Chaman Lal Setia Exports
This is my first new post and I wish I had done this a couple of weeks ago since the stock price has almost doubled since then. That said, I still think it has enough left on the table for a new entrant.
CLSE is a old basmati rice player with a modern rice mill and focussed exclusively on basmati rice. They have consistently grown their topline and bottomline over the last 4 years (Sales - 185cr to 510 cr from FY 2010 to FY 2015. PAT - 7 cr to 20 Cr over the same period). Q1 FY 2016 was a bumper quarter with a PAT of 10.8 Cr and margins jumping to 7.8% (as compared to 3.9% for the whole of FY 2014-15 and 2.2% in Q1 of FY 2015) which is the reason why the markets got so excited.
CLSE has some good differentiated products i.e. basmatic rice for diabtic people, pesticide free basmati rice and I believe they will do well going forward. For the first time, they have started on a branding and marketing exercise in India and that should augur well for them.
More importantly, I think 2015-16 will be one of the toughest years for the basmati rice industry as most are carrying overpriced inventory due to the steep fall in paddy prices this season. So this year should truly separate the wheat from the chaff in the basmati rice industry (REI reported huge losses in Q1) !!! and CLSE having done so well in Q1 is a good sign.
I estimate that the rest of the year will follow the Q1 pattern and we should end up with an eps of 35+ for the current year.
- Good, dedicated management
- Technically sound and one of their promoters is considered an expert in basmati rice.
- consistent historical growth and focused on the bottomline and margins.
- Not sure if the current year profits is on account of an one-off export order won.
- They certainly don’t have the pricing power or the brand strengths of KRBL. They have started off on the journey now though.
- the steep run leaves tremendous risks for a new entrant
- management not very communicative – not even a basic ppt on the website.
Disclosure - Hold a good position in CLSE and have been holding this for about 4 months now.