Agree with you. We should stagger the buying…
I bought again into Manjushree today at 56-57 levels. with FY11 EPS expected at 10-11-12 Rs, this is available at 5-6x. Roughly the level when most of us bought into the MAnjushree story. Some of us early birds had got in a little cheaper.
Since then Manjushree has scaled upwards. strengthened customer relationships, expanded capacities, improved on margins front -NPM over 9% which the management says is confident to maintain for the year despite a poor Q2. Even if it slips a bit on that front it will still be far better than the 7.7% registered in FY10
No reason why we shouldn’t accumulate again. Results to be out next week (may not be any better than Q2), may see lower levels. Q4 is their best qr so we should get ready to get in, cautiously …gradually
Great. I also bought yesterday 
But at higher levels @ 58 
I bought 20% of my total planned number. Planning to add on dips.
I added some more of Manjushree today, in anticipation of a good Q4.
Lets see.
EPS for the full year- 10.9
However, a quick look shows decrease in cash balance (79 to 12 Cr), doubling of total debt and more than doubling of working capital cycle as well.
Any views?
My bad- that’s 7.94 Cr to 1.2 Cr for the cash
The management talk of doing 18-20 crores bottom line has gone for a toss. NPMs are taking a solid beating. For the best quarter which is q4 the NPM is less than 5%. And the main culprit seems to be the interest payment of around 3 crores. On a positive note, PBIT margins seem to be sustained above 10%.
At around 7 PE for FY 11, the stock is midway between its valuation range of 5 to 10 PE. Could be a good idea to load up in the 50-60 range and exit in the 90-100 during bouts of pessimism and optimism.
Yes that 3.01 Cr interest payout in Q4 is a shocker isn't it.
The debt has risen from 57 Cr in Q2 to 107 Cr by Q4 or a d/e of 1.31 from 0.76x. An additional Rs.50 Cr. If I remember correctly the coy had projected a debt burden of 80 Cr for FY11. Also working Capital more than doubled from 32 cr in FY10 to over 84 Cr in FY11, or 38% of Sales from 22% of Sales! While they have cut down on debtor days, Inventory days have more than doubled to 51 days from 20 days.
In the current high interest regime, high debt and longer working capital cycle will make things more difficult for the company.
On the positive side, the company managed a very creditable Operating margin of over 22% for FY11. So the company has gone from 16%, 19% to 22% Operating margin in the last 3 years. Economies of scale working! Even Q4 wasn't bad with OPM over 20%.
The other thing to remember - Manjushree usually manages to put up the capacities for the next year in Q4 of previous year. Additional 50 Cr has been invested (hopefully in creating additional capacities, hope part of it is not for land) , so we need to check just where have capacities been ramped up to.
By the way,Sales have gone up 45%, PAT has gone up 43%, and EBITDA by 68% over the previous year. Thats not a bad record by any means. But was much of that growth factored in in the price uptick? Its a climbdown for Management talking of upping net margins to 9% levels surely (they maintained FY10 net margins), but can't say a bad performance for the year, can we? Its a pretty good performance actually.
But what of the coming year? What I need to think about?
The culprit is the huge interest burden of 6.24 cr vs 3.39 Cr for the year dragging down net margins to 6.84% marginally lower than the 6.94% achieved in FY11. Substantially higher working Capital requirements is also not a good sign in current environment.
Just how much of the debt is towards working Capital management and how much for long term capex/other requirements. Can they repay some of the debt, looks unlikely in the possibly longer credit cycle regime for the next quarter or two. In the pursuit of growth is the Management overextending itself? straying from its more conservative ways? Actually so far in the last 3 years, the best thing about Manjushree was its financial Management. A plant head of Alpla in HP - an unlisted MNC also in PET packaging had told me, the point where Manjushree stands tall over all others in Pet packaging is its financial management. Is that all coming undone, now?
Net margins and EPS will be under more pressure in FY12?? Welcome more views to think through whats in store going forward.
The Quarterwise data for your reference and follow-up comments.
-Donald
|
Manjushree |
1QFY11 |
2QFY11 |
3QFY11 |
4QFY11 |
FY11 |
1QFY10 |
2QFY10 |
3QFY10 |
4QFY10 |
FY10 |
|
PBIDT margin |
23.38% |
22.83% |
22.85% |
20.63% |
22.29% |
18.94% |
18.17% |
24.46% |
16.21% |
19.21% |
|
Operating Margin |
23.26% |
21.52% |
22.72% |
20.74% |
22.01% |
18.94% |
18.07% |
24.39% |
15.30% |
18.88% |
|
Raw Material/Sales |
55.81% |
58.07% |
59.42% |
55.01% |
56.83% |
57.59% |
60.51% |
59.82% |
62.54% |
60.32% |
|
Power & Fuel/Sales |
6.71% |
9.24% |
8.19% |
6.85% |
7.59% |
8.35% |
8.35% |
8.42% |
7.45% |
8.08% |
|
Employee Cost/Sales |
4.58% |
6.40% |
6.03% |
4.66% |
5.29% |
4.47% |
5.57% |
4.90% |
4.99% |
4.97% |
|
Other Mfr Exp/Sales |
1.65% |
3.25% |
5.62% |
11.42% |
5.92% |
5.39% |
5.38% |
4.13% |
4.53% |
4.81% |
|
Admin & Sales Overheads/Sales |
3.96% |
5.11% |
4.57% |
4.25% |
4.42% |
4.67% |
3.51% |
5.06% |
4.88% |
4.59% |
|
Net Margin |
9.20% |
6.56% |
6.38% |
5.36% |
6.84% |
7.70% |
6.72% |
7.43% |
6.19% |
6.94% |
|
Deprec/Sales |
7.34% |
10.72% |
10.59% |
8.00% |
8.95% |
6.60% |
6.72% |
8.20% |
5.75% |
6.73% |
|
Fin costs/Sales |
2.14% |
1.99% |
2.38% |
4.46% |
2.89% |
0.67% |
1.35% |
5.00% |
2.02% |
2.27% |
|
Manjushree Technopack |
2QFY11 |
4QFY11 |
2QFY10 |
4QFY10 |
|
Book Value per share |
56.45 |
60.27 |
47.56 |
50.52 |
|
Total Debt |
56.56 |
106.91 |
31.81 |
51.78 |
|
Debt/Equity |
0.74 |
1.31 |
0.49 |
0.76 |
|
Debtor days |
40.91 |
55.29 |
46.45 |
65.94 |
|
Inventory days |
37.21 |
86.01 |
45.82 |
49.20 |
|
Interest cost/Debt Outstanding |
1.49% |
2.81% |
1.32% |
1.87% |
|
Cash/Total Assets |
0.83% |
0.62% |
0.56% |
6.30% |
|
Fixed Assets Turnover |
2.38 |
1.93 |
2.59 |
1.62 |
|
Asset Turnover |
1.56 |
1.11 |
1.49 |
1.18 |
|
Return on Assets (%) |
10.67% |
7.61% |
10.00% |
8.21% |
|
Financial Leverage |
1.81 |
2.38 |
1.55 |
1.84 |
|
Return on Equity (%) |
19.34% |
18.12% |
15.54% |
15.12% |
|
Capital employed |
133.03 |
188.57 |
96.25 |
120.22 |
|
Return on Capital Employed (%) |
21.68% |
15.30% |
19.32% |
15.47% |
|
Working Capital/Sales |
21.98% |
37.99% |
28.18% |
22.43% |
Hi,
Can someone send me the Annual reports for 2008 and 2009 please? Also Donald’s Excel sheet seems to have some ref links that aren’t getting updated. I will be grateful if you can send this one as well.
Thanks in advance
Anand
Hi,
Couple of more questions on Q4 results.
1). Why is the excise duty of 12.35 so high (15%) compared to other quarters? Isn’t this to be in the 4-8% range.
2). Also the “other manufacturing expenses” cost has gone up significantly. This is almost more than that of the entire Q10 costs as well as more than the sum of 3 quarters of Q11.
Could someone help me understand this?
Thanks
Anand
p.s – I am a complete novice. So if something is very trivial and i haven’t understood it, please do not bash me.
Good observations Anand.
While the focus on quarterly figures is good, you should also add up the total for the year and rationalise.
1). Excise Duty - Its better to look at the total year figures. If you do that you will see effective excise duty paid is some 25.68 cr on total sales of 241.68 cr, effectively ED of 10.62%. For Fy10, ED paid was 14.33cr on 163.37 cr, or 8.77%. This is becasue in teh budget Excise Duty was hiked by some 2% across the board ( as a roll back of the stimulus measure of earlier cut in excise duties) . Fy09ED was some 11%
2). Other mfr expenses - Again on an yearly basis, this is 5.92% vs 4.81% a year before. The hike in Q4 could be because of higher storage and warehousing costs over Q2 & Q3 which they booked in this qr.
I wouldn’t worry too much on this, as the yearly figures are in line. The same expenses in Q1 & Q2 were much lower than the 5-6% average!
“Annual Reports” shared workspace athttps://acrobat.com.
Anand you should have got an invitation for the same. You will find Manjushree ARs of 2007-08 and 2008-09 there.
-Donald
Thanks for the clarifications TCX. I agree that the annual provisions are made in Q4.
Since Q1 and Q4 are the best quarters and if Q4 takes a hit due to these provisions, we are going to see more or less similar results across Q2,Q3 and Q4. Overall results seem to have a larger dependency on Q1. With a decent amount of monsoon this Q1, can we expect the growth to be as high in 2k12 as expected?
1).
Q1 and Q4 are generally good for Manjushree as these are the hot months - so more consumption of cola and beverages…more packaging!
Its a good idea like Hitesh mentions to ride the bouts of optimism and pessimism. The heavy interest burden may affect earnings in Q1. This seems to be priced in at the moment.
yesterday i purchased coke and searching for the manjushree name,it was on the cap
Was this a 500 ML PET bottle?
yes.[ Comment too short ]
Hi,
Just to create an understanding about this space of the market. We typically value companies based on a lot of factors out of which P/E is also considered a primary factor. So as the forecasts of the earnings increase the price must increase and hence the stock price moves up by approximately the earnings ratio. (Just assuming that the market doesn’t grossly misbehave which it in fact does most of the times)
The P/E is typically high for tech companies/ banks etc while it is less for technology companies. One advantage of large cap industries is that you can use the statistics of one company to estimate whether the competitor is overvalued or undervalued. (Assuming that other factors like debt, management, growth factors are already accounted for)
Manjushree apparently seems to be placed in a segment where the competition is not prominent enough to set up a benchmark. Currently the company is subscribed at the rate of 7 times Earnings. Assuming that the company keeps growing at the rate of 30% per annum, what of the guarantee that the market will continue to view it at 7x earnings?
Regards
Anand
Growth is just one component in the PE puzzle. Manjushree operates in a commodity industry. It has moderate to low margins and practically no pricing power. It is a “price-taker”. Also, the growth needs continuous capacity building. As such, it is unlikely to get much better PE. It would be lucky to be rated 10 times earnings as most commodity stocks range between 5-10 PE over time.
Hi,
I wanted to understand couple of things more.
1). I can see that the promoters holdings increasing from 54.9 to 59.93? I dont see a buy back or share issuance news. How did this increase?
2). There are plans of a 200cr expansion. How much of this this debt has been already taken and how much is planned to be taken over this year.
3). The land cost of the new expansion should be already part of the depreciation expenses for Q4FY11. Is that correct?
4). Manufacturing/Admin costs seem to be usually high for Q4. (Donald, can you please check your table for Q4FY10. ) Assuming that these costs come down for Q1, along with the reduced excise duties, the earnings for Q1FY12 must be handsome to say the least. Is that right. Btw would new interest costs enter into this equation?
But i am believing that any EPS above 5 would be an exaggeration.
5). A lot of companies have a strategic advantage of raising debts through issue of FCCB’s. These can be as low as 3%. But i believe that this would require govt approval. Is there any possibility of Manjushree using these methods for fund raising, rather than resorting to high interest rate bank debts. Low internal accruals also add to the misery.
Thanks
Anand
Manjushree-results-tracker.xls (37.5 KB)