Mazda Ltd - Sheer Undervaluation?

Hi Dhwanil,

Thanks for the update.

Apart from the slow demand any indication or talk about supply side pressures ie perhaps competition also increasing ( maybe from unorganised sector ) or is their quality of product superior enough to command the margins largely unaffacted by increase in supply.

Agree with the feeling of conservative management as i got similar feedback on speaking with one ( and only ) employee in Mumbai. In some ways that may not be too bad if they play safe, or is that my bias talking !



Hi Austin,

It seems they do have a strong niche in the jet vacuum systems and are enjoying good margins there. The competition is not a worry. The limitation is that its not a very big area and hence limited growth is possible. They are trying to expand the product portfolio (over next 2-3 years) and if successful, that will give high growth.



Hi Ayush,

I too missed the post. I recently heard about Mazda Ltd. and was curious to know more.

Do you have the Management Q&A details on this site? Please share the link.

This would be quite helpful.

I have a few other questions below. Looking forward to your views and comments.

1)The stock has minimal volumes ranging from few hundreds to 2,000. Although its not an issue if fundamentals are good it appears difficult if one buys 100 or more shares (difficult to find seller if you want to sell in future).

  1. There was a mention in the annual report on boosting the share of Food business in total revenue. Currently its around 10% or whereabouts. What will be outlook on food business growth, its share in total revenues in FY 2014-15 and future plans?



Dear All, I have compiled the notes for Management Q&A done for Mazda and posting


Ayush/Donald/Ankit/Janakbhai, please suggest additions/modifications wherever


**1). **JOURNEY

Great track record from 2001 to 2009 with turnover growing from just 10 Cr to 80 Cr in 8 years. But since then the growth has stalled. Kindly share your journey and the challenges.

Company has maintained growth of 15-20% CAGR over last 15 years and has grown its revenue 10 times. Growth has slowed down due to slowdown in the world market impacting exports. Recently, domestic business also has stagnated and de growth is expected due to challenging economic environment in the country.

In 2010-11, the company sold the valve division. Kindly share details on the same.



Product Mix

Vacuum Systems 50% contribution? How do we see this market for next 2-3 years?

Current contribution to revenue is 20% evaporators/10% food business/70% vacuum & allied system (surface condensers and some balance of plant equipments for power sector). Product mix drives the margin performance in a given year. Vacuum system commands highest margins due to long standing reputation of the company in the market and significant portion of revenue is derived from exports. Evaporators command relatively lower margins. Similarly, food business also is a low margin business and significant improvement in margins from current level (for food business) is not expected.

Multi effect evaporators market? 25% contribution, but growing faster.

Target customers? Technology tie up or is the technology developed by the company?

Collaboration with âIven Absorption GmBHâ for design and manufacture of Vapour Absorption Machines

Chemical/Agro chemical producers are major target customers. Any industry that produces substantial liquid effluent can be target customer. Though there is some technological/engineering element in the product, it is largely fabrication work. Company does not have any technology tie-up with any company for this product.

Absorption chiller- the tie up with Iven is in early stages and product development has just started. It will take some time before revenue to flow from absorption chillers.

Product Development cycle/Technical Collaboration

Company is looking for new product developments especially for export market in collaboration with Croll Reynolds. However, it is still in exploratory stage and it will take time to freeze on new products to be developed/marketed.

For technical collaboration, company has been exploring such opportunities, in general. However, no specific tie-up is in sight in near future.

End-User Industries

Vacuum: Any industry that needs vacuum to be generated will be target customer. Major end user industries include: power/pharma/edible oil/ petrochemical & Refinery. Major customers have been: ABB/Siemens/Alstom/Alpha Laval/TD Power/Triveni

Evaporators: mainly chemical and agro chemical industry where liquid effluent is generated and needs to be treated before discharging it to environment.

Product Lifecycl

Typical life cycle for vacuum systems is 8-10 years and that of evaporator is 6-8 years

Service/AMC Revenues

Not significant

Sales Model/Revenue Recognition

Product Sales vs Turnkey Sales

Vacuum system/condensers/balance of plant equipments: only product sales

Evaporators: Turnkey sales supplying complete systems

Vaccum system: the order size is relatively smaller than that of evaporators. Order size for vacuum system can be as low as 25,000 and as high as 40,00,000. For evaporators, the order size is much larger ranging from 2-7 crores.

Profitability Mix

Steady decline in margins - last 5 years, declined from 33% to 23%, steadily. Increased competition? Outlook on margins going forward?

Profitability is a function of product mix. Vacuum system has the highest margins amongst all the products. Evaporators have lower margins due to higher competition. As the product mix changes, the margin profile of the company will change. Higher contribution of evaporators to revenue may decrease the margin profile further.

Evaporator is a high volume- relatively lower margin business. Same is for food business.

New Product Lines

Company has been mentioning about providing solutions for zero discharge for Agro Chemical industries etc. These industries have been doing well and are needed to invest more due to tightening of Gujarat Pollution Control board. How has the co done?

Company has been actively exploring new product developments and some activity on this front has started. However, it will take 2-3 years before new products start contributing to the top New product development is done through technical collaboration with some established foreign player.

**3). **EXPORTS

Croll Reynolds Relationship/Equity/Orderflow

22 Cr vs 38.5 Cr

Association with Croll started in 1993. Company had technical collaboration for designing vacuum system till 2000. Under this agreement, company was to pay royalty to Croll for vacuum system sold. However, the collaboration ended in 2000. Thereafter, there is no formal agreement with Croll. Croll acquired 12% stake in the company in 1995 and continues to hold 6% stake in the company. There is one nominee director of Croll on the board. Croll is a known name in vacuum systems; however it is not very large in size. Its top line is in the range of USD 20-30 million.

However, company shares an excellent relationship with Croll and continues to supply to Croll for some of the orders from overseas market. In the markets where Croll has siginificant presence, Company largely relies on Croll winning the order and passing on some of the orders to the company instead of actively marketing its products on its own. As of now the strategy seems to be working well due to strong relationship enjoys with Croll.

Company received orders worth USD 4 million from Croll in FY 13. This is roughly, 25% of the top line of Croll.

Company is working with Croll to develop new products for export market. However, this is likely to take some time.

Balance Exports

Large portion of export comes through Croll. Even though, company has been supplying to other customers in overseas market like ABB and Alpha Laval, contribution is not likely to be very significant going forward. One of the reasons for less traction with other players is that many MNCs now source supply from a country through their global subsidiary hence not giving away higher margins. E.g. Company used to supply directly to Alpha Laval, Sweden till few years ago. However, recently Alpha Laval India procures the system from Mazda and supplies it to Alpha Laval Sweden thus making this a domestic trade and not export trade.

Higher Margin Picture

Profit margins increased from 27% to 37%.What is this margin improvement attributable to? How much is attributable to rupee depreciation, and how much to other factors?

Typically 5-7% margin gap is there for vacuum systems. However, export is largely dependent on orders from Croll.


Croll Reynolds purchased goods worth 22 Crores from the company as compared to 12 crores in FY 12

This is slightly difficult, considering the slow demand in developed countries and key markets for Croll. Croll had some one-time large orders from few players in the market which led to higher orders. This is not likely to be repeated and sustained.


Export revenue contribution grown steadily in last 5 years from 18.5% to 31%. How sustainable is this trend? Is this a result of deliberate strategy by management? What are the plans going forward?

Company, has steadily scaled up exports in few years and it is realizing its importance. However, at present company is largely relying on Croll on export front.At present, It does not have any marketing team dedicated to exports. Company is developing some new products with Croll for export market. However, it is still at exploratory stage.


Vacuum system: 4-5 major players. Most of them are unlisted. Company has track record in this product has supplied system to many large players. Hence seem to be in good stead. Company has one its kind testing facilities which none of the competitors have. Hence, reliability and performance of the system can be tested before supplying. This is one of the USP of the company

Evaporators: Very fragmented industry with many players


Company has scaled up the food business pretty well. Revenue has increased from 3 Crores in FY 09 to 9 Crores in FY 13 while profit has increased from (0.013) Crore to 1.08 Crore. How scalable is this business from here on? What is aspirational targets for top line and bottom line for food business in next 5 years?

As of now, the scale of food business is not very significant. Management mentioned that it is a high volume- low margin business. Moreover, there is high competition in the market and entry barriers are low. Hence, company is not focusing currently on scaling this up in a big way. However, if any such opportunity for large scale up arises in future, company may be willing to scale it up.

Food business is 100% export oriented business. Company has made investment of only 40-50 lakhs hence return on investment seem to be good.

What is the business model for food division? Does large part of its revenue come from private label or through sale of âBcoolâ products? What will be approximate mix between revenue from private label and âBcoolâ sales?

A large part of business is derived through private label sales and is likely to be so in future as well.


33 Cr Working Capital on 120 Cr Sales ~25% of Sales

Inventory build up has always been challenge as many a times after placing an order, customers do not off take the products due to project not taking off or delay in the projects. Hence, inventory shoots up many a times. However, mostly, the inventory gets converted into revenue, with a time lag. However, company has faced situations in the past that after building up inventory, the order got cancelled.

Inventory build up and subsequent order cancellation is one of the major risks for the company. Typically, company manages this risk by taking appropriate advance from the customer and setting the payment terms to match with product build up expenses. In case of order cancellation after inventory build up, company tries to re-use/re-deploy the product to in the best possible manner.

The performance has been poor in H1FY14 with turnover dropping 20% and profitability dropping 35%. How is the order book now and expectation going forward?

Management acknowledged that the growth has slowed down due to overall slow down in the industry. Company performed well last year due to good order book that it had built during FY 12. Management indicated that this year company will not be able to achieve top line equivalent to FY 13. They indicated FY 14 top line to be around 100-105 crore.

Companyâs current order book stands at around 17 crores. This order book is to be executed in 3-6 months.

However, in last 2 months, overall business environment seems to have improved as company has started getting more inquiries.


Company has a good dividend track record â 3.5 in FY11, 4 in FY12 and 5 in FY13. What is the dividend policy followed?

There is no formal dividend policy. However, management expects to increase the dividend consistently going forward. This year too, the dividend is likely to be increased marginally.


Low promoter shareholding, but has been going up consistently. Kindly comment (37.69%)

Management acknowledged that promoter holding is low. It indicated that promoter has intention to increase stake through creeping acquisitions going forward. Recent purchase by promoter from market is in line with this strategy.


Company has almost 25-40 Cr of liquid funds. What are the plans going forward?

Company intends to address capacity constraint problems by setting up new facility in one of the industrial zones near Ahmedabad. It is in the process of purchasing land and has already paid advance. Land purchased by the company is sufficient to accommodate 3 time current capacity. However, currently company is considering to build facility which can accommodate existing capacity spread across 4 different units.

This project is likely to cost around 17 crores in all including shade/land/equipments and machinery. It will take 2-3 years to complete this facility. After completion of new facility, existing units will be moved to new facility. Some of the newer existing machinery/equipment will be relocated to new facility while old equipments will be disposed off.

This will address the issue of capacity constraints at existing location. Further capacity addition (on top of current capacity) at new location will be considered nearer to the start of new facility depending upon business environment and order book.


Management seems to be conservative and expects to achieve historical growth rates of 15-20% going forward as well. Management prefers not to be too aggressive on growth at the cost of compromising quality of growth. Company will keep its focus on quality of growth and limiting its exposure to undue risk. In next 5 years, they may achieve turnover of 300 odd Crores however same is contingent on successful development and commercialization of new products. In absence of new products, company will grow at 15-20% CAGR.


Thanks Dhwanil. Good Job!

You are one of the first (in ValuePickr team) to take copious notes and taking the trouble to share that with fellow investors. Including you in as many Management Q&As as possible will help reduce our workload.

I will add to this from my Notes for inclusion in a formal Management Q&A sometime later. At the moment Mazda is not a priority.


Thanks for the notes Dhwanil.

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Thanks Dhwanil. That was quite comprehensive. Gives a clear picture of mazda. Seems like a mixed bag to me…

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Hi Donald,

Thanks for your appreciation. Valuepickr Admin team and so many active members of this forum have set the high bar in terms of enriching investors on this forum through their sharing. In comparison, this is a very small contribution. This is one of the rare forum in Indian investment community where some serious work done by members is shared sans any expectation. Kudos to the spirit and culture of this community!


Hi Mokhtar,

It indeed looks like a mixed bag! At the moment it looks like an cyclical undervaluation play which eventually when cycle turns can give decent upside due to sheer undervaluation of this company. This seem to be a classical “high quality cigar butt”!


Thanks dhwanil for the detailed notes. Its valuable info for investors.

One point that I’m curious about is why they are in to food business when margins are low. I checked and found that the profit margins as per segmented financials seems good approx 20%. This looks contradictory. Is it because variable margins are low and with a fixed costs/unit being low they were able to generate higher profit margins? Please clarify


There is a sudden spurt in Mazda Volume and quoting at 126 now…Is there anything interesting happening on this counter?

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I offloaded my stack after recent rally in the stock at decent returns…would love to buy again at lower levels…promoters seem to be buying heavily from the open market.

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There is a spurt in Mazda stock recently. FY 14 is in line with some of the expectations that Dhawnil, Donald and others mentioned as part of the Q&A. Are there any new developments that I am missing?

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Hello Guys

Its seems Mazda is off radar since not any post since Aug 14. I am from Ahm and have been invested since past 3 year almost. Just invested since its was undervalued, good div yield, zero debt, good promoters background and promoter buying.

I think after almost 18-20 quarters of low growth but same was the case with the whole industry; it seems growth should be picking up going forward. I met the management and they seems to be positive on the future.

So fellow members if you are able to dig further then this company looks worth looking at again.

Disclosure: I am Invested in the stock & planning to increase my exposure also.


Manish Shah


Steady Increase in Revenue and EPS every year (except FY14) for the past 11 years, despite being in the cyclical capital goods industry.

Increased or stable dividend every single year for the past 11 years. During the capex downturn phase from FY09, while most other companies in this industry were struggling with losses and huge debt burden, Mazda not only generated decent profits and cash flows every year, but actually increased dividend every single year.

Zero debt and cash rich, as mentioned in the above post.

Average RoE of 24% over the past 11-yr period (managed 13% RoE even during the cyclical bottom of FY14).

Promoters seem to be buying from market every time they have spare cash (promoter holding has steadily increased from 22% to 40% over the past 8 years).

Comfortably outperformed the market (BSE SmlCap, BSE CapGoods, Nifty) over the past 1-yr, 2-yr, 3-yr and 5-yr time frames and still available at an attractive P/E of 11.5 and a P/B of 1.4. Once the capex cycle in the country gains momentum, there is no reason why this Company cannot return to the pre-FY11 RoE of 25%-30%, resulting in EPS explosion.

Disclosure: Invested.


The latest Annual Report of Mazda Ltd is out.

Rs 6 dividend per share.

In addition to its vacuum business which grew 20 per cent and its evaporator business which grew 10 per cent Mazda is looking at two new verticals:

Absorption Refrigeration Units

The transfer of technology for Absorption Refrigeration Units is now
completed and your company has already dispatched two systems
indigenously manufactured under the said technology. The full fledged
commercial launch for the domestic / export market will commence shortly. This is likely to boost the top line of your company as a new vertical will be added.

Freeze Crystallization Technology:

Mazda has entered into a technology and know-how license agreement for freeze crystallization technology with a Spanish company in October, 2014.

Under the said agreement Mazda has a non-exclusive license for the
territory of India for manufacture and selling of products based on
freeze crystallization technology for a period of seven years. Mazda is
required to pay a lumpsum license fee of USD 1 million and running
royalty of 4% on goods manufactured and sold using the freeze
crystallization technology.

Freeze crystallization technology is for zero liquid discharge in chemical process industry as well as for increase in concentration of liquids / juices in food processing industry. Considering the vast applicability of the technology, the future of the product looks bright. Transfer of technology is in process & your company will commence the commercial sales shortly.

Other points:

Mutual funds have taken a small exposure to this company.

Company has reduced debt even further

Management remuneration is growing faster than company’s topline and bottomline!

Current Investments risen to Rs 32.66 cr from Rs 29.71 cr. Cash and bank balance up from Rs 5.69 cr to Rs 10.79 cr. (One third of the share value in investments and cash and bank balances)

notes to profit and loss account shows good increase in domestic business. management sounds optimistic about growth in business.

Cash flow from operations remains healthy.

views invited on how the new business could impact Mazda’s performance.

disclosure: holding


Hi All,

Anyone still tracking this company?
I did some study of parameters for last 2 years.

There last 2 year results are good with good growth in topline and bottom line.

In 2019 compared to 2018

the turnover of engineering business has increased by 29% and profits of the engineering
business has increased by 24%.The food business has continued its growth story in this year which is reflected by an increase in turnover by 23% and increase in profits by 77%.

and in 2019 to 2020
the turnover of engineering business has increased by 39% and profits of the engineering
business has increased by 23%.But their food business experienced de-growth. But food business have no such big impact in the overall figures.Below image gives segment wise breakup for the year.

EPS now stands at 41.56(2020) compared to 24.18(2018).

They have done a buyback also last year which reduced their equity share capital to 4 from 4.25 crore.

They had a bit of issue in cash flows in the year 2019 which gave a negative operating cashflow but in the year 2020 company has a positive operating cash flow of 22 crores.

As per my understanding company is growing significantly from last couple of years but Covid19 situation might put brakes on the growth.But will it derail the company from growth path or will be temporary hiccup?
Their Q1 results are not out yet(which might have given us some sense of impact of Covid-19).

Fellow VPs kindly provide your valuable suggestions on the company’s recent performance for future investments purpose
Tracking for investment purpose.



the capital goods sector is expected to be sluggish as corporate houses go slow on capacity expansion. But companies like Mazda with a clean balance sheet should be able to tide over the crisis.

disclosure: holding.


Mazda seems to offer decent value at current price though not as much as it was 10 years ago.

The company has two divisions – Engineering and Foods. Engineering business is cyclical but has shown good growth of 29% in FY19 and 39% in FY20. It has blue chip clients and caters to sectors such as agro chemicals, pesticides and chemicals – all of which are doing well. In FY20, 90% of the company revenues came from this division. H1 FY21 was hit by Covid, but one can expect growth to resume in H2 given that the consuming sectors are doing well.

Foods business is small but holds much potential. In H1 FY21, Foods business grew 59%. A large capex is underway and the company claims they are adding new clients and new markets. The entire capex is funded by internal accruals and company is debt free.

Low promoter holding was an issue with the company in the past, but over the years the promoters have increased their holding through creeping acquisitions and a buyback last year. Promoter holding currently stands at 46% which used to be in the 20s a decade ago. In addition, Croll-Reynolds International – Mazda’s technical collaborator, holds another 7+ % and also has a seat on the Board. Croll is a U.S. based MNC with worldwide operations.

Company invested around Rs.8 crore in Franklin Templeton credit funds which is now stuck in litigation. But this does not affect the core business operation. Hopefully they have learnt their lessons. Are there any other major negatives one is aware of?

Would appreciate any views on the company.

(Disc: Have a tracking position)


2010 Videos , but worth checking it