SOME COPY AND PASTE FROM ANNUAL REPORT.2015-16....STORY IS GETTING BETTER AND BETTER...In fact I am loving it:)
Huge demand of Optical fibre cable has led to industry wide shortfall of fibre supply and surge in fibre prices, which surely calls for scaling the overall manufacturing capacity. Aksh is set to cater to the market demand and has planned phased expansion at all its divisions to meet future requirements. The performance capacity of the fibre manufacturers would be a game changer, not only for the domestic operations but for exports as well.
The industry experiencing solid increase in exports: close to 9%. The percentage change in demand for optical fibre in India of 19%,..**The company has strong commitment to breach Rs 500 Crore barrier in the coming year (FY 17)**
Data usage has been growing dramatically, particularly due to streaming services, and is expected to continue that path in the year ahead. WiFi usage will continue to be key, especially as carriers look to offload more mobile traffic onto broadband networks (especially fibre) as well as considerations around other spectrum efficiency technologies and potentially unlicensed spectrum solutions (i.e., LTE-U). Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWiFi) services will also be a key focus to help carriers rationalize networks and potentially offer improved and expanded services.
To cater upcoming robust demand in Optical Fibre Industry and also to maintain its leadership position, Board of Directors also approved capital expenditure of Rs.95 Cr for expansion and modernization of existing manufacturing facilities and to enhance the capacity in Optical Fibre by 100%, Optical Fibre cable by 50% and Fibre Reinforced Plastic by 200%.
_he capacity expansion is being strategically planned to cater the market demands and is on track to become operational during Fy 2016-17.
The demand for FRP is also set to rise by 9 % during the current year as compared to the previous year. It is anticipated that the demand of FRP will rise by 18-20% by 2020 as compared to Fy 2015-16. Aksh share of FRP market is ~ 21%, which is set to rise by >10% by 2020.
During the year, with a view to increase product portfolio and brand presence, Board of Directors decided to enter into new line of business to manufacture Ophthalmic Lenses. The operation of proposed manufacturing facilities will be initiated during 2016-17 and the same is to be completed in a phased manner in next 3-5 years with production capacity of 200,000 pairs of lenses per day at a project outlay of INR 85 cr. Currently, 95% of domestic requirement of ophthalmic lenses is met through imports. There is no Indian Manufacturer with such huge capacities and there is handful of organised players in India. Setting up these facilities in India shall give a boost to make India as self reliant and is a notable step towards “Make in India” project. It shall also be a step forward towards sustainable growth of Company in years to come
In India alone around 450 million people need eye correction and only 25% get proper treatment. This creates a huge potential for selection of our product of ‘Ophthalmic Lens’. The ophthalmic lens market in India is largely unorganised and dependent on imports. Aksh is looking to aggressively tap into this market and the need to have an organized player providing a world class product at “Make in India” prices. This project is not just an offline product diversification but an organized phased movement to venture into the greater optical engineering space; which the company has extensive experience in.
Now we come to the valuation aspect...or the extent of undervaluation...
The current assets are 386 crores...if we subtract current liabilities of 163 crores and non current liabilities of 50 crores...that still leaves us with around 173 crores..and market cap of Aksh is around just 230 crores.... for a company which generates 33 crores of cash flow from operating activities....Aksh is now almost a net net stock.....
If Aksh is able to cross 500 crores topline in the present financial year...when the capacity expansion comes on stream by end of this year and the acquisition of unitape is completed...the topline may as well jump to 1000 crorers and more by end of next financial year...
And that satisfies all the doubts about Aksh fundamentals...On a broader level its faboulous...I am quite OK with the shareholding pattern (the number of shares held by the promoters is constant, although percentage holding dropped)...Broad picture investing does not require quarter to quarter monitoring of performance...Or as Daniel Kahneman tells us, broad picture approach is better suited than micro management approach...
So now its time for me to sleep over my investments in Aksh and let the time work its magic over this stock...and TIME is a friend of this wonderful little company...its getting better and better with time.
From now on., I will be monitoring the progress of Aksh mostly through Technicaals...fundamentals don't need much monitoring...
Disclosure: Disproportionately invested in Aksh...as I go back to rereading of the book ...Concentrated Investing- Strategies of the World's Greatest Concentrated Value Investors by Allen C. Benello.