Somi Coveyor Belts

ok… after multiple attempts, was able to get through to the company folks.

They were forthcoming and here are some of the observations.

-their foray into steel conveyor belts is indeed a big event. The pricing of this @ 3000/m is almost 4times the normal belt. The life is these belts is much better at 4 years as compared to 12-18 months for normal belts makes this more attractive for clients. Also, this requires less maintenance.

• there was a delay in getting this product in place and so they had subdued q1 and q2. But they indicated that q3 and q4 should be substantially better and they should easily cross 100 cr for the year.

• Also send next year should be much better. Close to their guidance. So perhaps 200 cr at a pat of 12% would mean an eps of close to 20. I think at a minimum u should give at 10 p/e for the growth rates they can sustain, but make ur call.

• The industry is still dominated by small players and clients are largely psu’s where price is the most important determinant without major emphasis on quality.

So in pvt sector bids, they easily win, but is not so the case with psu’s like NLC. But the market size is huge (I don’t remember exactly, but I think NLC alone is 200 cr/year). So with their competencies they should be able to scale up.

I checked with some local folks and they had good things to say about Somi and the Bhansali’s. But I don’t know the source all that well and since he is from the local pollution control board, I don’t know what this means.

p.s I hold a position – a medium one.