strive to become a cutting edge, technology-savvy, self-sufficient, and world-leading industry. According to data published by the Department of Industrial Policy and Planning, India’s defence industry had attracted ₹ 130,000 million in Foreign Direct Investment (“FDI”) in Fiscal 2015. The proposed 100% FDI with full technology transfer aims at addressing the need of capital investment and improved technology transfer. Ordnance factories (“OF”) and Defence Public Sector Undertakings (“DPSUs”) are engaged in the manufacturing of weapon systems for the armed forces. The private sector has been mainly involved in supplying raw material, semi-finished products, and components to DPSUs, OF, army base workshops, air force base repair depots, and navy dockyards.

Some key features of the Indian defence industry include:

Fourth largest armed forces worldwide, in the 2017 Military Ranking by the Global Firepower list

One of the largest arms importer, accounting for 12.8% of global arms imports (between 2012 and 2016) Ranks fifth in the global military budget (2016)

The industry however, suffers from several legacy issues. Almost half of India’s military equipment is approaching obsolescence. Additionally, India overwhelmingly relies on imports for its defence equipment. Almost 70% of its defence requirements are imported.

India’s military seems reluctant to procure weapons from Indian firms, citing low or no track record in defence manufacturing. Additionally, Indian firms have refused bidding for government tenders worth approximately ₹ 975,000 million since 2013, quoting unrealistic quality demands, opaque processes, and slow decision making.

By 2027 the government plans to achieve approximately 70% indigenization in defence purchase, and the government has taken steps by budgeting ₹ 915,800 million for defence capital expenditure in Fiscal 2018, which is 25% of the nation’s overall defence budget. To take this to the next level, India expects to export defence equipment worth ₹ 128,000 million by 2019 to countries such as Vietnam, Mauritius and the UAE.

Between 2015 and 2020, the defence cumulative spending is estimated to be ₹ 22,931,500 million, of which new armaments spending is estimated to be ₹ 8,630,500 million. Procurement of new equipment from domestic sources is estimated to increase between 2015 and 2030 from 44% to 55%. By Fiscal 2025-2030, the defence spending is estimated to hit ₹ 41,934,700 million.

New procurement policies would likely result in indigenous development and increased production in the long term. The Indian defence establishment will move from off-the-shelf purchases to co-development and partnership. Critical equipment shortfall in certain sectors would mandate high-value, off-the-shelf purchases in the short and medium terms to maintain the combat readiness of the Indian Armed Forces.

Contribution of the Defence Sector to the Indian Economy

There is a positive direct link between the defence budget growth and economic growth. Defence spending has macroeconomic implications, since security threats have an adverse impact on trade and business. Gross Capital Formation (“GCF”), (investment, at current prices) estimate for Fiscal 2016 was 30.4% of GDP, the lowest since Fiscal 2012. However, India stood well above the global average of 24.2% in 2015, which is a healthy sign. The way forward is to boost investments through increased private-public partnerships.

Defence allocation is likely to remain constant for the next three to four years, in order for the government to focus on offsetting the economic impact of demonetization. The MoD currently need an increase of roughly 10% to deal with inflation and the vast sums required to modernize India’s aging military hardware.

Speciality material – high value speciality Steel, Superalloys and titanium alloy products – are a vital segment to the defence industry, and is found on almost every application platform. For instance, fighter jets use high performance specialty steels and Superalloys. Light armoured vehicles use significant tonnage of steel plate per vehicle. Steel plates are also used by the navy in the fleets of bodies and propulsion systems. The control cables found in the defence industry are produced from steel wire rope. A subsequent increase in the defence budget will have a direct positive impact on the demand of speciality material in India. Given the cost advantage and highly skilled engineering talent base, India could harness its potential to produce superior material indigenously and also increase its presence in the global supply chain.

The market growth for high value speciality steel, Super-alloy and titanium alloy products is largely dependent on new project investment and expansion plans of the defence, air force, navy, space segments. The Army’s plans involve indigenization of key components and spares of tanks and other weapons systems. This is in synchronization with the aim of the MoD to reduce import bill and promote domestic production of military equipment. The Indian Air Force (“IAF”) has outlined its 10-year modernization plan (2016-2026) that identifies services and technologies which it requires, and aims to share this information with the private sector. About 15% of the projected acquisitions of ₹ 30 lakh million are likely to be sourced from local manufacturers. Also, half of the Indian fighters are due to retire between 2015 and 2024. A government to government (“G2G”) contract for off-the-shelf purchases of 36 aircrafts is currently under negotiation. The remaining 90 fighters will be developed under Make in India. In its expansion plans, ISRO has announced various projects that will increase demand for specialty materials. For instance, Chandrayaan 2, GSLV MK-III, SAARC Satellite, GSAT-9, and Aditya L1 are some of ISRO’s upcoming space missions.

Emphasis is laid on the indigenous design, development, and manufacture of cutting-edge weapons and missiles

Global Industry Outlook :

Market Overview for High Value Speciality Steel

High value speciality steels are premium alloy steel grades that are used across major industries such as automotive, industrial components, aerospace, defence, oil & gas etc., mainly as functional components that are subjected to high temperature, stress and corrosive environment. As per World’s Steel Association, the global finished steel consumption is estimated to be 1,515 million tonnes, of which commercial high value speciality steel products account to around 5% in 2016. High value speciality steel grades are broadly classified as Nickel alloy, armor grade steel and other speciality stainless steel grades.

Market Overview for Superalloys

Superalloys are speciality products that have superior resistance towards corrosion and oxidation at high temperature (around 600oC) with extended lifespan in higher stress conditions. Frost & Sullivan observed the global demand for superalloy products to be around 425,000 MT, with major consumption in countries such as US, Germany, France, Italy, UK, Russia and Spain.

Market Overview for Titanium Alloys

Titanium metal is known for its high strength to low weight ratio, making it an ideal material for aircrafts manufacturing, including fighter aircrafts. Other key end user segments where titanium finds application are bio medical implants, and exhaust systems in high end automobiles. Frost & Sullivan observed global production of titanium to be around 200,000 MT in 2016, with China and USA leading in global production. Titanium alloys occupying a healthy 13% of total aerospace raw material demand through the year 2020 globally, will fuel the demand growth for titanium alloy products during the next five years.

The United States is the largest supplier of high value speciality Steel, superalloy and titanium alloy products in the global market. The US has high defence budgets and large internal demand for aerospace and defence products. Majority of the global suppliers of high value speciality steel, superalloy and titanium alloy are based in the US due to large end users being based out of the country. These suppliers also have strong export orders. Other key countries for the supply of selected products are UK, Japan, Italy, Germany, France, Russia and China.

MOU / Alliance:

Recently Mishra Dhatu Nigam and TUBACEX, a multinational group with its headquarters in Alava, Spain and a global leader in the manufacture of stainless steel and high-alloyed tubular products signed a memorandum of understanding (MoU) to pursue a collaborative business model with the intention to develop and analyse potential joint business developments both for India and for other regions, based on their complementary manufacturing technologies for Power Generation and Oil & Gas applications.

Fundamentals


DIVIDEND POLICY

As per CPSE Capital Restructuring Guidelines, all central public sector enterprises are required to pay a minimum annual dividend of 30 % of profit after tax or 5 % of the net-worth, whichever is higher, subject to the maximum dividend permitted under the extant legal provisions and the conditions mentioned in the aforesaid memorandum.

Future:

Midhani seeks to enter the new markets of oil & gas, mining, power, railways, chemicals and fertilisers. The company is also positively looking at export opportunities.

Last but not least but very important point is that main expense of the company is cost of conversation is power / fuel

Fuel is taken from government public sector undertaking through competitive pricing and power is taken from state utility department. To reduce the cost of power, Company has invested in gas based power plant known as Andhra Pradesh Gas Power Corporation Limited and 4MW solar power plant and has applied for open access systems for starting the power trading to reduce the overall cost.
To ensure the reliable supply, company have a dedicated high power electricity line from Telangana State Transmission Company for it’s manufacturing facilities. It has installed 132/11 KV power transformers and one 132 KV switch yard for it’s manufacturing unit. It is also installing a second transmission line for high reliability.
However, for emergency, manufacturing facilities are also supported by four DG sets, one with a capacity 625 KV and three of capacities 500KV each, with the total aggregate capacity of 2,125 KV

Source : RHPROSPECTUS ( https://www.sebi.gov.in/sebi_data/attachdocs/mar-2018/1521178415613.pdf) and Company website and news articles

Disc: Not Invested Looking for lower valuations , I am not SEBI approved analyst .This is not any recommendation to buy or sell or hold
Regards

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@vikas_sinha wrote:

Disclosure: Together with GSPL, the parent company, total 15% of my portfolio since past 2 months. Have been adding since PE has been falling even as performance remains good/improving. As seen from screener.in, PE is at historical lows, while performance and outlook is the best ever.

Preamble:
I discovered this after having invested in Gas space about 3 years ago when I first started my investment journey. First picks were LNG Petronet, GAIL, Mahanagar and Indraprastha Gas. Exited most of them after some disappointment by the modest gains within a year. 2017-18 were turbulent times to judge value!
Mostly the bet was pre-mature and in case of LNG Petronet I could see forsee that it would be a laggard in the terminals business. Was shocked by Indraprastha gas re-rating and hence re-entered.

Objective is to create a thread for collecting/sharing ideas/opinions/information. The ValuePickr way!

Disclaimer:
Most of this article is credited to this report of BOB capital markets published a week ago:
https://www.barodaetrade.com/Reports/GujaratGas-CompanyUpdate30Dec19-Research.pdf

The analysts write:
At our recent meeting, GUJGA’s management assured robust outlook on volumes driven by (a) implementation of anti-pollution measures by the state government (new CNG state buses), and (b) relatively low LNG prices.
Volumes continue to trend above 9 mmscmd, as Morbi units sustain >6 mmscmd offtake, and carry additional 1-2 mmscmd potential. We raise GUJGA’s TP to Rs280 (from Rs270), as we roll forward valuation to Mar’21.
At 12.7x FY22 EPS, GUJGA remains most attractively value among its peers.

Buoyant volume outlook:
Ceramic units in Morbi (Gujarat) continue to offtake >6 mmscmd volumes, and carry potential for another 1-2 mmscmd as new units get connected. Concerns on Morbi customers shifting to GAIL for sourcing gas seems to have alleviated, as GUJGA’s pricing remains most attractive, along with its commitment to add incremental pipeline capacity to connect more
units. CNG volume growth could improve as Gujarat state transportation (GSRTC) has approved induction of 1000 CNG buses (250 in Q4 FY20).
Over the long-term, management expects most of the GSRTC’s ~7000 fleet of buses to convert to CNG.

Volume potential from new areas to fructify from FY21/22:
GUJGA is aggressively pursuing expansion into newer areas, maintaining capex guidance of Rs6-7bn annually. Initial strategy is to tap potential from existing network from Rajasthan until rural Thane region near Mumbai. Simultaneously, this
would help tapping volumes from new areas such as Dahej, Punjab (GUJGA has license for about 6 areas) and Rajasthan, that offer 4-5 mmscmd potential.

Undemanding valuations:
At 12.7x FY22E EPS, GUJGA’s valuations remain relatively attractive to CGD peers (~16x for IGL/MAHGL). This gap may get bridged gradually, given stability in volumes and margins.

Valuation methodology
GUJGA’s unique positioning in the CGD space makes it one of the best bets on gas volume growth potential, based on a) access to more than 80% of CGD potential in Gujarat, and b) strategic expansion into new areas (such as Dahej in Gujarat, Rajasthan, western Maharashtra and Punjab) that are contiguous to its parent GUJS’ pipeline networks.
At 12.7x FY22E EPS, GUJGA’s valuations remain one of the lowest among CGD peers (13x-17x for MAHGL/IGL). This gap may get bridged gradually, as volumes and margins sustain as elevated levels. We raise GUJGA’s TP to Rs280 (from Rs270), as we roll forward DCF valuation to Mar’21.
Key assumptions for our DCF-based fair value are as under:
 Cost of equity of 11.9% (from 11.4% earlier) and terminal growth of 5%
 Long-term average EBITDA margins at Rs5/scm

Key risks
 Lower-than-expected margins over FY21-FY22 could change our valuation
outlook for GUJGA
 Below-expected volume growth.
 Change in the PNGRB regulations, or an unfavorable court ruling (against
NGT ruling for ceramic units), could alter volume growth outlook.

Note:
GSPL owns 55% of Gujarat Gas.

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@prabhatg1 wrote:

A company with a market cap of below 56cr as today (10th Jan 2020) having ROE of 21%, ROC of 20%, sales growth of 20% forced me to look into this company.
So let’s analyze the company

Before analyzing any company of market cap less than 200cr. It is essential/mandatory to analyze the promoter/company owner first.

Promoters of Company is Mr. Anil Choudhary, Mr. Mohanlal Choudhary and Super Sack Private Limited

Mr. Anil Choudhary :
• Experience of more than 30 years
• Has been the director of the company since it’s incorporation so comsyn is the baby of Anil Choudhary
• Holding a degree of BSc from the University of Indore, M.A(Economics), Diploma in Marketing Management.
• Mr. Anil Choudhary’s age is around 60 years (This is a little sign of worry I prefer the company to be lead by a young person but they have their son onboard Pramal Choudhary and Ravindra Choudhary). Although Pramal Choudhary in his linked profile mentioned his position as Director of comsyn. In their company page, the designation is Chief Operating Officer (Just FYI nothing to conclude roles are almost same anyways)
• Salary :

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So jump of 40% salary from 2017 to 2018 I think it’s on higher side but one silver line is during the tough years he has taken an increment of 14% Only which is Ok but if you consider it whole salary of director 24 lakh is on very minimum side because in MNC(IT) an Employee of 8 years experience gets more than this.

Mrs. Ranjana Choudhary:

She is there with the company from 2011 She has completed her graduation in commerce from North Maharashtra University, Jalgaon. She has also completed her Masters in Computer Management from North Maharashtra University, Jalgaon. She has experience of more than five years in the plastic packaging industry. She looks after the day to day affairs of the Company. Why I highlighted in red here is there is someone on the board who has just 5 years of experience so is there any effective value addition to the company. Although her annual salary is 10 lakh and one more thing a micro-cap company with annual sales of 200 cr is It really adding value to the company to have two whole-time directors?

Mr. Virendra Singh Pamecha (Whole Time Director) :

Mr. Virendra Singh Pamecha, is appointed as Whole Time Director of the Company w.e.f. March 26, 2016. He acts as occupier of the company‘s factories and is entrusted with control of affairs of the Company’s factories at Pithampur. His salary is also around 10 lakh I didn’t get much detail about him so if someone has please let me know I will be happy to add here

Mr. Ravindra Choudhary, Chief Executive Officer :

Mr. Ravindra Choudhary is designated as Chief Executive Officer of the Company w.e.f May 12, 2016. He has done his Diploma in Finance & Tax Management and Diploma in Import Export Management. He is responsible to look after the strategic growth of our Company. His annual salary is 15 lakh

Mr. Pramal Choudhary, Chief Operating Officer :

Mr. Pramal Choudhary, is designated as Chief Operating Officer of the Company w.e.f May 12, 2016. He has done his Master of Business Administration from The ICFAI University, Dehradun. He is responsible to look after the operational and overseas marketing activity of our Company. His annual salary is 18 lakh

In total salary given two key managerial people is around 1 crore 40 lakh which is I believe Ok for a company of sales 200 crore and net profit of 11 crore

One thing I noticed here is company employee benefits expense is around 24 crore for total no of employee 1571 and if you divide the amount by no of employee it is coming around 1.5 lakh per person per annum which looks decent as shareholder point of view. The one reason to pay such a low salary could maybe work doesn’t require any special skill set.

But if you compare with Emmbi Industries limited there Employee benefit expense is 15 crore so in that manner Emmbi looks more economical because after spending 15 crores on Employee they can generate 289 Crore of sales and 17 crores of profit whereas comsyn has spent 24 crores on Employee but getting sales of 200 crore and net profit 11 crore something management has to retrospect is there any overstaffing?
Note : All source of information is Annual Report of Comsyn and Emmbi. Numbers can be completely wrong as I am very naïve investor please verify yourself all the numbers.
So all and all I didn’t find anything suspicious about management, about there salary with the limited public information available.
If you look at the company Mr. Anil Choudhary ‘s age is 60 years so Pramal and Ravindra have enough time to learn from their father.
Now let’s look at the key statement made by the company during IPO filling
They came with an IPO on 30th June 2016. The purpose of the IPO is to do debt reduction and meeting a working capital requirement. I don’t like when the company takes money from the market to reduce debt or to meet the working capital requirement because that shows a basic weakness in the business at the same time if the company takes money from the market for capacity expansion I feel comfortable in that anyways let’s move forward below is the details.
The below also there was one reason mentioned

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This is what the company promised what they will do of 7 crore, repayment of 4 crores and rest 3 crore is for working capital

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Now let’s check have they done it?

So IPO came in 2016 and my sense is the debt should be reduced by 2017

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So data from the screener suggest otherwise the company took money from the market but debt didn’t decrease we need to ask from the management about it.

Few questions till now.

• Why two whole-time directors in the company?
• Why there is a whole-time director with only experience of more than 5 years.
• Why there is a jump in salary of the director of 40% from 2017 to 2018
• The company has promised to reduce debt from the 7 crore amount which the company has received from the market during IPO why the company has not reduced debt?
• In general, we can see the business is capital intensive so earlier you taken money from the market and still, the debt to equity is around 0.9 how are you planning to manage the working capital in future and also the debt because money without interest option (IPO) has already been taken.

Enough talking on management now let’s talk about the business. Let’s move forward

What is the business ?

Comsyn is a manufacturer of FIBC, Tarpaulin, Woven Sacks, and BOPP Bags, located in Indore, a city in Central India. The product company made is mainly used for bulk transportation of material.

Sales figure : 75% Export and 25% Domestic market. So company is vulnerable to the currency fluctuation and any other business policy change in any country

FIBC Conductive Bags Market: Introduction

Total world market for FIBC bags stands approx. at 7.5 MMT. Flexible Intermediate Bulk Container (FIBC) bags are also called as Type C bags, which are also known as jumbo bags in market. These are industrial flexible containers, play a vital role in transporting hazardous chemicals, granules, powders etc. which are prone to electrostatic discharge hazardous events. The fast loading and unloading of the explosive or flammable chemicals, granules and powders may induce static charge on their surfaces, which in turn can cause sparks or hazardous events. FIBC bags are made up of polypropylene (PP). Elongating supply chains and increasing industrial activities creating more demand for FIBC conductive bags, which are lightweight and cost efficient. China, Turkey and India are the highest producers and exporters of FIBC conductive bags. Buy consumption Americas, China, Europe stands at the top places.

FIBC Conductive Bags: Market Dynamics

FIBC conductive bags are extensively used in industrial material handling or transportation which occurs in bulk quantities. These bags are nothing but a conductive jumbo bags, used in industries where the surroundings may likely contain explosive material, which might be ignited due to presence of ESD. Growing safety awareness, government regulations are driving the FIBC conductive bags market. These bags are interwoven with conductive threads (grounded) and non-conductive PP threads. The sewing is done in grid pattern. A grounding point is built on the body of the bag to safely discharge the accumulated static charges to the ground. Growing agriculture activities, which demand higher utilization of fertilizers, growing infrastructure development and mining activities influencing the growth of FIBC conductive bags market. Space optimization can be achieved in industrial material handling and inventory storage in warehouses using these flexible bags. FIBC conductive bags are used in food & beverages, cement, sugar, agro products, PTA chips, etc. Each FIBC can carry up to 1000 times its own weight, 75% of each FIBC has integral lifting loops, eliminating the need for pallets. Excellent printability, efficient use of space with specific designs, simple to use and cost effective. Very strong yet flexible, low per mt packaging cost, variety of dimensions available, variety of filling, discharging and lifting facilities, can be used for hazardous chemicals as specified in the UN Chapter 6.5. Recommendations are the factors making FIBC conductive bags market to grow at a healthy CAGR.

FIBC Conductive Bags: Market Segmentation

The global FIBC conductive bags market is segmented on the basis of grade, product type and end-use. On the basis of end-use, the global FIBC conductive bags market is segmented into food & beverages, agricultural products, Chemicals, building & construction, industrial and others. On the basis of product type, the global FIBC conductive bags market is segmented into Type B, Type C, and Type D FIBC conductive bags. On the basis of grade, the global FIBC conductive bags market is segmented into food grade and others. On the basis of packaging design the market is segmented into woven and non-woven.

FIBC Conductive Bags Market: Regional outlook

FIBC conductive bags market has been segmented on the basis of region into North America, Latin America Eastern Europe, Western Europe, Asia Pacific Excluding Japan (APEJ), Middle East & Africa (MEA), and Japan. FIBC Conductive Bags market in APEJ is expected to be the fastest growing market due to high demand and preference towards flexible packaging.

FIBC Conductive Bags Market: Key players

Some of the players in the global FIBC conductive bags market are FIPCO Filling & Packaging Materials Manufacturing CO., Gulf Plastic Industries Co. SOAG, GOLSAN BAFT COMPANY, Greif – Division Flexible Products and Services, LASHEEN PLASTIC INDUSTRIES S.A.E, Chuangda Plastic Industry Co., Limited, Fairdeal Jumbo Packaging Pvt. Ltd., Polychroic Petrochemicals Pvt. Ltd., Boxon GmbH, Carbognani S.r.l., Cesur Ambalaj San. Ve Tic. A.S., CLIMESA, CONTERRA S.A., Emmbi Polyarns Limited, Daphne Europe GmbH, EURO-PAK 2000 S.A, GPK PRODUCTS and others.

Source : transparencymarketresearch/ fibc-conductive-bags-market.html

Company has not given breakup of revenue among the products or at least I didn’t find if someone finds please let me know so company in a business of making bags which helps to transport bulk material, saves space for you so business is not very niche like Electric Vehicle or something but will not have much headwind or disruption in future that is my take on the business and the demand of the products will be there in the market as reports suggested.

Few Points about the business

• Business is capital Intensive
• Working Capital Requirement is more
• Not a Niche Business
• Not very disruption going to happen at the same time
• All and all an average business

So far Management is OK (Until we get our questions answered)

Business is Average

Now let’s look at the capacity expansion done by the company during past 4 years and how the sales and profit associated with it

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Now they are doing expansion of additional 3540 MT which will be ready by April 2020 so in 2021 or in 2022 it is fair to assume by looking at trend company can clock a net profit of around 20 crore if all goes well and if they are able to clock the same margin as they are doing now but keeping the same margin looks difficult we will get to know about it by a report from ICRA

But all these expansion comes at a cost of debt increase , equity dilution

Question for management when they are planning to reduce debt? After expansion ?

What our rating agencies says ?

A report by ICRA
They also pointed out the declining margin and the company’s requirement of inventory holding due to the nature of business and hence it directly affects working capital

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Weakness mentioned by Crisil

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One major Red Flag

Company has not provided information to the Crisil in Sep 2019 and in Oct 2019 rating has been withdrawn

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Need to ask the management why they have not provided information to the CRISIL and why the rating has been withdrawn

Their Debt has increased exorbitantly

So far we talked about

• Management
• Business
• Rating Agency View
• Capacity Expansion
• Working Capital and Debt

Now let’s talk about numbers and conclude with few open questions left to the management

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So far we have talked about mostly negative now lets see some positive side

1. Promoter Holding :

As latest Promoter Holding released on 9th Jan 2020 is 56% which has been increased from 52.15% in 2016 so promoters are buying their shares from the market

2. There ROC, ROE, Book Value, PE, Sales Growth looks good a clear case of undervalued stock if we just look at the number
3. A big positive - Only In this year company has declared dividend no that is not a big positive hang on company has given a 3% dividend to CMP(48) no this is also not positive the biggest positive is which I have seen in very less companies.“The promoter is not taking dividend which company has declared “
   
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Now I will conclude this blog with few open questions to Promoters and I will mail them and update here if I get anything

1. Why Information has not been given to rating agency because of that they withdrawn the rating.

2. Why dividend has been declared when company’s debt is increasing and company is in expansion phase

3. How are you planning to tackle the debt

4. Why two whole time directors in the company?

5. Why there is a whole-time director with only experience of more than 5 years.

6. Why there is jump of 40% in salary of director from 2017 to 2018

7. Company has promised to reduce debt from the 7 crores which company has received from the market during IPO why company has not reduced debt ?

8. In general we can see the business is capital intensive so earlier you taken money from market and still the debt to equity is around 0.9 how are you planning to manage the working capital in future and also the debt because money without interest option (IPO) has already been taken.

9. When there is no barrier entry to the business and cut throat competition and how you are planning to go ahead and what is your future plan to tackle the same

10. What is your expected margin going forward as ICRA pointed out there will be impact on your margin going forward

In Summary

Promoter: Ok
Business : Average
Valuation : Undervalued
Red Flag : I would say Orange Flag till we heard from management

Disclousure : I hold a tracking position in the company around Rs 48
This is my first post in Valuepickr so definitely i might made some mistake please forgive me and let me know i will correct it
Please forgive me also for two things

1. My Financial Knowledge as i am not from finance background and started investing just 3 years before
2. English in the post i know the english will be poor and will have lot of grammatical mistakes

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@alexander wrote:

Indo Amines is a specialty chemicals manufacturing company. It has been around for a long time (IPO in 1994. https://indoaminesltd.com/about/)

From the annual report -
“Your Company is a leading manufacturer of Specialty Chemicals with diversified end-uses into Agrochemicals, Pharmaceuticals, High Performance Polymers, Paints, Pigments, Printing Inks, Rubber Chemicals, Additives, Surfactants, Dyes, Flavors & Fragrances, Home & Personal Care applications, etc. Your Company makes continuous efforts to explore and innovate new products & processes in all
segments. This diversified end-user base helps the Company to reduce its risk from downturn in any individual business segment andalso to capitalize on the growth opportunities in each of the end-user segments”

It has 6 manufacturing sites in India with 4 under construction (https://indoaminesltd.com/). Their website claims to be one of the largest manufacturing companies in South Asia.

They seem to have 3 product lines of chemicals - fine, specialty and performance (https://indoaminesltd.com/products/). I couldn’t understand the technicals

Pros:

1. Good dividend payout in the last 10 years (~15-20% of profit can be expected as dividend going by history)
2. Greater than 15% profit and sales growth in the last 3, 5 and 10 year periods
3. Reasonable low valuation of PE - 7.85, Enterprise Value to EBIT: 6.71
4. Good ROE and ROCE of > 20% consistently
5. Promoter holding is high at 73% (Would love to hear more about promoters as I couldn’t find much…)

Cons -

1. It is a very small market cap company - 187 Cr mCAP
2. Debt seems to have increased - 123 Cr currently (Would have been great if it had grown without taking on so much debt)
3. Annual report is not great to understand the business properly
4. Don’t know the global threats to this business as I guess, its customers could buy from China etc… Don’t understand competition also
5. Employee review of the company is not great (https://www.ambitionbox.com/reviews/indo-amines-reviews, https://www.indeed.co.in/cmp/Indo-Amines-Ltd/reviews)
6. The promoter family (Palkars) are getting > 1 Cr salary while other key personnel are not getting good salaries

Why I am thinking of investing?
Growth seems good… for this type of growth, PE seems very less and the stock should appreciate significantly if the last 10 year trend continues for the next 2-3 years in my opinion

Please share your views.

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@rishit.05 wrote:

MMP Industries manufactures atomized aluminium power (AAP), Pyro & Flake aluminium powder, aluminium paste, aluminium foil, aluminium conductors and some other products too where aluminium is the main raw material

It’s products are used in multiple industries like paints, mining, pigments, pesticides, explosives etc

The company has recently moved out from the SME platform and is now listed on the NSE

Positives

• RM prices are passed on almost immediately, i.e. 10-15 days. It is basically an aluminum converter & processor
• 26% JV with Toyal (Japan) - commenced in Feb 2018. It is the only tie-up that Toyal has worldwide. This capacity is in excess of its capacity in china, japan & usa put together. This JV might also help MMP market its own products through Toyals worldwide distribution
• Market leader in its niche categories = 60% in explosives, 70% in AAC Blocks, 70% in pesticides
• Value migration from traditional bricks to AAC Blocks will occur at a quicker pace once real estate picks up

Risks

• Company is bit of an unknown entity. We don’t have a track record of its past performance across business cycles
• It’s subsidiary, Star Circlips (26% holding) makes auto fasteners, the performance of which is impacted due to the auto slowdown

Promoter holding is at 73%. Son & daughter in law are both into the business. Old bridge’s Kenneth Andrade has a decent stake in the company

The company is debt free, ROE’s have been 15%+ and profits have grown very well in the past five years. IPO money has been used to put up capacity which should come on stream very soon.

Views Invited

Disclosure: Invested

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@Hardik166 wrote:

Gokaldas Exports Ltd 20th January 2020
About the Company

1. The company is one of the largest manufacturers and exporter of apparels in India. The company’s portfolio includes Jacket, Shorts, Pants, Tops/Shirts contributing 23%, 3%, 21%,46% respectively of the revenue. Women and Men segments contributes equally.
   It has 30mn piece annual garment manufacturing capacity with turnover of ~Rs 1174.5crores in FY19 and ~Rs 704.1 crores for H1FY20.

2. Clientele includes GAP, Columbia, ZARA, H&M, Adidas, Nike, Lee Reebok, PUMA, etc. Top 5 client contributes 65% of the Top Line.

3. Hinduja Family, now running Capital Float- one of the largest Fintech company, was the original Promoter of the company. The company had come up with an IPO in April 2005 with a fresh issue of 31.25 lac shares at Rs 475 per share aggregating to Rs 133 crores for expansion. The total no. of outstanding shares after IPO was 171 lac shares of FV 10 aggregating to Market Cap of Rs 816 crores at Rs 475 per share. The promoter holding after IPO reduced to 76.90%. The turnover was Rs 720 crores with a reported PAT of Rs 39 crores in 2004-05. In FY06-07, the shares got split into FV of Rs 5.

4. Between 2007 to 2009 Blackstone PE bought ~68% stake in the Company at Rs 275 per share from existing promoter and got classified as a promoter with Hinduja moving out and selling its stake over the period.

5. In FY 2008-09, the company reported hefty foreign exchange loss of Rs 70 crores on account of volatility of currency and reported profit of Rs 3.45 crores. Post that the company continued posting hefty losses in FY11, FY12 and FY 13 of Rs 88 crores, 132 crores and 108 crores respectively with revenue decelerating, lower absorption of fixed cost and original promoter moving out from the business after selling stake to Blackstone PE.

6. From FY 14-15 onwards , even Blackstone started offloading its stake in open market and its holding reduced to 39.96% in FY16-17.

7. In FY 17-18, the Director of Blackstone PE fund, Mr. Mathew Cyriac bought Blackstone PE’s stake in the Company in personal capacity with few other investors through Clear Wealth Consultancy Services LLP at Rs 42 per share aggregating to Rs 58.61 crores. Also made an open offer at Rs 63 per share.

8. With Blackstone moving out, Mr. Mathew has brought experienced professionals on board to run the organization. The professionals started undoing things which went wrong during Blackstone era.

Business Strategy
9. Mr. ShivaKumar Ganapati who joined Gokaldas in May 2017 is known as a turnaround strategist in Industry. He was mastermind in setting up of the GNFC chemical plant. Before joining he was the COO of IDEA. Mr. Ganapathi has been with the Aditya Birla Group for more than two and half decades.
Mr. Sathyamurthy is with the company since November 2015.

10. The company has raised ~Rs 70crores through QIP and allotted 77,08,000 shares @ price of ~Rs 90.94 per share on 3rd May 2018.

11. The company is focusing on four-pronged strategy
    a. Strengthening of customer relationship by also catering to other brands of existing clients.
    b. Operational excellence by reducing wastages
    c. Cost effective capacity expansion. The capacity can be increased by two ways
    i. Improve efficiency by de-bottlenecking the existing capacities
    ii. Greenfield expansion. The company has already purchased 10 acres of land in Andhra Pradesh (labour subsidy is Rs 1,000-1,500/employee) and are also in evaluation process in North and central states for future expansion. The labour subsidy per employees in Jharkhand is Rs 7,000, in Madhya Pradesh is Rs 5,000 and that in Gujarat is Rs 4,000 per employee for five years.
    d. Infrastructure – To put in place required IT and other support services which will yield benefits in next 3years.

12. The company’s employee cost is ~33% of the sales which is higher than the industry standards. The average industry employee cost is ~25% of sales. Total no. employees as on 31.03.2017 is ~22,000 and majority are women.

Mr. Shiva is working on controlling employee cost by
a. Centralizing each facility/unit, which was earlier decentralized brand-wise.
Illustration: Earlier they had dedicated facility for GAP and raw material procurement was exclusively done for GAP. Thus, economy of scale could not be enjoyed in case of multiple order and multiple vendor. Employees utilization would be at sub-optimal level in case of lack/non- continuous order flow from GAP.
b. Currently employees are not skilled and can only perform some part of garmenting. The company is planning to implement employees training program where each employee would be trained enough to do each part of garmenting. Eg. Currently employee stitching collar is not trained to do buttoning or bottom part, etc.

13. The average rejection rate (including wastage) is around ~8-10% and defects are sent back to the company. The new contracts are made in such way that some part of defects would be borne by clients. Eg. New contracts will take care of + or -3% of rejections.

Competitors

14. In India, in garmenting, Shahi Exports is a leader with revenue of ~Rs 6,000 crores followed by Orient craft with revenue of Rs ~Rs 3,500-4,000 crores, followed by Gokaldas with revenue of ~Rs 1,200 crores.

15. KPR Mills, Kitex and SP apparels are not comparable on basis of employees cost with Gokaldas as all three companies are also into knitting which involve high capex. The average employee cost of these companies is ~20% and of Gokaldas is ~33%.
    Capex Program

16. The capex program for next 3-5 years would be around Rs 200-300 crore which would be met through internal accruals and debt and also the amount that will be received from releasing FD (FD -explained below). No need of further dilution in equity. The company enjoys 25% subsidy on Investment

17. The current capacity is 30mn pieces per annum. The company is operating around 90-92% utilization rate. The company would be increasing 15% capacity from existing facility by increasing efficiency. The Andhra Pradesh green field expansion project is in process and would be streamline by FY20.
    Losing on Fixed Deposit

18. In the past (8-10 years ago) the company hads secured loan against property, but the property was sold and thus FD of Rs 133 crores was put in place for the same. Due to bank’s complex compliance its not easy to release FD but the company is in process of releasing this FD and the new asset charge has to be created. New asset that will be purchased in future in capex program will be utilized to create charge and the FD will be released.

19. The company’s borrowing rate is ~7% after subsidy which is much better than going for foreign loan.
    Client concentration

20. Top two customers -GAP and COLOMBIA contributes more than 50% to the top line. The company is process of adding clients and reducing concentration risk going forward.

21. The company has added 5 customers during FY18. The revenue from these clients were 21crores during the year and potential is very huge.
    Foreign trade policy and geographical presence

22. As Japan offers duty free access to apparel from India, the company is evaluating ways to penetrate Japanese market. During FY18, revenue from Japan was 10-15 crores.

23. Europe levies 10% duty on imports from India and allows duty free imports from Vietnam and Bangladesh.

24. North America contributes ~51% to topline, Europe contributes 21% and Asia contributes 26%.

25. The company’s revenue from domestic market is 18-20% and this is during Q2 when the exports orders are low and the capacity is used to meet domestic demand.
    Others

26. The company hedges as and when the revenue is booked but MD is working on new hedging policy.

27. The company was having 35+ plants in 2008-09 and post that it started consolidating and today has 22 plants.

Industry size
28. The global apparel retail market is valued at $1300bn with China contributing ~$182bn and India contributing ~$65bn. China is de-growing by 5% and employee cost getting expensive augers well for Indian market. As far as low-cost producer countries are concern, Bangladesh and Vietnam are the direct competitor to Indian market. However, Bangladesh is only into garmenting and it has reached at saturation level. Vietnam is also at peak of its garmenting facility thus leave little headroom for the competitive edge it enjoys.

29. State like Madhya Pradesh and Chhattisgarh has come up with various garmenting initiatives. These states are planning to give ~Rs 5,000 per day per employees for next 3years. Though company has purchased land in Andhra Pradesh, it is evaluating various states policy where benefits would be highest.

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Triggers

1. The company has potential to grow its business by 15% CAGR in next 4-5 years. Thus, expecting top line of Rs 25,000 mn with EBITDA margin of 10-12%.
2. Professional on board to turnaround the company
3. Rerating in Sales and P/E multiple.
4. The global apparel export market is valued at ~$429bn in 2016 with China contributing ~$161bn and India contributing ~$17.4bn. US-China Trade war along with non-competitive labor cost will transfer some of the China’s business to other countries majorly India.
   Disclaimer: This is not a buy or sell recommendation. Views are based on personal research from publicly available information
   I am holding this stock

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@rk1771 wrote:

Recently I come across Sirca Paints India Limited.
The company is involved in distributing and selling wood coating/finishing products. Earlier the company was an importer and seller of products, imported from Sirca SRL Italy. Sirca SRL is also a minority shareholder in Sirca Paints India Limited.
The company has a 2-decade-old relationship with Sirca, Italy. The company has entered into a Manufacturing License Agreement, in 2018, with Sirca S.p.A pursuant to which the company is setting up a manufacturing plant to manufacture paints in India, under the mark “SIRCA”. Sirca S.p.A is also providing the technical know-how for the upcoming manufacturing facility. The company has also entered into a Distributorship agreement pursuant to which we have received exclusive selling rights for Sirca products in India, Sri Lanka, Bangladesh, and Nepal.
Sale is consistently increasing with a decent pace, 25%. The company is also maintaining a good Ebidta margin of more than 25%. In 2019, the company made a sale of 131 crores with net profit of 22 crores. The story continues in 2020, and in H1 the company has made a sale of 75 crores with profit of 15 crores. The sales are primarily sale of imported products.
The manufacturing facility was expected to start in September 2019. Management has guided that on full capacity, it shall add around 225 crores to the topline. Further, the company is increasing its sales and distribution reach from North India to other parts. Some new products are also being added. The manufacturing facility will not replace the sale of imported products, it shall add new product line.
Trial run for the new facility has started. In q4 results, we may see some addition in topline through the manufacturing facility. On a 30% capacility utilization, in next financial year the new facility can add substantially to top line.
Look like a decent company. Please share your view.
[Dosclosure- Invested]

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@m1hirk wrote:

Alkem Labs, an Indian pharmaceutical company

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Annual Report 2019 notes
Alkem is Ready to Scale the Next Frontier of Growth. It was a landmark year for the Company AS IT CROSSED THE REVENUE MILESTONE OF US$ 1 billion. The intense focus on building market-leading brands, investing in state-of-the-art manufacturing and R&D FACILITIES, ensuring continual adherence to quality and compliance, setting up robust supply chain and distribution network, penetrating deeper into key focus markets and driving efficiencies and productivity enabled it to achieve this significant milestone. While Alkem has firmly established itself among the leading pharmaceutical companies in India, the determination and drive to outperform itself remains as high as ever.

In the domestic market, Alkem is amongst the prominent players in the acute therapy segments of anti-infective, gastro-intestinal, pain/analgesics and vitamins/minerals/nutrients. The Company looks to further consolidate its position in these therapy segments through market leading brands, comprehensive product portfolio, extensive marketing and supply chain reach and an experience of over 40 years. In the fast-growing chronic therapy segments of neuro/CNS, cardiology, anti-diabetes and dermatology, the Company is taking rapid strides to emerge as one of the faster growing companies in the country. The Company looks to outperform in the chronic segments on the back of new product launches including in-licensed products, effective sales and marketing strategies, improved sales force productivity and building strong brands.

In the US market, the Company has developed a healthy pipeline of products with over 120 ANDA filings of which more than half are yet to be commercialised. Continuous investments in R&D, adherence to quality and compliance and timely product approvals will be pivotal in taking growth to the next level, not only in the US market but also in other international markets. Investments in biosimilars and its in-house manufacturing is another tactical lever for growth.

All in all, the capabilities and capacities are in place, be it product offerings, manufacturing, R&D, supply chain, technology or control systems. At the core of the Company’s ability to realise an even stronger tomorrow, is the unshakeable competitive desire of its talented team to outperform and a work culture that is aligned with organisational goals. These strategic levers will bolster the successful progression to the next level.

The financial year 2019 has been a mixed year for the Company. While our International business, mainly led by the US business, delivered a robust year-on-year revenue growth of 31.2%, our India business faced challenges on account of FDC ban on select products, relatively weak anti-infective season and muted growth in our trade generic business due to tightening of credit terms by the Company. Our EBITDA margin dipped by 60 basis points compared to the previous year on account of higher API prices, increase in R&D cost and change in revenue mix. However, on the working capital front, we showed good improvement over the previous year, and that translated into better operating cash flows during the year.

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Clavam, one of their brands features in the top 10 drug brands sold in India

Key risks mentioned in the annual report include
Alkem’s products face fierce competition from multiple pharma players, which may lead to shrinking revenues and impact its competitive advantage. The occurrence of quality issues, manufacturing defects and adverse audit findings by regulatory agencies may impair Alkem’s reputation and expose it to liabilities, fines or penalties. Adverse pricing regulation by NPPA on prices of key products may reduce company’s revenue and margins.

My view

The company witnessed strong growth across major therapeutic areas in Q2 FY20. As per the company’s quarterly results, anti-infectives and gastro-intestinal segments grew 30.8% and 17.5%, respectively, whereas Indian pharma industry in that space grew only 19.9% and 12.1%, respectively. The stock can do well especially because majority of the market is looking at MNC companies and ignoring other quality companies.

Technically, Alkem is near its 52 week high breaking out with a cup and handle pattern with high volumes
Disclosure: I have recently bought a tracking position in Alkem India, I might buy more/exit if the thesis changes. Hence recency bias. I invite other members of the forum who have looked at this company to share their opinions.

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@Sanjay_Kumar_E wrote:

I was going through stocks that recently saw exponential growth in EPS.

Ester came up in the screener with a EPS jump of 166% in Q3 FY20 and 280% in Q2 FY20. This is not due to the tax cut as the tax rate is still high. Operating Margin has gone up which is a good sign but Sales saw a negative growth in the Q3.

A closer look reveals that the EPS has been making higher bases every 4 - 5 quarters!

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How do the charts look? Stock recently made a 52w High at 43.75. CMP - 41. Forming a good base at 35.

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Before further research, I wanted to know if it is undervalued using a back of the envelope calculation. It is undervalued despite using very conservative assumptions.
Growth of 8%, Discount Rate = 15% and Margin of Safety - 30%.

Fair Value = 50, available at a discount of 20%?

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Has anyone studied this company?

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@rk1771 wrote:

Recently I come across Sirca Paints India Limited.

The company is involved in distributing and selling wood coating/finishing products. They have a tie-up with Sirca, Italy; import their products and sell it in India. Last three year results shows;

|Financial Year| 2016-17|2017-18|2018-19|
|Revenue (Cr.)| 84 93 131
|OPM %| 24 27 24
|Net Profit (Cr.)| 14 19 22

It can be seen that sale is increasing at a decent pace, and the company is maintaining a healthy margin. The imported products are high-end products.

Earlier the company was an importer and seller of products, imported from Sirca SRL Italy. Sirca SRL is also a minority shareholder in Sirca Paints India Limited.
The company has a 2-decade-old relationship with Sirca, Italy. The company has entered into a Manufacturing License Agreement, in 2018, with Sirca S.p.A pursuant to which the company is setting up a manufacturing plant to manufacture paints in India, under the mark “SIRCA”. Sirca S.p.A is also providing the technical know-how for the upcoming manufacturing facility. The company has also entered into a Distributorship agreement pursuant to which we have received exclusive selling rights for Sirca products in India, Sri Lanka, Bangladesh, and Nepal. The manufacturing facility was expected to start in September 2019. Management has guided that on full capacity, it shall add around 225 crores to the topline.

The manufacturing facility will not replace the sale of imported products, it shall add new product line. The trial run for the new facility has started. In q4 results, we may see some addition to the top line through the manufacturing facility. On a 30% capacity utilization, in the next financial year, the new facility can add substantially to the top line.

The company has primary sales and distribution strength in north India. They are increasing the sales network in other parts of India. Lately the company has also added new products like wall paints in their sales portfolio.

Investment Thesis:

(i) We may see substantial sales growth in the next couple of years. Sales of imported products are growing at a decent pace of 20% and likely to continue in the future. The addition of new products through manufacturing pipeline will add 250 crores in topline in 2-3 years. The addition of new products and expanded distribution will add to the sales.

(ii) The company is likely to maintain its OPM going forward. OPM on the imported products should increase marginally with higher sales. Even if the manufactured product has a lower OPM, on the whole, they can attain 20-22% margin.

(iii) The company has a strong balance sheet with almost zero debt. Not much capital required going forward.

(iv) Company has done 80 Cr. topline and 15 Cr. Net profit in H1 2019-20. With some effect of new manufacturing facility/distribution reach coming in H2; I expect 35 crores profit for 2019-20, resulting in eps of 12 rupees.

Valuation:

Presently the company is valued around 700 crores; at a PE of around 23. In 3 years, when the effect of all these changes may come; the company may be doing a topline of 500 crores with net profit of 100 crores. Looking forward, the valuations look reasonable.

[Disclosure- Invested].

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