Control Print - Deserves attention?

Stock Opportunities
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Company profile:

Control Print is one of the leader in Coding & Marking Industry in India. It has partnered with leading global players technologically to provide improved products in India. They provide services for entire range of manufacturing industries which include Automotive, Agro-Chemicals, Metals, FMCG, Pharmaceutical, Food & Beverage, Wire, Cable, & Pipe, Construction Materials, and Commercial Printing.

http://www.screener.in/company/?q=522295

company website: http://controlprint.com/

I added small position at 40 and seems like it is now trading at 90. Doubled within few months. Anyone tracking this counter?

would like to know snrs view on it.

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Looks good on first sight .

On a lighter note Sanket ji why didnot you post when it was at 40 :smiley: .

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Hi Shashi,

I got serious about value investing just a month back :stuck_out_tongue: …and got introduced to valuepickr… before this i was just following every damn report … :frowning: and burnt my fingers …

between how does one start gathering info about this co ? googled it and the website looks good …printing industry as well sounds good … but not sure who are other players and as a whole what is scope for it ?

:D .

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Hi,

Anyone looking at this company ?

Although the growth has been sluggish but from some investors who have met the company feel it is on a new growth path.

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control print seems like an interesting stock. company has shown very good growth in last few years.

net profit and sales figures for last three yrs

yr 2009 10 11 12 ttm

sales 38 46 58 66 72

net P 0.2 2.1 5.9 8.4 12.7

after losing its way in 09, company seems to be doing the right things as seen above. plus it does not seem to have too much debt.

business of coding etc should gain traction with increasing growth of retailing which will require coding solutions.

there does not seem to be any comparable peers. I think bartronics was one such company but has gone down the drain.

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Have had a look couple of times, though the recent performance is interesting, however if one looks at the longer term track-record, some negatives are:

1). The co earlier also had high profits of 5-6 Cr and then they had a bad patch. So we should understand the reason behind that period

2). The sales growth has peen slow - so is it a tough business to scale up?

3). The ROEs have been pretty low at under 15%

4). What exactly is the business model and how is it sustainable and scalable?

Ayush

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Hi Ayush,

I am following this company for a while.Interesting in terms of business prospects and potential in terms of market size etc.

About company:Control printers ltd, based in Mumbai (Maharashtra), provides industrial grade coding and marking solutions to various industries such as pharmaceuticals, personal care, food and beverages, metal, agrochemical and extrusion products, such as pipes and wires. The company specialises in providing solutions for printing variable information such as batch numbers, manufacturing and expiry dates, maximum retail price, serial number, special markings, logos, company/brand name, and barcodes.

Why Coding & Marking -http://www.controlprint.com/coding_marking.html The company manufactures and trades the printing machines (30 to 35 per cent of revenues) required for the above applications, provides consumables such as ink and spares (60 to 65 per cent of revenues), and provides annual maintenance contract (AMC) services (5 per cent of revenues) for the same.

The company manufactures the printing machines under licenses from various companies such as KBA-Metronic AG (Germany) for continuous inkjet (CIJ) printers under the alpha JET brand, and Sisma (Italy) for large character inkjet printer. CPL has two manufacturing and assembly facilities, one each in Vasai (Maharashtra) and Nalagarh (Himachal Pradesh). The company also trades laser printers, which it directly imports from Macsa ID, SA (Spain).

http://www.controlprint.com/Partner.html

Previously the company under licence imports the printing machines and sold them to customers.Due to this heavy trading nature in Fy 09 it took heavy knock when Rupee depreciates heavily.The company completes new plant in Nalaghar in 2008 and starts complete manufacturing of printing machines and consumables.So if we keenly observe trading items reduced substantially from Fy08 to Fy 12.


 Fy 08 Fy 09 Fy 10 Fy 11 Fy 12
sales 42.96 37.93 47.53 57.97 66.54
Manufacturing sales 1.8
 4.93 18.2 30 44.19
Trading sales 34 31.44 26.74 25.92 18.34
Service income 2.77 1.49 1.12 2.48 4.55
PBDT 8.28 1.62 3.17 4.74 8.11

Now company manufactures complete range of printers and consumables and imports laser printers only from Masca ID Spain.Company regularly pays Royalty for using technology and license.

From Fy 09 company growing 25 percent year on year and in one annual report chairman stated that industry itself growing double the GDP.With modern retail and consumer awareness these applications will have bright future.

Due to heavy capital expenditure and impact of forex in Fy09 ROE is quite low and improving year on year.

Concerns :

-Frequent equity dilution. Eventhough company having debt free status promoters issues preferential warrants and diluted equity four times in last four years.

-Heavy working capital.

-Irrational use of liquid resources.They invests cash in equities worth of 10 cr .

## No positions till now.. just tracking ..

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Nice write up Om…

I liked the point of moving from trading to manufacturing …

Read in one of the Annual Reports : “The Indian Coding & Marking industry has reached a level of maturity and acceptance across applications and is dominated value-wise by four players with Control Print Limited being amongst them”

But I couldn’t find who are the competitors. you have any idea ?

Also, i still can’t get my head around jargons: preferential warrants etc … :frowning:

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One of the competitors I was able to find -http://in.markem-imaje.com/

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This is a difficult business to scale up as the price points for the laser printing and the ink jet printing machines is quite high. The ongoing maintainence and the consumables also make it an expensive running proposition.

Only a few FMCG companies with the cash and the margins would be the customers for this. Have worked with these machines in the past and these are also not easy to maintain.

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Hi Om,

Thanks for sharing the details and providing the break-up, which in a way highlights that the co is growing at about 50% (manufacturing activity) and this is a very good thing.

However, I’m still unable to get any insights on competitive advantage etc. Barcoding etc, is a highly penetrated area now, it would be very tough to get high ROE in this area.

Ayush

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Since we are seeing a re rating and huge upside in packaging industry in the cuming days …I think this stock have also the potential of going upside …it is moving vertically with a good pace and need value investors to look on this stock as it is available very cheap looking to the financials of the company…this is the era of online shopping…everything is available in packets and on every packet their is some printing, coding , marking is necessary. So for that we have to depend on these types of industries…this industry is claims to be the largest among this sector and also in October 2014 it’s new unit will cums in production which have the income tax benefits also…overall it looks nice to add this stock in our portfolio…debt free industry, very good margins, good divident yield, low pe, and available at very decent price…one more feather in the cap is that it have a very good land bank …so I think it needs to be seen by our experts once and give their suggestions on this stock…

Thanx

Regards:-Pradeep

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The obvious physical growth prospects of a business do not often translate into shareholder returns. If in doubt, look at the airline and the car industry over the last 100 years - shareholders have taken bath " - warren buffet

I know for a fact that TVS electronics used to focus on this and exited it completely. IMHO, its tough to build a moat around an activity like printing.

Regards:Pradeep

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Katalyst Wealth has a detailed presentation on this.

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I like the business - it fits lynch’s description of a dull, boring businesss that has longevity and does not change.

However, one investor I respect told me that if you are looking at a company less than Rs. 500 Cr. you have to be sure the company can grow topline at 20-30% easily and 50% during good years.

This company is hardly growing at GDP like growth rate (hindu rate of growth). So, what’s the big alpha the company is creating in this sector - at this rate of growth I am sure it is not moving market share aggressively or building differentiation.

The thing with micro caps is that if the growth drops further and the stock gets re-rated to nothing, minority investors will have to hold an empty bag.

Senior VP-ers ? any views ?

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For all those who mentioned valid counter arguments, this slide is must read.

Control Print can be viewed as more like growth stock but not like moat investment. It has technology collaboration with German company which provides an edge among peers.

Over last some quarters, return ratios are improved with growth in topline and bottomline.

One important observation is that company is focused on increasing margin and it has been successful this year.

It seems market has given PE rerating after election mandate. One can see the fact in chart that it moved substantially after 16th May. Market wants to see it differently with new government which has priority on Make in India initiative.

Kunal

Link: http://www.slideshare.net/ekansh01/control-print-ltd-bse-code-522295-may14-katalyst-wealth-alpha-recommendation

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Hi,

Any one now tracking Control Print? The company would be announcing March 31 2015 quarter results tomorrow.

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@dd1474 I am looking at it. Looks interesting. Though the promoter has been really dilutive- issuing warrants to himself consistently.

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Rohit,

Agree with promoter diluting equity point. However, there are no recent dilution in last 6 months at least. I have concern about IDBI issue. Find enclosed extract of page 45 from FY14 annual report

Pasted image1099Ă—163 44.6 KB

Do you have any information about when this event took place? I have gone through old annual report till FY10 but could not get anything but above enclosed information. Would appreciate if you can share whatever information you have this respect. In fact, this could be one reason for the promoter to frequent issue warrant to increase his stake in the company.

Discl: I hold shares. Investor are advised to do their own analysis before taking any decision.

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Thanks Dhiraj, I had missed this point somehow. Will take a look. The promoters have been issuing equity since FY08-FY09 when the company changed its business mix. Their warrants got converted recently- you can see the increase in no. of shares on BSE.

I will look into it and get back to you.

Were you able to talk to some competitors-to understand the market dynamics?
Domino which is its competitor, is also focusing a lot on India it has increased its capacity here and done some org changes as well.