Sunday, January 29, 2006

Elgitread India

Elgitread is all about retreading. Retreading equipment, retreading material, retreading equipment and retreading tools. And if you are as stumped as I am, the company has been gracious enough to explain dummies like myself what retreading is.

My first impression of the company, was a capital intensive industry with single digit NPMs but the 11%+ NPM got me looking. Rising sales and profits over the last 5 years (although 2004-05 was a bit weaker in the OPAT area which would explain the lower dividend payout that year)

The financial are enclosed -
Share capital - 4.28 crs
Face Value - 1 rupee per share
Loans - o.oo crs (debt free)
Investments - 40.39 crs
Net curr assets - 63.62 crs
Dividend - 0.60 rupees per share
CMP - 42.75 rupees (27-Jan)

Notes -
1. The NCAV per share is 14.86 rupees which is just 1/3rd of the CMP. A secondary cushion is provided by investments
2. Investments are at 9.44 rupees per share. However, not all of this 9.44 is under quoted investments. Upon examination of the annual report 2003-04 (couldn't find 2004-05 report), I find that 153,907,849 rupees is under quoted investments i.e. 3.60 rupees/share. That would make our NCAV (incl invt) equal 18.46
3. Dividend yield is at 1.40% which is again low.
4. P/E (LY) is at 13. 54 and although Q1 and Q2 have been a dash better, its not something very commendable.
5. Debt recapitalisaition is also not very strong. It sums up to 33.78 crs which is 0.16 of m-cap.

Retreading is a growing business in many countries esp. China, Russia and India. Although the financial donot support a confident buy, keep an eye for this stock. You might be tempted to buy the stock in a smaller quantity and increase intake once the price reduces.


Anonymous rakesh said...

Guru keep on your good work....
on ur reco did bought a small chunck...
hope it gives good returns
you sound very very technical...

great to have a link to ur blog...


5:59 PM  
Blogger Shankar said...

Thanks rakesh, my first boss often said - "with data you can prove anything ... even the truth". I guess, i have caught on to this.

Regards, Shankar

11:10 PM  
Blogger Ravi Purohit said...

Hi Shankar,

A few notes on Elgitread -

a). The p/e ratio of 13 times (as of 7-Feb-06) is highly inflated one.

b). During the last four quarters, the company earned a non-recurring (extra-ordinary) income of Rs.7.7 crore. Total net profit for the trailing four quarters sums up to Rs.14.8 crore.

c). Thus at the normal net profit (including the extra ordinary items as well), the p/e works out to 13 odd times.

d). but, if one were to exclude the extra-ordinary items (presuming these would not recur the following year), the p/e works out to be 27.4 times.

Like u said, not to attractive an investment at the current levels, isnt it ?

There is an interesting value play in Tinplate Co. of India though. Check the financials of this co. u mite find it attractive. Annual cash flow - Rs.60 odd crore, mcap - Rs.240 odd crore. Where do i get such valuations these days ?

Personal disclosure - I do hold stock of this co. Like dear old Buffet said - when confident of a company's value, invest large sums and not puny sums, in search of diversified low risk.


10:18 PM  

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