Meera inds ( BSE code : 540519 ) is a fairly simple business to understand. Basic details as follows
- CMP : 65
- Mcap : 25cr
- 10 paid up
- 3.92 cr equity.
- 39.27 lac shares only
- 71% promoter stake
- Zero pledge
- Recent IPO of 10,80,000 at 36/-
- 10 year old co.
- Long term debt 3 lacs
- Short term debt zero
- Net current assets of 1.3cr which includes cash of 1.05cr. This does not include the IPO money of 3.88cr as that was done after 31st March 2017.
Now about the businesses…they are mainly into the manufacturing of Yarn Twisting, Winding and Heat-Setting Machine for textile industries. Company’s products are sold under the brand name “MEERA”.
MIL cater to the domestic market as well as Exports the products to continents like America, South America, Africa, Europe and Asia and major countries like Germany, Spain, Turkey, Thailand, Belgium, USA etc.
They have government recognized in-house R&D Center by Department of Scientific and Industrial Research, Government of India located within the manufacturing unit.
- 1 plant in Surat speard over 1.6 acre appx
- Has the capacity to do 30cr of machiney revenue at full capacity
- Did 13.45cr of revenue , up 64% yoy
- Did 1.75cr of EBIT…almost 13% margin, up 75%
- Did 1.06cr of PAT…almost 8% margin, up 158%
- 38% ROCE
What I like about this co is its unique combination of
- 1st generation technocrat entrepreneur who does business the way I would.
- No debt.
- Day receivable only 27 days.Apparently all sales are done on cash and carry basis and this 27 days refers to the L/C processing time
- Double digit opm
- All this at a plant which is currently operating at 45% capacity…full operating leverage yet to play out.
- High Promoter Ownership
- They have won several awards for R&D
- Out of 3.83 EPS, dividend payout was 1/- more than 25% which is unique for a small co.
- Young promoter. Dharmesh Desai, aged 44 years, has 19 years experience in the industry.
- Co has been able to break into the export market
Part of the IPO has been used to setup a showcase yarn manufacturing center using their own machines. As per bse announcement, this unit has begun in August 2017. This will work as a demo place as well as an independent profit center.
Co. has also planned a similar forward integrated setup in USA.
Product range : http://www.meeraind.com/products.html
- By 2020, I expect revenue at 50cr (30cr machinery + 20cr yarn), with 15% net magin
- 7.5 cr pat
- 19 EPS
- you can arrive at your target based on what p/e you will give it
Now about the risks
- Key man risk
- Appreciating rupee risk can reduce export margins
- Yarn division sales yet to kick off ( will see early signs in H1FY18 )
- Ability to fund growth as i see existing capacities getting fully utilized by 2019
- Liquidity risk as its a SME segment stock
In conclusion, sometimes we see good companies getting listed in SME segment which remain unnoticed by the investor community. This is a interesting company which investors should track. I for one will be watching it closely to see if this can move up from nanocap to smallcap and onwards. If the company can keep up with its pace of growth showing the fiscal discipline that they have, this can definitely be a company to own for a long period of time.
Disclosure : I take concentrated bets, Meera is one of them forming close to 8% of my portfolio. I am a long only investor who doesnt sell unless the basic story turns. Any stock sale will be updated.