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Nitin Spinners Ltd Investment IdeaNitin Spinners Ltd, promoted by the Nolkha family of Bhilwara, is one of the leading manufacturers of cotton yarn, knitted fabrics, greige and finished woven fabrics and a Government of India-recognized export house. Established in 1992, NSL started operations with open end spinning with 384 rotors. Currently, the company has an integrated textile complex with over 3 lakh spindles, 3488 rotors, 63 knitted machines and 168 air jet weaving machines. Product Portfolio Nitin Spinners was incorporated in 1993 in Bhilwara as a small-scale unit with a capacity of only 384 rotors. Over the years, Nitin Spinners has expanded the operations to include open end yarns, multi-fold open end yarns, ring spun combed yarns, multi-fold ring spun yarns, compact yarns, fancy slub yarns, core spun yarns, S and Z twist yarns, dyeable cheese cones and organic cotton yarns and blends. Their product range in knitted fabrics include single jersey, pique structures, inter-lock structures, rib structures and three thread fleeces. Capacities Nitin Spinners has an installed capacity of 2,23,056 Spindles and 2,936 Rotors, producing 50,000 tons of yarn per annum. No of installed spindles between FY16 to FY21 increased by 2x. No of installed rotors & knitting machines between FY16 to FY21 increased by 1.2x & 1.3x respectively. As of FY21 it has 168 looms for Woven fabrics and processed woven fabrics with dyeing, finishing & printing capacity of 30 mn MTS/PA. Thus, increasing contribution of value-added products going forward. Clients The customer base of the company is diversified with top ten customers accounting for only 16% of the total income of the company in FY21 (PY: 18%), with each customer having less than 5% share of the total income. NSL supplies its products to some of the renowned brands like Raymond, Donear, D’Decor, Siyaram’s, Welspun etc in domestic market and Zara, United Colors of Benetton, Hennes & Mauritz (H&M), Marco Polo in the international market. The company enjoys good relationship with these customers and receives repeat orders from them. As on December 31, 2021, the company had nearly 2.5-3 months of orders on hand. FY21 Revenue Break-up Growing contribution of Value-added products. -Yarn: 68% (FY20 73%) -Woven Fabrics: 15% (FY20: 9%) -Knitted Fabrics: 11% (FY20: 11%) -Others: 6% (FY20: 7%) FY21 Revenue Geography-wise -Export: 63% (FY20: 55%) -Domestic: 37% (FY20: 45%) Capex Capex done in 2020 Integrated Textiles Complex at Begun, Chittorgarh, by setting up 76,992 Spindles for manufacturing Cotton & Blended Yarns. 552 Rotors for Blended Open end Yarn. 168 Air-Jet Weaving Machines along with facilities for Dyeing, Printing & Finishing of Fabrics. Fresh capex of 950 cr. announced in December 2021 which should finish in 20 months with additional capacity in spinning (from 75'000 TPA to 110'000 TPA), knitted fabrics (from 8'500 to 11'000 TPA) and woven fabrics (from 30 to 40 million m/pa). On January 2022, ICRA reaffirmed Nitin Spinners Ltd’s ratings as stable. Following are the excerpts from the credit rating report: - Key Rating Strengths Experience of promoters in the textile industry - NSL was promoted by the Nolkha family in 1992. Mr. R. L. Nolkha, Chairman, has an experience of over four decades in the textile industry. At present, he is also the Vice Chairman of Confederation of Textile Industries (CITI) and a member of the Board of Governors of Textile Skill Development Council. Mr Dinesh Nolkha, Managing Director, has around three decades of industrial experience and handles yarn marketing, finance and general administration. He is also Chairman of Northern India Textile Research Association (NITRA) and a committee member of Rajasthan Textile Mills Association (RTMA). Mr Nitin Nolkha, Joint Managing Director, has around two decades of industrial experience, and looks after marketing of fabrics, procurement of materials and implementation of projects. Long and established track record with integrated nature of operations in textile industry - NSL has a track record of around three decades of operation in the Indian textile industry. The company has presence in more than 60 countries globally, deriving more than half of revenue from exports. Further, NSL is continuously investing in the latest technologies, resulting in delivering quality products. Furthermore, NSL has various accreditations pertaining to quality management (ISO 9001:2015), energy management (ISO 50001), environmental management (ISO 14001: 2015) and occupational health and safety management (OHSAS 18001). As a part of value addition and widening of its product range, the company has set up an integrated textile complex at Begun (District: Chittorgarh, State: Rajasthan) equipped with modern spinning, weaving, dyeing, finishing and printing facilities along with compliance with pollution control norms. NSL’s plant is capable of producing wide range of yarn as per the market demand. Furthermore, the company has also set up a 10.5 MW thermal power plant and 8.5 MW rooftop solar power plant for captive consumption ensuring consistent power supply. Moreover, the company is also planning to set-up another 6 MW rooftop solar power plant over a period of next 2 years to reduce its power & fuel cost. diversified product profile with large share of revenue contributed by cotton yarn - NSL is engaged in manufacturing of wide variety of cotton yarn, knitted fabrics and finished woven fabrics. Cotton yarn accounts for most of the revenue generated by the company registering around 68% of the sales in FY21 and H1FY22 (FY20: 73%) followed by woven and knitted fabrics. NSL is continuously focusing on providing value added products to its customers. It provides wide range of yarn to meet its customer requirement both for woven fabric and knitted fabric. Healthy growth in TOI (Total Operating Income) along with significant improvement in its profitability - during H1FY22 NSL’s TOI grew by 88% on y-o-y basis and stood at Rs.1,219 crore during H1FY22 largely due to significant improvement in the average sales realization of cotton yarn and knitted fabrics amidst strong export demand. It was also aided by the lower base of H1FY21 which was impacted adversely by the first wave of Covid-19 pandemic. The company has witnessed healthy growth in its export revenue as it earned 73% of its revenue from export market during H1FY22 as compared to 63% in FY21 and 54% in FY20. The sales realization of cotton yarn and knitted fabric improved by 41% and 40% respectively during H1FY22 as compared to FY21. PBILDT (profit before interest, lease, depreciation and tax) margin of the company also witnessed significant improvement by nearly 1,300 bps and 900 bps to 25% during H1FY22 as compared to H1FY21 and FY21 respectively on account of sizable jump in the spread between cotton and cotton yarn along with improved operating efficiency led by better capacity utilization. With healthy growth in scale of operation coupled with improved profitability margin, the gross cash accruals (GCA) of NSL grew by 293% on y-o-y basis and stood at Rs.197 crore during H1FY22. Improvement in leverage and debt coverage indicators during H1FY22 - The capital structure of NSL marked by overall gearing and TOL/TNW (Total Outside Liability to Total Net Worth) improved and stood at a moderate 1.05 times and 1.35 times respectively as on September 30, 2021 as compared to 1.71 times and 1.88 times respectively as on March 31, 2021 backed by healthy accretion of profit to reserves coupled with reduction in total debt level. Debt level of the company stood at Rs.734 crore as on September 30, 2021 as compared to Rs.962 crore as on March 31, 2021 primarily due to scheduled repayment of term debt coupled with lower utilization of working capital utilization as on even date in light of healthy cash accruals during H1FY22. With improvement in profitability, the debt coverage indicators also improved marked by PBILDT interest coverage and Total Debt/PBILDT of 11.02 times and 1.20 times respectively in H1FY22 as compared to 4.20 times and 3.72 times respectively in FY21. However, the capital structure and debt coverage indicators are again expected to deteriorate marginally in the medium term due to the planned large size debt-funded expansion project and expectation of higher utilization of its working capital limits considering envisaged internal accruals to be deployed for capex. Further, post commissioning of project, the company would also require additional working capital borrowing to fund its incremental working capital requirement which may also lead to some moderation in capital structure and debt coverage indicators. Key Rating Weaknesses Implementation and saleability risk associated with large size proposed debt funded capex - NSL has planned to enhance its capacity through brownfield expansion at its existing location in Rajasthan with acquisition of land adjacent to its existing plant, as company is currently running at optimum utilization of its existing capacities. The capacity addition is also proposed to meet increasing demand, penetrate newer geographies, aid widening of product portfolio and to bring competitive cost advantage by having economies of scale. The estimated cost of the project is Rs.950 crore (1.35 times of tangible net-worth as on September 30, 2021) which is to be funded through term loan of Rs.650 crore and remaining through internal accruals translating into project debt-equity ratio of 2.16:1 times. NSL has envisaged to complete the project in phase-wise manner over a period of next 20-24 months. Phase-I of the proposed capex is expected to commence from September 2023 (i.e. Q2FY24) and project is expected to be fully commissioned fully from FY25 onwards. As informed by the management, the financial closure of the project is yet to be achieved. The company is envisaging to avail term debt of Rs.650 crore for a door-to-door tenor of around 9 years (including implementation and moratorium period) along with expected benefits of interest subsidy. However, due to the large debt-funded expansion project and expectation of higher utilization of its working capital limits, the leverage and debt coverage indicators of the company are expected to remain at an elevated level, contrary to earlier expectation of improvement. Furthermore, such large size projects are susceptible to inherent implementation risks and consequently any delay in execution of the project may result in cost overrun and impact the currently envisaged timelines for cash flow generation. Apart from that, demand for cotton yarn is driven by international demand-supply dynamics and susceptible to economic cycles. Historically, the textile industry has witnessed high cyclicality wherein demand shoots up and then falls rapidly. Hence, there is a salability risk associated with the project in case of sudden drop in demand which may adversely impact the credit profile of the company. Timely completion of the project within envisaged cost parameters and realization of envisaged benefit therefrom would be a key rating sensitivity. Susceptibility to volatility in the raw material prices and foreign exchange rate fluctuations - The basic raw material consumed by NSL to produce yarn is raw cotton, which accounts for more than 90% of the total cost of production. The prices of raw cotton are volatile in nature and depends upon factors like area under production, yield for the year, vagaries of the monsoon, international demand-supply scenario, inventory carry forward from the previous year and minimum support price (MSP) decided by the government. Prices of raw cotton have been volatile over last couple of years, which translates into risk of inventory losses for the industry players; albeit at times it also leads to inventory gains. Collectively, these factors along with intense competition in the industry contribute to low bargaining power of yarn manufacturers and volatility in profitability. Further, NSL is also exposed to foreign currency rate fluctuation as the company derives significant portion of its revenue from the export market (exports accounted for 73% of the total revenue in H1FY22 and 63% in FY21). Thus, profitability margins of the company remain susceptible to any adverse movement in the foreign currency. However, the company has a policy to hedge its foreign currency exposure through forward contracts mitigating the forex exposure to an extent. Presence in fragmented, cyclical and competitive textile industry - NSL operates in a cyclical and fragmented textile industry marked by presence of many organised as well as unorganised players leading to high competition in the industry. Apart from competition, the relatively commoditized nature of cotton yarn also limits the pricing ability of the industry players to an extent. Further, textile industry is inherently cyclical in nature and closely follows the macroeconomic business cycles. The prices of raw materials and finished goods are also determined by global demand-supply scenario, hence any shift in macroeconomic environment globally also impacts the domestic textile industry. Liquidity: Adequate The liquidity of NSL remains adequate backed by healthy cash accruals and cash flow from operation apart from cushion in the form of undrawn working capital limits. Further, the liquidity of the company is envisaged to remain adequate on account of expected healthy GCA as against relatively moderate debt repayment obligation over the next one year. Furthermore, the cash accruals are likely to remain adequate to fund its proposed capex. Moreover, its current ratio improved to 1.58 times as on September 30, 2021 as compared to 1.27 times as on March 31, 2021. The average utilization of its working capital limits stood moderate at 64% for trailing six months ended November 2021. In October 2021, SEBI warned the company over violation in company's RPT policy in relation to Regulation 23 of the SEBI LODR regulations (2015). Financial information : - Ten year CAGR sales and profit at 20% and 101%. Five year CAGR sales and profit at 24% and 42%. TTM sales growth at 66% and TTM profit growth at 380%. Average Roe for last 10 years at 22%, last five years at 21% and for last three years it has been 24%. Debt to equity at 0.79 (less than 1 is good), Interest Coverage at 10.2 (greater than 3 is good), Current ratio at 1.83 (greater than 1.5 is good). Debtor days improved to 33 in March 2022 from 39 in March 2020. Promoter holding increased from 55.82 in December 2019 to 56.25 in December 2021. FII stake increased from 1.23 in June 2021 to 4.84 in March 2022. On the chart I have tried to pinpoint the confluence of multiple supports and resistances as demand zones. These demand zones can prove to be good areas to accumulate this stock but prices can go down below these support levels too and stay there for many months. Buy at your own risk. One will do good if he/she can find the demand zones with at least three supports and three resistances and buy there. 200 week moving average also acts as a good support. Disclaimer: I am not SEBI Registered. Do trade or invest at your own risk, I am not responsible for any losses and won't claim anything from your profits either. Take financial advices from your advisors before jumping in.
NSE:NITINSPINLong
by akashbothra
BankNifty Intraday Trade Setup for 17th May 22The market is likely to go sideways in the First half today, Not Expecting any Big moves The Red Zone is the supply Zone and the Green Zone is the Demand Zone, I plan to buy in the Demand Zone (But not sure), so be active on this post to see my live positions and Trades Do Support by Liking and Commenting on our Post as it motivates us to post more such ideas The chart is for study purposes only!! NSE:BANKNIFTY NSE:BANKNIFTY1! . . . bank nifty option trading strategy NIFTY TRADING STRATEGY, intraday, intraday strategy, simple intraday strategy, Share Trading Strategies, BANK NIFTY TRADING STRATEGIES, bank nifty today, nifty prediction today, volume profile in Hindi, trading with volume profile , intraday, mcx , crude oil , crude, crude oil trading tricks, open interest analysis, options trading, options trading strategies, Emotion in Investing, markets scientist, candlestick pattern, candlestick , candlestick analysis, candlestick stock pattern, trusted spots, cool brains, learn and earn, trending, profits How to find stocks for intraday, how to buy and sell in Zerodha kite, Zerodha trading tutorial in Hindi, bracket order, daily income plan, emotions, Unsuccessful Investor, share trading course, share market course. day trading, best strategy on intraday trading, Candlestick types, Candle types, Candlestick analysis in Hindi, Candlestick Body, Japanese Candlestick , Rakesh Jhunjhunwala, share market, stock market for beginners tutorial, how to enter the stock market for beginners, stock market guide, Share market basics for beginners
NSE:BANKNIFTY
by harshnisar45
Sportking India Ltd Investment callSportking, incorporated in February 1989, is a part of the Sportking Group. The company manufactures cotton, synthetic and blended yarn in counts ranging from 20s to 46s. It has manufacturing units in Ludhiana and Bathinda, both in Punjab. The company has large size capacity of 2.75 lakh spindles and dyeing capacity of 20 tonne per day. It manufactures value-added yarns, such as compact, sustainable and contamination-free cotton yarn, which provide higher realisations than normal cotton yarn. Products: - The Yarn business is the largest strategic business unit of the company which manufactures Cotton Yarns, Poly-Cotton Yarns, Fancy Yarns, Acrylic Yarns and Polyester Yarns. The Co also supplies knitted fabric (Single Jersey, French Terry, Fleece etc.) and manufactures garments for Men, Women, Girls and Boys that are made available to customers through their own Retail Outlets. Geographical Split: - Domestic (India): 53% in FY21 vs 52% in FY20 Exports: 47% in FY21 vs 48% in FY20 The major exporting destinations of the Co are Bangladesh, China, Hongkong & Singapore. Associated Brands: - The Co is associated with brands like Zara, H&M, Ikea, Jockey, Marks & Spencer etc. Its top five clients accounted for 24% of total revenues in FY21. Manufacturing Facilities: - The Co has seven manufacturing facilities in India spread across the states of Punjab and Himachal Pradesh. The present total installed capacity of the Co is 2.72 lakh spindles for the manufacturing of Gray/Dyed Cotton/Cotton Blended/Synthetic Yarn. The Co also owns 100 Retail Garment Stores spread across India. The capacity utilization in FY21 stood at 95%. CRISIL Ratings has upgraded its ratings on the bank facilities of Sportking India Limited (Sportking) to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Stable/CRISIL A2+’. Excerpts from the rating report are as follows: - Key Rating Drivers: - Strengths: Sportking has a strong market position in the compact cotton yarn industry, with total spindle capacity of 2.75 lakh and revenue estimated at over Rs 2,000 crore in fiscal 2022. The company has established a strong position in several export markets, such as Bangladesh, China, Egypt and USA. The company also has longstanding relationships with international garment retailers in the USA and Europe and, thus, benefits from its diversified geographic reach. In fiscal 2022, export demand improved with increased competitiveness of Indian spinners in the global market on account of lower domestic cotton prices compared with global prices and supply disruptions amid Covid-19 pandemic. Performance is likely to remain at higher level than historical trends on account of structural changes in export market. The company consumes about 4 lakhs bales of cotton every year and is, therefore, one of the largest buyers of cotton in India. Large-scale procurement will keep the bargaining power high over the medium term. The company is focusing on de-risking its exposure to basic cotton yarn products and emphasizing on value-added yarns, such as contamination-free cotton yarn, sustainable cotton yarn and multi-twist cotton yarn, which fetch higher margin. Sportking had a healthy capacity utilisation of over 95% in the last three years, and has therefore, planned additional capacity expansion of 40,800 spindles expected to be commissioned by September’2022. This should further strengthen the business profile of the company. The company has also approved the installation of the Rooftop Solar Power Project of 20 MW Capacity at its Existing Factory Units for captive consumption in Oct 2021. The project is likely to be implemented in the next 6-8 months. Timely execution of the capex within budgeted cost and achieving expected ramp up will be key monitorable. Improved spreads between prices of raw cotton and cotton/ synthetic yarn and benefit of operating leverage should help sustain the operating margin at above 15% over the medium term. TOL/TNW is expected to improve to less than 1 times in medium term despite additional term debt to be availed for capex plans. Adjusted interest coverage ratio expected to be over 15 times in fiscal 2022 because of increase in profitability and is expected at above 8 times in fiscal 2023, driven by better spreads between prices of raw cotton and cotton/ synthetic yarn and healthy capacity utilisation. Financial flexibility is healthy, as reflected in moderate bank limit utilisation. Adequate liquidity and comfortable financial flexibility will continue to support the debt obligation. Any larger than expected debt funded capex or higher dividend payout resulting in weakening of capital structure will remain key monitorable. Strong liquidity position: - Unutilised bank lines stood at Rs 169 crore as of Feb 2022 (bank limit utilisation averaged 65% over the 12 months ended Feb 2022). Net cash accrual, expected over Rs 400 crore in fiscal 2022 and over Rs 200 crores in next 2 fiscal years which will be sufficient to cover debt obligation of Rs 30-40 crores in next 2 years. The company has well spread capex plans over the next three years. Company financials: - • Market capitalization at 1528 crore. • Average Roe for last 10 years 32%. • 10-year CAGR of sales at 11% and 10-year CAGR of profit at 33%. • 5-year CAGR of sales at 16% and 5-year CAGR of profit at 80%. • Debt to equity at 0.70 (less than 1 is good), Interest Coverage at 20.2 (greater than 3 is good), Current ratio at 1.70 (greater than 1.5 is good), FCF to CFO at 46.8%. • March quarter sales growth at 43.54% end March quarter profit growth at 77.19%. • TTM sales growth at 65% and TTM profit growth at 310.65%. • The promoters have increased their shareholding in the Co by 5% between June 2020 and Sept 2021. • The Co issued bonus equity shares in the ratio of 3: 1 to the eligible shareholders in Sept 2021. Risks: - • The company derives over 90% of its total revenue from the yarn sales, which is susceptible to volatility in cotton and cotton yarn prices. As a result, the operating margin fluctuated between 10% - 28% over the last 10 fiscals through 2022. Demand for cotton and yarn is driven by international demand-supply dynamics. In the past decade, the industry has seen five cycles (fiscals 2012, 2015, 2018, 2020 and 2021) wherein demand spiralled and then fell rapidly. Additionally, as Sportking derives close to half of its revenue from the overseas markets, it is susceptible to any significant volatility in forex rates, which is mitigated through foreign exchange forward contracts/ availment of working capital limits in foreign currency. • Operations are working capital intensive, as reflected in gross current assets estimated at around 165 days as on March 31, 2022, driven by stocking of raw cotton bales being a seasonal product leading to high reliance on debt. On account of high investment in inventory and debtors, working capital loan remains sizeable. Why is this a good investment?? Stock is trading below its 10-year average PE of 5.9 (current PE 3.72). Near term demand zone between 970 and 1030.
BSE:SPORTKINGLong
by akashbothra
2
NIFTY SPOT INTRADAY LEVELSHere are some intraday important levels of Nifty spot chart Most investors treat trading as a hobby because they have a full-time job doing something else. However, If you treat trading like a business, it will pay you like a business. If you treat like a hobby, hobbies don't pay, they cost you...! Disclaimer. I am not sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
NSE:NIFTY
by RK_Chaarts
Eicher Investment CallNSE:EICHERMOT Eicher Motors Limited, incorporated in 1982, is the listed company of the Eicher Group in India and a leading player in the Indian automobile industry and the global leader in middleweight motorcycles. Eicher has a joint venture with Sweden’s AB Volvo to create Volvo Eicher Commercial Vehicles Limited (VECV). VECV is engaged in truck and bus operations, auto components business, and technical consulting services business. Fundamentals of the company: - Iconic Brand It is the owner of the iconic Royal Enfield brand which is focused on mid-sized motorcycles (250-750 cc). Classic, Bullet, Himalayan are some of the brands that come under its Royal Enfield brand. It is sold in 60+ countries globally. It also provides protective riding apparel, urban casual wear, and Motorcycle accessories. It has launched two BS-VI Compliant Motorcycles, i.e. Classic 350 BS-VI and Himalayan BS-VI in FY20. Commercial Vehicle segment Its VECV segment makes- light & medium-duty trucks, heavy-duty trucks and buses, engineering components, and aggregates. It is also the manufacturer of medium-duty base engines for Euro VI requirements of the Volvo Group. It has launched India’s first BS-VI compliant CV range in FY20. Manufacturing Facility It has 3 Manufacturing Facility around Chennai. Its VECV’s manufacturing plant in Pithampur, Madhya Pradesh produces medium-duty five- and eight-liter engines. Its VE PowerTrain plant is the first engine plant in India to produce a Euro-6 compliant base engine. A new body shop for Pro 2000 and Pro 8000 trucks has been commissioned and installed. Capacity expansion Its Phase 1 capacity expansion for the Bhopal plant is 40k vehicles per annum. Its VE PowerTrain plant current capacity is 50,000 engines, scalable up to 100,000 engines. Distribution It has 1889 dealers (989 stores and 900 studio stores) across 1,550 cities. Its network has grown 3 times in the last 5 years. It has 308 dealers, 27 distributors for its Bus Segment. It has added 35 new stores across international markets in FY19-20, increasing its overall touchpoints to over 660 stores including 77 exclusive stores and 585 multi-brand outlets. Market Share Mid-size Motorcycles segment: >95% in FY20. VE Commercial Vehicles market share in domestic LMD segment: 29.5% in FY20. Above 125cc segment: 26.6% in FY20. Commercial Vehicle: 14.6% in FY20. Overall Motorcycle segment: 6%. Eicher HD Trucks Market Share: 5.1% in FY20. Revenue Mix Domestic: 91% In FY20. International: 9.1% in FY20 which was 2.8% in FY16. Average ROE (Return on Equity) for last 3, 5 and 10 years are 19%, 23% and 24% respectively (all above 15%). Debt to equity at 0.01 (less than 1 is good), Interest Coverage at 107 (greater than 3 is good), Current ratio at 2.73 (greater than 1.5 is good), FCF to CFO at 51%. TTM sales growth of 26% and TTM profit growth of 42%. Dividend yield of 0.71% (consistent dividend payer since 2009). Borrowings came down to 122cr in September 2021 from 249cr in March 2020. Details from credit rating report presented by ICRA in Sep'21 Eicher Motors Limited: Ratings reaffirmed Rationale The reaffirmation of ratings of Eicher Motors Limited (EML) continues to factor in its strong business profile, as evidenced by its market leadership (>90% share) in the premium middle-weight motorcycle segment (>250cc-800cc) in India, its established Royal Enfield (RE) brand, strong product portfolio and well-developed dealership and aftersales network. The ratings also favourably factor in its strong financial profile, reflected in its healthy return indicators, credit metrices and a superior liquidity position. In FY2021, the Covid-19 pandemic exacerbated the already weak two-wheeler (2W) demand environment, and additionally disrupted the supply chain ecosystem. Consequently, EML reported a 13% YoY contraction in its consolidated sales volumes in FY2021 vis-à-vis 9% contraction for the overall motorcycle segment (domestic + exports). Nonetheless, improving pace of the vaccination programme, coupled with an increasing premiumisation trend, is expected to augur well for EML. Its strong brand pull, regular product launches/ refreshes supported by expansion of its overseas presence is likely to support its growth strategy. The ratings continue to factor in the strong financial profile of the company, evidenced by its healthy profitability (average OPBDITA and ROCE of ~27% and over ~35%, respectively, over the past five years) and cash accruals, negative net debt position and robust liquidity profile (cash, cash equivalent and investments of ~Rs. 7, 790 crore as on March 31, 2021). While commodity price headwinds and semiconductor chip shortages may constrain profitability in the near-term, ICRA expects EML’s cost rationalisation initiatives, better product mix and increasing exports to support its profitability. The company is expected to fund its capacity expansion/ new product development plans from internal accruals/ cash balances, thereby keeping its dependence on external borrowings negligible. EML’s commercial vehicle (CV) business under VE Commercial Vehicles Limited (or VECV, a 54.4% subsidiary of EML) has improved its presence in the domestic market over the last few years, despite operating in a highly cyclical industry, prone to stiff competition. This had been aided by continuous product launches/ refreshes, technology advancements, expanding dealer and after-sales networks, and targeted marketing efforts. ICRA expects the Government’s thrust on construction and infrastructure projects, coupled with the potential implementation of a fleet modernisation and scrappage programme, to support demand for VECV over the medium term. The company continues to maintain a strong liquidity position, which is likely to limit any funding support requirements from EML. The Stable outlook on EML’s long-term rating reflects ICRA’s expectation that it will continue to maintain its leadership position in the Indian premium motorcycle sub-segment, aided by its established brand and product portfolio, regular investments in new model launches and extensive dealership network. The same is likely to help the company successfully navigate through the uncertainties caused by the pandemic and maintain a robust credit profile. The company’s volumes grew at a CAGR of ~10% over FY2015- FY2021 vis-à-vis marginal decline for the overall domestic motorcycles segment. Despite the increasing competition from domestic and international OEMs, RE is expected to maintain its stronghold in the target sub-segment over the medium term, backed by its niche brand and value proposition, expansive dealership, and after-sales service network (2,0711 domestic touchpoints in June 2021 against 527 in FY2016). Regular new launches and product variations underpin RE’s technical prowess. With launch of the Himalayan (early 2016), The Twins (FY2019) and Meteor (FY2021), it has demonstrated its capability to develop new models from the ground up, incorporating new engines as well as a platform. This has given the existing RE users a chance to upgrade and helped ramp up its presence in export markets. EML’s liquidity is superior as reflected by its cash, cash equivalents and investments (MF’s) of ~Rs. 7,790 crore as on March 31, 2021. The company does not have any long-term loans on its balance sheet. Healthy cash flows from operations coupled with negligible debt obligations and favourable working capital cycle, have enabled EML to maintain a superior liquidity profile, despite a large capex undertaken in the last few years. In line with its track record, the entire capex for FY2022 (estimated at around Rs. 500-600 crore) is also expected to be funded through internal accruals. Despite near-term demand uncertainties, ICRA expects the company to continue to maintain a strong liquidity profile. Risks RE’s product portfolio, concentrated in the >250cc to 650cc sub-segment, caters to a niche clientele. Despite YoY improvement over the years, the >250-800cc sub-segment constituted only 6% of the total 2W market in India (in FY2021). Further, within the sub-segment also, the company relies heavily on the Classic brand/models, which accounts for over 60% of the motorcycles sold. While the company has launched new brands (within the same sub-segment) over the past few years, there scale-up remain to be seen. Lack of segment diversification and product concentration remains a credit sensitivity for the company. Furthermore, several domestic and international players have entered the premium sub-segment with new products in the past few years. The increasing competition could limit the pricing power of the company to some extent. While RE’s export volumes in FY2021 had increased at a CAGR of 33% in FY2015-2021 on a YoY basis, these accounted for only ~6% of total volumes sold during FY2021. Thus, the company remains exposed to geographical concentration risk, with India remaining its key market. However, over the past few years the company has expanded its distribution network in over 60 international markets. The company established one assembly facility in Argentina in August 2020 and its Columbia facility became operational in August 2021. In addition, it is working towards setting up assembly operations in Thailand, Brazil, and certain other locations to improve its competitiveness. The 650cc Twin motorcycles and newly launched Meteor 350 have been well received in the mature markets. The company’s ability to increase exports could offer a significant scope of market expansion and, thereby, help mitigate the impact of any slowdown in the domestic market. Why is it a good buy right now? on weekly charts NSE:EICHERMOT is trading at a confluence zone of 3 resistances and 3 supports. Also, it is trading near its 10-year average PE of 41 (current PE is 42).
NSE:EICHERMOTLong
by akashbothra
Why BEPL is becoming more attractive day by day? INVESTMENT IDEAThis post is not for traders who want to trade with stop loss. This is for long term investors who wants to buy fundamentally strong beaten down names at a good entry points. NSE:BEPL Bhansali Engineering Polymers Ltd is engaged in manufacturing and sale of ABS Resins, AES Resins, ASA resins, SAN resins and their alloys with other plastics in the Indian market. Its customers include leading companies dealing in Automobiles, Home Appliances, Electronics, Healthcare and Kitchenware. Why is it a good buy right now? The Company had entered into a 50 : 50 Joint Venture Agreement with Nippon A&L Inc., Japan (NAL) and incorporated a Joint Venture Company namely Bhansali Nippon A&L Private Limited which provides sales support and technical support to the Company. This JV has enabled the company in catering the growing demand of ABS resins, ASA resins, AES resins and other specialty polymers. Nippon A&L Inc. was established in 1999 as a JV between Sumitomo Group and Mitsui Chemicals, which focused on polymerisation of Styrenics and enjoys high reputation in the field of manufacturing and marketing of ABS, AES, ASA resins and SBR/PBRLatices. Technical expertise, as and when required, is deployed from NAL Japan, in the purview of the JV between the company and NAL. With the help of the technical support BEPL has developed several new ABS grades and going ahead also the company believes that they will continue adding new SKUs to its product portfolio. Indian ABS market has duopoly situation with only two players BEPL and INEOS, while the rest of the market demand has been catered through imports. Despite the availability of a market in India, global players find it difficult to meet the demand of the Indian market as the scale of operation is not favorable. Further, every segment requires a different colour and performance specification so manufacturing such a wide variety of colours requires a strong balance between investment and sectional capacity utilisation. Need for high grade technology is another strong entry barrier. Both these domestic companies have technical collaboration with foreign partners and have long standing relationships with end user industry. The market is niche which acts as a natural entry barrier for the new players. The Indian automotive industry is undergoing significant transformation, with respect to its sustainable growth and profitability. The industry is witnessing megatrends that are expected to transform the industry in a significant way. Rapidly evolving customer needs, disruptive impact of technology, a dynamic regulatory environment, changing mobility patterns etc. are impacting the way auto companies are doing business in India as well as abroad. The industry now aspires to double its contribution to manufacturing GDP with a four-fold growth in size and a six-fold growth in exports by 2026. These bold aspirations, along with the trends shaping the industry, create new opportunities in the years ahead. India is becoming a global manufacturing hub of two wheelers as well as four wheelers. As a result of which, international giants in the automotive field, viz. Suzuki, Hyundai, Honda, Toyota, Volkswagen, General Motors, Ford, Nissan, Renault, Fiat have established their respective manufacturing facilities in India, with growing degree of indigenization of its components. For components manufactured out of ABS, BEPL’s presence is well registered with all such international giants. Indian appliance and consumer electronics (ACE) market is expected to double by 2025 according to Indian Consumer Durable Report. There is immense scope for growth of these products in India as the penetration level is immensely low as compared to global average. Demand for consumer electronic goods is likely to witness an increase in the coming years, especially in the rural areas as the Government plans to invest significantly in rural electrification, supplemented by rising influence of social mass media and the popularity of online sales. The Government of India’s policies and regulatory frameworks, such as relaxation of license rules and approval of 51% Foreign Direct Investment (FDI) in multi-brand and 100% in single-brand retail, are some of the major growth drivers for the consumer market. The Production-Linked Incentive (PLI) scheme in 10 key sectors (including electronics and white goods) shall boost India’s manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat’ initiative. Near-term outlook for Appliances and Consumer Electronics (ACE): Pent-up demand (most seasonal categories missed out massively in the previous two seasons), work-from-home (to support convenience driven categories), improving housing activities, and resumption of Capex will sustain strong revenue traction in the coming quarters too. Average ROE (Return on Equity) for last 3, 5 and 10 years are 40%, 39% and 25% respectively (all above 15%) 5year CAGR (Compound annual growth rate) Sales and Profit at 19% and 82% TTM (Trailing 12 months) Sales and Profit growth at 33% and 147% Promoter Holding increased from 55% in Dec'19 to 56.45% in Mar'20 (greater than 45% is good) Dividend Yield at 1.56% (consistent dividend payer since 2011) Debt to equity at 0.00 (less than 1 is good), Interest Coverage at 1070 (greater than 3 is good), Current ratio at 6.81 (greater than 1.5 is good), FCF to CFO at 78% (company won’t have to raise debt for expansion) Current PE at 4.82 is much lesser than 10-year average PE of 26 BEPL is trading at a very good support point and is heading towards another important support point at Rs.100. If anyone consider it for buying, put only 3% of your capital right now, buy with another 3% if it falls another 40% and invest the rest 4% (don't invest more than 10% of your entire capital in one stock) when the share closes at a 52 week high.
NSE:BEPLLong
by akashbothra
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