BANCO LTD
Company is a manufacturer of radiators which are used
in commercial vehicles, off the road
vehicles, and passenger vehicles in
exports markets. Majority of the sales
is from supply to OEMs.
Over the years as a measure to derisk its business model,
the company has reduced the revenue contribution from automobiles to the overall revenues by focusing on non
auto sectors like railways, power sector, earth moving and construction segment
etc.
Subsidiaries of the company include NRF BV Netherlands,
Kilimanjaro Biochem Ltd, Lake Mineral Mauritius and Banco Gaskets. (spun off in
2012)
NRF manufactures aluminium, brass and copper radiators, marine heat exchangers, oil coolers, air
coolers, and automotive air conditioning products. It was a client of Banco for 15 years and was
acquired at below book value at a cost
of 17.7 million euro against net current assets of 24.8 million euro.
DIVERSIFICATIONS
Banco invested 3.5 million USD in Kilimanjaro Biochem which
manufactures potable alcohol.
It also planned to invest 12.3 million USD into greenfield
expansion of cement capacity in Tanzania.
Both these diversification were done few years ago. Thankfully for investors this has not caused
any grief in terms of a drag in profits.
FINANCIALS
CMP 55, market cap
400 crores.
Outstanding
7.15crores shares of face value
of Rs 2 each.
Promoter holding 67.88%, no pledging.
Debt on March 13 was 174 crores which has come down to 150
crores in H1 fy 14 ended Sep 13.
Cash and equivalents at march 13 was 20 crores which has
gone up to 46 crores in H1 fy 14.
Net debt has come down from 154 cr in march 13 to 104 cr in
Sep 13 ended half year.
Company has already declared and paid interim dividend of Rs 1.7 per share during current year.
Book value for fy 14 likely to be around 60.
Last few years figures
Year
2010 2011 2012 2013 9M 2014 9M fy 13
Sales
466 871 1018 1024 867 765
Net profit
78 65 76 61 80 55
9M fy 14 eps is 11.25
Full year it can post eps of around 13-14 per share.
Based on this it is available at a PE of around 4.
Quarterly performance
Qtr
|
Sales
|
NP
|
Q1 fy 13
|
268
|
27.5
|
Q1 fy 14
|
307
|
28
|
Q2 fy 13
|
275
|
21.62
|
Q2 fy 14
|
300
|
29.8
|
Q3 fy 13
|
223
|
5.85
|
Q3 fy 14
|
260
|
22.7
|
9M fy 13
|
766
|
55
|
9M fy 14
|
867
|
80
|
March 13 qtr had sales of
242 cr and net profit of 6.35 crores.
Company had two consecutive poor quarters in terms of
profitability and margin viz Dec 12 and March 13. But since past three quarters it seems to
have gotten on track in terms of profitability and margins and it is highly likely
that this trend continues in March 14 qtr as well.
Dividend payout ratio has been traditionally high in the
range of 25%.
INVESTMENT THEME
Investment in Banco Ltd is based on the theme of
undervaluation cum turnaround.
Positives are that the company seems to be getting its act
together since past few quarters after a lackluster fy 13. If March 14 quarterly results come out
expectedly good then there is chance of some rerating happening in the company.
Company has a good dividend payout policy.
Currently it is available at around 4 PE.
Negatives are the diversifications that the company has made
in cement and alcohol.