Goodluck India Ltd

Stock Opportunities
1

Businesses

Goodluck Steel tubes is engaged in manufacture of Steel pipes and sheets diversifying into more valued added products like forged components for auto & railway industry and structures for power, telecom and solar industry.

Expansion

GoodLuck Steel Tubes has lined up following expansion over next one to three years.

  1. 30 crore expansion of new Structures unit. Should start production by March 2016. This expansion will expand companies margin.
  2. Setting-up a new Auto Tubes, Heavy Support Structures & Forging plant in Gujarat at cost of 260cr.The project will implemented in two stages first will be Auto Tubes & Heavy Support Structures and second stage will forging.

Financials

Q2FY16

Long term Debt = 76 cr
Short term Debt = 220 cr
Cash = 8.4 cr

Current Assets = 382 cr
Current Liability = 307 cr

Screenshot from 2015-12-08 19:21:02.png970Ă—777 70.2 KB

Key Concerns

  • Future profitability depends up on the managements ability to successfully diversify into more value added products.
  • Implementation of expansion projects in-time will be critical for growth of the company.

Key Positive

  • Investment at current market price provide good margin of safety. TTM PE = 5.95

  • Company is showing improvement is OPM over several quarter from 5.x% to 9.x%

Disclosure
Invested with tracking position

3 Likes
2

Having tracked the company:
Positives:
Technocrat Promoters( IIT ians)
Company adamant on improving margins…the same is reflected in recent results with flat sales but booming margins.
Company expanding into a new plant in Gujarat to be close to port and improve export benefit.
Good Promoter Stake
Low PE of 6
Company has been consistently generating good cash flows out doing PAT figures consistently
Company has gotten licensed to be a supplier for Indian Railways.
Orderbook for Solar structures good for 1 year.

Negatives:
Substantial capex of 300 crores in next couple of years
Dependence on capex by government

Overall though can see a vast opportunity ahead for the copany specially considering the sectors the company is in .

Disclosure: Invested

2 Likes
3

Goodluck steel tubes got approval from Research Design and Standards Organisation (RDSO), Ministry of Railway, India for fabrication and supply of steel bridge girders.

Read more here.

4

Transcript of latest interview of MD

Surabhi: Can you run us through how volumes have shaped up for you and
what the break up has been between both the businesses in terms of
actual growth in Q4?

A: Volumes have grown by 7 to 8 percent in spite of difficult
conditions. However, the revenue has gone down because of low
commodities prices.

Nigel: 7-8 percent on a year-on-year (Y-o-Y) basis?

A: Yes.

Nigel: Could you break up what exactly was the exports as well as your
domestic business? What exactly is the current break up and going ahead
what are you looking to maintain that at?

A: Exports declined by almost 18 percent and these are muted export
performances, which resulted in lower turnover.

In spite of lower raw material prices we would have done better if
exports were better. However, export demand was very low in the year.

Nigel: Could you tell us out of the Rs 236 crore that you have reported
how much was exports in percentage terms, 30 percent?

A: Yes, almost.

Surabhi: What is the outlook? You mentioned that despite volumes picking
up because of lower prices it has been a sluggish quarter for you. Do
you see that changing, how soon can we expect a pricing uptake?

A: Year ahead I see lot of prospects because of our some capex
commissioning in the structure division, ramping up the capacity in the
auto tube division and revamping our forging division we are expecting a
very good year ahead.

Surabhi: When these fresh capacities come on stream what does it mean in
terms of additional revenue, additional volumes, if you are not willing
to talk about pricing?

A: We expect 15-20 percent growth this year.

Nigel: Margins?

A: Margins will also equally improve to that extent.

Surabhi: Can you tell us a little bit about your current debt to equity
ratio, the debt levels right now and if there is any plan to change
that?

A: Total debt to equity ratio is improving. Our long-term debt is
already about 0.7 percent ratio. However, total debt to equity is around
1.51 and in a year to come, we are expecting it to go down to 1.32.

Nigel: Could you tell us what exactly is your current order book? You
were talking about railways orders as well coming in there. Currently
how much of that is railway’s orders and how much of that order book has
export related orders?

A: There are no export order in railways.

Nigel: Out of the total order book how much of it is railways and also
out of the total order book if you could breakup what exactly is
domestic and how much is export orders?

A: Exports are roughly for two months and balance is domestic, our order
book is for almost three months but that too in a structure division we
are booked for up to 8 months. Structure includes our railways, over
bridges, solar support structure, heavy duties structure and telecom
towers and transmission lines. We are very happily placed there.

Read more at: http://www.moneycontrol.com/news/results-boardroom/expect-15-20-topline-growthfy17-goodluck-steel_6751961.html#?utm_source=ref_article

1 Like
5

Reliance Small Cap Fund entered Goodluck Steel tube yesterday.

Good Luck Steel Bulk Deal on NSE on May-26, Client: RELIANCE MUTUAL FUND- A/C RELIANCE SMALL CAP FUND, Tran: Buy, Qty: 1410000, Traded@ 95.10, Close@ 98.15 May 26

6

These news might be good for Goodluck in the future as capacity is in place

http://economictimes.indiatimes.com/news/economy/infrastructure/highways-to-have-sheet-barriers-to-curb-accidents-nitin-gadkari/articleshow/53343444.cms

http://epaperbeta.timesofindia.com/Article.aspx?eid=31804&articlexml=20000km-of-natl-highways-to-be-fenced-in-26042017031009

7

Any idea why the market has always assigned a low PE to this stock? Infact, the current PE ratio is on the higher side of historical range. The numbers seem to be good, maybe I am missing out on something.

1 Like
8

I was studying the goodluck india and found that FA is very attractive level and i don’t know why market has assigned very low PE to goodluck india??

9

Did anyone attend the concall on 15/9? If yes, can you plz summarize?

10

Poor ROE, debt rising faster than profits, PE not the only factor, can be misleading in such scenarios.

11

The margins of the company are squeezing, and as per the latest conference concall the management has advised that due to MIP imposed by the government they are forced to buy the raw material (Mainly HR Coil) locally and suppliers (like JSW, Tata Steel) are taking advantage of the situation and increasing price frequently. The management also advised that artificial shortage of HR Coil has been created by Industry major for justifying their price hike. There is lag time of around 2 months after which only price rise in raw material can be passed in finished goods as they are supplying under contract orders with fixed price. The raw material price will continue to be in increasing trend at least till first half of next financial year because of which the performance of the company is expected to remain muted. Besides this the the company is also facing some liquidity issues due to GST refund. Also as advised by @vinkash the debt is rising faster then the profits.

For the past many quarters the management is anticipating good quarters however we are getting disappointed every time.

Disclosure : I was holding the stock however exited in the current rally at 134. Keeping a watch for better performance in quarterly results.

2 Likes
12

The company will be significantly impacted due to the proposed 25% import duty by US government.

13

Goodluck always finds a way of messing up cash flows. Earlier, they were pouring money into capital expenditure to expand capacity. Now, when returns should start getting generated, working capital keeps ballooning up.

14

The main concern with this Company is financial cost. Once it is able to bring it down by way of efficient working capital management then we may see a re rating in this stock.

One good thing about this Company is that the promoters are reliable and constantly pouring money in the business. Its very difficult to find good promoter quality in micro cap Companies.

Disclosure : Invested 10% of my portfolio at average levels of Rs 80

2 Likes
15

295eef27-996a-442b-a9e2-083ce02b23a6.pdf (2.7 MB)

Why the Company is diluting its stake at Rs 75 and that also to non promoter holding when the book value is more then 150

2 Likes
17

I think the stock has run up 10X due to the frenzy around metals. There’s no visible turnaround in the numbers, the operating cash flow still does not cover interest costs. So, debt continues to increase.

3 Likes
18

Booked entire profit at current levels… Stock price has appreciated whereas the same is yet to reflect in numbers… Further dilution of stake by promoters at Rs 75 has added discomfort for me

19

Adding my research here:

Goodluck India is into 4 divisions- CR Sheets, Pipes & Tubes; Precision Tubes; Forging; and Engineering Structures.

Their products in each division are:

Engineering Structures – Transmission & Telecom towers, Fabricated steel structures (including structure for solar panels), Railway & road Bridges

Forging – Forged flanges, gear rings, gear shanks, forged shafts, railway products, Defence, Aerospace (defence is currently 2% of forgings revenue)

Precision Tubes – Auto Tubes, CDW/ERW Tubes, Boiler Tubes, Transformer Tubes, Air Heater Tubes

CR Sheets, Pipes & Tubes – C.R Sheet/Coil, G.P.G.C Sheet/Coil, C.R.C.A Sheet/Coil, Pipes, etc.

Some of their clients are:

Forging and precision tubes segments are higher EBITDA margin segments

The company aims to be debt-free in the next 3 years.

Historically, interest cost has been more than net profit.

So, if interest goes down to zero within 3 years, PAT will double in 3 years even if there is no increase in revenue.

They are focusing on increasing the share of value-added products

In line with this plan, they have recent expanded capacity of forgings division from 12000 MTPA to 30000 MTPA (addition of 18000 MTPA).

FY21 EBITDA was Rs 117 Cr. Forgings division was 36% of FY21 EBITDA so forgings division did an EBITDA of Rs 42 Cr in FY21 (when capacity was 12000 MTPA). So, in 18000 MTPA capacity, assuming same utilization and realization as FY21, they would earn Rs 63 Cr EBITDA. So, it is interesting to note that they were able to add 18000 MTPA capacity with an investment of only Rs 40 Cr (i.e., they will earn more EBITDA in a single year than the entire investment amount). This plant will also enable them to make larger forgings thus opening multiple opportunities.

They are expecting to reach peak utilization on the new plant in a quick time period

Q3FY22 EBITDA/ton was Rs 6557 (EBITDA of Rs 47.39 Cr and volume of 72273 tons). They are targeting to reach Rs 8000 EBITDA/ton

In Q3 FY22 they did the highest-ever quarterly volumes, sales and profits

They also recently got LoI for Rs 198 Cr from L&T for Mumbai-Ahmedabad bullet train

This will start contributing to revenue from Q1 FY23

There is a renewed management focus with intent on moving towards being a solution provider

They have a vision of Rs 5000 Cr revenue in next 5 years

Disc- have a position

2 Likes
20

Any idea why this sudden 20% LC? Is it just market volatility or something wrong with the recent issuance of Warrants and shares at Rs.450?

1 Like
21

file:///C:/Users/ADMIN/Downloads/295eef27-996a-442b-a9e2-083ce02b23a6.pdf

Arpna Capital Services Private Limited was issued 1500000 shares at just Rs 77 when the book value itself was Rs 150. After this issuance , stock had a phenomenon bull run to Rs 500.

Evidently Arpana Capital has exited its entire share holding of 5.86% during current quarter :grinning:
:grinning: :grinning:

Disclosure : Exited in Oct 21 after booking decent profit

2 Likes