CMI Ltd - Specialized Cables manufacturer

(prabhatg1) #67

Any idea why promoter has pledged there share of 41 Crore

(Rushikesh Kanthamani) #68

I was anticipating it, as they are having cash problems, as they have very low operating cashflow and negative free cash flow for a while. This is because their major money is stuck in trade receivables as pointed by me in my earlier posts. But valuation wise, i am not so afraid, as stock is trading at a discount to other peers and this is the only stock which is trading at low valuations currently. Company needs cash for smooth running but I dont think they are getting any, thats the prime reason I feel that they have pledged the shares. Another comforting parameter is D/E ratio which is 0.65, so no immediate problem that will take the stock down(they can raise some funds from debt), but if the company manages to maintain low working capital (by keeping inventory and trade receivables low ) then this company has great potential to tap . Hence I feel low downside risk, but huge upward potential.
Small concern-Promoters should not dilute the sharecapital going forward like they have done in the past.
This is my personal view.
Disc- Invested

(harshb232) #69

But given the fat that there major customer is government cash flow is always going to be problem. They need to find a way around this and reduce the dependence on government contraacts.

(Manohar T. Patil) #70

Stock has been on fire in past few days. Appreciated about 60-70% in a matter of a month. Sold all my holdings today at 352 given the sharp run-up. However later came across the Edelweiss report with price target of 462(link below). Just wondering, have I exited too early?

Any thoughts from other investors/interested members in CMIā€¦

(Rushikesh Kanthamani) #71

If you ask my personal view, then yes the report is correct, but the stock has not moved because of it(just came yesterday), the stock was highly undervalued as also said by me in many of my previous comments, According to me a correct valuation for CMI is around 420-430, currently a good quarter will be a icing on the cake, I believe that this is a long story to go and it will playout with ateast taking its time like 2-3years and not before that, Cmi is yet to discover its true value as we can see how undervalued it was(inspite of uptick of 65% its still looking undervalued as per sector peers at CMP).It has just started to get some value thats it. At this point I expect some profit booking coming and some/big correction, but long story is intact and I am invested for that story, not for this lump-some.
This is my personal view, not a recommendation ,I am just trying to put my points front, that how big the opportunity is in next 3-5years for CMI.
Fundamentally company is good, my only key concern is the working capital cycle(as it has high trade receivables-but their biggest customer is Indian Railways so not so much worried) which the management told to improve going forward. They are also diversifying the product portfolio which is good. Has great opportunities going forward like

  1. Electrification of railways
  2. Smart cities
  3. Metros rails is bid cities
  4. Infra development

All these opportunity are lying ahead of CMI and co is rightly positioned to en-cash it, but yes it will take time like atleast 2-5years. Dont expect quick money.

Disc- Invested

(Rushikesh Kanthamani) #72

Recent interview of management have a look

(skg) #73

I was checking CMI ltd. I heard MD interview and briefly reviewed the company. It seems it has many clients. But most of them are Govt companies. There might be delay in payments with Govt client.

Good thing was that D/E is 0.7 and PE is 11. also FCF is +ve. I expect company to grow once Baddi location become fully operational. But I am seeking expert advice here before investing in the company.

(nevermore) #74

Investor presentation for 9M FY 2017-18.