ITL Industries - adding cutting edge to my portfolio

ITL came up with good result -

Sales: 19.09 Cr vs 17.14 Cr (11%)
Net Profit: 1.2 Cr vs 0.85 Cr (41%)
EPS: 3.76 vs 2.61 (44%)

Valuation looks extremely cheap, considering the growth and Capex plans.

With a track record of growth for past five years and the 40 pc growth shown in latest quarter , I see the share is available at a pe of less than 10 on current years anticipated earnings for which there is visibility . With the Nifty PE at 27 I perceive almost 100 percent margin of safety with minimum downwards risk with a visibility of appreciation. I hold.

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Some stocks trade at low PE because the opportunity size is small or because of industry structure. ITL makes steel cutting machines - the demand is contingent on how many such machines are needed by the steel industry. The price shot up because of PAT growth year on year. How long will this sustain? Also the margins are not growing, so why should the market pay any premium?

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You seem to be tracking this one for quite sometime now.My understanding is that Its a cyclical business and if their products are indeed as good as advertised then their customers dont need to deal with them again,No?

We have used bandsaw and hacksaws made by ITL Industries in past and have been pretty disappointed with their performance. Though their customer service was good but the frequency of breakdown in their machines is a big headache. What surprises me is the fact that they have been growing at such a good pace because other people also who are using their machines have similar feedback.

Disclosure: Not invested. Not interested

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Thanks for this. This piece of information goes against the OP’s claim that there is a wait for ITL machines and there is a high demand. Hope OP can clarify

Theres nothing to clarify. Dont trust anyone…noth even me…just the numbers. If co is growing means demand is there. If not, then assume no demand.
Third possibility, that machines are useless but still co is growing is also there. That depends on lack of alternatives or huge demad supply gap. This is impossible to fathom.
Again i say…go by financials.

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Thanks Utsav, I admire how you take big gutsy bets like this one, even if they must go wrong, most people will never have the stomach.

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On reading this I have made enquiries -on MEP Group who are associated with ITL for supply of machinery manufactured by ITL - through some friends to make who have businesses in Italy .According to my friends “ MEP Group is a global major in its domain .Seems to be ahead of competition in innovation and quality .MEP if they are outsourcing from speaks positively about quality assurance systems at ITL.Companies like MEP would usually carry out through due diligence reviews from design to shop prior to engaging with any vendor, from a perspective of credit rating, quality ,supply chain management .It is likely that MEP would have carried out such due diligence prior getting ITL under their vendor list. MEP Group maintains a website of their own. “.I am holding ITL .Let me see how it turns out.

Well I have shared our and close relatives experience of Hacksaw and Cold Saw Pipe Cut off Machine Which has been supplied by ITL. Overall experience has not been satisfactory for both of us.

Do you have any idea which machines ITL is exporting and what are their revenues from exports?

One of major users of bandsaws which is ITLs main product are forging companies who cut billets and rounds for forging. I happen to know Ramakrishna Forgings and Amtek Auto ( Both are listed companies) both of whom have big plants in Jamshedpur and they have all imported bandsaws as both of them say that Indian manufacturers are not so reliable.

I’m also bit surprised to know the waiting period for their bandsaw is 3 months so for confirmation I will drop them enquiry mail tomorrow and can find the delivery time for the same.

Further I agree with @thestocklady that you should not trust anyone and do your own due diligence before making investment decision.

Aman

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I studied the ITL industries AR for last few years till 2017, I guess 2018 one is not yet publishes. My observation:

  1. Company claims that every year has been tough and because of that their : - performance was bad or despite that performance was great, depending on the sales position.
  2. Every year management sounded hopeful but that does not provide any direction on where the business is headed as number have been mixed/

I am ok to ignore for a time, the above two points as such businesses are function of lot of other things, which for a small company are too big to have a grip on, like - cyclicity, pricing, competition etc.

However, what i am not comfortable with is the increasing working capital. If I were to increase my sales by compromising my working capital, especially in B2B business, I dont know one bad year or bad payment can hurt years of profit. Hope that does’nt happen with ITL.

So,I am not going to be comfortable with unless the Working capital situation improves.

To each his own. Hope this helps.

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From the AR:

The company has extended a large loan to its subsidiary MM Metals Pvt. Although the AR mentions its an ancillary business not sure how ITL’s investments in and intracompany loans to MM Metals brings any benefit to the former.

The management expresses confidence to beat growth in capital goods sector this year

Other thoughts:

The company has a self-sustainable growth rate of 17% and sales are growing at the same pace, so there would be no need for debt increase, as long as receivables are converted. The company’s net profits are in the single digits.

Not sure why its such a low margin business, when some of the equipment involved is complex, however net profits have grown recently and the stock trades very cheap on PEG basis

ITL Industries Limited-09-28-2018.pdf (442.6 KB)

Care Ratings on ITL. Interesting Data Points

So there is a name missing in the shareholding list and it has been replaced by Centrum Broking. Looks like broker triggered margin call, and has the shares in their custody and is now sellling all the shares of that person.

Same thing appears in other counter i.e. Yuken and Intense.
Looks like the Pied Piper has a hole in his pocket and his broker is taking the margin shares in custody.
Broker will keep dumping the shares now to make good the losses.

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Utsav seems to have transferred 36000 shares to a family member. There is a bulk deal on 26 th September. Please check.

But even family member to whom the bulk deal was done is not there is the shareholding disclosed in excess of 2 lakh. So @ashwinidamani info seems accurate. Same for Intense Tech as well, family member to whom bulk deal was done is missing in shareholding details.

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Request you guys to discuss business and not personal holdings, etc.
I am holding all my shares and they will be visible under my name in the 31/12/2018 SHP.
The same goes for the other counters as well.

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One more good result for quarter September 2018 from ITL Industries with a 40 pc plus growth registered on all parameters .While there more than 100 pc increase in cost of Raw Materials other expenditures are in control resulting in a higher profit for the quarter. Since the management is optimistic on the Long term performance I expect the rest of the quarters too to do well .Holding for long term.

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New unit is technologically advanced, and doubling the capacity. Already started production and booked for months. Company was working on new products, they have uploaded new video of Automobile Cylinder CI Liner Pipe Cutting Machine last week.

Company is dirt cheap, considering the capex complete, quality of products, clientele and consistent growth its posting.

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Isn’t there some correlation between Meera and ITL. Same set of shareholders, both companies suddenly coming out with pictures and videos of their machines…supposed capacity expansion. Fishy Comnection

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