Ah! That makes sense. Thanks for the update.
Clarification received from Manjushree Management
Shareholders definitely would be worried for the change taking place twice during the year_.__We had an interim arrangement with the Auditors Sharma and Pagaria till we found a long term partner._Finding a suitable long time Auditor was a time consuming process. As such, we had an interim arrangement with them till we could__select someone who could be suitable to handle our account on a long term basis.
The new auditors Singhvi, Dev and Unni (SDU) are one of the most reputed audit firms in Bangalore.
On a lighter note, lets see how long these new reputed auditors last.
The results are below expectations . Stock has taken a beating .
It was expected results of Q2 will disappoint for 2 reasons:
1). Historically Q2 & Q3 are lower sales qrs, Q1&Q4 are the best quarters for cola beverages and hence for Manjushree
2). On top of this, Q2 was very bad for Cola majors in North India with unprecendented monsoons. For coke production line was stopped for 15 days in North india
So while the extent of performance underperformance could not have been known, that Q2 results would disappoint was expected. I think there was several mentions of this expected results disappointment in store mention in previous threads by many members. perhaps we could have been more explicit!
Even now 90-95 is not a bad price to book profits on Monday (CMP 95). Time to re-enter the stock could be post Q3 and prior to Q4 after tracking closely.
Hi Donald,
I'm posting a recent interview by the mgmt of Manjushreewhereinhe mentioned that turnover for this year would be close to 200 Cr and NP in the range of 18-20 Cr! Is such kind of NP possible??
Here is the interview:
Capacity to double by June 2012: Manjushree Technopack
Play VideoDec 29, 2010 at 03.28 PM
Manjushree Technopackhas gained after the company announced plans to double their capacity by the year-end. The company sees high growth opportunity in FMCG sector, says Vimal Kedia, Managing Director of Manjushree Technopack Ltd, in an exclusive interview with CNBC-TV18.
The company is developing two new factories in Banalore and has also signed the MOU with the Karnataka government. âWe will be investing around 200 crore on this new project wherein our capacities will almost go double by mid of 2012,â he said.
Below is a verbatim transcript of the interview. Also watch the accompanying video.
Q: We understand that you are looking at some capacity expansion, could you tell us your plans over there? Any kind of fund infusion or fund raising that you will need?
A: We are looking forward to put up new greenfield factory in the coming year. We have land allotted by government of Karnataka which is around 25 acre around the vicinity of Bangalore. We will be investing around 200 crore on this new project wherein our capacities will almost go double by mid of 2012.
Q: You are investing around Rs 200 crore for this capacity expansion, could you highlight how exactly you are going to be funding this and in terms of this increased capacity expansion? What sort of opportunities are you planning to tap in terms of an increased demand?
A: This funding will be done through debt as well as internal accruals. We foresee a huge growth of about 20% year on year in FMCG business. We look forward to see the dairy industry â fresh milk, beer, wine and edible oil to get into next two-three years into rigid packaging than flexible and other formats of glass etc today. This change is going to bring in big numbers for packaging industry in India.
Q: What are the big numbers that you are looking at, especially, for FY12? Where are your capacity expansion accretion kicks in?
A: The capacity expansion will happen in June 2012. Today, we are 36,000 tonne and b June 2012 when we start a new plant it should touch over 50,000 tonne and subsequently to 70,000 tonne by 2013.
Q: We meant in terms of your revenues and profitability, if you could tell us the forecast for this year and next year?
A: This year we should be doing over Rs 200 crore, already predicted and the bottomline should be close to Rs 18-20 crore. Next year, we are looking forward to Rs 250 crore and proportionate bottomline would follow as per the old procedure.
Q: You spoke about FMCG being a strong opportunity for you in terms of sector going forward. How much does it comprise of in terms of a revenue share for you currently and what exactly would your current client profile look like?
A: Our FMCG clients contribute to almost 80% of companyâs turnover. We work with companies likeCadbury,Nestle, P&G,GlaxoSmithKline, Coca Cola, Pepsi, Unilever and almost every brand which you can think of in FMCG sector.
Q: Where are you seeing this increased growth coming from â renewed contracts from existing clients or would you be tapping into different FMCG players? What is the plan going forward in terms of augmenting the growth from the FMCG space?
A: One is, continuous growth in FMCG which is around 20% then we see lot of convergence happening from glass and other flexible format to rigid packaging which we are the leaders in India. We see the growth coming from these two segments and also pet preforms wherein big cola majors are coming to India besides existing Pepsi and Coca Cola. We have another big cola which recently launched in Mumbai in a big way and RC Cola is also there, these two are big names in carbonated soft drinks and they are eyeing India as the next growth centre.
Doing 18-20 cr net profit on sales of 200 crores would amount to the company achieving NPM of close to 9-10% and in last six quarters, it could reach 9% NPM only in June 2010 quarter. In other quarters, the NPM has been in the range of 6.2 to 7.7%. If one were to expect something like 7.5-8 % NPM being conservative, then on sales of 200 crores (which seems achievable looking at the H1 figure of 103 crores) company would do around 15-16 crores NP for full year, which would amount to EPS of around 11-12 minimum as we expect margins at the lower range. In optimistic scenario they could do what the management says and that would amount to eps of around 15 or so and that makes for a wonderful buy at cmp of around 80.
**
I have been observing the stock price since a few days and it does not seem to be going down too much with the markets. So based on FY 11 and FY 12 results expectations, it again comes on buy on declines list.**
If the management walks the talk, then Manjushree from here on also could give very good returns.
Hi Ayush,
Maintaining a 9-10% NPM for the year, seems tough given that Q2 had seen margins falling to 6.5% levels from 9.2% of Q1. Q2 & Q3 are dull quarters for Manjushree, but Q4 is the best. Infact they produce at regular levels and carry higher inventory during Q2 & Q3 since they know they cant ramp up to meet demand in Q4 alone.
Management has always been confident of maintaining NPM at 9% levels for the year. This is what they had averred when I had last met them too. So I would not take that lightly given that they are pretty conservative in the figures they put out.
Given the timing of the interview, Dec 29, this might imply
a. they have done much better than expected in Q3
b. expect to do exceptionally in Q4
c. they might have got new contracts for PET preforms from other cola players
d. new capacities added for GSK/other clients have reached scale
I was thinking of adding more on Manjushree post Q3 results where I expected another dull quarter. However the timing of the interview and your highlighting Management’s re-inforcing NPM expectations at 9-10%, we might be looking at a good Q3 from Manjushree.
May not be a bad idea to add some before Q3 results! I also like the fact that the market has come to appreciate the lumpiness in qtrly results (and despite the bad Q2), the stock has been stable at around 80 level, ~15% down form peak expectations post the superb Q1.
Discl: I remain invested in Manjushree in decent quantities might have a favourable analyst bias for the stock!
Manjushreewhereinhe
Hi Donald,
I am not sure about how Manjushree is managing its Raw Materials but they being dependent on Crude which has gone up in recent times implies that margins should come under pressure in the near term. The only way then they can retain margins is by passing on costs which i doubt they are able to do in this sector. So i am a bit wary about the company making 18-20 crs this fiscal. Further the kind of expansion they are going into would require a good amount of debt in a raising interest rate scenario which will further hurt margins. So there is enough concern and if one is patient enough i believe we can get a chance to enter the scrip at much better levels provided the fundamentals remain sound.
Hi Siddharth,
Yes, it is better to err on the side of caution.
I am not worried on the RM side. RM/Sales keeps going down because the preforms part of the business growing substantially higher. In preforms business, the RM is on account of the customer (a la Coke, Pepsi, etc.). They have been bringing down debt form 71 Cr start of year to 56 Cr in Q2. This contains the 30 Crs they need on Capex in this fiscal (of the total 60 Cr) needed for new capex. So thats not worrying me either.
Margins are now primarily related to their economies of scale. So what I am worried about is what they will have executed in Q3 in Sales. Therein lies the answer to this puzzle. If they do only marginally better than Q2, then they do not stand a chance at 18-20 Cr of PAT for FY11. Q4 will be a good quarter but that will not be able to compensate for the shortfall in Q3. The odds are on that in the Beverages side they would not have done much better. Chances are that they might have scaled on the new relationship with GSK for which they had put up 2 dedicated machines, which might compensate.
On balance, I will agree with you. No need to hurry. Its more prudent to wait for the results of Q3 and then take a call.
And the adventurous need to weigh the odds for a much better Q3, because if there is a hint of the company doing better on the margins front the stock will still run away, as now there isInstitutionalinterest in the stock too.
Can I steer the discussion and stretch the time-frame on this a bit? What do you guys feel on a 2-3 year perspective? I think that on that timescale it will do well, with a lot of capacity coming onstream. The management is doubling the capacity from 36K to 70K. With everything remaining the same, the sales should double and margins should be better than current due to the fact that the raw material burden is being shifted increasingly to the customer. That makes it a very interesting and attractive play. Now, how to time the entry/addition is another ball game altogether.
Manjushree is set to do well in the medium-longer term. Management is conservative, sets for itself a lil’ bit stretched targets, and has a good track record of achieving what they say they will deliver. To that extent one should stay invested and accummulate on dips.
I maintain the odds are on that given Q3 will not be spectacularly different than Q2, and market sentiment being very vulnerable, we will get more dips on the stock than the current stable levels of ~80. One can be patient;)
patient
The stock has come down to levels of 66-68 today and going by the market weakness, might head towards next support zone of 53-60 where it faced a lot of resistance earlier.
Fundamentally I think around 5-6 PE level of 60 -65 based on expected eps of around 11-12 for fy 11 might be a good entry point.
Any views where investment in Manjushree might be considered as a very mouth watering level for next few quarters?
Q4 is their best quarter in the year. Management remains confident of maintaining 9% NPM for the full year.It will be a good buy at 60+ levels.
Disc: I hold Manjushree at half initial positions. looking to accumulate more post Q3 results
I was just looking at charts of manjushree and the 61.8% retracement of entire rise from 42 to around 109 comes to 67 which is cmp. so if cmp does not offer good solid support we might be heading for the support zone of 53-60 levels.
Any idea when the dec qtr results are due to be announced?
Hi, just saw an ad by Dhunseri Petrochem and Tea Ltd in today’s ET.They claim to have a superior technology for making packages for beer, carbonated drinks, juices etc. This is in collaboration with an Italian com which makes a bottle resin which retains Oygen and Carbondoxide better. Dhunseri is supposed to be the first com in Asia with to commercialise this technology.
Any threat for Manjushree? Could we get a quick update from the Management?
Regards
Vinod
Q3 results will be announced by mid February.
Have forwarded the query. Thanks.
-Donald
ET.They
Communication received from Manjushree Technopack, quoting verbatim
"No threat to us.
Dhunseri is our vendor for supply of PET Resin.They have developed a new grade of Resin which would have the barrier properties for products like Beer.They would be supplying resins to the interested parties like us.
In fact, this development from Dhunseri may make the conversion of Glass to PET easier.Processors like us need to take the project further with the end user industry like Distilleries.
This is a positive development for us."
ET.They
Manjushree is back to my buy zone once again. I am just worried about the overall market sentiment hurting mid and small cap stocks further. So, probably a periodic buying might help.