Why I like ITL Industries ( http://www.itl.co.in ) . BSE code 522183
- Mcap 60 cr
- CMP 180
- 10 paid up
- 3.2 cr equity.
- 44% promoter stake
- Zero pledge
- Established in 1986 …IPO in 1993
- Continuous dividend paying track record
- Based out of Indore
Debt position ( as on 31/3/17 )
- Long term debt 132 lacs
- Short term 1002 Lacs
- Net current assets of 2000 lacs++ which includes cash of 105 lacs
What does the co do
Co is mainly manufacturing high end cutting equipment catering to the steel industry
All products are developed inhouse and cater to both domestic as well as overseas markets
Products include Band Saw machines, Circular saw machines, Power Hack Saw machines, Special Purpose machines, Tube mills, Blades and cutters.
These are used by anyone who needs to cut steel
Make machines ranging from 100mm to 3000mm capacity.
Also has trading division (~30% of revenue), selling cutting tools and lubricants for its machines as well as distributing hydraulic components of EATON, USA.
Representative offices in US, Germany, Italy and all across India.
Service network across India.
1 plant in Indore where all divisions are co-located
Did 69.78cr of revenue in FY17… up 24% yoy
Did 7.32cr of EBIT…almost 10.50% margin, up 38%
Did 3.80cr of PAT…almost 5.5% margin, up 72%
- 25% jump in revenue
- 44% fall in interest cost✅
- 117% jump in pbt✅
- 144% jump in PAT
- 190 basis points jump in PAT margin✅Now 4.4%…will slowly move to 10% over next few quarters as operating leverage kicks in
- balance sheet also showing all round improvement with reduction in loans, lower days outstanding and better cash position.
What I like about this co
- Cos products are unique and have little or no competition in India
- 1st generation consisting of 2 brothers ran the company conservatively and brought it to this stage. Now 2nd generation, having completes their studies from the best global colleges, is now fully involved and determined to take this to the next level.
- In a bad year for industry , the company was able to grow by 24% to almost 70cr last year. I am expecting them to do appx 90cr of sales in FY18, a growth of 28%
- If company does 90cr of sales, we could see operating leverage kick in and margins expanding to 15% from 10.50%. PAT margin could see expansion to 8%
- Global majors have started getting their products made from them .
This is a testament to their quality and reliability
- Slowly receivables will reduce as sales move to cash and carry
- ROCE is 24.66% based on last years numbers….i think it will cross 40% based on FY18
- last year h2 was appx 42 cr. Assuming 25% growth is here to stay, h2fy18 should be 52cr
- we may end year with 85 to 90 cr revenue
- last year h2 pat margin was 6.79%. Extrapolating q2 cost heads, I get 6cr operating profit for h2 and about 4.5 cr pat
- thus, full year pat expected is 1.6+4.5=6.1
- eps 19😋
One of the cheapest profit making cos available today.
Product range can be seen from the following videos
- buy at 60cr mcap
- By 2020, I expect revenue at 160cr , with 10% net magin
- 16cr PAT
- 25 p/e can be given, given high ROCE and negligible debt
- 400cr target mcap
- 5x in 30 months
Typically in these small companies…keeping in mind allocations risks…difficult to make a LOT of money.
Disclosure : Own 1% in the company along with many illustrious names…average cost would be around 140…I keep buying intermittently whenever i have some spare cash.
This is NOT a buy recommendation.
Mcap when posted : 60cr