Attached is link to 34-pages Research Note on Shalimar Paints Ltd. [ NSE â SHALPAINTS ; BSE â 509874 ], India's Fifth Largest Branded Paint Company and one of the Oldest Paints Manufacturing Company of the World dating back its Brand inception to 1902 i.e. A Rare 111 Years' Long Existence History.
The company needs thoughtful consideration by any serious fund manager because of its Current Valuation on the Bourses being 28.66 % lower than even its Orderly Liquidation Value ( INR 259.37 cr. ) with its Tangible Fixed & Net Current Assets Value standing at INR 397.37 cr. as aginst current MCAP of the company at just INR 184.65 cr.
Possession of Huge Freehold Land ( ~67 acres ) with one key spare land parcel at the most sought after property location in Gurgaon ( Sector 32 ) limits the downside risk to current valuation considerably, while the recent Senior Management Change, with ex- Ingersoll Rand, Blue Dart honchos being inducted at seniormost level, offer possibility of multiple Valuation Upside Triggers starting 2HFY14. The senior management now stands thoroughly professional and reasonably dynamic â the best senior management structure company had in its 111 years' long existence history.
Operationalisation of Maiden South Indian Plant starting Q2FY14, which will enhance the production capacities of the company by 56 %, ensures the much needed 20 % p.a. Revenue Growth Visibility for the Company for atleast next three fiscals, whereas, Company's current Positioning in Decorative Paints segment wherein it derives 66 % of its revenues from Industry's Weakest Sales regions ( North & East ) ensures Significant Marketshare Capture by the company in Industry's strongest Sales regions ( South & West ) once its pan-India Manufacturing Presence gets established post Operationalisation of said South Indian plant.
Reasonable Scale of Operations at INR 594 cr. (FY14e) with FY16eINR 882 cr. coupled with consistent Profitability Track-Record with improving EBITDA & PAT Margins make the company a compelling relook candidate ; with its status of being the only Branded Paint company of India available at reasonable valuations which are at an average 67.78 % discount to all peers make it hard to ignore by any prudent fund manager.
Views are Invited from fellow members on this promising Indian Consumer Discretionary Story.
Contents of this Note :
Key Investment Arguments In Favour & Against Shalimar Paints Ltd.
( Shalimar Paints Ltd. - Mcap â Rs. 184 cr. with FY14e Revenues of Rs. 594 cr. ) Page 3-5
Why it Deserves to be a Part of One's Core Portfolio
( India's 5th Largest Branded Paint Co. with 111 Years' Existence History & Most Credible Promoters )
Change in Management â
Most Extensive & Professional in Co.'s 111 Years' Long History
( Key ex- Ingersoll Rand, Blue Dart Express honchos inducted at Topmost Level)
Judicious Capacity Expansions over Last Decade
( Last 10 Years' Debt v/s Capacity Enhancement Record )
Huge Spare Land at Co.'s Manufacturing Locations
( Land in Possession v/s Land in Use at Each Location )
South Indian Greenfield Plant - Operational from Q2FY14
( 56 % Capacity Increase â Productwise Capacity Breakup at the Plant )
Regionwise Sales Breakup of Industrial & Decorative Paints
( Company v/s Industry )
Regionwise Production Capacity Breakup - Dedicated Industrial & Decorative Production
( with Sales Region Catered & Annual Revenue Generation Potential of each Manufacturing Plant )
Capacity Utilisation Schedule of Greenfield South Indian Plant
( FY14 to FY17 with ~Revenue Contribution each Fiscal )
Replacement Value of Tangible Fixed Assets
( Freehold Land Asset Value + Production Capacities' Value )
Replacement Value v/s Co.'s MCAP & EV
( Pure E.V. considered after including Off-BalanceSheet Debts )
Peer Valuation â Co. Trading at 67.8 % Discount â An Anomaly
( Asian Paints, Berger Paints, Kansai Nerolac & Akzo Nobel )
Conservative Financial Forecast
( FY14e, FY15e, FY16e alongwith Key Assumptions )
( Rare Undervalued Consumer Discretionary Play â Time to Have a Serious Relook )
Overview of Company & Industry
( Marketshare of Key Players, Segmentation of Industry & Co.'s Offerings )
Important Data Points
( Co.'s Past Decade's Financial Performance alongwith
Segmentwise Breakup of Revenues )