I don’t think it is a trading company- it is a paint application company. Thus, they don’t import and sell paints, they import and apply. As they apply the products their margin is good. They did have fall in topline during covid, but now they have recovered their topline too, this year I estimate that it may touch 30 crores. Their profitability has always been good, and it may touch 12% this year. They have done well in H1-2023, and declared Eps of Rs. 4.37 in H1. Going by the past trends of better results in H2, we can expect an annualized eps of Rs. 10 in the current year.
These figures command trust as in the last 2 years, dividend payout has been in the 40-50% range. Even on a 30-35% dividend payout this year, we may expect a dividend payout of more than Rs. 3 this year. Thus on a current year earning, its p/e is around 20, and the dividend yield of 1.5%; not bad.
The real issue which needs to be examined is scalability- can it scale? We have no history of any paint application company in India. On a global scale there are a few reputed paint application companies- Sherwin Williams which command lofty valuation and market cap. Can we have such companies in India. It may be noted that even established paint companies like Asian Paints have started taking application work.
Today the company has a topline of 30 crores. Certainly, it can touch a topline of 100 crores or 200 crores going forward, that scalability is always there. Can it go further? If it can go further, in my view it is a gem.
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