Nitin Fire - How did it catch fire?

1

Products:

  • Fire extinguishers
  • gaseous fire suspension system
  • kitchen fire suspention system
  • fire sprinkler system
  • vehicle protection system
  • fire pumps
  • foam equipments
  • foam compounds

Salient Features:

  • 22 year old company
  • Chairman MR. NITIN M. SHAH is 38 years experienced.
  • ISO 9001:2000 certified since 2007
  • Got listed in forbes india best companies under a billion 3 times.
  • Has recenetly enter JV with Worthinton Industries
  • Has operations in India and middle east

Financials:

Screen Shot 2017-07-15 at 8.47.14 AM.png1102×515 105 KB

But inspite of all that this is what has happened.

Why has it been falling for last few years and what exactly happended to sales in last quarter?

Risks:

  • Declining ROCE, ROCE has declined from 48% to 13% in a decade.

Triggers:

  • There may not be enough reason for PE of 2x and multi year low valuation unless the company is found to be fraud and may go bankrupt soon.

Disclosure: Not invested.

1 Like
2

Governance is a big concern here.

3

There was a post on Quara recently on this!
https://www.quora.com/What-should-I-do-now-with-my-1-000-shares-of-Nitin-Fire-which-I-bought-for-Rs-42-in-BSE/answer/Bhartiya-Niveshak?share=13644299&srid=dRps

FY 15-16 Annual Report
http://nitinfire.com/wp/wp-content/uploads/2016/09/Annual-Report-ECPL-2016.pdf

BOB Capital Coverage initiation report (31 Aug 2015)
https://www.bobcapitalmarkets.com/getreport.asp?id=76

4

Because of all the good reasons you mentioned , specially because i read the article on forbes
i do studied it couple of years back.
Btw one of my friend used to work for very famous business magazine told me everything is paid, there is no independent journalism in today’s world it seems :slight_smile:

Anyways i gave it pass due to inconsistent cash flows -ve most of the time and some of receivables was never coming back, also you can see the constant equity dilution has happened over the years and the valuation was not too attractive at that time.

But now at Rs 6 /- i do feel a bit of greedy in trying my luck out.
The situation has to be thought in probabilistic way here … From here on there are two things possible

  1. Either company will bankrupt
  2. Or Will come back to normalcy - May be whatever happening today is a short term resolvable issue.

So, clearly here the risk is losing 50-60 % of capital if it never comes back to normalcy may be it will forever trade as a penny stock Rs 2-3 / share .

Or it will come back to normalcy may be stock will trade around 20-21 after 1-2 years. and you will end up making 3x.

So, at this point from risk reward point of view it looks really good. Please do your due diligence before taking a call.
I have had good success in doing this kind of contrarian investing where i put 1-5% of my portfolio depending on the messiness of the situation and it worked out for me pretty well.
Like a year back i did on Unitech and Jp associate a year back with 2-2% of my portfolio. To my surprise both seems to be working out …

Here you have to be prepared to lose all as well …

1 Like