CMI Ltd - Specialized Cables manufacturer


(Ankit Sharda) #1

CMI Ltd is engaged in manufacturing of various types of specialized cables catering to various sectors.

FY 15 Sectoral Rev split – Railways (56%), Power (17%), Petro-chem (13%), Rest (14%).

79% of its revenue comes from PSU & rest through private sector.

Major customers include – Indian Railways, GAIL, Indian Oil, Alstom, TATA, Siemens, ISRO, SAIL, Global Toyo, The Linde Group, NTPC, Bharat Electronics, HP, EIL, etc.

23 of their clients have empanelled them as their preferred vendor

Current manufacturing facility is located in Faridabad, Haryana. Operating at 65% utilization, the plant reported 9 month revenues ending Dec 2015 of Rs 170 Crs.

During FY 2015, the production capacity increased by almost 25% over last year due to commissioning of one additional cable laying machine, improving capacity of other important machines & by better production planning & control system.

In Sep 2015, CMI acquired Haryana facility of Danish company FL Smidth for Rs 20 Crs. Link

In March 2016, CMI completed acquisition of another manufacturing facility at baddi from General Cables, USA for Rs 150 Crs. Link

  • Baddi acquisition positions CMI as a leading manufacturer in India for specialized cables. Also, CMI has inherited international processes & systems for manufacturing specialized cables.

  • Baddi plant has the potential to generate almost four times the revenue generation capacity of Faridabad plant

  • The acquisition strengthens their current product portfolio with addition of new products & new clients. Also, the potential for cross-selling to their existing clients.

Promoters are increasing stake in the company by way of warrants / pref allotments.

GMO acquired almost 10% stake in the company in Jan - Mar 2016 qtr.

Q3 FY 16 Investor presentation

Financials –
https://www.screener.in/company/517330/

At Current Mkt Cap of Rs 250 Crs, CMI trades at an LTM PE of ~13x.

Risks / Concerns –

  • Recently completed acquisition would result in leveraging of capital structure. Though June 2016 consol B/S is not available but finance costs have gone up by 140% in June 2016 qtr yoy.

  • For a company of its size (FY 16 turnover @ 240 Crs.), Rs 150 Crs acquisition is pretty large & a slight slowdown in revenues – could deteriorate the outlook considerably.

  • The company is reporting high growth rates in revenues for the past 3-4 yrs but it does not disclose its order book position. Hence, difficult to get a sense of revenue growth going forward. However, Mgt. has given a guidance of 100% rev growth for FY 17 Link

Disclosure: Holding tracking qty


(Rajeev M. Parashar) #2

Any particular reason for the stock to halve from its December 2015 peak?


(manish) #3

I was researching CMI but gave up after sometime.
The promoters are frequently issuing warrants and too in huge quantity which i don’t like.


(Shashank Gupta) #4

Any idea whether the promoters have any kind of political connection since 80% of their business comes from the government? Was searching but couldn’t find anything on google.


(indrajeet100) #5

Do not even think of this share. Promoters have shady background, numerous defaults in past. Skeptical of business and Balance sheet quality and someone mentioned frequent issue of warrants. Wont be surprised if they actively managing their stock price.


(indrajeet100) #6

Just checked their credit rating history. BB suspended with ICRA and BW and BBB- with CARE. Signs of shopping for rating until they got better. Still BBB- only.


(Ankit Sharda) #7

I came across issue of warrants by promoters here

They have allotted 7,00,000 warrants at the price of Rs 101/share.

Also, 19,45,650 shares were allotted to non-promoters as well at the same price.

Are there other instances of dilution / equity raising by the company? Plz point out.

Further, lock in of shares (1 yr) for non-promoters also expired some time back which could be one of the reasons for such a huge fall in the price.

Plz direct me to instances of defaults by promoters in the past. That would be a major red flag. Thanks.


(indrajeet100) #8

Just check history of the company on moneycontrol. Immediately after buying this company, current management went to bifr but bank used sarfesi. Later on there was a settlement.
Do some research, you will some related companies and their past.


(shamoilp) #9

The company has given guidance to increase its turnover to rs 1000 crores in 2 years(video of MD on money control), considering railways getting an infra push this scrip could soar higher. There may be instances of bad management but that should not be the precursor to blacklist it cause it survived the downfall and the management pulled it through tough times. Adding capacities through acquisition and even supplying to foreign rail corporations, being a preferred supplier to various institutions by qualifying their quality tests also off lately got an ISO certification. Promoter holding is low so they are adding through warrants, don’t see anything wrong in that. At current levels the downside is low hence risk is less disc: invested


(Srinivasan) #10

CMI has bagged apprx.155 cr new orders recently, apart from this they are also seriously looking for the export opportunities
As per the latest mgmt interview we can expect revenue doubled in Q2 result

Recent order bag


(shamoilp) #11

Hi, isn’t the order of Rs. 155 crore + Rs. 91 crore or this 91 crore relates to old railway order? So far it seems rs 246 crores worth of orders over and above the old railway order


(Srinivasan) #12

Hi, Including that Rs 91 cr only it is Rs155 cr worth new order, not Rs 246 cr


(sivakkri) #13

CMI is not generating cash flow though it has reported profits for a long time. If you look at the cash flow statement for 2015-2016 (from AR), you would notice the below under “Cash flow from operating activities”

Around 121.45 crores in Trade and other receivables !!!..Thats huge amount of cash. Cash flows show if the company is making real profits or cooking up numbers. Though I’m not a numbers expert, it looks like something is really wrong.


#14

This difference is due to advance to related party (subsidiary) 96.73 cr and 28.72 cr increase in debtors
During the year company had acquired general cable energy ltd I guess this is for the payment of acquisition.
Correct me if I am wrong
Disc analysing not invested


#15

disl not invested


(Keshav Karunakar) #16

Today Board notice. Promoters are doing preferential allotment at Rs 300. Good step considering that last big investor entered in the counter at the same price.

Disclosure:- Holding with just 1% allocation. No buy/ sell from a month.


(Satya Prakash) #17

I think time has come to lap it up.
Company expect to add Rs 1000 Cr worth revenue due to new acquisition in Three years. It’s current revenue is ~ Rs 250 Cr.

In recent board meeting, Syndicate Bank has increased working capital from 100 Cr to 150 cr. Company expect more working capital need due to improved volume. Company also said that company expect Cash flow positive in 2018 after adjusting working capital need in 2018.
(taken from recent board meeting).

Disclosure: I am invested.


(Shiva Prakash) #18

Hi, I too had same question. Can some experts enlighten us on negative cash flows please?


#19

This difference is due to advance to related party (subsidiary) 96.73 cr and 28.72 cr increase in debtors
During the year company had acquired general cable energy ltd I guess this is for the payment of acquisition.
Correct me if I am wrong
Disc analysing not invested[quote=“sumitjain0014, post:14, topic:6882”]
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(roomy) #20

caution :the eps for this company anually is only ard Rs5 and not Rs15 which is only due to extraordinary income in mar16 so evaluate accordingly pls