Porinjiu Veliyath’s investment in the company drew my attention towards the stock. Sharing what I have observed during my research:
The company is one of the market leaders in rubber threads. It has undertaken capex during the past 2 years increasing its capacity by 1.6x (25000 MT). The business has tail winds like increase in demand for quality inner wear and demand uptick in international market. Headwinds are: commodity inflation, spandex as an alternative to rubber and inverted duty structure (high custom duty on raw material and low custom duty on finished product).
One key question remain: Has the new plant in Tamil Nadu (commissioned in March 2022) reached maximum capacity utilisation? If yes, that would be reflected in Q1 FY 23 results where revenue was 112 crores. Extrapolating it, EPS in FY 25-26 is estimated to be Rs 12. A P/E ratio of 10 gives stock price of Rs 120 in three years (~25% annual returns).
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