Bansal roofing products – Pre-engineered for growth

Hi Friends,
I have been tracking this company for sometime and with market catching up with infrastructure theme and increase of govt spend in this area, it can be a big boost for this stock in future.

From the annual report – https://www.bseindia.com/bseplus/AnnualReport/538546/74259538546.pdf
The products are mainly in roofing category like

1. Roof sheets (Steel sheets, Polycarbonate sheet, FRP sheets, Deck sheets, Panels, Sky light panels)
2. Roofing accessories (Purlins, Ventilators, Louvers, Frame, Canopy, Gutter, Vent)

Use: These products are mainly used to setup infrastructure for plants, machineries, construction, temporary roofing for storage, labour etc.

Track Record:

1. 10 year, Sales growth is ~18%
2. 10 year, Profit growth is ~21%
3. Management seems prudent and honest based on how they have managed the balance sheet of company, no pledge, or preferential allotment.
4. Debt has increased in last two years, form ~nil to 6.5cr, mainly due to capex.
5. OPM% are on the lower side, but the optimisation is visible during last two down cycle. Now stands close to 7%
6. Unable to pass cost to customers, as visible from yearly results, especially during time when raw material price are increased in short span of time.

Triggers:

1. Quality of clients, it boast of an impressive list of clients like Sun Pharma, GMM, ABB, Deepak nitrate, Transpek, L & T, Adani, Bajaj, Borosil, SRF, Roles
2. Quality of products: design standards of product are quiet impressive as per AR. Confirming to both American and Indian standards
3. Capex plan to increase the production from 600Mt to 2000MT, recently did the increase from 200Mt to 600MT.

Risk:

1. The company has moved from SME platform to main board in 2021, which coincided with bonus issue of 3:1, unlocking enhanced liquidity in the counter. The price may remain stagnant due to this (already stagnant for 2 years)
2. No long term contract for raw material, so it is exposed to market volatility and fluctuation in raw material prices can adversely impact the OPM.
3. Serve the debt, even with healthy cash flows can be daunting if the margins are squeezed.
4. Capex plan from 600MT to 2000Mt was announced but has not gathered any pace. This may keep newer business limited. Any adverse situation here can stagnate the growth.

Given the amount of money flowing in infrastructure growth, there are definite tail winds for the sector as well as company. Also the size of opportunity, especially with kind of established clients are huge.

Would like to get your opinion on this. Also any obvious miss in this thesis or known red flags can be helpful for community.

Thanks for reading.

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Tracking