Introduction:
Marshall Machines Limited is a micro cap stock [Market Capitalization- 18 Crores], listed in NSE Emerge platform. Lot size is 3000 shares.
Marshall Machines Limited is in the business of developing, manufacturing and marketing of machine Tool Equipment including wide range of single spindle, patented double and four spindle CNC machines, automated robotic solutions and patent pending IoTQ [internet of things and quality] suite of intelligent equipment. Computerised numerically controlled (CNC) machines are electrical cum mechanical devices which are capable of controlling tools, with high-precision via a computer programming. As technology further leads, intelligent machines are now becoming a reality. They are providing product offering and solutions to wide range of industries including manufacturers of Axles, Crankshafts, Auto Parts, Fans, Pumps, Bearings, Gear Blanks, Bushes, etc. They claim that their machines are known for reliability and quality, innovative technology, quality manufacturing and complete service and support are part & parcel of the Marshall experience.
Financials:
| FY | Revenue | Ebitda | Net Profit | Cash Flow from Operating activity |
|---|---|---|---|---|
| 2013-14 | 39.3 | 5.2 (12.26%) | 0.6 | 1.4 |
| 2014-15 | 42.6 | 6.2 (13.39%) | 0.2 | (-)0.8 |
| 2015-16 | 43.9 | 5.6 (12.48%) | 0.4 | 7.1 |
| 2016-17 | 50.5 | 6.5 (12.25%) | 1.2 | 11.5 |
| 2017-18 | 59.4 | 12.9 (21.55%) | 5 | 5.2 |
| 2018-19 | 65.5 | 15.4 (23.24%) | 5.8 | 13.6 |
| 2019-20 | 60.5 | 16.4 (25.68%) | 3 | 11.5 |
For the last 3-4 years, the company is investing capital in the intelligent technology. The figures are reflected in cash flow from investing activities and higher depreciation. The company has reasonable amount of debt, debt equity ratio of 0.8.
New Initiatives:
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Marshall is Dealer of M/s SPINNER (Germany) one of Europe’s top builders of Turning & Machining Centres. Marshall has Technical Partnership with M/s CARON Eng. (USA) for machine performance enhancement technologies. Marshall had a tie-up with M/s DOOSAN (S. Korea) from 2012-2014 to produce LYNX 220 series in India.
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In 2019 end, Marshall tied up with the world’s leading IIoT Platform (Machine Metrics) who has its systems installed on thousands of CNC machines in hundreds of customers AND with THE TOOL & GAGE HOUSE, one of the largest dealers of measurement equipment who has almost all top OEMS & TIER 1 & 2 companies in its customer base. Marshall will integrate Machine Metrics solution for machine monitoring, called Machine Metrics Production on existing machines for OEM, Tier 1 & Top Tier 2 companies. Apart from direct revenue, it will build relationships and help reach out to Vendors of OEM & TIER 1 companies. Further, it will Pre-Load MM in its top end machines & automated lines to deliver high value to customers & enhance the saleability of its products. The company feels that it is a HUGE Competitive advantage for Marshall.
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Lately the company engaged top world dealers- The Tool and Gage House (TGH), and Morris South to sell its products.
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Marshall Automation America, Inc. successfully started operations from Atlanta, US launching & inaugurating their Technology Center.
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The company has been awarded 5 patents and 16 patent applications are pending.
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Recently the company was awarded order worth INR 29 crores for ROBOT OPERATED MACHINING CELLS from M/s ROCKMAN.
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From 10% share in FY 19, sales of Smart Automated Machines rise to over 40% in FY 20.
The thesis of Investment:
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Automation is being accepted. The company has potential to grab the opportunity in affordable automation space. Further government push on Make in India and Atmanirbhar Bharat can also help the company.
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There are large organized players in automation, serving large industry. The company emphasis on affordable automation can find acceptance in MSME sector.
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Attractive valuation- the company is available at 0.5 times book value, 0.3 times sales and 6 PE.
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Automation businesses operate on a better profit margin. OPM is increasing sequentially for the last 3 years and may increase in the future. Decent margin improvement is expected. With topline growth and margin improvement, net profit can grow at a quicker pace.
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Shareholding pattern is attractive. The promoters own almost 74% of the equity. Further, 8.5% equity is held by Ace Investor Ashish Kacholia.
Risk Factors:
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Investing in micro-cap companies are extremely risky and it can result in loss of 100% invested capital.
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The products of the company do not have high customer loyalty. Further, any change in technology can make their products obsolete.
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With covid lockdown, the company is not likely to put good results in the current scenario.
Disclosure: Invested
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