Cenlub Industries Ltd

I started research on this company when it cam under 1 of my screens of cash by market cap > 0.2 and market cap > 20 and few other filters on ROE, ROCE growth etc.

Business:

CENLUB is synonymous with CENTRALISED LUBRICATION answering to all problems related to friction in machines, plants and equipments.

Clients
Various clients are listed here: http://www.cenlub.in/clients.php.
Clients are concentrated from Steel, Power and Paper industry experiencing tailwinds in respective sectors.

Financials Snapshot:

Market Cap.: â‚ą 24.00 Cr.
Cash end of last year: â‚ą 8.30 Cr.
YOY Quarterly sales growth: 19.50%
YOY Quarterly profit growth: 660.00%
Return on equity: 11.42%
Return on capital employed: 13.78%
https://www.screener.in/company/522251/

Opportunities:

As per the latest annual report, company has recently added delhi metro as one of the clients and management expects to receive orders from metro in future. Metro will be operational in multiple tier 1,2 cities within next few years and this could translate into huge opportunity for this company.

Threat:

As stated in the annual report, company is facing competition from MNCs and also from unorganized sector. Can introduction of GST to an extent reduce threat from unorganized players?

Disclosure: Initiated a tracking position

1 Like

I always wonder looking into these kind of companies, how it survived since 1992 being this small, what they offer that so many MNCs and other major lubricant companies cant ? Its still a mystery to me. If they are good then why they are this small since 30 yrs ?
If you look at the last 10 years sales and profit growth it’s around 7-10% which is pathetic, At least you should have beaten the inflation + gdp growth if you are in business, If you yield lower than FD what’s the point of doing business ?
Most of the time i have seen these companies have fixed local client with very good relationship and these client remain loyal to them thats the reason why they remain small yet relevant and these companies never really care about winning more client , gaining market share and innovation.

Some of the things i grabbed from quick look into the annual report -

What will be the Growth Drivers ?
Amazing he is claiming 90% market share in supplying machine tools lubricant. they have made 36Cr sales, really machine tools lubricant market is this small 90% market = 36cr ?
They are entering to supply to power plants ? that will eat up ROCE as i don’t see any new capex happening in power sector in coming years and i doubt they will be able to gain market share from existing power plants by replacing competition, too much to expect from a company who did nothing in last 30 years.

Vehicle lubricant - Lets leave it here … there are too many very good branded players.

btw he showed same optimism in Fy 13-14 annual report as well :
Now, since there is change of national policy, we expect better
results. The nation as a whole demanding more power, hence
more power generating machines i.e. Generators and turbines.
With each machine your company is supposed to supply
lubrication systems.
Nothing happened it seems :slight_smile:

Recent raise in stock price, promoters took this as a opportunity to sell some of their holdings.

One positive they got contract from Delhi metro and there is a lot of traction in metro built up all over india , if they can catch this opportunity, but this surely makes shareholders anxious too :stuck_out_tongue:

This is a serious threat

This is not good -

All in all financials looks okay … One good thing is they never diluted the equity -

Conclusion - I don’t see any value at current market price, I would love to buy it at PE < 5 considering management track record and very thing margin fixed asset cost business. We have to watch out how metro thing works out.

PS: not sure why images are missing , in preview its showing all of them.

9 Likes

Dear Dhruva1705,

I really like the way you gathered facts and presented. Images are missing in your reply.
Looks like this is what " Separating the wheat from chaff" :slight_smile:
I have learned something today?

Thanks for the Appreciation , I have been beaten badly when i shared my concern with 8K miles in other thread :wink:
Anyways now the images should be available (hopefully )

2 Likes

I find some mismatch as there are two websites for this company and it looks like the real promoter has no role in the listed company :

http://www.cenlub.com/about-us.php

http://cenlub.in/AboutUs.php

CenLube Industries:
CMP:56.50
MCap: 23.28Cr
Consolidated March 2017: Sales: 35.53Cr, Net Profit: 1.74Cr
http://www.cenlub.in/
Annual Reports

Lubrication is a prime requirement for all machines, equipments or plants as it adds to the life and efficiency of the the machine by reducing wear and tear of its parts. The lubricating oil forms a film between the moving parts which results in lesser friction and correspondingly less heat generation in the machine, thereby keeping the working temperature of machine parts within safe operating limits. Wear and tear of parts is thus greatly reduced resulting in fewer breakdowns, greater machine utility, lower maintenance cost and longer machine life.

Cenlub Industries Limited, a Public Limited Company having its registered office at Plot No. 233-234, Sector-58, Ballabgarh, Faridabad - 121 004, Haryana. Basically the company is in the field of design, manufacture and supply of Centralised Lubrication System for various Machines, Plants and Equipments.
Registered office / Plant-1

It is a listed company at Bombay Stock Exchange incorporated under the Companies Act, 1956 by Registrar of Companies, Delhi & Haryana in the year 1992.

The company has been promoted, mainly, by Mr. V.K. Mittal , Managing Director - a Mechanical Engineer with M.Sc. (Physics), M.Sc. Mech. Engg. specialization in Machine Tools from Moscow. He has worked at senior position in TELCO for more than a decade. He started working on import-substitution of lubrication systems for machine tools in 1977 and has been instrumental in making the company a profitable concern in this field. In recognition of his capabilities, Haryana Government bestowed “Prize for Enterpreneurship” on him for 1987 - 88. He has widely travelled overseas and is fully aware of the latest trends in this field.

The company has 17 offices all over India to take care of Sales and Service i.e. Aurangabad, Ahmedabad, Bangalore, Bhuvaneshwar, Dhanbad, Chandigarh, Chennai, Coimbatore, Faridabad, Hyderabad, Jamshedpur, Kolkata, Mumbai, Pune, Rourkela, Rajkot and Visakhapatnam.

The company is having 3 manufacturing units as under, which are totally independent:-
The total number of employees are around 225.

The company has its own proprietary items of Lubrication Pumps and Accessories and most of them are existing for the last 35 years.

The company has the capability to take turn-key projects from concept to commissioning. These projects are basically related to Plant Lubrications for Steel, Power, Paper, Sugar etc. which are normally approved on blue print stage before taking up for manufacturing.

The company has bagged the following prestigious awards :-
“FIE foundation” award for import substitution activity at IMTEX’86 exhibition.
Transworld Trade Fair “Gold Medal” selection award in the year 1987.
“Entrepreneurship” award by Government of Haryana in the year 1987-88.
“Best display” award in the 9th Indian Engineering Trade Fair in the year 1991.
“Business Sphere” award for the year 2008-2009 for most respected No.1 Company in Lubrication System.
“Udyog Ratan” award by Institute of Economic Studies (IES) in the year 2009.
Client lists is like the who-who’s of indian industry:
Machine tools:
ACE DESIGNERS, ACE SYSTEM, ALEX,BATLIBOI,BFW,CADMACH,EMTL (ELECTRONICA MACHINE),GALAXY,GEDEE WEILER,GH INDUCTION, HARISH,HEC,HILDEN, HMT, IMPACT, ISGEC, JYOTI CNC, LMW,LOKESH, MAC POWER, MARSHALL, MICROMATIC,NUGEN,PARI, PMT, PRECIHOLE, PREMIER, SCARLO, TAL MANUFACTURING, WINDSOR, ETC.
Steel Plants:
ADHUNIK METALLIC,ARMECH,BEEKAY ENGG.,BHUSHAN STEEL, BHUVEE PROFILES, BHUWALKA STEEL, ELECTROSTEEL CASTING, ELECTROSTEEL STEELS, ESSAR STEEL, GRADUATE AGRO, H.N. CONSTRUCTION, HULAS STEEL INDS., INDIAN METAL FERRO ALLOYS, ISPAT METALLIC, JINDAL ISPAT STEEL,JINDAL STEEL- HISSAR, JINDAL STEEL-RAIGARH, KINNERA STEEL, KUDERMUKH IRON & STEEL, LLOYDS STEEL,LOI WESMAN, MAHARASHTRA SEAMLESS, MAHINDRA UGINE, MALVIKA STEEL, MIDEAST INTEGRATED STEEL, MUKAND, MULTIFORM MACHINERY, REMI METAL, RENUKA EQUIPMENTS, REYMONDS STEEL, ROLLCON INTERNATIONAL, SAIL - ALLOY STEEL PLANT, SAIL - BHILAI STEEL PLANT, SAIL - BOKARO STEEL PLANT, SAIL - DURGAPUR STEEL PLANT, SAIL - INDIAN IRON & STEEL CO., SAIL - ROURKELA STEEL PLANT, SAIL - SALEM STEEL PLANT, SAIL - VISVESVARAYA IRON & STEEL, SARDA ENERGY & MINERALS, SUNFLAG IRON & STEEL, TATA METALLIC, TATA STEEL GROWTH SHOP., TISCO, TRF, TUNGBHADRA STEEL, UNITED SEAMLESS TUBULAAR, VIDYUT METALLICS,VISAKHAPATNAM STEEL PLANT, WELSPUN STEEL, ETC.

Sponge Iron Plants:
A.S.R. MULTIMETALS,ACTION ISPAT & POWER, AGNI STEEL,AIRAN STEEL & POWER, AMBAY SPONGE, AMOD SPONGE, ANAND ISPAT, ANIDITA TRADE & INVESTMENT, ANKIT METAL & POWER, AYARSE PLC, ETHIOPIA, BASAI STEEL, BHAGWATI SPONGE, BHASKAR STEEL, BIMALDEEP STEEL, BINDAL SPONGE, BMM ISPAT, BS SPONGE, CP SPONGE IRON, CREST STEEL & POWER, DAMODAR ISPAT, EVEREST IRON & STEEL-ETHIOPIA, GAGAN RESOURCES, GRACE INDS. LTD., GREWAL ASSOCIATES, HIMA ISPAT, HINDUSTAN CALCINED, HI-TECH MINERAL, HYDERABAD INDS., IDCOL KALINGA IRON, IND AGRO SYNERGY, IST STEEL & POWER, JANKI CORP LTD., JHARKHAND ISPAT, JINDAL SPONGE, KHETAN SPONGE, KOHINOOR ISPAT AND POWER, LAKSHMI GAYATRI STEEL,MA CHHINNAMASTIKA STEEL, MA SAMLESHWARI, MAA CHINNAMASTIKA ISPAT, MAA MAHAMAYA INDUSTRIES, MONNET ISPAT LTD., NAVKAAR ISPAT, NR SPONGE, OCL, PADMAVATI FERROUS, PHIL ISPAT PVT. LTD.,PT DELTA, INDONESIA, RAIGARH ISPAT & POWER, RAJURI STEELS & ALLOYS, RASHMI METALIKS,REACTIVE METAL, REAL ISPAT, RELIABLE SPONGE IRON, RLJ CONCAST, RUNGTA MINES, S.K. SARAWAGI & CO.,SAI SINDHU SPONGE IRON, SATYA POWER AND ISPAT, SEN FERRO ALLOYS, SESHA SAI ISPAT, SHIVALAY ISPAT & POWER, SHREE BAJRANG POWER & ISPAT, SHREE METALLIC, SHREE NAKODA ISPAT, SHREE RADHA INDS.,SHREE SHIVSHAKTI STEEL, SHYAM STEEL, SMC POWER, SUMI VAYAPAAR, SUNVIK STEEL, SURANA INDUSTRIES, THAKUR PRASAD SAO & SONS, TIRUPATI UDYOG, TRIMULA SPONGE IRON, USHA MARTIN, VENKATESHWARA SPONGE, VIJAYA SPONGE & ISPAT,VINAYAK STEEL, ETC.,

Cement Plants:
ABG CEMENT, ACC, BHAVYA CEMENT, BINANI CEMENT, CHUNAR CEMENT (JAYPEE),DALMIA CEMENT - ARIYALUR, DALMIA CEMENT - DALMIA PURAM,DALMIA CEMENT - KADAPPA,ECO CEMENT, FALCON - BEHRAIN., GRASIM CEMENT, GUJARAT AMBUJA, J.K. CEMENT, JAYPEE BALAJI CEMENT, KAMDHENU CEMENT, KARCEMENT, KAZAKHSTAN, LAKSHMI CEMENT, MADRAS CEMENT, MAIHAR CEMENT, MILLENIUM CEMENT, ORIENT CEMENT, PRISM CEMENT, SAGAR CEMENT, CEMENT, SHREE CEMENT, STAR CEMENT, ULTRATECH, VASAVADATTA CEMENT, VIKRAM CEMENT, ZUARI CEMENT, ETC,

Sugar Plants: We are the original equipment supplier to Sugar Plant machine manufacturers such as ISGEC, KAY IRON, CIMMCO, TRIVENI etc. We have already supplied our lubrication systems to various major Sugar Plants in India as well as abroad and some of them are:
ACUCAREIRE XINAVANE, MOZAMBIQUE, AMR SANGAM SUGAR, AP SUGAR, BAJAJ HINDUSTAN, BIJNORE SUGAR MILL, CHADHA SUGAR MILL, CHANDPUR SUGAR MILL, CONSOLIDATED FARMING, ZAMBIA, D. S. M. SUGAR MILL, DALMIA SUGAR, DAURALA SUGAR, DHAMPUR SUGAR MILLS, DSCL SUGAR, EASTERN SUGAR, NEPAL, ENERAGRO PROJECT, ECUADOR, HUTATMA KISAN AHIR SAHAKARI, INDIAN CANE POWER, J.K. SUGAR, JAY MAHESH SUGAR,KAMLAPUR SUGAR MILL, KHOTOLI SUGAR, KISAN SAHKARI CHINI MILL, LOKMANGAL SUGAR, MAWANA SUGAR, MODI SUGAR, MUKERIAN SUGAR, MUZAFFARNAGAR SUGAR MILL, NANDGANJ SIHORI SUGAR MILL, NORTHLAND SUGAR, PALWAL SUGAR MILL, RAMGARH SUGAR, RAVALGAON SUGAR, RELIANCE SUGAR, NEPAL, SAKHOTITANDA, SAKTHI SUGAR, SARASWATI SUGAR MILLS, SARAYA SUGAR MILLS, SHAMBAHOLI SUGAR MILL, SHREE TATYASAHEB KORE WARANA, SIEL SUGAR, SRI RAM SUGAR MILLS, NEPAL, SUGAR CORPORATION, UGANDA, SUPREME RENEWABLE ENERGY, SYAN SUGAR, TITAWAI SUGAR, ETC

Power Plants:
ADAMTILLA, ADHUNIK TPS, ADITYA MAHAN, AMARKANTAK, ANPARA TPS, APGENCO RAMAGUNDAM PS, AZARBIZAN HEP, BAIRA SIUL, BAJAJ HINDUSTAN, BAKRESWAR, BANSAGAR, BARAGRAN, BASKANDI, BHOOPALAPALLY THER.POWER, BHUSAWAL TPS, BUDGE-BUDGE, CHAMERA, CHANDIL, COAL INDIA,DB POWER, DEHARKHAND, DVC- CHANDRAPURA, DVC DURGAPUR, GANGUWAL, GGSR BHATINDA, GIRAL LIGNITE POWER, GNTPS, BHATINDA, GOKAK FALL HYDRO, GUNGWAL & KOTLA, GGS REFINERY(CAPTIVE POWER), HARIDWAGANJTPS, HARINAGAR, IOCL - PANIPAT, JINDAL DERANG, JPL RAIGARH, KALI NADI, KAPHERKHEDA TPS, KHADANA, KHANDONG, KODERMA TPS, KOPILI, KOTLA, KUTTIYADI, MALANA, MATHON TPS, MODIPONE, MUKERIAN, NAJHARI, NTPC ARAVALLI, NTPC BONGAIGAON, NTPC DADRI, NTPC ENNORE, NTPC MAUDA, NTPC NABI NAGAR, NTPC RIHAND, NTPC SIMAHDHRI, NTPC VINDYACHAL, PARAS TPS, PARBATI, PARLI TPS, RAICHUR TPS, RAIPUR POWER N ISPAT, RAJGHAT, RANJIT SAGAR, REL DAHANU, RELIANCE ENERGY, ROURKELA STEEL PLANT, ROURKELA TPS, SANTHALDI TPS, SANTHALDIH TPS, SARAVATI HYDRO ELECTRIC, SARDAR SAROVAR, SATPURA, SHREE SINGAJI, SIKKA TPS, TALA, TAMILNADU STATE ELECTRICITY BOARD, TATA JOJOBERA TPS, UKAI TPS, VASANTHARAO DADA PATIL SSK, VIJAYAWADA THERMAL POWER, VIKAS SSK, ETC

Paper Plants/Mills:
ANDHRA PAPER MILL, BINDLAS PAPER MILL, CENTURY PAPER MILL, GRD PAPER, ITC- BHADRACHALAM, K.R. PULP & PAPER, MADHUBATI PAPER MILL, MAGNUM VENTURES,MECANO PAPER, MOHIT PAPER MILL, MUKERIAN, MULTIWAL PULP & PAPER, ORIENT PAPER MILL, RAMA PAPER MILL, RAMA SHYAMA PAPER, SATIA PAPER, STAR PAPER MILL, UNITED PAPER MILL, ETC.

Miscellaneous:
BALMERLAWRIE, BOSCH, DANIELI,DLW, FL SMIDTH, GODREJ, HINDALCO, HONDA MOTOR, HUMBOLT, HV TRANSMISSION, KIRLOSKAR BROTHERS, L&T, KANSBAHAL, L&T POWAI, LEITNER SHRIRAM, MAHINDRA & MAHINDRA, MOHIT PAPER MILL, MARUTI, NUPOWER, PAHARPUR COOLING TOWER, PARADEEP PHOSPHATE, PP ROLLING, PRAJA MECHANICAL, RCF, RENUKA EQUIPMENTS, RIETER, SAMKRG PISTONS, STEEL STRIPS, TOSHIBA MACHINE, VAYUNANDANA,VELJAN, WMI KONECRANES, ETC

Exports to Countries: Initially for two decades the company was busy in catering to the Indian market and prior to the inception of the company, basically lubrication units were imported. Having catered efficiently the Indian market, the company started contributing to the world market. Now the company is exporting its products to :- BAHRAIN, DUBAI, ETHIOPIA, FINLAND, GERMANY, HOLLAND, HONDURAS, INDONESIA, IRELAND, ITALY, KENYA, MALAYSIA, NEPAL, PHILIPPINES, SAUDI ARABIA, SHARJAH, SOUTH AFRICA, SRI LANKA, TANJANIA, THAILAND, UGANDA, USA, VIETNAM, ZAMBIA, ETC.

Balance Sheet

Income Statement:

CashFlows:

Company seems to be very small considering the client base… so either there are other ways the company management seems to take out benefits … else the client list is rock solid… Capital investment for March 2016 is 3.5Cr out of which 3.4Cr is in buildings… 1Cr invested as advance for flat at Noida and Faridabad, 45 lakhs for a flat in banaglore, so company is moving into the business of property management…
March 2015 3.2Cr spent for plot in Faridabad … wonder where that went in 2016?..

Latest announcement 13 July 2017 to BSE indicate that the subsidiaries and associates have been merged with CenLube Industries. ie. MiniHyd Hydraulics Limited & Ganpati Handtex Pvt limited. If you look at the consolidated data subsidiaries will add additional debt burden to CenLube and zero topline… which is negative but consolidation of nonlisted associates and subsidiaries should result in increase in promoter shareholding… and hopefully better disclosures and higher EPS in the future…

Conclusion: Cenlube Industries and many similar small/microcap companies which are market leaders are feeling the pressure of Modi-nomics. better income disclosure, tightening of loans by basel-III also is reducing the possibility of nonlisted entities from getting credit… if you dont have sufficient income it will be difficult to get credit lines from banks… I expect Cenlube to start reporting “realistic numbers” which should translate to higher topline and bottomline and higher stock prices… Since the merger of associates and subsidiaries is after July we will have to wait for September shareholding data to see how much the promoter shareholding has increased…over past 5 yrs promoter shareholding has increased by 2% I would recommend “BUY Now” as company is undiscovered and still very attractively priced…7-8Cr cash in hand 23.8Cr market cap…its attractively priced… and actual sales numbers and profits should improve in the future.

You are right if black money starts to go away from the systems these guys will start reporting real numbers but the fact is these guys get order because they offer cheap cash deal (i don’t mean by these mean this company) , i know of some SME companies B2B space do all cash transactions and give great discount. They even pay salary in Cash.
So that was the kind of moat they had and those who want cheap & can afford to pay in cash became their loyal customers and the reason they survived from 30 years & yet they are so small.
So now if they start doing in white what will happen ? They really have to compete in price with superior branded products out there in the market, will they be able to do that thats the real question ?

I feel its too much to expect from a guy who did literally nothing in last 30 years will do something and start generating shareholder value bcoz of Modi.

Thanks,

3 Likes

KODURI APPA RAO - Pls recheck - the details you gave seem to be of RK Mittal and his company is not the listed one. Below details from http://www.cenlub.com/about-us.php :
"Mr. R.K. Mittal – Chief Executive Officer
M.Sc., Mechanical - Peoples’ Friendship University, Moscow

              Over 30 years of experience in designing and new product development in field of lubrication and hydraulics. Started his career with TELCO.                                                 Among one of the meritorious students selected by Govt. of India for education program in Russia".
1 Like

The stock has reacted to better quarterly results.

@dhruva1705 Regarding your comments related to risks mentioned under annual report, my view is that a microcap company providing this much detail about overall industry structure and future plans of the company tells us a lot about management’s intention to take the company at higher levels.For most of the microcap companies it is very difficult to understand much about the business/future plans from the annual report.

However, construction of metro is progressing at a very slow pace in other cities such as pune, ahmedabad. Hence it will take much more time to tap the opportunity in that segment.

1 Like