Great set of results, OPM expanded both qoq and yoy. Stock available pretty cheap still at pe of 7.
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Another good quarter from DHP with 7.5 cr net profit, most of which will go into mutual fund investments. At the moment probably works out to be 89 cr + 7.5 cr = 96.5 cr. If we take out 30%of it just for assumption of market correction & dividend distribution tax, we can safely discount 66 cr from market cap, which is 215 cr at the moment. Post cash discounting, the mcap turns out to be 149 cr. If we consider normalized profit base to be 10 cr (assuming normalized ebidta 24% margin for fy2019), the company is trading at 15 pe. We still have to discount elevated inventories, which usually get liquidated profitably, elevated receivables which again seem to be coming down slowly, asset base addition of 7 cr few months back.
If we consider the current year earnings as base then at normalised 24% ebdita margin & no other income the PAT will be 18 cr thus PE of 8.3, which probably is still quite low in raging Bull market, when company is showing good growth.
[Forgive me for this silly financial analysis. I am just trying to figure out why the company is available at such low valuations].
Few reasons I can think of:
- there are no signs of promoter willing to distribute/share cash pile with minority investors
- the natural gas prices going up steeply since last one year causing the customers to ditch natural gas and move other energy sources like solar etc
- the Russia conflict threating the natural gas market thus again leading countries to reduce depandancy on natural gas.
- no communication from management on prospects of business like order book, future outlook etc even in annual reports
- overall market is nervous with US inflation data, bond yields etc
- micro/Nano caps trade at low PE for their risk profile.
Would be happy to be corrected if there are mistakes in numbers quoted.
Disc: invested. Not a Sebi registered advisor. My market knowledge is very basic.
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they not increasing dividend payout even having so much cash, this will be the main reason of such low pe ratio. Business wise all good also invested in fixed asset so growth may come in future.(But they also purchased land at Islampur in Previous yrs and sold in Fy20 same should not be repeated). Do anyone know where coy invested money in land/factory bldng/machinery etc.?
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When the market is tanking 2% - 3% in last 2 trading sessions, this one is clocking new 52 week highs with healthy volume and delivery ratio.
Seems some new interest is picking up here. Will not be surprised if there is a swift correction in price action soon as the stock is already in over bought zone with RSI near 90.
Hope there are more fireworks this time around Q4 results date to push the price decisively into 4 digits.
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hi @nitin_verma
Can you let me know or is there any outlook from management what could be the max OPM it can attain and maintain.
It will be great if any fellow VP can answer.
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This year can well turn out to be more rewarding than FY22 mainly on two factors: 1. USD strength which is not likely to fade off quickly. 2: Base metal prices witnessing sharp declines since June. Brass prices showing signs of peaking as well.
Volume growth due to capacity expansions can magnify the impact further. Recession fears can add pressure on volume growth, but assuming they can at-least maintain current volume. 50cr profits seems a achievable target for FY23.
Stock moving 50% up YTD when Nifty midcap is down 12% and smallcap down 25% is a reflection of the underlying financial strength ahead.
I expect the price to recapture its all time high of 1200
before Q1 results are announced and resume its onward journey towards a 500cr Mcap (Price ~ 1700).
Disc: Long time invested here.
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Didn’t take much time to scale past its previous all time highs as one would have expected. With healthy volumes and delivery rates, looks like some interested hands are in a hurry to accumulate as much ahead of Q1 results.
Hope this will not be another false breakout, but will hold its ground until Q1 results are announced next month.
A robust result with 12 Cr + PAT can give the impetus for next phase of rally towards 1700 levels. Expecting the price to prevail at 12x TTM PE, if not more.
Anything below can add significant pressure for downward correction to sub 1000 levels.
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Very good results posted for Jun’22 quarter with a growing topline and a stable profit which was a fraction short of 12 Cr that I expected.
Following are some observations that I noticed:
a. 4 Cr CAPEX last financial year on machineries seems to have started yielding results which are way more than its CAGR from Mutual Funds. Dollar strength also must have had its role for increase in sales.
b. Operating returns continues to be maintained at healthy rate of 34%. Could be again a mix of reasons like Dollar strength result in net currency gains, company being able to pass on the impact on input cost fluctuations, manufacturing efficiencies due to machineries upgrade.
c. 1.11 Cr Other income for Jun’22 cannot be compared with 10.16 reported for FY22 which included 7.64 Cr gains on redemption of Mutual Funds. On QoQ / YoY basis.
d. 8.29 Cr Mutual Funds notional loss for Q1 (not counted for PAT) has more than reversed at its current NAV (assuming the units held as of 31st Mar are not sold) with effective gains of 3 Cr.
e. Q1 profits historically have been lower than remaining quarters of the year. On this basis, we can expect current year’s profits exceeding TTM net profit of 42.2 Cr. Recession scenarios playing in Europe / US can only stand in the way of this.
With general market already in a buoyant mood, we can expect the stock price continuing its catch up action with stronger results.
Disc: Invested
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The management should up its game by giving more information on strategy for future in AR or conducting concall to understand its long term strategy on cash invested in mutual funds. It will enhance value creation. Tried to contact company & never got responses.
Disc: Inv around 370 levels, holding.
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Is countrywise sales data available?
What are your thoughts on the insane increase in prices of natural gas after the whole Russia-Ukrainian conflict.
Is there headwind wrt to demand in short term for DHP ?
Sure the company will experience headwinds in the short term due to the gas crisis in Europe. But the global gas industry is so large and that this company’s sales being just a chicken feed, it can quickly readjust itself to different markets to ensure it runs on its full capacity.
What we have to look for is the day when the company gets the confidence to expand in a massive way that it’s products no longer remain chicken feed for the industry.
It’s worth noting that the company is aggressively building its cash reserves which may well be to partly offset the capex/investment needs when it chooses for a massive expansion either organically or inorganically. I won’t be surprised if it goes through a combination of debt & equity route to finance its expansion plans within next 2 to 3 years.
Alternatively, distributing its cash pile as big dividends will strongly indicate the company has no interest to grow further.
Who knows, it may also go back to its roots 25 years ago when it was a Financing/Leasing business. (Refer Annual reports for 1998 & earlier)
I see one of this unfolding within next 2-3 years as management will soon loose investor’s faith if cash is just kept locked without any productive use.
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tradestat.commerece.gov.in
we can track total exports of LPG regulator
HSN of products : 84818090 and 84819090
maybe we can use this to gage demand scenario for DHP
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Sir, my initial analysis was wrong.I’m no technical expert in hydrocarbons.
https://twitter.com/javierblas/status/1556913515440529408?s=21&t=8u0YzVpSjGS8iNE0nHR5cg
Javier is an Bloomberg columnist/ contributor.
Disclosure: invested
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Copper prices are also coming down(~25%) which should bring the overall sales realization down in Q2 Fy23. But the way price is moving, market is expecting it other way.
Disc: Holding.
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Sir, as per AR 2022 company invested 5.91 cr in ofc building (registered ofc) in FY 22. In other expense ofc rent paid was 1.5 lacs. By getting interest of 6% on 5.91 cr (i.e. 36 lacs) coy can pay ofc rent for many yrs. it looks like capital misallocation now. Am I getting right sir or any other perspective may be there? Only 13 employees are posted at registered ofc. One good thing is 4 cr invetsed in plant n machinery which will drive growth in coming future. (Factory shed of 1.66 cr was shown in Cwip)
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1.5 lac rental I remember seeing paid to related party which is too small to have any impact. 5.9 cr office building I am seeing as part of their larger expansion plan in coming years. If there is no major follow through capex by 2025 on productive assets and cash still locked up tight,will consider as a major red flag for staying invested.
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The Promoter’s family has been traditionally in the Real Estate business (Dabriwala Constructions and Dolphin Properties) and the office rent is being paid to Dabriwala Constructions I believe. Dabriwala Constructions is also one of DHP India’s largest Promoters with 11.90% Shareholding.
While it’s definitely a red flag, the amount is simply too small to matter.
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2003 AR:
III. FOREIGN EXCHANGE EARNINGS AND OUTGO :
The amount of foreign exchange earned during the year is Rs. 2,69,21,388.34 on account of Export
of Domestic Pressure Regulator for LPG Cylinders & their parts and Die Development Charges as
contained in item No. 10(1) of Part (C) of Schedule 21 of the accounts.
2022 AR:
(a) Activity relating to export, initiatives taken to increase exports; development of new
export markets for products; and export plans:
The net exports of the Company has been increased from Rs. 6199.42 lacs to Rs. 10449.14 lacs
during the year. The Company is expanding its production capacity to emerge as a leading exporter
of our product. The Company is ISO 900 I : 2008 certified.
decent journey from 2.7 cr to 104 cr, but in 2021 it was 61 cr. The thing difficult to track down is revenue concentration in top5 customers back then & now.
INR depreciated 43% against USD from 2003 till now - 2003: 1USD ~45INR, now ~78 INR
Thanks.
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Just to clarify, I am least concerned on the office rent paid to related party. Red Flag I meant is spending over 5 cr for office building without a follow through on a major capex within next 2 years on capacity addition while locking up >100 cr cash in MF.
As much as I salute the company management for their remarkable performance in growing their business and shareholder’s wealth over the years, I also expect the team to vest more faith in their own strengths in furtherance of business and shareholders wealth rather than vesting faith on the Fund Managers in protecting hard earned cash.
2 years from now will be a reasonable time in my view for a break out either in form of a major expansion/diversification move or in worst case distributing surplus cash as dividends.
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Good thing here is the company is still far from reaching a peak in this line of business. If they can further diversify their product lines, improve on quality standards, productivity and increase customer base, sky is the limit for their growth.
Imagine the position as shareholders in next 10 years time if all these pans out!
God bless the company and the leadership!
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