Business Overview
Bright Brothers is a ~150cr market cap manufacturing company. It has ~250 crores of trailing revenue with ~5% EBITDA margins.
Promoter Background
- BBL commenced operations as a private limited company in 1947, led by Mr. T. W. Bhojwani. His son Mr. Suresh Bhojwaniis the present chairman and managing director of the company. The promoters have over five decades of experience in manufacturing and trading injection moulded plastic components and have established long-term relationships with its key clients.
Manufacturing Footprint
- The company has six manufacturing units currently—three in Puducherry and one each in Faridabad (Haryana), Bhimtal (Uttarakhand) and Dehradun (Uttarakhand)
Products Offerings:
a) Consumer Durable Parts & Systems
It makes parts for Refrigerator, Washing Machine, Air-Conditioner, Water Purifier, Vaccum Cleaners, etc.
Consumer durable plastic moulding is the core business for the company
b) Crates, Bins and Containers:
Jumbo Crates, All Rounder Crates, Space Saver Crates, Beverage and Milk Crates, Agro Crates, Bins
c) Hair Care Products: Brite Combs, Divo World,
d) Tooth Brush Handles: Available in different sizes, shapes and colors
e) Tool and Die making: Different types of dies, molds and jigs are available
f) Painting: Molded parts are Painted, printed, plated and assembled
g) Automotive Parts and Systems: Exterior Parts, Interior System
h) Pallets: HDPE Pellets
Customers:
Company caters primarily to white goods manufacturing companies such as
- Whirlpool,
- Eureka Forbes,
- Havells,
- Rialto,
- Titan,
- Amber Enterprises
- Carrier Midea India
- Procter & Gamble (tooth brush handles)
As per ICRA Credit Rating reports, Whirlpool and Eureka Forbes were the largest customer of the company and accounted for 66% and 15% of revenue.
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Company had 230 crores revenue in 2019 and hence Whirlpool business would have been ~150 crores and Eureka Forbes would have been ~35 crores
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For context Whirlpool India’s COGS in 2019 was ~2,800 crores. Hence, this implies Bright Brother was supplying 5-6% of COGS of Whirlpool India.
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Similarly Eureka Forbes’s COGS would be in the range of ~800 crores implying Bright Brother’ accounting for ~4-5% share of its COGS.
Sale Of Vacant Land:
This event is worth noting.
- In July 2021, company sold its vacant land situated at Kurla, Mumbai Suburban District to Kanakia Spaces Realty Pvt. Ltd. for Rs 43.75 cr.
Manufacturing Capacity Expansion
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Importantly, company re-invested the proceeds from sale of land to expand its manufacturing footprint, which is a very good sign and signifies management’s confidence in growth prospects and industry opportunity.
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Effectively, company has 2x it’s gross block over the past two years
Growth Potential
- Historically, the asset turns have been ~4-5x
- Hence, it is possible that the incremental gross block addition of ~40 crores can have the potential to add 150-200 crores of incremental revenue over the coming years
- Potential for company would be to reach ~400-500 crores of annualized revenue in the next 2-3 years, if they can tie up the newly built capacities
Return on Capital
- Company has a patchy track record on RoCE. During 2018-2022 it averaged ~15% RoCE
- Over the past two years, RoCE has declined as the company embarked on capacity expansion strategy
Risks
- Plastic moulding is an intnsely competitive industry with low barriers to entry
- There is very little pricing power
- Margin defensibility can be weak
- Industry is reasonably capital intensive
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