McLeod Russel group company, which is into process equipment and foof processing equipment segment
Clients : LnT, HPCL, BPCL, GNFC, GFFC, McLeod Russel, and most of Sugar companies in India
Last year there were certain exceptional things which happened in the company. One was relocation of its plant from Bombay to Thane because of which the companyâs operations were shut for almost about two months. There was almost nil or negligible production and sales. That is the reason the turnover came down by 20%. Profitability was hit because of certain exceptional expenses which the company incurred on account of all this.
End result - turn over down by 20%, profitability by 90%.
New facility is in operational condition now, Started showing profitability in last 2 quarters, with increasing EPS.
Has around 90 crore Reserve, Book value 100 crore, Debt is 29 crore
At CMP of 26, market cap is 30 crores (1/3rd of the reserve, and book value)
To me it make a superb short term investment opportunity. Views invited from Valuepickr seniors.
dont know much about kilburn but I have high regards for rajen shah as a wonderful stock picker. he has the uncanny knack of picking multibaggers from amongst well known and lesser known stocks.
I have a small position in this business.Need to explore more for including it to short term portfolio. If the numbers and management are to be believed next 2 quarter results will take this stock back to 50+ from current level.
Also, plzz share source of this- “Last year there were certain exceptional things which happened in the company. One was relocation of its plant from Bombay to Thane because of which the companyâs operations were shut for almost about two months.”
attaching a weekly line chart of kilburn engg. Stock currently seems to be at a low risk entry point. I think one can keep a stop loss of 20 on closing basis and take a position. Potential target could be nearer the upper end of channel.
Hi, thanks to Subash and Hitesh, I have taken a small position here in my short term portfolio. Shilpa also has a position in the short term portfolio.
Possible reasons for undervaluation:
From the Annual report:
“revenue declineddue to macroeconomic factors. in many instances both domesitc and overseas clients cancelled or deffered their capex”
“During the current year order inflow continues to remain bearish, expects 2013-14 to be better”
The plant was operational from Sep 2011, but Q-1 2013 nos do not show better performance. Com itself has mentioned in the AR that the above quoted reasons lead to slide in orders and the tone of the report is quite negative in terms of business prospects. The new plants depreciation and higher finance costs (huge increase in short term loans) will also not help.
Inspite of negative cashflow and weak order situation the com invested 1200 Cr in Mcnally Bharath, another cap goods listed com with executive chairman being the same person who is chairman of Kilburn. How would you view this?
Not sure if anyone here is tracking this company of late. Has been reporting good set of numbers backed by robust order book, experienced track record in setting up customized equipment, sectoral tailwinds, change in management and revival in capex cycle.
Conducted its first ever con-call post Q1 FY 24
Con-call notes
Business Overview
• 300 cr revenue in coming year is achievable
• Targeting 450-500 cr revenue in 2 to 3 years
• Enquiry pipeline of approx. 750 crores. Most of this likely to get closed in this year.
Global collaborations
o Nara (Japan) – Company manufactures paddle dryers of Nara design for Indian market and in talks on supplying it for other markets
o Carrier – manufacturing some of the equipment of their design and working on offering them engineering services from India and arrangement of contract manufacturing. Looking to support them if they get orders from US or Europe.
o Idreco ( A European based water treatment company) is recent tie-up – started receiving orders for spare parts and other small equipment. This is an exclusive collaboration. Tenure is 3 years; and can be extended further.
More details - Idreco_Presentation_Letter_(En).pdf (707.1 KB)
Applications diversified across sectors –
o Chemicals
o Speciality chemicals
o Food industry
o Fabrication of critical equipment
Earlier, were more product centric. Now transforming to becoming more solution providers.
Margins –Endeavour is to maintain 15 to 17% EBITDA margins.
Export is roughly – 15 to 20%. Export will remain key focus area and will look to take advantage of lower manufacturing costs compared to Europe.
a. Currently US & Europe are serviced through a regional tie-up. Looking to setup own team there in near future.
What has changed of late
o New management – Mr Ranjit Lala as MD (has 3 decades experience in different companies across different functions like Manufacturing, supply chain, international sales, etc)
o Lot of focus on scaling up order value and Economies of scale
o Better product mix
o Tailwind of sector demand
o Superior Operational efficiency – on receipt of orders, RM orders are placed within 48 hours, which mitigates fluctuation in cost of RM
o Recently entered carbon black market
o Fabrication of silos - Recently bagged a project with Technip for IOCL refinery in Paradip.
o Transforming into a solution provider than product centric
Differentiators
o Strong relationship with customers. (Company’s customers include Reliance Industries, Tata Chemicals, Nirma, Vinati Organics, etc). Start working right from conceptualization stage. Ability to manufacture with different kinds of exotic materials.
o Operating in in a niche market where setting up equipment like Carbon black dryers requires technological knowhow
o Experts in fabrication – Mastered all kinds of welding practices. There are 450 processes involved in welding and fabrication. Huge competitive advantage…
Dryer business globally is a $1-2 billion market and in India its roughly around Rs.3,500crs.
Service segment has higher margins than manufacturing. Will look to scale up the service segment further
Competition is different by for different products
o Rotary dryers - GMM Pfaudler, Walchandnagar.
o Applications in carbon black – few companies in Germany, China
o Soda ash – Chinese companies.
o Paddle dryers – Mostly small players.
Products are capex intensive. Must keep monitoring capex cycle …
After Brightcom saga, one should look at balance sheet of the company.
As per screener data company has : Increases in inventories, increase in receivables, short term loan, reduction in fixed asset, lower cash flow, etc.
Per today’s notice, the company is planning to think about preferential warrant issue during 3rd Oct meeting. Definitely showcases the kind of solid expectations management has from business in next 1-2 years.
Management is demonstrating their drive for growth, acquistion + preferential, promoters infusing own capital. Nos coming and guidance of doubling topline in 2 years. Valuation looks ok.
