Can somebody explain what are the growth triggers from here? Is current capacity utilization that only growth avenue? If that’s the case, looks fully valued.
The ZAHORANSKY Customer Magazine
Shaily Plastics Engineering from India is Capturing the Brush Market with support from ZAHORANSKY
"In our cover story, our Indian customer Shaily Engineering Plastics
describes how all-round support from ZAHORANSKY – from product development
through to start of production and the implementation of a new technology
– works in practice. This story and other current highlights about the company
are waiting for you in the new issue of CONTACT".
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Shaily come up with another good set of Numbers. Very good quarter Indeed.
Looks very impressive numbers…record quarterly EBIDTA and EBIDTA Margins (17.8%)…
Disc - Invested
Why so you think so ?
In general I don’t quite understand why is the return on capital employed for plastic industry is so great ? What is it that triggered such a boom in plastic industry for last 2 years ? What miraculous activities are being done with plastic products now that were not done 2-3 years before ?
Disc: Not invested.
Did a little research myself. In fact sales hasn’t drastically improved at all in last 2-3 years ; just that operating profit has increased a lot. So noticeable reduction is seen in cost of raw materials.
Constituent | Percentage of total cost of Raw Material | Change in price
NaturalGas | 30-60%| -40%
Crude | 30-40%| -60%
Coal | 5-10%| -50%
ethanol/cellulose | 5-10%| -50%
others | 5-10%|
Clearly the cost of raw materials has almost halved from 2012 to 2015, however the question is, is this growth sustainable ? when will the pressure from peers come to lower the margins ? Secondly even if they collectively decide to sit pretty on healthy margins, what will happen when prices of crude rises, will they rise cost of plastics as well to maintain the margin ?
Shaily does occupy a niche among plastic processing companies. You can go through their ARs/presentations to understand what makes them different.
Disc: Not invested.
I find most people in this thread are stories’ people with great visions about company without talking anything about how that translates into numbers and future projections.
I am not sceptic about Shaily’s niche, I am sceptic about plastic industries growth potential for next few years in general. If the plastic industry is able to maintain this kind of ROIC/ROCE for next 5 years no reason for it not to grow, in fact Arrow, Jindal, Nilkamal, Shaily all have their niches and all will grow.
Very much so, pricing power is a big concern for B2B businesses. Even if crude prices remain low enabling them to manufacture cheaply, I would prefer to hold on to plastic companies with bigger B2C business wing like Nilkamal.
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“Scope is always there for plastic manufacturing companies like shaily”. Why should I think so?
India’s plastic consumption is expected to grow at a healthy rate on the back of growing substitution, expanding middle income groups and new applications. Plastic products are increasingly finding application in all sectors of the economy, replacing other competing products such as steel and aluminum.
The plastic processing industry is highly fragmented. Presently, 75% are in the small-scale sector but accounts for only about 25% of polymer consumption. The top 100 players account for just 20% of the industry turnover. The industry also consumes recycled plastic, constituting about 30% of total consumption. Despite being an industry dominated by unorganized players (70% of the industry size), the organised players over the last few years outpaced them in terms ofgrowth through constant innovation and regular introduction of niche products and thereby gradually eating into their share.
According to the All India Plastics Manufacturers’Association (AIPMA), the Indian plastic industry should grow 2.5 times in the coming eight years so that the five year plan target of 20 kg per head by 2020 can be attained. Presently, India is processing 8 kg plastic/head/year, while the global average stands at 28 kg per head per year.
Moreover, China processes 56 million tonnes of plastic while India at 8 million tonnes. The industry body feels that India needs to work in the direction of attaining China’s growth level as its one-year growth is nearly India’s overall capacity. Chinese imports have captured 25% finished goods market and is growing fast. Consumption is growing faster than industry and is being captured by Chinese imports. The Government should promote foreign direct investment (FDI) in the plastic industry as China has been able to strengthen its position in the global market through this concept.
Hope above details may helps you to understand the scope of the Organised Plastic Manufacturing companies in India.
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“I find most people in this thread are stories’ people with great visions about company without talking anything about how that translates into numbers and future projections”.
What should I Say!!!.. I couldn’t believe that just because of story telling in this platform cause the stock price movement from 250 to current level. There must be some reason for the growth. Conviction level is different from person to person. Please study in detail. To be honest I thought to share about shaily because I felt something special in this story. Iam sure at least few boarders got the opportunity to understand the company at early. Even now I welcome Expert boarders opinions. I am sure they can elaborate in details about risk factors and other points
B2B to B2C Comparision. I do not think it is fair. Both companies have potential to grow on their on ways. Lot of space remains in this growing Industry
Good posts, finally I got some numbers I was looking for.
My estimations of change in crude prides ruling the industry is a part of the story but not the full story; have you found any numbers around cost of manufacturing split for any given product?
Shaily Engineering Latest Investor Presentation - Nov 2015
@ishandutta2007; @remonc; @jinesh1212; @neil991
Must Read - It is answering most of the question asked by you
Q2 FY16 - Earnings Call Transcript -
http://www.shaily.com/userfiles/file/Q2%20FY16%20-%20Earnings%20Call%20Transcript.pdf
Here’s why Shaily Engg has potential to transform into largecap
I just tried to re align important part of the last con call transcript with category wise for easy understanding.
Introduction
Shaily Engineering Plastics Limited was incorporated in 1987 with the sole purpose of
manufacturing precision component with high performance engineering polymers to fulfill the
gap that existed in the plastic processing market in India. Through the years, we have worked
with various companies across multiple user industry such as IKEA in Home Furnishings,
P&G and Hindustan Unilever, Pepsi in Consumer and FMCG, Honeywell in Automotive,
Sanofi, Wockhardt, and Sun Pharma in Healthcare and many more companies both from
Appliances and Switchgear industries.
The strength of the company lies in its capability to offer end to end solutions to OEMs for any
of its plastic requirements beginning right from conceptualization to commercialization
including project management, design, industrialization and scale up, going up into managing
their entire supply chain. As you may have noticed, the company so far has been working with products which are customized to customer requirements. In order to manage the risk of contract manufacturing and in order to improve margins to achieve the next level of growth we have forayed into ourown products in the Healthcare segment.
IKEA
The relationship with IKEA began in 2004 and today we are one of their most preferred plastic suppliers globally. With this trust we managed the entire supply chain of products right from our factory to IKEA stores. We service this demand from 100% EOU facility at Rania, Gujarat and I am sure all of you would be aware now with IKEA plans to enter into India with a total investment of about 10,500 crores over the next several years. Shaily is well poised to capitalize on this upcoming opportunity.
Q: One on the IKEA side of the business, now which is about 50% of our total business. What is the scalability in that part of the business from three year to five year perspective?
Ans: Let me talk about the opportunity first a bit. We have all read about IKEA now coming into India. We have all read about where they have bought land. Essentially IKEA is going to be close to I would say increasing their sourcing and plastics by 60% to 70% uptill 2020 and being a supplier that has consistently preformed with IKEA I definitely see a lot of opportunity for us to grow with them. As far as exact projection goes it is too far out for us to give you indication but if IKEA is opening 25 crores in India alone you can imagine what the potential for the revenue would be including other markets.
Q: If you could tell from the global supply angle where we are to the next peer and what size it would be and what size we can achieve? : And what would be the largest supplier size?
Ans: Today IKEA source is about €1.2 billion worth of plastic globally. We are at €20 - €22 million of that. the largest supplier is about €150 million.
Q: We were looking at some of your products that you have displayed on the website and the ones for IKEA from a lay person‟s perspective we were not able to figure out what the level of manufacturing complexity is here which explain your stickiness and why IKEA can be so keen to work with you. So, could you just explain to us as to what is that creates the stickiness with IKEA with respect to your specific skill in terms of your technical skills your manufacturing skills and any other skill that you might have which would explain why you would be able to leverage the growth of IKEA in this country significantly.
Ans: So, let me first start to answer that question with what is that IKEA looks for in a supplier. First and for most the most important thing to IKEA is something that they have referred to as Iway. If you refer to our presentation we were awarded the best Iway supplier in South Asia in the year 2009. Iway is nothing but a social compliance requirement that IKEA has put up. Social compliance means environment means how you treat your workers we talk about child labor obviously we would not be involved in any such activity and sustainability. Sustainability means how is that you are able to incorporate your renewable and recycled materials and energy into your manufacturing operations. And we should not forget the most important is our performance with products. See IKEA only sells finished products in their stores so everything we manufactured is a finished product. Now they would not does any inspection or further value add on our products which means that they have to be confident in the quality that we are manufacturing that enables us to supply directly from Shaily to their stores worldwide. So one is making sure that the stores never stock out, second is making sure that the customer remains happy with the quality of products supplied. Third is the Iway System that I spoke about and fourth is going forward we talk about being sustainable as a supplier. Keeping all these things in mind and our performance our historical performance there is detailed KPIs and what not behind it but we have been one of the better performing suppliers in their portfolio. And Now that we talk about the technical aspect behind the products, I agree with you, that from layman‟s terms you look at the products and they look quite simple. But most of our products are non-straight shoot and ship when I say shoot and ship it is not that we just put a mould in the machine take out the parts and send them out. Most of our products have assemblies, most of our products have are made up engineering plastics not commodity plastics we manufactured kitchen legs for IKEA. IKEA‟s bread and butter is their kitchen‟s so each one of our leg is supposed to take 250 kilos of load and it is a fixed component assembly that we manufacture for IKEA we do all the testing. We ensure it is made to the right specification so that tomorrow when their kitchens are being used worldwide they should not just fall flat on the floor. So that is a bit on the technical part, and we offer very innovative assembly solutions and that does not mean that we have the highest level of automation that means we have the right combination of automation and labor that makes the product cost effective, okay. I hope that answers your question.
Q: you have talked about growing with IKEA as it expands in India what about the IKEA worldwide requirements would not that be a big kicker for growth?
Ans: Absolutely, I think IKEA‟s worldwide requirement is going to be just as much as driver of growth as their India venture. China as we all know that cost are increasing in China and there has been movement we currently supply to the Chinese market as well for IKEA product and they will be moments where there will be chance for our products. Time scale is not something that we will be able to tell you. But what we can tell you that if you look at our historical figures even given in the presentation which is currently only corresponds to export products, products being exported from Shaily. From FY13 to FY15 we have seen a 170% growth in revenue for IKEA.
PHARMA AND HEALTH CARE
One of our coveted achievement had be designing and manufacturing World‟s First
100% Plastic Insulin Pen which we did for Wockhardt in 2005-2006.
In Healthcare we are actually not doing anything for the domestic market while we supply these closures and bottles to players in the domestic market they sell the product and it get exported basically primarily to the United States, Canada. And when you look at the device landscape essentially there is no one but Shaily in all of India that manufacturer pen injector or auto injectors. In the past we have done dry powder inhalers as well. That portion of the business has much more to do with regulation, compliance, understanding of polymer, understanding of process, the processing window and the tolerance is required are very-very tight for anyone to just come in and take that share of business away from us. And when you look at the trends in the pharmaceutical industry there are key patents that have expired over the past 12 months and will continue to expire over the next 36 months. With there is two opportunities for Shaily, one is that innovative companies based out of U.S., Europe, Canada will be looking for cost effective solutions on their devices. So, I am sure that we will be approached for some of those opportunities and Indian generic companies looking to get into the business where the patents are expired and will also be looking for cost effective solutions from India. So there is going to be a portion of business that hopefully comes from the innovators and a portion of business that comes in from the generic as far as pharma is concerned.
In 2014, we went into a tie-up with Global Closure Systems to offer closure solutions to pharmaceutical companies. GCS is a European multinational company with patents for child resistant closures. They are basically the pioneers when it comes to CRC and European market leaders today. We are an exclusive licensee for GCS for our CRC caps in the Indian market. In 2015, we set up our second ISO Class 8 Clean room Facility also at Rania to Gujarat to manufacture CRC Caps and HPP bottles for regulated markets. These products are currently under validation by various pharma companies and we believe that such validations would take anywhere between six months to eight months. We believe that India being the second largest exporter of generic drugs globally this presents a large opportunity for us to capitalize on.
Q: on the pharma bottle side if you could tell us a little bit on the scalability angle the capital investment we have done and corresponding out come from a three year to five year perspective.
Ans: To the current capacity we have put in place will enable us to manufacture 100 million caps and 100 million bottles all in all. When I look at market size and when I look at players in the industry as far as caps are concerned even today about 90% of India‟s generic player‟s requirement is imported. So while there are some cap manufacturers in India they have not been very successful in commercializing the caps. Indian generic market is going to grow at a CAGR of roughly 13% to 15% if I remember my numbers correctly. So just that itself tell us that even if we capitalize on the new opportunities, where it is easier for us to enter and eat into the current market share even by 10% to 15% of current market share we would be well in the range. We would have basically ended up selling our capacities
Q: you will be producing 100 million caps and bottle with the new facility is this already started and if it has started what is the realization in this caps and bottles?
A: We have supplied samples batches and trial batches to a lot of customers; most of it is under different stages of validations right now. There are about ten steps involved before when you set up manufacturing to when you can start commercial supply. We had various stages with various customers and we have said and I am not sure this is in the presentation or not. We will basically start seeing larger commercial supply starting in quarter four of this financial and the balance of the next financial year is when we will scale up to a large portion of our capacity.
Q: And when does the commercial operations or revenue booking on the pharma plant starts? What kind of utilization level one should expect next year?
A: We have started commercial operations in March. We expect some income to start from quarter four of the current financial year then going forward in the next year we expect that there will be substantial ramp-up in the next year. I would say 45% to 55%, about 50% utilization next year.
Q: if you can just elaborate on what kind of the peak revenue potential of the new pharma facility that you are building? I mean just a ball park number. And what is the capacity utilization in existing products right now?
Ans: It will be about two times the investment number, so about 60 crores. Our capital utilization overall on all our plants combined would be about 75%.
Q: I notice that you have a DMF filing for an applicator SEPL tropical underarm, can you please throw some light on this I mean which molecule is this and when do you expect to commence supplies or whatever?
Ans: I am sorry, that is confidential with the customer we will not be able to divulge details at this point.
Other Sectors – FMCG, Automotive etc
In the automotive again we do not do anything for domestic automotive, we manufacture some very-very niche products high value added products for GE Lighting, Honeywell, FAG and for a company called Amvian Automotive. Most of these are either engine components they are either traffic components, they are either components for breaking systems, or they are components for safety. In the first three that I have mentioned, we have done a few metals to plastic conversions. So this is where it is not that easy you need to really understand the application of the component and you need to have the knowledge of polymers on how you can make that. There is a process that we do for the Honeywell, Rods which is maybe I would not be able to call it a proprietary process. But it is a process that we have developed in house and there are several post processing, post molding, processes involved to get the integrating of the product. So these are all area where we are quite strong, quite competent and we have seen a lot of growth over the last even over the last financial year.
Q: And have the metal to plastic conversion in the automotive space in India been rather slow.
And if so what are the reasons for it?
Ans: I will not be able to comment on the metal to plastic conversions in India yet. There was a timeback in 2009 where we were involved in domestic automotive industry we have kind of exitedout of that industry it is not a high margin or a high value added industry it is more of a
conversion model and Shaily as a company you could call this is a converter because we are
doing injunction modeling but we are more of the service provider and a solutions provider.
Our proposals are not based on shift rates or per kilo conversion cost.
In FMCG we have been successfully partnered with large corporate MNCs to meet their very unique requirement and introduce uniquely designed and manufactured products into the industry. To mention a few in the early 90‟s P&G came to us with a problem that they have their Vicks containers leaking because of climate conditions in India. We changed their design to suite adverse climatic conditions in India. When Pepsi first launched „Aquafina‟ they launched with a regular tamper evident cap which are prevailing on most water bottles today. The problem that they faced was that these caps people would use them and then refill it and seal it again. We designed the unique cap incorporating their logo where the ring would essentially break-off and could not be resealed.
In FMCG we have received quite a few enquiries over the last several months again I think one of the driving factors is maybe the tax benefits which will expire in 2017 and there are companies which are looking for solutions other than provided by our competitors in the tax free zones and we are able to give them some innovative solutions which is what our forte.
Q: If you look at this whole combination of opportunities that you have, what is the broad sense of how do you expect let us say what do you expect the size of the company to be in maybe about three years‟ time and how are you geared up to take advantage of these opportunities if your CAPEX is in place or are you likely to be investing in a lot of CAPEX in the next two years to three years. If you could just give some sense on how as a company you are also gearing up for this growth and also what level of growth is you comfortable with? The growth opportunities can be huge but each company has its own sort of comfort zone and beyond which sometimes it does not want to grow what would that be if any for you?
Ans: I am 32 years and obviously my passion to grow as fast as possible which is the case with most people from my generation but as far as the next two years ago I mean you have seen the presentation our vision is to get to a $100 million by 2020. I think we are looking to grow at 25% year-on-year. In terms of CAPEX there is not much visibility beyond the 2016 and 2017 figures but I do not think we will be raising further debt or equity at the moment.
Finance
I will share highlights of our financial performance following which we will be happy to respond to your queries. To begin with Q2 FY16 Company registered revenue of Rs.62 crore with a year-on-year growth of 34% from 46crores in the same quarter last year. EBITDA is at 11.0 crores from 7.1 crores in Q2 of FY15which represents a growth of 57% year-on-year. EBITDA margins are at 17.8% in Q2 ofFY16, up as compared to 15.5% in Q2 of FY15. This basically represents an expansion of 230 basis points over last year. Profit before tax is 7 crores on Q2 of FY16 as compared to Rs.5crores in the same quarter last year, a substantial growth of 40% year-on-year. PBT margin isat 10.4% in Q2 of FY16 as compared to 9.8% in Q2 of FY15 basically leading with expansionin margins by about 60 basis points. Net profit for Q2FY16 is at 4.1 crores as compared to 3.9crores in Q2 of FY15. This represents a growth of 7% year-on-year. Net profit margin is at6.7% in Q2 FY16.
Q: there was high interest cost in this quarter like 3.2 crores as compared to 1.44 crores.
Ans: interest cost for the current half or current half year includes 77 lakhs of FOREX expense. So it includes that basically predominantly on a FOREX borrowing which was repaid in the current quarter. Second is we had taken on loans for setting up our new facility which was put into operations sometime in March 2015 so, post that the interest on that was charged to revenue that is the reason you will look at a little higher interest cost or compared to the comparable quarter in the last year
Q: going forward what would be the interest cost, will remain same?
Ans: Interest cost would remain same we expect some improvement in our interest rate. So you see some interest savings there but the interest cost would remain the same.
Q: I quite did not get the answer on that interest cost increase in the quarter. I actually could not understand if you could tell again?
Ans: See the current quarter‟s interest cost includes 77 lakhs of an FX expense which was on foreign exchange borrowing which we had taken which was repaid in the current quarter. So it includes that. Second is in the last year we are basically setting up the pharma plant and also expanding our EOU facility where we do manufacturing for IKEA. The pharma increase both capitalize to operation which was sometimes in March. The pharma increase is being charged to revenue and that is the reason you say for an increase in the increase cost in the current year
Q: So until it was capitalized which is now getting charged to the P&L?
Ans: Up till March it was capitalized, post March it has been charged to revenue.
Q: Okay. And what is the cost of borrowing that we have and we have about 22 crore funds in liquid assets also, if you could tell us what is the cost of borrowing today?
Ans: Our average cost of borrowing would be because we have a mix of FX and rupee borrowing so our average cost of borrowings would be somewhere between 8.5% to 9%.
Q: But that does not correspond with the reported numbers so, let us say half year reported is about 5 crores in which 77 lakhs is the transaction cost on the borrowing which you will refer to which makes it about 4.2 crores. Even if I annualized then it is well about 12%-13% because I think borrowing which we can see in as on the reported balance sheet which you reported is about 78 crores.
Ans: You are right. The interest in finance cost also includes bank charges which are there.
Q: Right. But so there is a target return on equity or return on capital employed that you are targeting that this is what we should get?
Ans: Any incremental business which we look at we would look at improving ROC or ROA from the long-term basis is what we are going to do.
Q: I want to understand the tax rate which has been low historically has risen this quarter. So how should we view the tax rate for the full year and for coming years?
A; Maybe for the last year we were under MAT so MAT credit is about to offset in the next year so we basically had minimal tax rate. In the current year we will be at a full tax rate it will be a 33.99% so we will be at that tax rate.
Q: And what is the CAPEX requirement for the next two years to three years? And how you are going to finance it?
Ans: For the current year we are looking at investing 20 crores. For FY17 and FY18 it would dependent on the business needs with various customers‟ need we are in discussion so…
We would basically be looking at internal accruals.
Q: But last year our cash flow from operation was like 4 crores so this year we are going to make enough cash flow for financing CAPEX?
Ans: Yes, we have already received. Last year we have raised, 25 crores of equity also which has not been deployed till now so part of the CAPEX in the current year would be out of the equity which we have raised.
Q: question relates to working capital, how does the whole cycle really work? Could you shed some light on kind of working capital that you enjoy? Is there any scope for improving the working capital management, etc.?
Ans: On the working capital if you again look at last four quarters or five quarters there has been an improvement in the overall working capital cycle but we have been able to compress the working capital cycle and improve the overall working capital cycle, that we achieve in a year we are now at about 4 times a year and going forward we would be looking at improving that.
Q: What kind of improvements have you actually made in the working capital management because if your terms with your clients are more or less fixed and they are being generally paying in time or they kind of stick to their payment history what is the scope for improving working capital? Which areas have you actually put your attention and what would you do going forward?
Ans: See there are two or three things which we have been doing. One is we have been focused on when we basically looked at removing or basically exiting some small customers that is when our working capital improvement cycle started happening because these were customers who were the drag on the working capital like one of the question which was there on the call was we exited a large supplier and so a drop in sale that large customer was a huge drag on our working capital and one of the reasons for exiting the customer was the overall working capital cycle which we were having in addition to the margin issues which we had with the customer. At the same time with scale what also happens is our ability to buy material was quite a lot so you basically end up having the supplier stock material and then supply you on a regular basis. See typically give you an example there was a material which we were using we were probably using 20 tons a month we are now using 100 tons of that material so, we could change the shipment to come in every week so basically that gives us drag basically it pace up your payment to that supplier within that whole month. So that is how we have been trying to do and also look at how we are can improve overall working cycle improve debtors recovery and everything so it is a combination of all this which we have been trying to do in terms of improvement in working capital cycle.
PRICING STRATEGY
Q: So how do you manage raw material volatility because we have seen a lot of raw material volatility in the last few months and are your margin is on a percentage basis or is it per unit basis how one should look at it?
Ans: Okay, let me split that question into two. First – how do we manage the raw material volatility? See our business is about one-third commodity plastics and two-third engineering plastics. All the volatility you see is primarily on the commodity plastics basically like polypropylene, polyethylene styrene. On the engineering plastic side you see much less volatility. It would be less than maybe a quarter of the volatility on the engineering plastic side. As far as how do we manage the volatility on the commodity side is concern with most of our customers we have raw material neutral agreements so, whichever way it goes it is taken care of, whether it is give or taken.
Q: if you could provide some color on how should one look at the margins for the company going forward. If you could give some color regarding say the revenue mix that you have and incremental higher percentage say from consumer or pharma that will drive the revenues or how should one look at say raw material prices going down?
Ans: Yes, I will answer that. Let me start by giving you some history. If you look at historical figures of the last two years to three years our margins have seen improvement. So why have they seen this improvement. There are three to four factors on why these improvements have happened. One is that it is sheer scale, you see whatever capacities we have set whatever people and human resources that were available we are using that scales to it efficiently today. Secondly, we have consolidated our business which means that we have gotten out of some low value, low margin businesses we have gotten out of businesses that required a lot of our technical resources but they do not add much to revenue. Third is that over the last two years to three years we have focused on adding high value and high margin businesses across various segments. So the example of the connector rods, the example of the insulin pens and we have also focused largely on operational and financial efficiency that is how we have improved our margin so far. Going forward your question was that how much is the margin going to improve I am not sure if I can give you an answer directly on how much it is going to improve but I can tell you that it is going to improve.
Q: can you elaborate on you said that your pricing is not based on a fixed margin EBITDA (30.00) per ton or kg kind of a model if you can just elaborate on how do you price your products what is that you are targeting there?
A: what I can tell you is product pricing is done we are present across six different industry segments in each segment there is different pricing strategy. In Healthcare industry you would price the products based on regulatory and compliance requirements, so a lot validations a lot of testing, trials, you have to do a micro build count of your facility, you have to test your employees for diseases on a regular interval to make sure that there is no communicable diseases for instances. So based on the industry there is a costing done. In the complexity of the component more than a shift rate model.
Q: just wanted to understand how is our terms with all our clients primarily the large clients because they are pretty large in terms of company so, when they would be sourcing from us what are the terms, conditions normally we supply to in terms of like in the bulk prices or is it linked with the commodity prices or how if you can help us to understand the pricing situation?
Ans: This is a slightly larger question but let me try to address it. With each customer we have different pricing strategy based on the segment in which that customer is. We price our products based on the complexity, value addition, compliance requirements and capacity utilization. These are the factors that play into the pricing. With most our raw material is neutral in the sense whether the raw material prices go up or go down it is passed on to the customer it is a customer who use an increase or take the decrease that is only to do with one third-of our business which is commodity plastics. Two-thirds of our businesses comes from engineering plastics where the volatility is much-much lower but even in that you will see pass through of material pricing. It is less volatile that is all.
So, I would like to sincerely thank everyone for joining this call. I hope that we have been able
to response your questions adequately. I know that there have been some callers to whom we
have refused to answer it is not our willingness to do so maybe it is too premature to answer
those questions right now. Thanks once again and we look forward to hosting you again after
the next quarter. And if you have any further questions you can get in touch with our Advisors
which are SGA. Thank you.
10 Likes
This counter hit the lower circuit breaker of 652.50 and trading is halted in BSE. What’s the buzz?
Dis - Invested a small tracking quantity
Due to very less free float stake (=~4%) in public its normal for Shaily to hit either UC or LC
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Even after the news of 30% growth in 3 years and with IKEA going to foray into India with its stores and manufacturing, this stock has been beaten tremendously in the last 5 trading sessions.
Just trying to understand if there is some other news that might have this effect or is it due to the general dumping of mid-cap & small-cap stocks that we are witnessing.
Well it’s not so much rattled, as one might put, but rather, if there might be some news that might be breaking the valuation of this particular stock. I personally like this company since it has come to my attention in Nov 15’. I know it is a short time period, but wanted to but some qnty of this stock and see how it grows till budget.
As i feel they have a lot of scope to grow in the next five years, especially the way how they can diversify their injection molding unit plus the medical foray they got into.
As an investor, I am that it breaks, for me to accumulate more.
Hi, I had a done a bit of research on this way back (when the stock was ~Rs.60)…I have a quirk…i.e. to track a company I need to hold atleast few shares…however negligible. I came across this company’s as I was reading something on Motika (it was a shareholder in some other company where we had an interest) and then out of curiosity just researched a bit to know where else these guys had invested…which was Shaily.
Tried to buy 50/100 shares at Rs.60-80 (around that) but almost every day the stock would open and get locked at upper circuit…the stock more than double (3x) from there in the smoothest possible manner…which also gave me an impression (could be totally wrong!! that there was an operator / whatever you might want to call him who ensures that it trades but in a manner where I as a small lay investor could not get it for a prolonged period). One more thing which stood out was that the quality of investor communication was good for a company of that size. In most cos of even Rs.1000 cr+ we have to keep requesting the management to improve quality of information provided thru updates / Annual reports but here was a company which knew exactly what information investors would be looking for / metrics tracked by the street. Which also reinforced my view that there was a financial advisor / operator/ consultant who might be involved and ensuring that there was not much of floating stock to buy at lower levels…this stock was always at valuation higher than that of peers. At same valuation it made sense to invest in a supreme where there was more comfort on mngt quality / governance.
Regarding customer concentration…most (young) b2b businesses will display this characteristic as they tend to grow on the back of a customer and learn the nuances of the business…I guess this would be true of many auto ancillary cos. During the 2008 melt down multiple textile(different industry) cos went under as walmart which was their biggest client just stopped sourcing due to slow down in demand and these guys had nowwhere to hide. Ability to add more customers / products I guess would help in addressing this concern.
Been following the discussions on plastics and questioning the returns. I was intrigued at first as I have relatives who operate in this industry and they to did well (without too much effort). One probable answer could be that as crude prices increase while the conversion cost as % would remain the same, in absolute terms it does go up i.e (if your mark up is 10% of your cost…as crude moves higher the profits also follows). What enhances the return is efficient working capital mngt and sweating the assets.
However don’t you think going forward the same would work in reverse? Now a company would have to generate higher volume growth to maintain the same turnover…the higher your raw material cost as a % of sales, the more relevant this would be.