Exited AA Plus some days ago.
Today added Holmarc Opto.
CMP: 68.5
Mcap: 69 cr
P/E: 19.5
Mcap/Book Value: 3x
Company having low debt and debt/profit is 0.35x
Company doing 3.5 cr capex from IPO funds.
Working Capital is not stretched with miniscule receivables outstanding over 1 year. Apart from it, Operating cash flow is positive and cash flows is not misleading with borrowings into operating and things like that.
Company incorporated in 1993 and promoters are associated with the company since incorporation.
The Company manufactures variety of scientific and engineering instruments for research, industry and education i.e. Imaging Instruments, Measuring Instruments, Spectroscopy, Analytical Instruments, Lab Instruments, Physics Lab Instruments, Breadboard/Table Tops, Opto-mechanics, Optics, Linear & Rotation Stages, motorized Linear & Rotation Stages, Industrial Automation etc.
Company has not revealed the capacity utilization stating that it is not possible to calculate the same.
RHP: Prospectus_NSE_Holmarc_11092023.pdf
Company has listed its products from page 109 – 120 along with process flows.
Company has two Building with space cumulative of 30000 sq ft.
Sector is niche and small but with more R&D expenditure being done in economy, this sector might do well in the upcoming time.
Company has exports around 15% of total revenue. Around 45%-50% sales are done to Government sector.
Surprisingly for a company incorporated almost 30 years ago, there are no direct/indirect tax cases outstanding as on date. They do have a 18 lakhs Property Tax matter.
One of the most weird thing is their Board of Directors. They have 15 Directors of which 5 are Independent, which is both a boon and bane.
Related Party Transactions: Red Flag
- With 10 directors all around 7 lac per director remuneration it totals to 70 lac. (Fair enough).
- Sales Incentives. This here is a bit troublesome. Around 3% of sales are distributed among the directors as incentives with 2% to promoters and rest to heads of different departments. (This can be an issue in future as they can increase the ratio whenever they want with special resolution, although the main promoters remuneration has decreased more than present remuneration + sales incentive combined).
Rationale:
- Niche sector with growth in company possible due to capex.
- Decent valuations at listing price.
- Experienced promoters with long history.
- Export though small; is done to many countries.
Neutral Reasons:
- No listed peers
Cons:
- Related Party – Sales commission (Things can go downhill affecting PAT)
- Company too small.
| Subscribe To Our Free Newsletter |
