About the Co.
The company mainly manufactures railway Seats, Berths, Compreg boards. It is also into Plywood, Phenolic Resin & Hardener, Rubber floor.
Its wholly owned subsidiary Oriental Foundry Private Limited manufactures bogies, wagons and couplers.
The company has also resolved to serve only Railways (directly/indirectly) and will be changing its name to Oriental Rail Infrastructure Limited.
Moat
There are multiple players in this segment. The company has no moat.
Though they are also RDSO’s Part-I vendor for compreg boards. (Part-I vendor is preferred over Part-II vendors)
For wagon, bogies they are in RDSO’s approved vendor list. Though it is not a very exclusive list.
The process of securing orders from Railways is tender based. If the competition increases the co’s OPM would drop from current 15%.
Financials
I am not good at accounting so i will just paste the screener link: https://www.screener.in/company/531859/consolidated/
Shareholding
The promoters hold 57.85% stake. They increased their holding by 1.25% in 2018.
There are no institutional investors. No holding is pledged.
Management
All the promoters are Mithiborwala family members.
The company was founded in 1991 and the managers looks committed.
Management isn’t drawing any salary. They also don’t hold any board membership in any other company.
They have provided majority of the working capital loan (~70cr) to the company interest free and loan drawn by the company is guaranteed to the bank by them.
Growth Prospects
Infra expenditure by the govt should result in increased requirement of coaches, thus seats, bogies and wagons.
The company had completed a capex of ~40 cr to boost production capacity of wagons and is already running at > 50% capacity.
Pros
- Focused management. Delivered good performance.
- Govt focus on infrastructure.
Cons
- Only one client - Railways. There is no long term contract by the railways and so they can always be replaced. (They also do contract manufacturing, but if their products are rejected by the railways then i guess they would lose the contracts as well?)
- High and increasing receivables. This is expected since they are catering to Indian railways. But this increases capital requirement.
Disclosure: Small tracking position.
1 post - 1 participant