I was looking for ideas that would fit in with the maturing and growth of the indian manufacturing sector and came across this West Bengal based safety equipment manufacturer.
On the business front , the company is one of the few manufacturers of safety equipment in India. They have renewed their branded entity and started focusing on the India operations much more. More engagements with local businesses etc through exhibitions which has translated into higher sales growth locally (yoy growth 100%). I think that with the make in india and export focus, the safety compliance of manufacturing houses will go up significantly. Mallcom being one of the most reputed businesses focused purely on safety equipment will benefit if they get their act together and start penetrating deeper into existing customers and also acquire new ones.
In my view if the management is honest, this could be a good stock to hold for the next few years.
CMP - Rs.150 ; Market Cap - Rs.90 crores; Debt ~20 Cr - Coming down significantly due to better cash flow management
FY 2014-15 Sales - Rs.250 crores (growth of ~ 20%) , Net Profit ~ 5 Cr
Cash generated from Operations in FY15 - Rs.15 Cr, Cash generated last year after working capital changes - 28 Cr
Capital Employed - Fixed assets - 43 Crores + Net Current Assets - Rs.4 Crores ~ Rs.47 Crores. Maintenance capex is negligible is what I could understand.
Domestic sales are growing at 100% this year and 9M EPS is Rs.11 so far - check the latest quarterly results. Last quarter of last year there was a loss - need to investigate if this was one time or related to seasonality. Sales growth is muted this year but still positive growth in profit as they are improving their product mix. Safety gloves are ~50% of their turnover at the moment.
It would be nice to hear contra views and any information on the safety equipment market from people working in the manufacturing sector.
Risks - Overseas sales are falling possibly due to downtrend in manufacturing abroad/ competition
Disclosure : Invested at current levels.