Stovec Industries Ltd - Manufacturer of Textile Printing


(Rupesh Tatiya) #1

This stock showed up on one of my screens on screener.in (well thanks screener.in founders - it’s a lovely website now that I’m playing with it).

What Company Does?
The company is a subsidiary of SPG Prints, Netherlands which is a leading company in textile and graphics printing worldwide. Stovec Industries was established in 1970s. The company manufactures various machine + parts for the textile printing, graphic printing and sugar screens.

The company is leader in India in the sector of Rotary Screen Printing. They also have products that cater to Digital Graphics Printing markets and Sugar Screens. They have a manufacturing and R&D facility in Ahmedabad. In 2014, they acquired Atul Screens Private Limited to augment their market share in Sugar Screens Business.

More on Products

  • Rotary Printing machines for Textile printing
  • Rotary Screens and Chemicals for Textile printing.
    Both of the above can be found in following videos.

Kitex Garments factory (3.06)

Rotary Printing Process

More links can be found upon googling.

Accordingly their major customers are Textile Manufacturing Companies, Packaging/Label Printing, Sugar Mills.

India Center
Ahmedabad centre is mainly involved into manufacturing of rotary screen prints, distribution and after sales support.

Competition
I do not have a clear-cut picture of competition as well as Industry scenario. This is a TODO item in upcoming days and I am looking for inputs from fellow VP members.

Just a quick search on IndiaMart shows up following companies:

  • Sunshine Engineering, Surat
  • Jay Shree Shakti Engineering, Ahmedabad
  • Ganapati Enterprises, Mumbai
  • Muso Hitech Systems, Ahmedabad
  • Roopa Engineers, Ahmedabad

I have no idea whether these guys are manufacturer themselves or they just import and distribute in India. If fellow VP members from Ahmedabad, who are interested, can do some scuttlebutt - that would be a great learning.

A Look at Numbers - Standalone
Sales and Profit

Source: Moneycontrol

Very good set of numbers last year.

Cash Flow:

Source: Moneycontrol

Operating Cash flows have declined in Dec’13 and Dec’14 even though net profit has increased and that remains a matter of concern.

Inventory increased from 0.91 Cr to 8.77 Cr from Dec’13 to Dec’14.
Trade receivables increased from 0.95 Cr to 6.52 Cr from Dec’13 to Dec’14.
Both of these are matter of concern as well.

Ratios:


Source: Moneycontrol

Company has been regularly paying out dividends, there is no debt on company. Promoter holding is 71% and No equity dilution in last 10 years.

TTM Net Profit is already 14.85 Cr., a growth of 33% YoY. Stock is trading at 24 TTM P/E (Relatively expensive).

A Look at Numbers - Consolidated

Source: Moneycontrol

The delta between the standalone and consolidated is the contribution of Atul Sugar Screens Pvt. Ltd. Atul’s business seems to be of lower quality compared to Stovec’s core business.

Consolidated cash flow numbers and capital ratios also take a hit on consolidated basis.

Product Share

A Word on MD
Mr. Shailesh Wani is the non-promoter, managing director of the company.
He is an alumnus of VJTI, Mumbai (which is my alma matter as well) which is a top college in Mumbai.
The company is paying him total compensation of 1.15cr+ and a special resolution was passed this year. He is not directly related to any of the promoters.
This might be interpreted in two ways.

  1. This might be an indication that they have found a good MD who board feels confident that will take the growth forward.
  2. Or some competitor tried to snatch him and board had no option but to raise his compensation.

Views Invited.

Thanks,
Rupesh

Disc: Not invested, might buy on declines.


(Dhiraj Dave) #2

We have one thread with typo. I am enclosing link for your reference.

While I have investment in the company, the sector appears to be good with revival in fortune of textile division. The company has open offer by parent in 2006. Find enclosed details about parent till 2006 which I find useful:

The main raw material for company is Nickle which has been declining. The demand for printing machinery is expected to show around 15-20% due to revival in textile capex. With limited capex due to sufficient capacity, I see company well placed for next couple of years. My only concern is acquisition of Sugar business (Galvanic in my understanding as shown in segement wise financial).

Disclosure: Hold shares of the company and my view might be biased.


(Rupesh Tatiya) #3

Thank you Dheeraj for pointing out the other thread, I had searched for “Stovec” before starting this thread. Apologies for duplicate thread. Request admin to take appropriate action.

I am a bit skeptical on “Textile Industry revival”, can you please help me with some data/ground report that says textile industry is on upswing? Pardon my skepticism.

Also I have few more questions, if you know answers any of them, please provide them.

  • Who are Top 5 customers of Stovec?
  • What is the price of say one Textile printing machine, one rotary screen, one sugar screen etc.? How does that compare with competition?
  • What is the life of these parts (1 year? 2 years? 3 years? more?)? Does newer generation of products have better technology/better productivity than older parts? Do companies have motivation to move to newer parts?

I am trying to find answers to these questions. If you do, please share with us.

Thanks,
Rupesh


(Dhiraj Dave) #4

I do not have much information about question you asked. The better prospect was more driven by revival of profit growth in spinning sector and support from Textile upgradation funds which resulting in higher capex across the chain in textile.

One broad information about Indian textile machinery manufacturer I could get from web which I am enclosing
http://www.tmmaindia.net/PrintMediaPDF/IndianTEIProfileupdated.pdf

What is important to notice is no growth in PROCESSING MACHINES (page 2 table) at around Rs 575 Cr. Also check the high dependency of import (nearly 60%) as shown in page 3 of the table.

Latest Information about TUF are as under
http://www.txcindia.gov.in/html/mdo2007_4.pdf

Now if we compare share of processing machine from Textile Machinery manufacturer data, we get processing machinery share in total textile machinery sector we get following figures:

As per my understanding, Indian textile need to do substantial capex in processing sector which is still lags in moderinsation. If we look at various segment in textile, India would be best placed in cotton spinning, followed by garments, then weaving and last in fabric processing. This is very primative/subjective assessment and may on verification turn out to wrong.

In view of above, I see moderate demand for printing machine (particularly driven by higher exports cotton home textiles (bad sheet/towels being major) which also would require state of art fabric processing. I assume Stovec among the global leader in Rotary Printing Machinery and consumable (Screen/Roller for printing machine). That can also be compared with growth in Welspun/Trident/Indo Count which are among the top 3 players in home textile sector.

Trident Presentation providing textile home textile prospect
http://www.bseindia.com/xml-data/corpfiling/AttachHis/29D15DDE_C248_45BD_B6A9_EB85C7847F79_101313.pdf

Hope this partially answer growth prospect and industry growth expectation. On competition and company position in global and Indian market we need to get more information and work.


(Dhiraj Dave) #5

New Table including Stovec Textile Segmentwise sales with large three players in home textile sales:


(Nikhil Moryani) #6

http://www.indiantextilemagazine.in/textile-printing/stovec-bullish-on-future-growth-for-textile-printing-business-in-india/


(Manish Vachhani) #7

Everybody is requested to continue posting in this thread only as the other thread does not have much activity and is under the Q&A section. Everyone who had posted in the earlier thread are requested to move their content to this thread as eventually the older thread will be deleted.


(Jimit Rajeshkumar Zaveri) #8

Stovec Industries Limited (SIL) was incorporated on June 5, 1973 as Stovec Screens India Limited. Stovec is a part of SPGPrints Group, The Netherlands.

Manufacturing facilities of the company located at N.I.D.C., Near Lambha Village, Post Narol, Ahmedabad, Gujarat.

Company offers products such as Rotary printing machines, Rotary screens and chemicals for textile printing, Anilox and screens for graphic printing, Digital ink and Sugar screens.

Stovec Industries


(Ayush Mittal) #10

Have been tracking Stovec for past few months and have been intrigued by the fantastic results the company has been posting (The co has been delivering 40-50% growth YOY since last few quarters).

Few strong points about the company:

  1. Parent company is a global leader in textile printing machinery - https://www.youtube.com/watch?v=rADnREPKbUA
  2. In India also they have been leaders and command a high market share. Their machines and screens sell at a premium to most of the other players in this area.
  3. The balance sheet seems to be efficient - the business doesn’t employ lot of capital, its a debt free company, they get advance from customers etc, good cash flow and dividend payout.

So the questions are:

  1. If they already had a high market share, how could they grow at such a pace? Has the market expanded or have they done something different?
  2. What is the opportunity size and scalability?

Interesting part of the business is that a majority portion of revenue (about 60% till 2014) comes from selling of consumable items such as screens, ink etc.

Negative - As per FY2015 annual report - there has been a 3 fold increase in sales of machines…so one needs to understand how sustainable it is.

Views Invited.

Regards,
Ayush
Disc: Invested


(rationalist) #11

Really glad that this has also piqued your interest…I have started investing for last 1 year and really happy that Stovec is getting attention.

w.r.t. answering your questions.

I understand that textile printing industry is going transformation. Traditional(Rotary, Screen) to Digital Printing.
Reference Hyperlink Digital Textile Printing

The same trend is also seem in Indian Textile Printing Industry.
Reference Hyperlink Indian Scenario

Stovec has strong position in traditional printing…However the overall industry is moving towards digital and there is large room to grow for next couple of years. Stovec with its technological partnership with SPG prints should get advantage of this transformation for next couple of years.

SPG showed it PIKE printer in MILAN ITMA 2015
PIKE Printers

Thus my view is they uniquely positioned to take advantage of this transformation.

Also my own common man’s check as suggested by Lynch.

I visited central malls in 2-3 cities. And all the women’t salwar suits are replaced by digitally printed salwar suits with very fine prints costing ( 600 to 1500) rupees and no traditional work.

All costly bed sheets are replaced by finely printed bed sheets in newer digitally printed patterns.D’Decor etc as they have their own setup.

Disclosure : 8% of Portfolio Invested


(Ayush Mittal) #12

Hi,

The digital printer market size is very small as of now (there is no doubt that it will grow rapidly in coming years). Based on the articles, it seems that Stovec has just launched the digital printer and so it shouldn’t be the reason for the aggressive growth delivered by the company in recent times. We need to understand the drivers of current growth and how much more is possible.

Regards,
Ayush


(Parth S) #13

So Stovec India isn’t selling the digital printers, they’re being sold by the parent company in India. Also the company is just importing inks and trading them in India (although margins would suggest otherwise). Very interesting company and pretty impressive management however majority of the decision making is made by the parent so it’s tough to predict how much of the business they would like to divert to Stovec.

Interestingly Investcorp acquired SPG in 2014 for 240 Mil Euros, while sales of the total group is 214 Mil Euros. The Stovec stake was then valued at 80 Crores (approx.) and is today valued at about 350 while sales have doubled since then. Today SPG’s stake in Stovec represents 25% of what Investcorp then paid for SPG. Could be game changing if they see the potential in Stovec and allow Stovec to manufacture inks and digital printers.

On a positive note Stovec is now allowed to export machines to other markets which was earlier only being done by the parent.


(rationalist) #14

Seems in 2012 they introduced new product line STORMAC GOLD and that’s helping them increase machine sales even when they have good base with old Stormac machines. Check the launch of Stormac Gold Series.

http://www.spgprints.com/news/news/stork+prints’+stovec+introduces+multiple+innovations+at+itme+mumbai?news_id=104

Stormac Gold Specifications

Interview Stovec GM Capital Sales

As per the article market is shifting from low quality printing to high quality rotory printing and Stovec RD VI Gold series is gaining popularity.

How is the rotary screen printing machines business for you in India?
As I have said, our rotary screen printing machines can print from cotton to silk, wool or synthetics. We can print on any textile fabric. We had sold good number of machines to customers that look for high quality, high volume reliable printing systems. However, in between, we have witnessed a market trend that looked for low cost machines where quality is not a prime criteria. But, today apparel buyers demand high quality printed goods and therefore, Stovec printing machines are in good demand. Especially, Stormac RD VI Gold series machines are gaining popularity. The market’s demand for quality is the reason for this shift from low-cost to latest technology machines.Stovec today enjoys major market share in highquality rotary screen printing machinery category in India.
- See more at: http://www.textileexcellence.com/news/details/386/stovec:-we-offer-the-best-quality-printing-solutio#sthash.raz2vV0R.dpuf

Some international customer testimonial and benefits. ( Dated 15 March 2015)
http://www.danliris.com/cms/article/view/218


(rationalist) #15

Q: Can you name some of the major customers and installations in the Indian market?

A: Premier Spinning and Weaving Mills, Coimbatore, Alok Industries Ltd., Mumbai, Jay Jay Mills, Tirupur, Shivalik Prints, Delhi, Creative, Delhi, Akash Fashions, Ahmedabad, Chiripal, Ahmedabad, Bombay Rayon Fashions Ltd., Mumbai, Sri Krishna Spg. & Wvg. Mills, Bangalore, Ramkumar Mills, Bangalore, Binayak Tex Processors, Mumbai, Pradip Overseas, Ahmedabad, Raghuvir, Ahmedabad, and Printex, Tirupur.
Source

Answer 2 : The price of rotary printing machine by other indian competitor seems to be in range of 30 - 50 Lakhs.
Source

Answer 3: I assume the life of these machines should be 15 to 20 years as 10 year old machines are available in re-sale market.
Source


(rationalist) #16

Please add following to the list of international competitors.

  1. ZIMMER Austria ( ROTARY PRINTING MACHINES)
  2. Reggiani SPA Italy ( Rotary Printing Machines)

(Ayush Mittal) #17

Yes, it seems Stormac Gold machine has been really successful and a key reason behind the growth. Thanks for sharing several links.


(dr mehul shah) #18

(dr mehul shah) #19

Introducing: Stormac RD VI Gold – the new Gold standard in rotary screen printing
Dedicated to the Indian market, the Stormac RD VI Gold is the new techno-enhanced incarnation of the Stormac RD IV rotary screen printing machine, with a golden touch of quality and a host of enhanced functionalities. So much so, there was no better name to call it, but Gold. Benefits such as the permanent magnet beams, the single AC servo drive motor ensuring optimal repeat accuracy, the proven closed bearing system - all guarantee superior printing sharpness. The RD VI Gold offers a choice between a blade and roller squeegee system, or a combination of both. The new machine is very easy to operate and extremely versatile: suitable for all fabrics ranging from light synthetics to heavy cottons with a repeat range of 640 to 1018 mm. Moreover energy savings of up to 30% can be achieved. With corrosion resistant SS covers, fasteners and Chrome plated main drive roller, the life of the machine is improved further. In sum, the Stormac RD VI Gold offers the best price performance ratios for the Indian market.

Solutions for every phase of the production process
And there’s more. We’ll be demonstrating that we are the only global partner that can offer solutions for every phase of the production process as well as consumables. Including (digital) pre-press, printing and drying.

smartLEX: the future of intelligent digital pre-press
Nowadays, the textile industry has increasing demands for high-quality pre-press and printing, but wants to decrease the complexity of the production processes at the same time. Stork Prints has the perfect solution. As an exclusive at ITME, Stovec will launch the brand new smartLEX machine to the Indian market. This new direct laser exposing system, containing Stork Prints’ blue-ray technology, combines perfect imaging quality with an unmatched ease of use. Anyone who is capable of using a smartphone, can make perfectly imaged screens. The machine has intuitive design and is operated via a very user-friendly oversized touch screen. Perfect engraving of halftones or geometric designs is literally only a few button touches away. Based on design and screen type, the intelligent software chooses the optimal process settings fully automatically. This also ensures - especially in combination with Stork Prints screens - an unmatched reproducibility.
Due to Stork Prints’ thirty years of experience in laser engraving, the machine ensures extreme high productivity and utmost reliability, with a rapid Return of Investment. The TCO per engraved screen is very competitive. Our specialists will be more than willing to demonstrate the latest innovation in laser engraving and prove that this machine is in fact the future of intelligent pre-press


(dr mehul shah) #20

Printing machines are used for the printing of all kinds of fabrics for many applications such as garment, upholstery (bed sheeting, curtains), flags.

ZimmerThere are three techniques of printing machines with dryers : rotary printing machines, flat-bed printing machines and inkjet printing machines.

Once the fabrics are printed, they are conveyed into a dryer with a dryer belt or net conveyor, also called printing dryer or dryer after printing, so that the dyestuffs inks can be fixed.

The relevant dryer can be steam, oil or gas heated.

According to the various device equipping the machines (heating-system, washing unit,…), the working conditions (temperature, speed, type of printed fabrics …), the width of the requested conveyor belt, Dollfus & Muller is advising the most recommendable quality of open mesh belt ; it might be either rigid or flexible ; it might be manufactured of polyester, Nomex®, PPS, fibreglass, Kevlar® or of another material.

Dollfus & Muller has been working with worldwide well-known manufacturers such as BUSER, Efi REGGIANI, SPGPrints and ZIMMER among many others


(dr mehul shah) #21

At the recently concluded PackPlus South show, Stovec Industries, a subsidiary of SPG Prints Netherlands, targeted flexible packaging and foil converters and yarn and jari manufacturers with coating anilox rollers.

The company has been involved in the manufacturing of mechanically engraved anilox rollers for the last 30 years. Shashank Patel, sales manager, SPG Prints, said, “For coating applications, the mechanically engraved anilox rollers are preferred over chemically etched rollers and imported ceramic rollers.”

According to Patel, the mechanically engraved rollers are capable of working in the coating transfer range of 1.5gsm to 15gsm. “This is the USP,” said Patel.

Besides this, the company also showcased rotary screen for flexo printing and direct laser engraving system (DLE) flexo CTP for digital pre-press plates, sleeves, etc. Mohanish Satam of SPG Prints said, “The DLE systems from SPG Prints can be used for printing processes such as dry offset, flexo, letterpress and rotary screen printing applications.”

Satam informed PrintWeek India that the company has sold a software Best Image 3D CAD - CAM based RIP to flexible packaging major Uflex at its Jammu site. The Best Image software drives Uflex’s DLE kit and the installation is seen as a breakthrough for SPG Prints in India.

(l-r) Mohanish Satam of SPG Prints with Uflex’s PK Agarwal
Mechanical anilox rollers by Stovec
(l-r) Team SPG Prints: Shashank Patel and Mohanish Satam
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