Sumeet Industries

SUMEET INDUSTRIES

Sumeet industries is a manufacturer and exporter of polyester and polypropylene yarn and woven fabric. During the period FY04 to FY09 sales have grown from Rs 34.24 crores to approx Rs 157.79 crores which is approximately a five fold increase or a 45% CAGR. accordingly the PAT (Profit after tax) has also grown from Rs 81.56 lacs in FY04 to Rs 3.81 crores in FY09 which is again a CAGR of 43%. However the EPS has not increased in that proportion. That is because the equity base has been expanded. And the reason is simple â for expansion.


Quote BSE
Last Traded Date (#) 2010-09-17
Price High (Rs.) 27.90
Price Low (Rs.) 27.15
Price Close (Rs.) 27.55
Previous Close (Rs.) 27.05
Price Change Today 1.85
Volume (#) 38654.00

QUICK SNAPSHOTS

Variable Current
Market Capitalisation 110.20
Face Value (FV) (#) 10.00
Shares Outstanding 4.00
Equity Capital (Rs. Cr.) 40.00
Foreign (FII) Shareholding (%) 0.35
Promoters Shareholding (%) 62.98
Govt./FI Shareholding (%) 0.00
Others Shareholding (%) 27.78
Corporate Shareholding (%) 8.87

5 YEAR SNAPSHOTS

Variable FY05 FY06 FY07 FY08 FY09 YoY 5yr CAGR
Sales Turnover (Rs. Cr.) 39.36 93.82 121.52 137.98 165.41 22.78 45.82
Profit After Tax (PAT) (Rs. Cr.) 0.90 0.85 3.36 3.67 3.82 4.09 43.53
Cash from Operating Activities (Rs. Cr.) -2.64 0.92 -1.97 1.39 -3.10 144.84 4.10
Free Cash Flow -5.39 -3.84 -5.54 -110.95 1902.71 174.06
Equity Dividend (Rs. Cr.) 0.00 0.00 1.98 0.00 0.00
Dividend Payout 0.00 0.00 58.93 0.00 0.00
Net Profit Margin 2.58 1.03 2.99 2.86 2.42
Operating Profit Margin 10.63 7.73 9.58 8.96 8.38
Asset Turnover 0.57 1.24 1.54 1.51 0.78
Return on Assets 1.48 1.29 4.60 4.32 1.89
Financial Leverage 2.91 3.04 3.10 2.67 3.26
Return on Equity 4.30 3.90 14.27 11.54 6.17
Capital Employed 55.96 61.09 68.03 79.88 202.13
Return on Capital Employed 3.72 5.75 12.55 11.67 5.55
Free Cash Flow to Sales -6.56 -3.41 -4.31 -70.32
Debt to Equity 1.67 1.81 1.89 1.51 2.26
Interest Coverage 3.15 1.61 2.37 2.28 2.30
Interest Cost to Total Debt 1.88 5.54 8.11 8.51 3.48
Quick Ratio 2.52 1.80 1.51 1.75 1.99
Current Ratio 4.62 4.06 3.92 4.03 5.48
Debtor Days 46.44 22.83 18.72 25.02 14.69
Inventory Days 124.54 67.99 83.44 92.67 101.64
Variable FY05 FY06 FY07 FY08 FY09
Equity Capital (Rs. Cr.) 11.60 17.40 17.40 20.12 40.00
Reserves & Surplus (Rs. Cr.) 9.32 4.37 6.14 11.69 21.92
Total Shareholders Funds (Rs. Cr.) 25.92 26.77 28.54 36.81 61.92
Secured Loans (Rs. Cr.) 31.47 35.26 39.44 42.80 129.82
Unsecured Loans (Rs. Cr.) 3.57 4.06 5.05 5.27 10.39
Total Debt (Rs.Cr.) 35.04 39.32 44.49 48.07 140.21
Total Liabilities (Rs. Cr.) 60.96 66.09 73.03 84.88 202.13
Gross Block (Rs. Cr.) 63.74 76.51 80.87 86.65 84.85
Accumulated Depreciation (Rs. Cr.) 29.66 33.00 36.57 40.41 42.71
Net Block (Rs. Cr.) 34.08 43.51 44.30 46.24 42.14
Capital Work in Progress (Rs. Cr.) 9.27 2.68 0.15 1.27 109.96
Investments (Rs. Cr.) 1.05 1.04 1.26 1.56 1.07
Inventories (Rs. Cr.) 9.69 14.05 22.99 27.49 39.16
Sundry Debtors (Rs. Cr.) 4.44 5.14 5.77 8.81 6.35
Cash and Bank Balance (Rs. Cr.) 1.02 0.46 0.26 1.61 4.04
Loans and Advances (Rs. Cr.) 6.12 5.53 8.45 10.61 11.92
Current Liabilities (Rs. Cr.) 4.60 6.20 9.57 12.03 11.21
Provisions (Rs. Cr.) 0.11 0.12 0.58 0.86 1.59
Net Current Assets (Rs. Cr.) 16.56 18.86 27.32 35.63 48.67
Miscellaneous Expenses (Rs. Cr.) 0.06 0.07 0.14 1.05 2.35
Total Assets (Rs. Cr.) 60.96 66.09 73.03 84.88 202.13
Contingent Liabilities (Rs. Cr.) 0.12 2.36 3.47 4.13 32.66

Now posting some interesting point:
1.In JUNE Q company has top line of Cr which is half the sales posted by company previous year and nearly 3 times posted in last Q.
2.In JUNE Q company has bottom line of Cr which is nearly half the profit posted by company in previous year and nearly 3 times posted in last Q
3.The company has successfully commissioned 100000 TPA Continuous Polymerization ( C.P. )Plant and 23500 TPA of POY Plant and 21000 TPA of FDY Plant
4.The Company has chalkout Rs. 530 Crores expansion plan for enhancing its manufacturing capacity of both POY and FDY and Pet Chips in two phaseIn the first phaseof expansion production capacity of POY and FDY will beincreased from 53000 TPA to 100000 TPA and setting up another 8 MW Gas based GensetCaptive Power Plant with project cost of Rs.130.00 Crores. This expansion will utilizebalance capacity of Polycondensation Plant as captive consumption by manufacturing POY/FDYdirectly from MEG & PTA instead of Producing PET Chips. This project will enhance thescale of operation and improve the cost competitiveness of company's product. Aftercompletion of this expansion total turnover of the company will be increased by Rs. 100Crores and EBIDTA by Rs. 40 Crores.In the second phaseof expansion new green field project of 200000 TPA ContinuousPoly Condensation ( CP ) Plant will be setup to manufactureBright FDY Yarns, POY Yarns,Yarn grade and Bottle grade Pet Chips and setting up another 26 MW Gas based Genset PowerProject with total project cost of Rs. 400.00 Croes. After completion of this project ,the company will achieve record turnover of Rs. 2500.00 Crores mark.
4. lot of insider trading is going on ref:bseindia.com
5. Expected to cross top line of 750 Cr and bottom line of 30 Cr for this fiscal year giving EPS around 10rs.
6 Stock is shown a good stability around 26-28 level,even promoter are accumulating at same level.

Thanks Sumeet for some interesting details on the stock. I looked at the stock, and on the flip side you may like to check the following:

1). The company is laden with Debt. D/E stands at 2.72, which is pretty highly leveraged already. How will it fund any of the ambitious expansion plans?

2). Return on Capital hovering between 8-9%. This looks to below the cost of capital unless it has access to some very low cost funds, doubtful.

In this scenario why will I look to invest in the company or why would a lender want to provide it debt financing.

I don’t know the reasons for the boom for this companies growth, you can educate us on that; but that yarn demand/supply cycle can change pretty soon, when it might be very difficult for this company, given such low returns on capital.

Please read the Annual Reports of past few years carefully to get better-informed, also of a few competitors, so you can cross-link industry/sector issues/challenges, the management etc.

1).

2).

they have issued 1 Crwarrants to promoter group and are planning for QIP.

Recently the company has been growing by leaps and bounds. Management has guided hefty growth projections. For ex FY16 np was 16.84. For FY17 they are sure to do 70cr and further 1-2 years after that they have guided 100cr net profit.

Hi Vij,

What will be drivers for the growth to profit, is it new market or additional capacity.

Disc - No holding

Has the promoter stake increased in Sumeet lately?

BSE filing shows its 43.28% now.

The Public shareholding is mostly in the hands of retail investors but the returns have been phenomenal. Almost a 140% in less than 6%. Wondering how institutional investors still haven’t entered here.

Have been invested in this company since Mar’15 from 14 level. Have seen good development since then and have a positive view on the company. The below links might help in studying the company more -

Disc - Since its a small company I have limited my exposure in this company to 1.5%, must increase to 2.5% if available again around 32-33 level.

1 Like

Another good quarter…impressive numbers.

Is this turnaround due to power cost savings only ?
Do anyone have some info around value added products management mentioned in videos posted in earlier post ?

Tried searching on google but not much info available…

The moment company talked about expenditure and rights issue…share started downward journey … 60 CR worth rights to be issued for expenditure upto 100 CR. Remaining I guess company might take more debt.

1 Like

Company planned to get coal based captive power plant, and since then share has tanked more than 20 %.

Can some one please comment if it’s that bad a decision ?
When world is moving towards renewable resources and wind and Solar energy prices has fallen to record low, why company opted for coal based plant ?

Promoter had mentioned to make profit of 100 crore in couple of years, can this expenditure help in that ?

what about promoter quality?

Besides, it was found that the company and its directors acted in concert with SIC Stocks and Services to manipulate the price and volume of the company scrip so as to enable the promoters, directors and related entities to offload their shares at higher prices. - Basically these statements an be another trap?

http://www.business-standard.com/article/pti-stories/sebi-slaps-rs-17-92-cr-fine-on-sumeet-industries-its-directors-114022001045_1.html

Dis - invested before and exited upon further study.

Another set of excellent numbers … EPS more than doubled YoY … but stock price moved in opposite direction ( reason unknown)

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/29e66db7-c5b5-46f6-a1f3-959300895206.pdf