Hi guys,
I am new to this forum. I would like to take this opportunity to open this thread on this microcap company.
The company is located in Nagpur, Maharashtra and commenced its operation from 1981. The company manufactures wide range of rubber V-belts and related products.
The key raw materials are synthetic rubber and natural rubber.
Key financial data – 2014-15 (Rupees in crores)
Equity 13.62
Reserve 135.59
Revenue 221.86
Of which exports 94.94
Net profit 3.91
EPS 2.87
As against market cap of 68 crores, the company is having net debt of Rs. 134.43 crores which is a cause for concern.
The company borrowed term loan @ 13.75% to 14% towards capital expenditure, new product .
The company sold one of its business for Rs.85.62 crores in the year 2012 and partly retired the debt.
Incidentally, the company declared special dividend of 30% in addition to 15% out of the profit on the above sale.
The company has exported products to more than 50 countries particularly to Europe and Middle East.
To cater the exports, the company is having two subsidiaries, namely, Pix Transmission Europe and Pix Transmission Middle East.
Pix Transmission Europe is having Pix Transmission Germany as its subsidiary.
Further, the company is having joint venture at Ireland and Middle East.
Though, the key raw materials synthetic and natural rubber are at low level , the margin is low due to stiff competition and economic slowdown.
The company is number one in India in this field.
The company is commanding brand equity in local and abroad.
It is having state of the art technology in adopting for manufacture and excellent infrastructure for hi-tech applications.
Hence , its products fall in special category.
The future performance of this company hinges on the growth of automobile industry, machinery manufacturing and agriculture.
The net profit of the company for the year 2014-15 has been halved over 2013, due to exchange rate fluctuation, high depreciation and interest cost.
The financial cost of the company itself is around Rs.15 per share.
For the current year also, the Q1 performance was dismal.
However, the company came out with better performance in Q2.
WHY THIS COMPANY?
The promoter, over the period, increased their holdings from 52% to 60.54%.
Though the dividend has been reduced from 15% to 10%, the dividend yield is attractive at 2%.
This shows the promoter’s confidence over the company.
The company is servicing the debt very well.
On clearing of at least 75% of debt alone, the earnings will increase substantially.
There is no pledge of shares by the promoters.
The company will show reasonable CAGR by cashing development of new products, capital expenditure made and rupee depreciation.
Due to economic slowdown, the company is not in a position to take opportunity of low key raw materials cost.
The company is continuously spending amount for new product development.
Once the economic revive, the company can increase the business as well as improve its net profit margin.
CONCERN
As on 31.03.2015, the company was having investment in liquid funds to the extent of Rs.12.9 crores and cash and cash equivalent at the extent of Rs.15 crores. It is not clear why this amount has not been utilized for prepayment of high cost debt. (In the year 2013-14 also, the company kept cash and cash equivalent at high level)
The company share is listed only in BSE.
Dis. Since I invested, my views are highly biased. The views are only to share information and it should not be construed as my recommendations for purchase/sale .
I request the members to critically analyse the company and to understand the future prospects of the company.
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