Shakti Met Dor

When I first looked at this company 3-4 years back, I couldn’t believe that selling doors could be a highly profitable and organised business.

Yes, SML is a Hyderabad based company which specializes in Special steel Doors & Windows. The company has quickly scaled up from about 7 Cr turnover in 2002 to 80 Cr in 2010. SML caters to diverse industries like Pharma, IT, Hotels, Construction sector, embassies etc. Do make a visit to their website and one will instantly feel the quality and difference the company has. Visit to their Gallery section, speaks highly about their association with leading architects and contractors like L&T etc. They have experience of handling large prestigious projects like – Hyderabad Airport, Reliance Petroleum, TCS IT Parks etc.

A look at the numbers and other ratios between years 2002 – 2008

  • Was growing rapidly @ 47% CAGR
  • Had excellent operating margins consistently > 25%
  • Has had an track record of excellent ROCE in the range of 40-50%+
  • The business doesn’t involves lot of investment in Fixed Assets, Inventory and debtors.
  • The company has mostly carried moderate debt.

To repeat the above growth the company had carried out an ambitious plan to triple it’s production capacity and introduce new products. The expansion was funded through internal accruals and debt. To scale up, the company also opened offices in every metro. Year 2009 & 2010 were tough years for the company as capital expenditures and opening of new buildings had slowed down…hence the nos of these years don’t look good. Yet the company was profitable in these two years.

If one looks at the last two quarterly numbers of the company, the company has done 23 Cr for Q3 & 34.33 Cr for Q4. The sales seem to be coming back and company seems all set to reap the benefits of the expanded capacities.

In last few months the promoters have increased their stake through an open offer @ 180.

As per a latest announcement on BSE, the company has intended to delist the shares from BSE. Currently the promoters are holding 56% share and would need to buy 44% of additional shares. It won’t be an easy task and if promoters are serious to de-list, lot of value-unlocking may take place.


Welspun Syntex

Welspun Syntex Ltd (WSL) is part of the reputed B K Goenka group (Welspun Gujarat). WSL is one of the largest exporters of Polyster Textured Filament Yarn from India. The company has two plants located at – Silvassa and Palghar, Thane.

Interesting points to note are:

  1. The company is doing a turnover of approx 400 Cr while the Mcap is just 35 Cr.
  2. The company is profitable and posted an Operating profit of 27.12 Cr and NP of 7.13 Cr in FY 2010.
  3. The company has restructured itself well over the years. The company had reduced the equity capital by 3/4th to make the Balance Sheet stronger in 2008.
  4. Now the company is trying to reduce debt .
  5. Company has a huge gross block of almost 300 Cr with an accumulated depreciation of almost 200 Cr.

Interestingly as the company has high turnover and comfortable debt position now, they can spend more on the modernisation and technology front to improve the operating margins of the company which are just 7-8% as compared to 12-13% of JBF Ltd. If done, it will have a huge positive effect on the fortune of this company.

Hidden trigger is that most of the equity is held by Promoters and Financial Institutions. Promoter’s holding is 37.69% & FIs holding is – IFCI 33.62%, IDBI Bank 6.19% and LIC 1.59%. Change of hands could be a major trigger in the stock.

Valuation @ Rs 15:

  • M Cap to Sales ratio is just .08 times.
  • Book Value = 21.60
  • TTM PE = 5

We view this small cap stock idea as an interesting long term turnaround story where the possibilities of value addition are huge.


Majestic Auto – Performance Updates

We had recommended Majestic Auto here at just Rs 60/- (then at approximately at 80% discount to its value of investments). The stock has been hitting upper circuits for last few days and is trading @ 138.75 now.

The valuation gap discussed earlier has now reduced to approx 52% now from 80% earlier. We would recommend investors to book profits at current levels and upsides.

The other stock idea on the similar concept is – BNK Capital. We had discussed the same at our blog here. BNK capital is still available at more than 75% discount to NAV value.


Are there any value picks in this market? Yes, I believe there are a few options like – Jocil. Most of us would be hearing this name for the first time 🙂

The company is a subsidiary of Andhra Sugars (55.02% stake) and is listed only on NSE. The company specializes in manufacturing of Stearic Acid Flakes, Fatty Acids, Toilet Soap, Soap Noodles and Refined Glycerine. The company has been doing contract manufacturing of toilet soaps for leading FMCG brands such as – HUL ( Liril, Lifeboy etc), ITC (Vivel, Superia etc), Marico ( Manjal, Jasmine etc), Johnson & Johnson (Savlon) etc.

Very strong financials:

  1. Jocil has been growing at a CAGR of 51% for last 3 years and a CAGR of 25% for last 5 years, yet it is available at a P/BV ratio of just 1.25, TTM PE of just 6.
  2. It is a debt free company. Has excess cash of 25 Cr on Balance Sheet (as of 31st March 2009)
  3. Has limited investment in inventory and debtors. Hence the business is not working capital intensive.
  4. Has a track record of excellent dividend payout ratio. (Payout ratio has been around 35% for last two years)

So at CMP of 265, we are getting an FMCG related company at a M Cap of about 115 Cr having atleast 25 Cr as cash on Balance Sheet, turnover of approx 300 Cr, Operating profit of approx 35 Cr and a Net Profit of 21 Cr. Isn’t it a value pick?

Other trigger could be – If the company maintains the div payout ratio of even 30%, it means a 150% dividend this year :):)

Company’s website:

Views Invited.

Happy Investing


Poly Medicure – Aiming to global medical devices market

“In the next three to five years, our focus will be on safety devices market. We are expecting our revenues to grow from Rs 135 crore to Rs 300 to 400 crore by 2013” – Rishi Baid, executive director, Poly Medicure Ltd

We recently discussed about Poly Medicure which is one of the biggest exporter of IV Safety Cannulae and other healthcare disposable products. Now it is looking to expand in global markets too and targeting a 10% global market share.

If the company is able to do a turnover of even 165-170 Cr next year, the stock is trading at just 5-6 times FY11 expected earnings.

Pharmabiz discusses about the talks with management:

The New Delhi-based Poly Medicure Pvt Ltd, manufacturer and supplier of medical devices and disposables, is planning to invest Rs 100 crore by 2013 to expand its presence in overseas market with a thrust on safety medical devices and outsourcing manufacturing and research activities.

The company, which currently has almost 75 per cent of its total Rs 135 crore revenue from exporting products to more than 80 countries including US and Europe, is planning to invest around Rs 100 crore within 2013 to increase its presence in global market and to explore the potential of outsourcing market, said Rishi Baid, executive director, Poly Medicure Ltd. The company is also mulling on acquiring a medical devices company with research and development focus in US, by spending around USD 20 to 30 million.

“In the next three to five years, our focus will be on safety devices market. We are expecting our revenues to grow from Rs 135 crore to Rs 300 to 400 crore by 2013,” Baid averred. The target for the financial year 2010-2011 is fixed at Rs 175 to 200 crore.

The company sells its safety device products to almost 30 countries including South America and Middle East. The safety devices portfolio is expected to increase to 30 to 40 per cent of its revenue in next five years, from a meager eight per cent reported at present, he added.

Poly Medicure is currently operating on selected medical devices and disposables segment, which has a potential up to Rs 1000 crore and currently has five per cent market share. Through the capacity expansion, the company is targeting to bag 10 per cent of the market share by 2012.

Sunflag Iron & Steel – CMP 31

Dear Friends,

Steel Sector has been witnessing a lot of price hardening due to both input price rise and demand. Stocks of this sector are finding interest.

One company which has good fundamentals and looks interesting is – Sunflag Iron & Steel. Sunflag is part of the Bhardwaj group having presence across 6 Countries in 3 Continents. The company manufactures high quality alloy steel which finds usage in Automobile Industry and Infrastructure sector.

The company has grown steadily over the years and should be able to post a turnover of close to 1300 Cr this year- FY10. Over the last few years, company has tried to go for backward integrations – for eg: expanding of captive power plants, acquiring coal blocks etc.

Attractive Valuations:

1. Stock is available at 7 times expected FY10 earnings.

2. Stock is trading at just 3 – 3.5 times FY10(E) EBITA margins.

3. If one analyses last few quarters, it seems the effect of backward integrations are fructifying and if the company can continue the same, the company may be on its way for yearly net profits of more than 100 Cr.

Another positive is – increasing shareholding of promoters (from 42.39% to 49.03% within one year).

Financial snapshot:

Interview of ER Shekhar, Director. | Company Website

Majestic Auto – Updates

We earlier discussed about Hero Honda and Majestic Auto at our blog and the valuations just keep improving.

As expected, Hero Honda has appreciated from approx Rs 1,600 to Rs.1935 i.e. a gain of 21% in less than 5 months; while Majestic Auto is yet to follow. The current upside in Hero Honda is creating fresh opportunity for Majestic as the gap between the Market Value of Investments (16.25 lac shares of Hero Honda) and the companies own market cap is widening everyday.

The valuation of Majestic as of today:

Own Market Cap of Company: 65.50 Cr

Value of investment in Hero Honda (16.25 Lakh shares) : 314 Cr

Apart from these investments, the company also has a factory, land and other assets.

Discount: >80%

Majestic Auto Website

Poly Medicure

P/E Comparison

Poly Medicure is one of our favourite small cap stock which has carved out a niche for itself and has grown well over the last few years.

The company is the one of the biggest exporter of IV Safety Cannulae and other healthcare disposable products. This business segment is always growing and with development of better medical facilities, this segment should grow faster.

Few worthy points:

  • The company has grown at a CAGR (Compounded annual growth rate) of 30.75% over last 10 years. (From turnover of 10 Cr in FY 2000 to 112.22 Cr turnover in FY 2009)
  • The company is expected to grow at 20% YOY (Year on year) for next 2-3 years. This year the company is expected to do a turnover of 135 Cr with a net profit of 15 Cr, thus implying an EPS of 27.
  • The CMP of 200 discounts the immediate EPS of 27 by just 7.5 times.

The last two quarters have been very good due to the backward integration efforts of the company done in the last few years and hence the company may be able to sustain operating margins around 20%.

Recent Developments

  • The company has won series of patent infringement cases against major B Braun, after which the company is free to sell the advanced IV Safety Cannulae with the inbuild safety feature ( This product has potential to sell at a very remunerative price in the developed nations.
  • The company has been strengthening its sales network on the domestic front and tying up with major hospitals.
  • The company is looking to expand its capacities and targets to double turnover in next 3 years. For they same they are also looking to put up a new factory.


Being a high volume low price product, the scaling up of the business is not easy. The company has been trying to develop new products to overcome the same.

Here is a company with strong financials, good business model, high margins, good return on equity, good cash flow yet available at less than 8 PE.

BNK Capital – Hidden deep value

BNK Capital is a small finance company with experience of over several decades. The company provides brokering services across the various products such as equities, commodities etc and serves several HNIs and corporates.

The interesting part is the market value of the investment the company holds. Some of the major investments are:

As on 18th Feb, 2010
Name Qty CMP Value (Cr)
CESC Ltd 30,17,351 378.00 114.06
India Foils Ltd. 2,24,000 10.00 0.22
Mcleod Russel Ltd. 2,74,205 234.00 6.42
KEC International Ltd. 3,75,105 577.00 21.64
Zensar Technologies Ltd. 4,200 286.00 0.12
Jaipraksh Associates 37,500 135.00 0.51
Total 142.97
* Co holds a lot of other investments also totalling 4-5 Cr

At CMP of about 42, the co’s own Mcap is close to 25 Cr while the value of marketable investments on Balance sheet is 143 Cr!! Hence the company is available at a discount of 82.65% to the value of investments. Similar valuations were once found in CHI Investments too, which was then our favorite and yielded very good returns.

Yes, many of the similar finance companies trade at discounts to their market value of investments, but such discounts are usually not more than 30-35%. Here we are getting a company at 83% discount.

Post Demerger impact of Asian Hotels – Unlocking the hidden value

Hi friends, this is exciting!

Asian Hotels (which we recommended recently for its demerger news) has filed a document with BSE detailing the post-demerger financial aspects including the post-demerger balance sheet of the three new companies. We were flirting with the data to guess the post demerger scenario and here are the possibilities (provided in the excel sheet below).

As per the announcement, a shareholder holding 100 shares of Asian Hotels will get:
– 50 shares of AHL residual company
– 50 shares of Chillwinds
– 50 shares of Vardhman Hotels
The new figures show a significant rise in the book values, as during the demerger, the assets are transfered at their fair values.

Do give it a look at the above numbers and share your comments.