On the growth part, if you compare YoY result, they have PBT growth of 22% YoY which is stunning. They achieved this through making operations more efficient + reduction of finance cost + new knitting facility that started in October 2016.
The way I look at the company is:
- They have high earning power, and running at full capacity which shows powerful demand for their yarns
- This is not cyclical business as they have fixed realization per kg and they have maintained in bad times >> Implying excellent pricing power
- Will they never grow in future? The answer is NO.....at some point they should be able to do the capex
- They are generating almost 70-80 Cr Free cash flow now (with minimal chance to go down in future)
So, here is a company which has strong earnings power, ethical managent, pricing power even in downcycle, ability to scale up in future and excellent free cash flow available just at 13x PE (and if you consider owener's earnings even cheaper!!)
On capex, as per my knowledge it's still pending, but should happen sooner or later. Will be probably attending AGM and can provide more clarity after discussion with management.
Other way I look at it is, if they are unable to do capex in future, they can distribute cash as dividend or buyback. Even if they give half of 80 cr FCF i.e. 40 Cr. >> Its whooping 5% dividend yield vs. 6% of G-sec yield. So, I am ready to hold it like bond until they do a capex and further growth happens. Looking it like a call option!!
Disclosure: Invested and adding on dips; My views may be biased