Hi,
Stock seems to have shown a good upmove today.
At CMP of 90+, what’s the view here? Considering-
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positive- rupee depn.
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negatives- the recent salary hike and low div payout.
Mudar Patherya"s view on Manjushree (today’s interview):-
Hi Donald- Manjushree was one addition I made to my portfolio when I joined valuepickr, i exited it about a year back and cashed a handsome profit though the investment was very small, thanks ValuePikr for that. Recently, I managed to get some time to read your short term portfolio thread, i am inspired to learn the short term game, want to look at manjushree from that perspective. Would you have some answers for the following question from your management discussions?
- I am trying to estimate the EPS for FY13 if someone hasn’t already computed it. What is their target capacity for FY13? When do you think it will come operational? Some articles quoted the management saying Oct 2012.
PRODUCTION CAPACITIES
What has been the progress on the capacity expansion program? What is the current capacity available and what was the Capex incurred in FY11 for the same. What is the capacity utilization currently?
As on 31st March we had 36000 MTPA capacity. About 27500 is for Preforms and 8500 for Containers. Capex incurred in FY11 was ~25 Cr. Capacity utilisation has been at 90%. Plan for FY12 is to reach 40000 MTPA.
- The EPS for Q1-13 has dropped in comparison to Q1-12 although the revenues are almost the same. I think it needs to be understood well to predict a trend. Do you think this question makes sense?
So is your point that 4% commission of profit to the mgmt is too high? We should be able to figure out some accepted percentage for a company of similar size. I will look around.
followingremuneration
1). 13,50,000
2). 8,40,000
3). 3,45,000
4). 10lac’sand 4%commissiontoo incommissionthat
I don’t see 4% commission as big but 8 Cr salary (top 4 executives) is more for company making only 20 to 25cr profit in a year.
Q3/Fy-13 Results out…
Total Income up 23.5% to 87.46 Cr from 70.81 Cr.
EBIDTA up 41.5% to 18.75 Cr from 13.25 Cr.
Profit before exceptional items & tax up 50.1% to 8.22 Cr from 5.48 Cr.
Net Profit more than doubled to 5.83 Cr from 2.55 Cr.
Adj Net Profit up 55% to 5.66 cr from 3.65 Cr. (Adjusted for exceptional items)
EBIDTA margin is 21.4% v/s 22.3% (SQ-12) and 18.7% (DQ-11)
Adj. NET Profit margin is 6.5% v/s 6.2% (SQ-12) and 5.2% (DQ-11)
Total Raw material costs as a %ge to Income is 57.6% v/s 57.8% (SQ-12) and 59.1% (DQ-11)
Employee costs to Income is 5.7% v/s 6.7% (SQ-12) and 5.8% (DQ-11)
Other expenses to Income is 15.3% v/s 13.3% (SQ-12) and 16.4% (DQ-11)
Financial costs to EBIT is 26.4% v/s 29.2% (SQ-12) and 39.9% (DQ-11)
Tax Rate 31.2% v/s 40.5% (SQ-12) and 33.3% (DQ-11)
Material costs and lower rise in other expenses helped EBIDTA.
Financial costs which is down 14% and
Exceptional item gain of 24 lacs v/s exceptional loss of 1.65 Cr helped Net profits.
9M/Fy-13 v/s 9M/Fy-12:
Total Income up 15% to 255.58 Cr from 222.19 Cr
EBIDTA up 28.3% to 55.08 Cr from 42.92 Cr
Net Profit up 26.6% to 17.65 Cr from 13.94 Cr
Adj Net Profit up 17.3% to 17.65 Cr from 15.5 Cr.
Reported 9-month EPS 13.03 v/s 10.29 (Fy/11-12: 15.14)
Recorded TTM diluted EPS: Rs. 17.87
At 03:20 pm on 04/02/2013, stock on BSE trading at Rs. 99/- up 1.4%
Thanks Deepak for all the labours for the benefits of all.
Vivek Bhauka,
Please refrain from cluttering up discussion space with your technical calls. If you want to put up technical calls, please do so under Techno-Funda picks with due write-up and justification.
ValuePickr Portfolio has recommended an exit from Manjushree in its Dec 2012 update - with good reason.
Your two-liners are often irrelvant and frankly irritating! Please respect the quality of discussion at ValuePickr. Please do not debase it.
@Donald/Administrator - Please consider including Like/Dislike buttons as possible. highly recommend a “Dislike” button - that will come in handy for irrelevant/low-quality posts like these, and also educate Mr Bhauka with direct feedback from the community.
Can someone point me to the discussion around
“ValuePickr Portfolio has recommended an exit from Manjushree in its Dec 2012 update - with good reason.”
Looks like I have missed it!
Binu,
Please refer ValuePickr Scorecard last updated in Dec 2012, recommended an exit.
This is a well-managed company in a difficult industry. The only way they can grow is by continuously adding capacities. There is high capex funded by debt. High depreciation and Financing costs are taking a toll on margins. They will need time to consolidate for a year or two to reduce debts and financing costs. But the nature of the industry is forcing them on continuous expansion mode - without the liberty of consolidating.
Q2 results did not include the BS details. Debt position now is bound to be higher because of latest capex. Interest burden for Q3 didnt show a big jump, there is a possibility of much higher financing costs accounted for in Q4, that will dent margins. Management had been (on record) aiming to target achieving Net Margins of around 9% for the past year and more. Net margins have been below 7% and on slow decline. FY12 may not close at higher then 6-6.5% leading to an EPS of 16+. That implies the stock is available 6x which is fair for a business like this, not cheap.
Sales & PAT growth in FY13 may be in the range of 10-15%, not more. Don’t get taken in by the huge quarter on quarter jumps. They create an illusion of huge growth. Q1 and Q4 are their best quarters. Compare full year FY12 to FY13 and will see the difference.
Hope that helps.
Thank you TCX, read Donald’s the qualifying comments and your detailed reasoning for the recommendation. Makes perfect sense, one question though Q1 and Q4 being the strongest, would it make sense to wait till Q4 results announced to time the exit?
Personally I don’t find the reasons strong enough for exit. A subscription based website had recommended it a buy at Rs.94. Its up 22% since then. Incidentally its the same price that valuepickr portfolio had exited. More views are welcome.
The stock is touching new highs in this kind of market. Can you please name the website that recommended this?
Touched a new high today. Promoters are increasing stake. Any idea what’s brewing?
Recent price movements aside, I was researching on this stock for the past week and thought would put down the story for your views -
I think a lot of details on this story are on this page, but just a quick recap along with an update on the latest -
a) Manjushree is majorly into manufacturing PET bottles and Preforms (small test tube like plastic tubes, which can be later blown into full sized bottles)
b) They have marquee customers list - Coke, Pepsi, Bisleri, recently Diageo, Kingfisher and other FMCG companies.
c) They have a capacity of 85000 MTPA. Last year, it was around 71000 MTPA. Next year, they have indicated it would be 100,000 MTPA
d) Their major RM is a derivative of crude oil. Hence, it comes with all the oil and forex related risks.
Observations:
i) They have to keep adding capacity to generate additional revenues and profits.
ii) Their capacity additions over the years are as below -
| 2014E | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | |
| Capacity (in MT) | 85000 | 71075 | 48505 | 36650 | 29210 | 21740 | 9120 | 4140 |
As you can see, there has not been even 1 year in the middle where they have consolidated.
iii) This capacity addition has been majorly for preforms rather than PET containers. With Coke and Pepsi, they supply preforms on a conversion basis (i.e., Coke/Pepsi give them the RM, and these guys do a preform - no RM risk) and on RM risk basis with other customers. Their margins are better in Preforms.
iv) Hence, if you look at it, their OMs have been consistently increasing and have sustained about 20% levels in the recent past because of the decisive shift in product mix into preforms.
v) However, with the increased demand on preforms, Manjushree had to continuously set up capacities - and with loans - which did not help the NPMs. Even though OPMs increased and have sustained about 20%, NPMs have not moved an inch beyond 6.5%-7% even though the capacities have gone 4x (and 5x shortly).
vi) This indicates that unless Manjushree consolidates and stops adding capacities, pay back loans, the possibility of NPM improvement is remote.
vii) The management has indicated a revenue of Rs.600 cr in FY15. With 7% NPM, we are looking at roughly 40 cr net profits. At the current market cap of 230 cr, it quoting at 6x FY15E, which I think is fairly/slightly over valued.
viii) The way to play this looks like buy at 4-5 PE and sell at 7-8PE (PE re-rating may not happen because of no pricing power, high debt, low RoE etc. etc.) .
Rough estimate:
| FY13 | FY14E | FY15E | |
| Revenue | 361 | 470 | 600 |
| Growth (%) | 30% | 28% | |
| NPM | 6.70% | 6.70% | 6.70% |
| Profit | 24.2 | 31.5 | 40.2 |
| Mkt cap at 7 P/E | 169.3 | 220.4 | 281.4 |
| CAGR | -4.2% | 22.3% |
Interested in your views.
I broadly agrees with your view. The problem is that company has to keep growing capacity to cater to orders from Coke else Coke will move to other supplier. from the history of Coke, they treat their supplier fairly and his is an advantage for MT. Moreover, coke’s order is a job-work which removes the volatility in margins.
The problem is that I do not see the company making free cash flows after capex in near term.
The positives are that management is good, very lean operations (look at the salary of MD) and they are buying the stock from the market.
Hi kiran,
How is the industry growth scenario? Who are the other players ? What drove this high growth in terms of demand? Is that sustainable ?
Kiran,
That’s excellent crisp details on Manjushree by you. Anybody can go through your post and get most of the insights of business in those few points without going through whole thread. I completely agree with you on your strategy - it falls in ice-cream category business - You buy it historic low-pe and sell it at fair p/e and get handsome returns very quickly (before it melts).