I live beside a carpenter’s market in a tier-3 city. All I see is the brand EURO 7000 product (60-70% of all product range) on every shelf for more than 30 – 40 shops displayed in front space ahead of Fevicol… selling like butter, at least in the west of the country in smaller cities. They call themselves the second biggest brand in wood adhesive white glue, and I don’t see any reason to defy that.
The company has recently completed the capacity expansion from 1500MTPA to 2000MTPA, and it was completed in the month of August. Currently, they are commissioning a warehouse to energize the distribution reach. They have also started focusing on building brand visibility and cash flow generation on the internal operation side. It is, in my understanding, an effort to gain the interest of big investors.
Company Guidance at present is –
“We are targeting +25-30% CAGR for Revenues over the next 3-4 years (Base Year: FY2022). Continue to maintain +30% ROE and +40% ROCE. Stay debt free and generate positive operating cash flows and free cash flows.”
As per my understanding, the Growth Triggers are not related to new product launches but mainly on account of the execution into venturing and entering new states and expanding the distribution network with increasing the market share outside the west region, especially in the north and south. Coupled with the fact that the free float is extremely less and buying from the big funds lets the stock roaring high… and I think there is a considerable buying interest at a lower level. The company has completed the issue of bonus shares in the ratio of 3:1, which I think is an effort to satisfy the request of incoming investors.
Disclaimer:- People in the above chain have raised some concerns over the management, but I found that the promoters have kept on buying shares at every level, and my entry is at a much lower level. Biased as this constitutes 20%+ of my overall allocation. Do your own diligence.
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