DHP India Ltd - Regulators and Fittings

(TJ) #43

DHP results https://beta.bseindia.com/xml-data/corpfiling/AttachLive/70d5e854-c25e-4183-beef-e51073de6962.pdf

(Dinesh Sairam) #44

Excellent set of results, in addition to improvement in financial position. Debt has come down a bit and Cash has improved a bit. Working Capital has worsened a little bit too, however.

(SOHAN) #45

Hello sir at what price to book this company becomes attractive in relation to its roe

(Dinesh Sairam) #46

At 12 P/E, 15%+ Revenue Growth, 20%+ Profit Growth and 20%+ RoE, I think it’s still very attractive at CMP. My only worry, as always, is the utilization of Cash. It’d help them to reinvest somewhere or acquire something that makes sense. But I wouldn’t mind receiving a Special Dividend too. What I’m worried about is Cash piling up, with nowhere to go.

(Rahul) #47

Why did the company do bad in 2015, 2016? Was it one-off or bound to repeat? What was the mistake and steps taken by management to avoid it next time?
What are the countries to which the company export? Which are those companies?
Given the fragmented and some-what commoditized nature of the industry, is the company venturing into value-added products? Is there scope for value-added products in the first place?

Disclosure: Not invested and not well-informed about this industry.

(Raman Sharma) #48

There is not much info available about this company. Management seems to be quite conservative. Even if you read Annual reports of last 10 years, it is just a copy paste (only the numbers got changed :slight_smile:️) let me share some info which I got based on my little research.
Sale/profit drop in 15&16- As per the Annual report ‘this was due to the lower demand due to high competition in market’. Other than this no info available. If any body has attended the AGM he can share for the benifit to us.
They are exporting to North America majority of their products. Products are - pressure regulators for Patio Heater, Grill, RVs etc. Clients- ROTAREX SRG (Germany), SOL limited (South America), Fairview Fittings (North America), VFT international llc(Singapore). Regarding product category, yes they are facing completion but IMO their products are critical to safety and it is quite difficult to get the license and certification for supplying these products in export markets.This is some sort of moat IMO. Further I don’t have much info. If any senior member have done any shuttlebut it would be really beneficial for all of us.
Disc- Invested (just tracking position)

(Dinesh Sairam) #49

These are also my views. I tried to read a couple of their Annual Reports and got a headache. They are poorly structured and difficult to read.

As I’d shared in this thread earlier, only about ~70 players are licensed to produced Pressure Regulators in India (Since they are very critical safety components). Out of these, most of them supply locally. I don’t have the exact data, but DHP India is among the very few players that work in the export business.

While the licensing is definitely a smaller moat, I think the bigger moat comes from the production cost, what with them producing in India and supplying to Germany/America/Singapore. But we should be ready to admit that theirs is a quasi-commodity product and so, they can face headwinds as and when the cost leadership position is challenged. Until then, I think the cheap valuation offers a decent shot a good returns.

(Dinesh Sairam) #50

Poor QoQ results on the back of a significant drop in 'Other Income’

For reference, here’s what ‘Other Income’ consisted of during the last AR:

My guess it it would have been largely due to change in FV on investments (They have a ton of Equity and Debt investments) and perhaps Forex losses. It is good to see that there has been very minimal change in inventories, meaning the old inventory is getting depleted. Finance costs have dropped sharply (Not that the leverage was that high to begin with anyway). Every other item has remained the fairly similar.

(Santoshmk) #51

@dineshssairam True. I am however bit concerned about no revenue growth. Sales YoY has remained flat. Do you see this as a concern?

(Dinesh Sairam) #52

DHP India is a quasi order based company. So, I’d not bother about QoQ Revenues that much. We did have massive increases from Jun-17 to Jun-18 as well as Sep-17 to Sep-18 (70%+ in both cases if I’m not wrong). So for the year, I’d expect a generous increase in Sales overall.