Pee Cee Cosma Sope Ltd


(Vinay Taparia) #1

CMP : INR 111 (As on 4th Jan 2019)
Market Cap : INR 29.87 Cr.
TTM P/E Ratio : 7.83

Pee Cee Cosma Sope Limited is a Agra based company engaged in manufacturing of laundry soap, detergent powder, detergent cake and utensil cleaning cake. The company has three manufacturing units in Madhya Pradesh, Uttar Pradesh and Rajasthan. The company sells its products under ‘Doctor’ brand and enjoys good brand value. The company is not witnessing any growth in topline. The topline is same as it was five years ago in FY 2013-14. However, company‘s margins are improving. The company is managing its working capital very efficiently. It seems that the company does not sell its products on credit or the the credit is given for ultra short term period and the payment terms are very strict This is reflected from the fact that during last five years, the amount of receivables does not exceed 2-3 days ‘revenue of the company This fact may be the reason for no growth in topline. Low level of receivable also indicates the continuous demand of company’s products.

Financials:-

Company’s performance is satisfactory on bottom line front. The company has posted disappointed set of results for quarter ended 30th Sep 2018.

(in Cr.) Sep-18 Jun-18 Mar-18 Dec-17 Sep-17 FY 17-18
Income Statement
Revenue 18.84 20.57 17.69 20.27 19.74 78.51
Other Income 0.01 0.01 0.02 0.00 0.00 0.02
Total Income 18.85 20.57 17.71 20.27 19.74 78.53
Expenditure -17.82 -19.09 -16.29 -17.88 -18.24 -72.29
Interest -0.02 -0.03 -0.03 -0.06 -0.05 -0.23
PBDT 1.03 1.49 1.41 2.39 1.50 6.24
Depreciation -0.14 -0.14 -0.19 -0.16 -0.17 -0.68
PBT 0.89 1.35 1.22 2.23 1.33 5.57
Tax -0.28 -0.46 -0.46 -0.74 -0.44 -1.90
Net Profit 0.61 0.89 0.77 1.49 0.88 3.67
Equity 2.65 2.65 2.65 2.65 2.65 2.65
EPS 2.30 3.30 3.10 5.60 3.30 13.90
CEPS 2.83 3.87 3.62 6.23 3.99 16.42
OPM % 5.47 7.23 7.99 11.79 7.59 7.95
NPM % 3.21 4.31 4.34 7.37 4.48 4.67

Source : www.bseindia.com

Company’s share is trading at trailing PE of less than 8 which is very reasonable for the company engaged in FMCG business with good brand value. Any slight improvement of performance will result in rerating of the company

Share Holding:-

The promoters’ holding is 74.70% which is very excellent. Rest 25.30% is held by public. Around 1/3 of total public shareholding is in physical form. It is interesting to note that small cap investor Mr. Dheeraj Kumar Lohia is continuously increasing its stake in the company since 3rd quarter of FY 2017-18.

Dividend History:-

Company is regularly and generously paying dividend. The company is continuously increasing dividend payout since FY 14-15.

S.No Financial Year Rate of Dividend Dividend Amount Per Share (Rs.)
1 2013-14 12% 1.2
2 2014-15 15% 1.5
3 2015-16 18% 1.8
4 2016-17 25% 2.5
5 2017-18 30% 3.0

Credit Rating:-

Crisil has assigned ‘BBB-/Stable’ as long term rating with the suffix 'ISSUER NOT COOPERATING’. Since the company has negligible debt, this rating does not have any significance.

https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/Pee_Cee_Cosma_Sope_Limited_August_30_2018_RR.html

Summary:-

Positives:

  • Well Experienced Management
  • FMCG product with strong brand value
  • Strong balance sheet with negligible leverage. Debt equity ratio is 0.07 as on 30th Sep 2018
  • Efficient working capital management
  • Very low equity base
  • Return on equity is 18% in FY 17-18 and is expected to improve considering the continuous debt reduction and increasing dividend payout.
  • Negligible Receivables
  • Regular and generous dividend payment

Negatives:

  • No growth visible in topline
  • Increased competition from large players
  • Illiquid Share

Disclosure: - Invested


(maninder.nitw) #2

All directors are very aged - any possibility of fresh blood coming in ? That can bring new some new thinking to increase revenue


(Vinay Taparia) #3

I am trying to meet the management sometime in next month. Will seek clarification on this too


(maninder.nitw) #4

Thanks please keep us posted.


(Jinal) #5

Read your post company seems to be good

What are your reasons for investment?


(Vinay Taparia) #6

Stock seems to be reasonably valued.Downside is limited even if there is no growth and the company maintains the current level of operation.Doctor soap is a strong brand.

With present level of operations, I am expecting 20-30% upside once the market sentiments improve for small cap shares. Upside can be huge if company starts posting growth in topline.


(Vinay Taparia) #7

One more fact that I want to highlight that Dheeraj Kumar Lohia bought 32537 shares during 2nd quarter of FY 19 which was about 60% of total traded quantity during that period.


(Jinal) #8

Did you chance to speak to management


(Vinay Taparia) #9

Not yet. I am planning to meet them in next month


(Yogesh Sane) #10

@Vinay_Taparia any idea about volume of production over last few years? Since top line is flat but margins are rising it will be interesting to know if this is a sales mix issue or volumes are flat as well.
Also any info on capacity and capacity utilization and future capex?

Thanks for starting a thread on this microcap.


(Vinay Taparia) #11

Following is the sale quantity

FY 13-14 : -21935 MT
FY 14-15 :- 22830 MT
FY 15-16 :- 21607 MT
FY 16-17 :- 20377 MT
FY 17-18 :- Not available in AR

I could not find any data about production capacity and capacity utilisation. Not aware of any expansion plan. However, it is evident from the latest balance sheet that the company is not under going any expansion plan.

As per India ratings, the sale of company is concentrated in rural area of Rajasthan. 70% sales is from rural area and 30% sales is from urban area.

https://www.indiaratings.co.in/PressRelease?pressReleaseID=27101&title=India-Ratings-Assigns-Pee-Cee-Cosma-Sope-‘IND-BBB-’%3B-Outlook-Stable


(maninder.nitw) #12

Manage to meet promoters?


(Jinal) #13

Any update sir kindly share


(Vinay Taparia) #14

I have tried to meet them 2-3 times but it seems that they are not interested. However, one of their employee has confirmed that they are not seeing any significant growth in top line. I have deferred my buying plan till the results.