This company looks interesting for the current situation and economical conditions of India. I started looking into this company, the following is summery:

Manaksia Coated Metals & Industries Ltd. operates on a diversified business model that focuses on manufacturing high-quality coated metal products and expanding its production capacities through technological advancements. The company targets both domestic and international markets, leveraging its strong brand presence and adherence to stringent quality standards to maintain its competitive edge. Additionally, it diversifies its portfolio by producing other industrial products like Ultramarine Blue Powder and mosquito repellent coils, which further strengthens its business model.

1. Core Business Activities

• Manufacturing and Exporting Coated Metal Products: Manaksia Coated Metals & Industries Ltd. (MCMIL) specializes in manufacturing and exporting various coated metal products, primarily focusing on Colour Coated Galvanized Steel and Plain Galvanized Steel, available in both coil and sheet forms. These products are crucial for industries such as construction, automotive, appliances, and general engineering.

2. Production Facilities

• Location: The company’s manufacturing operations are based in Kutch, Gujarat, where it has been operational since 2006.
• Capacity: Initially, the plant had a production capacity of 108,000 TPA (Tons Per Annum). However, with ongoing expansions, including the addition of new Cold Rolling Complexes and a second appliance-grade Colour Coating Line, the capacity is expected to increase to 180,000 TPA.

3. Technological Advancements and Expansions

• Color Coating Line Upgrade: In April 2022, the company completed a project to enhance the production capacity of its Color Coating Line from 39,000 MTPA to 60,000 MTPA. This upgrade included an overhaul of the electrical automation system and the installation of a new thermal incinerator for better fuel efficiency.
• Alu-Zinc Coating: The company is converting its existing galvanizing line from pure zinc coating to Alu-Zinc coating, a superior product that lasts longer and commands a premium in the market. This upgrade will increase production capacity by 33% to 144,000 MT/year and is expected to be completed and commissioned in FY24.

4. Product Offerings

• Colour Coated Metal Sheets & Coils: These products involve coating substrate metals like galvanized steel, Alu-Zinc coated steel, and aluminum with a protective paint layer. The advanced processing ensures the coating adheres firmly, enhancing the product’s strength, aesthetic appeal, and corrosion resistance.
• Galvanized Steel Sheets & Coils: Galvanized steel is coated with zinc, providing a barrier and sacrificial protection against corrosion. The company’s state-of-the-art galvanizing line ensures high-quality output for various applications.

5. Diverse Applications

• The products are used across multiple sectors, including:
  • Construction: Steel framing, false ceilings, ducting, etc.
  • White Goods: Refrigerators, washing machines, etc.
  • Automotive: Auto internal components, bus bodies, etc.
  • Furniture: Office equipment, partitions, etc.
  • Others: Roofing, solar panels, elevators, etc.

6. Other Business Ventures

• Ultramarine Blue Powder: MCMIL also produces Ultramarine Blue Powder, a fabric whitener, under contract for Reckitt Benckiser India, with a highly automated facility in Bhopal, Madhya Pradesh.
• Mosquito Repellent Coils: The company also produces mosquito repellent coils in Guwahati.

7. Market Presence and Strategy

• Global Presence: MCMIL exports its products to various regions, including Europe, Russia, Africa, and the Middle East, establishing itself as a key player in the international market.
• Brand Development: The company has developed strong brands like “ColourStrong,” “Zingalvo,” and “Singham,” which cater to different market segments and emphasize product quality and durability.

8. Certifications and Quality Assurance

• The company is accredited with ISO 9001:2015, ISO 14001:2015, and OHSAS 18001:2007 certifications, underscoring its commitment to producing high-quality products.

How it’s different from other companies in the similar space:

1. Strong Product Portfolio and Brand Equity

• Diverse Product Offerings: MCMIL’s wide range of products, including Colour Coated Galvanized Steel, Plain Galvanized Steel, and Alu-Zinc coated steel, caters to various industries such as construction, automotive, and white goods. The diversity in its product range allows it to serve multiple market segments, reducing dependency on any single sector.
• Brand Strength: MCMIL has developed strong brands such as “ColourStrong,” “Zingalvo,” and “Singham,” which are recognized for quality and durability. This brand recognition provides a significant advantage in markets where brand loyalty and perceived quality are important.

2. Technological Advancements and Capacity Expansion

• State-of-the-Art Manufacturing: The company’s continuous investment in upgrading its manufacturing facilities, such as the Color Coating Line and Galvanizing Line, allows it to produce high-quality products efficiently. The technological edge in its production processes ensures that it remains competitive in terms of both cost and quality.
• Capacity Expansion: The ongoing expansion projects, such as the Cold Rolling Complex and the conversion to Alu-Zinc coating, will significantly increase the company’s production capacity. This not only helps in meeting growing demand but also allows for economies of scale, reducing the per-unit cost of production.

3. Global Market Presence

• Export Capabilities: As a Three Star Export House, MCMIL has a strong presence in international markets, including Europe, Russia, Africa, and the Middle East. This global reach diversifies its revenue base and reduces the risk associated with reliance on any single market.
• Quality Certifications: The company’s adherence to global quality standards, as evidenced by its ISO certifications, enhances its credibility in international markets, allowing it to command a premium price for its products.

4. Relationships with Key Suppliers

• Strategic Partnerships: MCMIL sources critical raw materials from leading global suppliers like Nippon Paints, Kansai Nerolac, HENKEL, and BASF. These partnerships ensure access to high-quality inputs, which is crucial for maintaining the quality of the finished products. Such relationships can be difficult for new entrants to replicate, providing MCMIL with a supply chain advantage.

5. Entry Barriers in the Industry

• Capital-Intensive Operations: The steel and coatings industry requires significant capital investment in machinery, technology, and infrastructure. MCMIL’s established manufacturing facilities and ongoing investments in capacity expansion create a high barrier to entry for potential competitors.
• Technological Complexity: The production of high-quality coated metals involves complex processes that require specialized knowledge and technology. MCMIL’s experience and expertise in these areas provide a competitive edge that new entrants would find challenging to match.

6. Customer Relationships and Customization

• Tailor-Made Solutions: The company’s ability to offer customized solutions to meet specific customer requirements enhances customer loyalty and creates a competitive barrier. Customers are likely to stick with a supplier that can meet their exact needs consistently.

What are the Risks and Threats for the company:

1. Technological Disruption

• Emerging Technologies: Rapid advancements in materials science or manufacturing technologies could lead to the development of new, superior materials or more efficient production processes. If competitors adopt these technologies faster than MCMIL, they could gain a competitive edge, reducing MCMIL’s technological advantage.
• Digitalization and Automation: As industries increasingly adopt digital and automated solutions, MCMIL must continuously invest in these areas to avoid falling behind. Failure to keep up with the latest advancements in automation and digital integration could lead to inefficiencies and loss of competitiveness.

2. Intensified Competition

• Entry of Global Players: The global steel and coatings industry is highly competitive, with large multinational corporations that have significant resources and advanced technologies. If these global players increase their focus on MCMIL’s core markets, they could exert pressure on pricing and market share.
• Local Competitors: In regions where MCMIL operates, particularly in emerging markets, local competitors might leverage their understanding of the market and lower operating costs to challenge MCMIL’s position.

3. Raw Material Price Volatility

• Dependence on Key Suppliers: MCMIL relies on strategic partnerships with suppliers like Nippon Paints, Kansai Nerolac, and BASF for high-quality raw materials. Any disruption in these supply chains, whether due to geopolitical tensions, price hikes, or supply shortages, could increase costs or affect product quality.
• Commodity Price Fluctuations: The prices of raw materials, particularly steel and zinc, can be highly volatile. Significant increases in these prices without a corresponding ability to pass costs onto customers could compress margins.

4. Regulatory and Environmental Challenges

• Environmental Regulations: The steel and coatings industries are subject to strict environmental regulations, which are becoming increasingly stringent. Compliance with these regulations can increase operational costs. Additionally, any non-compliance could result in fines, sanctions, or damage to the company’s reputation.
• Trade Policies: Changes in trade policies, such as tariffs, import restrictions, or anti-dumping duties, could impact MCMIL’s ability to compete in international markets. Such changes could also disrupt supply chains or increase costs for imported raw materials.

5. Economic Downturns

• Cyclical Nature of the Industry: The steel industry is highly cyclical, with demand closely tied to economic conditions. An economic downturn could lead to reduced demand for steel products, affecting MCMIL’s sales and profitability. The construction and automotive sectors, in particular, are sensitive to economic fluctuations.
• Global Market Uncertainty: MCMIL’s reliance on exports exposes it to global market risks, including economic slowdowns in key regions, currency fluctuations, and geopolitical instability, all of which could negatively impact revenue.

6. Customer Concentration Risk

• Dependence on Key Customers: If a significant portion of MCMIL’s revenue comes from a few large customers, the company is at risk if any of these customers reduce their orders, switch to competitors, or negotiate more favorable terms. Diversifying the customer base is crucial to mitigating this risk.

7. Supply Chain Disruptions

• Global Supply Chain Dependencies: MCMIL’s operations rely on a global supply chain for critical raw materials and components. Disruptions due to natural disasters, pandemics, or geopolitical conflicts could lead to delays or increased costs, impacting production and profitability.
• Logistics and Transportation Issues: Delays or increases in transportation costs, particularly for exports, could affect delivery schedules and erode margins, especially in competitive international markets.

8. Brand and Reputation Risks

• Product Quality Issues: Any lapses in quality control or product recalls could damage MCMIL’s brand reputation, particularly in international markets where brand loyalty is harder to build. Maintaining high standards is critical to protecting the brand.
• Negative Publicity: Environmental issues, labor disputes, or negative publicity related to corporate governance or ethical practices could harm the company’s reputation, leading to a loss of customer trust and potentially impacting sales.

Financial Summery:

Balancesheet:

Key Growth Drivers:

The key growth drivers for Manaksia Coated Metals & Industries Ltd. include its strategic capacity expansions, diversified product portfolio, technological advancements, strong global market presence, and efficient supply chain management. These factors, combined with its focus on cost management, geographic expansion, and strong brand equity, position the company for continued growth in both domestic and international markets.

Long term Strategy of the company:

As per the Q1FY25 concall, ths Manaksia Coated Metals & Industries Ltd.’s long-term strategy revolves around capacity expansion, product diversification, technological upgradation, global market expansion, and operational efficiency. The company aims to strengthen its competitive position by focusing on high-value markets, maintaining financial discipline, and adopting sustainable practices. By leveraging innovation, strategic partnerships, and a customer-centric approach, MCMIL seeks to achieve sustainable growth and build a resilient business model for the future.

Summary of Recent Financial Trends:

• Revenue Growth: MCMIL has been experiencing steady revenue growth, driven by increased demand and expanded production capacity.
• Rising Costs: Operating expenses have been increasing, which has put some pressure on profit margins, particularly in FY 2023.
• Stable Operating Profit: Despite cost pressures, the company has managed to maintain operating profitability, with a significant increase projected for FY 2024.
• Debt Management: The company has been using debt to finance its expansions, which needs to be managed carefully to avoid over-leverage.
• Increasing Reserves: The steady growth in reserves indicates a healthy accumulation of retained earnings, contributing to the company’s financial stability.

These trends suggest that MCMIL is on a growth trajectory but faces challenges related to cost management and debt, which it must address to sustain profitability and financial health in the long term

I dont have resources for back testing.

SOIC video highlighting key points from kopran concall.

4 Smallcap Concalls that look interesting

Yes. I gave the link assuming the information and the view expressed can help in using Sharpe at all.

Until we create a system, that starts delivering returns consistently, every bit of information helps. I guess, systems can be created this way too, along with basing it one particular thing. It appears you are in the middle of it. Do share your learning and findings if you have created one. I am always looking for something that I can understand and use.

I haven’t used any of the aspects of the strategy discussed here, yet, so you may find my views not particularly to the point.

WISE TRAVEL INDIA- WTI CABS

INDUSTRY TRENDS:

The B2B Corporate Mobility Industry can be broken into two segments:

a) Employee Transportation Services (ETS): Employee Transportation Services is a structured corporate mobility system aimed at facilitating convenient and efficient commuting for employees between their residences and workplaces. Organized: Unorganized market share at 15:85 (Calendar Year 2023).

The employee transportation service market, is estimated to have generated a revenue of ₹503.5 billion ($6.1 billion) as of CY2023. It is expected to grow at a CAGR of 11.8% to reach ₹1097.6 billion ($13.2 billion) revenue in CY2030 inline with steady development of corporates such as IT, Global Capability Centers (GCC) segments etc in India. (Report by Frost & Sullivan)

b) Corporate Car Rental (CCR): Corporate car rental services cater to the needs of corporate clients and their employees, offering professional drivers for transportation purposes such as airport transfers, corporate events, conferences and exhibitions, outstation trips and hourly rentals.

Organized: Unorganized market share at 25:75 (Calendar Year 2023). More and more corporate are moving to organized players for advantages of single vendor for across India, transparent billing, better pricing, standardized and reliable services across the country. Organized segment of CCR is expected to increase to more than 30% by CY2030.

The corporate car rental market, estimated at ₹392.4 billion ($4.7 billion) in CY2023, experiences healthy growth fueled by factors like increasing business travel needs, focus on employee well-being, and demand for premium services. It is estimated to grow at a CAGR of 9.3% to reach annual revenue of ₹731.8 billion ($8.8 billion) by CY2030. (Report by Frost & Sullivan)

Consolidation in the Industry ahead?– Over the next few years, as players reach out to more cities and competition intensifies further, leaving low headroom from growth, consolidation is likely to happen with smaller players getting acquired by the larger ones.

Growth at the overall Industry level can be attributed to:

1. Transition from remote work to in-office work
2. Focus on employee satisfaction and safety to improve retention rates
3. Rising corporate air travel and increase in number of airports
4. Expansion of office space, new corporates entering India and hiring, particularly in the IT and ITES sectors.

COMPANY OVERVIEW

The company was incorporated in April 22, 2009 as Wise Travel India Private Limited by Mr. Ashok Vashist, Ms. Hema Bisht and Mr. Vivek Laroia. The company took on the responsibility of managing the entire personal ground transportation for the XIX Commonwealth Games in New Delhi in 2010.

From 2013 to 2014, WTI broadened its horizons, bolstering its car rental fleet to over 2500 cabs. This growth was complemented with the strategic acquisition of Wyncabs and Smart Ride, a prominent coach rental company, thereby serving an even broader clientele. In 2021, WTI ventured into tier 2, 3, and 4 cities, ensuring that premium mobility services.

Currently the company has a pan-India presence, more than 200 cities has over 550 customers with 8000+ vehicles with counter presence in 17 airports across the country. As on June 2024- company had 800 employees.

The fleet is structured in an asset light model with over 300 vehicles owned and 7000+ vendor fleet vehicles- leased by them from various Vendors on Pan India basis.

SEGMENT WISE BREAKUP:

1. Employee Transportation(B2B):

This is the core business segment of the company wherein they service the employee transportation of corporates from Home to Work and back to home. More focused in tier-1 cities, with pricing models varying based on vehicle type, route distance, and service customization. Common models include per-employee, per-trip, and fixed monthly charges.

Pretty impressive clientele- includes marquee names like Indigo, Vedanta, Amazon, Microsoft, Indus Towers, Panasonic, Honda, Coca Cola and others.

The criticality of Employee Transportation increases for certain sectors because of odd shift timings and importance of on time arrivals of their employees. ETS is a direct beneficiary of large global and Indian companies setting up their new office presence in India inline with the boost given by Indian government under the “Make in India” theme.

Key Demand Sectors include:

• IT BPM- includes Captives of other sectors like BFSI, Telecom and Consulting
• Aviation
• Banks
• MNCs and other large corporates

There’s another aspect to the segment as Employee transportation services play a crucial role in enhancing the overall experience, convenience and satisfaction of workforce. An efficient and safe services is essential to ensure lower employees’ attrition.

WTI derives almost 35-40 percent of their revenues from this segment and their large fleets allows them to serve large corporates nationwide and have a PAN India presence.

2. Car Rental Division (CRD- B2B):

In this segment, they cater to corporate clients and their employee transport requirements other than the basic home to work (and back to home) service. Providing chauffeur driven cabs to help them to transport employees, guests or VIPs to airport, conferences, a sales call, intra city travel, hotel pickup & drop, outstation or for their long term or daily car rentals needs.

A very small portion of CRD is also B2C (49 lakhs in FY23) but that’s still largely B2B (62 Crores in FY23). The company is not much inclined towards B2C due to higher cost of customer acquisition.

3. Airport Counters: (B2B) They have a counter presence across 17 large airports. By placing their counters after the security hold areas, the company ensures convenient access for travellers, allowing them to avail their services. They’ve presence in 17 airports a few of which includes:

1. Delhi- Indra Gandhi International Airport (3 Counters at T1, T2, T3)
2. Bengaluru- Kempegowda International Airport
3. Guwahati- Lokpriya Gopinath Bordoloi International Airport
4. Varanasi- Lal Bahadur Shastri International Airport
5. Gwalior- Rajmata Vijaya Raje Scindia Airport
6. Bhopal- Raja Bhoj Airport
7. Amritsar- Sri Guru Ram Das Ji International Airport
8. Madhurapudi, Andhra Pradesh- Rajahmundry Airport
9. Visakkhapatnam Airport
10. Jaipur International Airport
11. Maduri International Airport
12. Jabalpur Airport

4. Managed Services(B2B):

The company started this segment in 2015 and in this segment, they’re managing the complete mobility for any organization. It includes their own technology and own fleet. They provide complete bespoke solutions to the companies on the basis of study, demand and solutions required. The company has their our own in house developed system for Fleet Management.

5. Projects(B2G):

Here they cater to government companies as driving at the ports premise need specialized skills. Working with a lot of govt. companies and providing specialized transport services. The receivables in the balance sheet worth 85 Crores as on March 2024 is largely attributed to Projects and CRD segment.

Key services at company level includes:

• Car Rental Services
• Employee Transportation Services
• End-to-End Employee Transport Solutions (MSP)
• Flexible Fixed/Monthly Rental Plans
• Plans
• Convenient Airport Counters
• Fleet Management Services
• Mobility Services for MICE
• Cutting-Edge Mobility Tech Solutions
• Sustainable Mobility
• Project Mobility Solutions
• Strategic Consulting and Advisory on mobility
• Community commute

Dubai Entry: On September 13, 2023 the Company has established a One-Person Company LLC in the Emirate of Dubai, namely, WTI RENT A CAR L.L.C with the objective of providing car rental services. Started in December 2023, they already have 100 vehicles as of June 24, Breakeven expected in next 4-5 months (June Concall). The management believes that the scale in Dubai have to be large to justify higher operations cost.

The revenue split between segments: (H1FY24)

1. ETS(B2B): 36%
2. CRD(B2B): 27%
3. Managed Services(B2B): 17%
4. Projects(B2G): 10%
5. Airport(B2C): 7%

Financial Analysis::

Financials appear impressive overall- They have been able to scale the business quite well from 89 crores in 2022 to 411 Crores in FY24. EBITDA margins crossed 10% in FY24. The company is among the top five organized players in terms of fleet size. The company also has 102 Crores of cash as on April 2024.

The business generated a positive cash flow from operations in 2024 worth 19 Crores. (ROE looks depressed due to recent IPO)

Client Concentration: Fairly diversified client concentration for a small company with Top 10 customers attributing to only 38% revenues.

Management Information:: Based on Mr. Ashok Vashisht’s TV interviews (Only promoter that’s visible in interviews) and Concalls, it appears he has a thorough understanding of the cab industry and has a vision to drive this company to a great scale. The company has recently started doing concalls and the execution history is impressive although limited being a recent IPO.

WTI CABS ASHOK VASHIST INTERVIEW- Targetting 2000 Crore Revenue by FY30?

Competition:

The market is highly fragmented, with many regional players succeeding in smaller areas. In the organized sector, a few large PAN India companies dominate, a few managing substantial fleet.

This data is a as of Feb 2024, now WTI has over 8000 vehicles as per their recent presentation and other players may also have added fleet since then.

Key Triggers:

• The upcoming IPO of Ecos Mobility could lead to a market re-evaluation of listed players like WTI Cabs and Shree OSFM (Ashish Kacholia recently invested).
• The company plans to establish partnerships with leading global car rental brands (as outlined in the June presentation), which could enhance scale and help them expand into more cities across India.
• Projected growth of 30-35% over the next few years, coupled with the addition of a new EV fleets and other optionalities such as International expansion and State Govt business.
• Industry still very fragmented and unorganized- Industry may see some M&A activities going ahead.
• Rise Of India’s Aviation Sector and Increased Airport Traffic: 14 New and Upcoming Airports Including Jewar & Lakshadweep. With the addition of new airports and expansion of existing ones, there will be a surge in airport traffic, including both domestic and international passengers. Increased Airport Connectivity Fuels Demand for Chauffeur Driven Mobility.

. Risks:

1. Highly competitive space with cut throat competition both PAN India basis and with regional players located in every state. Competition includes the likes of Mahindra Logistics, Ecos India Mobility, Carzonrent, Shree OSFM etc.,
2. The inherent nature of industry is such that the pricing power among the players is low.
3. The company doesn’t have long term contracts with most of their customers.
4. Disruption due to change in government regulations(Covid alike) and activities such as economic, political and other prevailing conditions in India.

Management Guidance and Outlook:

1. Aiming to grow at 30-35% per annum on topline and bottomline with sustainable margins.
2. Adding EV fleet of 1000+ going ahead in a phased manner and flexible on it being asset light and owned vehicles. (Added 400+ Vehicles already, will be focusing on Bio-CNG also moving ahead)
3. Small Fish in big pond?: Management believes that the market size and opportunity is large for all the players to grow multifold from current scale. Here’s what the management believes:

4. Also targeting bus services and taking parts in tenders in Delhi, MP, UP- State Government projects.

Valuations and P2P:

WTI is trading at a market cap of 651 Cr (Cash of 102 Crores as on March 2024) a FY24 PE of 28 and P/S of 1.38
vs listed peer Shree OSFM trading at a FY24 PE of 35 and P/S of 2.42
vs Ecos Mobility placed at a 32x FY24 PE and P/S of 3.5 (higher EBITDA margins-15-16% and size-12000 fleet).

Overall the company appears to be the least valued among the peers with a large TAM and good promoter backing with 30-35% growth guidance in coming years. In an Industry where competition is stiff, pricing power is limited and entry barriers are low – operational excellence becomes the cornerstone of success.

The key question is: Can the company manage efficient operations, allocate capital wisely, and scale sustainably from this point forward?

DISCLOSURE:

1. Not invested. Not a SEBI Registered advisor, please do your own due dilligence.
2. Have taken a lot of information from Ecos DRHP and WTI DRHP that includes third party reports.
3. First thread, Please highlight any changes or additional info if required as per forum rules.

References:

1. WTI CABS DRHP
2. ECOS Mobility DRHP
3. WTI June Concall
4. WTI Cabs June Presentation
5. Interview with Nirmal Bang