Orbit exports

Copy Pasting the investing rational from safir bhai’s blog

Orbitexports

1). Credit rating improved last year ICRA revises Orbit Exportsa Long Term rating to LBBB- http://www.business-standard.com/india/news/icra-revises-orbit-exports-long-term-rating-to-lbbb-/428448/ via @bsindia

2). The movement to novelty fabrics is clearly increasing the profitability and reducing dependence on past business. http://www.indiantextilejournal.com/corporate/CUdetails.asp?id=3912

3). The co is undergoing capex given its new thrust, pl remember there was a management change in 2004 from where company essentially picked up

http://www.indiainfoline.com/Research/LeaderSpeak/Mr.-Pankaj-Seth-Managing-Director-Orbit-Exports-Ltd./37228499

4). Per mgt, co is seeking listing on nse.

5). Per bse, co did an allotment very recently

http://www.finalaya.com/472545_ann/Outcome_of_Board_Meeting.aspx

6). Co announced a bonus of 1 for 2 due to improved financials, a factor that means liquidity may have improved

7). Per annual report, capacity of jacquard fabrics has already been doubled

8). Per annual report:

During the year under Report, the Company has developed new products and designs which has enabled the Company to develop new markets and in catering the existing customers. The introduction of new products and designs has helped the Company to add new customers in different geographical regions and segments.

9). Co used to outsource some requirement for fabrics that is since reduced due to the acquisition of 12 jacquard shuttle less looms, source: annual report

Cheers.

Company has been discovered by redoubtable Safir Anand so becomes a prime buy.

Also due to current n expected CAD manufacturing export stories with huge size of opportunity present , low labour n manufacturning costs in India plus Chinas exports becoming expensive due to currency appreciation makes this stock to be carefully evaluated n invested IMHO.

Which could be other g pod manufacturing export stories besides Orbit. Our eternal favourite Mayur Uniquoters is 1 stock which comes to mind. What else?

Accelya Kale can be another stock post it’s recent results. It’s Forward eps is @ 70 n div of 25 Rs ,MNC parentage with 75% stake . It’s an unique co now owned by 30 year old MNC Accelya working nicely with erstwhile Kale consultants. One of men rare co operating in IT product field but quite successful as well due to,platform based, transaction based model several IT cos are trying to replicate.

orbit hasdeclaredinterim dividends of 1.50

http://www.equitybulls.com/admin/news2006/news_det.asp?id=116015

Decent to good set of numbers reported by the company I believe. Seeing the trend, Dec quarter seems to be the weakest, while March being the strongest. In Dec qtr they managed to keep profits flat qoq, and >50% increase yoy, which I think is great.

Will be interesting to see what happens in next qtr…as last qtr seems to be the best.

I feel debt is bit on higher side … also equity dilution too frequent and too much?

Have been studying this co and feel its quite interesting. The co has done pretty well over last 5 years.

If one looks up the annual report etc, the co claims to be a major market share holder in the export of high end fabrics and has some of the best designers as its customers. Interestingly the co’s top mgmt had started from trading and has now done backward integration by going into manufacturing too…thus expanding the margins to close to 20% now…which is very good.

Views Invited

Regards,

Ayush

PS: Had bot recently but reduced exposure after Q3 results.

The company has come up with pretty good numbers for Q4FY13 with almost double PAT on y-o-y basis. With dividend yield (including interim dividend) of more than 3% and valuation of less than 7, it looks a decent bet. I think we should dig deeper into the company. Will do detailed analysis of the numbers and post it in night

Q4 Results Out:

Total Operating Income up 8.77% y-o-y at Rs.35.3 crore. Operating margins at 17.53% in Q4FY13 as compared to 15.16% in Q4FY12. Other income at Rs.81.07 lakh as compared to -0.11 lakh in the same quarter of last year. Net Profit more than doubling to Rs.4.03 crore as compared to Rs.2.0 crore in the same quarter of last year on account of increase in operating income, expansion in margins and increase in other income. EPS for the full year stands at Rs.11.14. On the announcement front, the company has granted4,50,000 ESOP. I think Ayush, Subash and other boarders who have been following the company can comment on the results and announcement of ESOP.

Hi Ankit,

Yes, the co has done pretty well again. The noticeable thing is the consistent imporvement in margins etc. The negative is that the growth rate is low considering it a small cap in a niche area. If we can get some insights on growth prospects, it could be a very good idea.

Ayush

Disc: I hold

Hi,

I spoke to the CFO of the company today regarding some of the queries we have regarding the company’s operational and financial performance. He has told me to call on Saturday (May 24) to discuss about the queries. Lets prepare a questionnaire and I will ask him regarding it on Saturday.

Regards,

Ankit Gupta

Nice initiative Ankit,

I have few very fundamental question.

1). What exactly is their moat? Why can’t another my-baap company of india start producing similar stuff and sell it at a cheaper rate

2). Why can’t a company from cheap labour country like Bangladesh/Pakistan/China out-compete them because of price.

3). What exactly is the market size, who are their biggest competitor. How is competitive atmosphere shaping up

4). What is their future plan, how are they planning to expand. What is the route they are planning to take for those capex (debt, internal accrual)

I need to ask these question as I couldn’t find answers to the questions by reading last year’s AR?

1 Like

Hi Subash,

I aggree with you and that is why I was a bit apprehensive about taking a position in this company. However, the recent results of the company have forced me to dig deeper in the company.

Good job Ankit. Plz ask-

  1. Company’s perfromance seemed to have turned since present mgt (Pankaj Seth) took over. What has been the reason for this?

  2. Profits have grown much faster than sales. What reason? Do we expect this to continue?

  3. Outlook for next 2-3 yrs. (though I think they are really bullish on their prospects-- making open market purchases, issuing themselves warrants)

  4. How is the demand shaping up given slowdown in US, EU?

Regards,

Jatin

I spoke to the company’s CFO today and he told me to either meet him or send him a questionnaire. Have sent him questionnaire. However, digging deeper into the company, I found that the company has been regularly issuing equity to promoters and other corporate bodies (may be of relatives or someone else). In the last board meeting also they have issued ESOPs. I am not too comfortable with it. Any ways, have asked them following questions:

Company was not doing well till the time new owners (Mr.PankajSeth) acquired it. What was the reason for the turnaround?

What is companyâs installed capacity as on date? How much was it increased after the lastcapexexecuted by the company in FY12? What was the capacity utilisation in FY13?

What is the break up of sales in terms of woven fabrics and made ups in FY13, FY12 and FY11? What are theEBITDAmargins in each segment?

Who are companyâs main customers? What kind of contracts we have with them? What are the payments terms? What kind of products are sold in domestic market?

What is the market size of companyâs products? Who is companyâs biggest competitor? How is the competitive environment shaping up?

As compared to company’s sales, its profit after tax (PAT) has shown higher growth. What are the reasons for substantial increase in company’sEBITDAmargins over the past 3 - 4 years?

How is the company coping up with the slowdown in US and European markets? Has there been a major impact of the slow down on company’s product’s demand?

What are the future plans of the company? What is the capital expenditure (capex) expected to be incurred by the company in FY14 and FY15? What will be its source of funding thecapex?

Company has been continuously diluting equity by either issuing warrants,ESOPsetc to its promoters? What is the reason for that? What is the reason for issuing 4,50,000ESOPsas per latest announcement? Mr.VarunDagawas inducted in the board as per annual report of FY12? What expertise does he bring in to the company? How are the promoters related toShreyasCredit and Capital Pvt Ltd, the company to which warrants were issued in FY13?

What are the growth projections for the company in terms of sales and PAT for FY14?

Hi,

Spoke to management today for their reply on our queries. The CFO was tied up last week in some work and will get back to us in 3 - 4 days.

Regards,

Ankit

Hi Ayush,

Do you still holds it.

With the recent results, it looks quite good.

But promoters issuing lot of shares to themselves. Not really very comfortable with this.

Everyone comments are invited.

Hi Dinesh,

The numbers, the growth, the ROEs, the business model is quite nice. This looks fundamentally attractive to me even at current levels.

Yes, warrants to promoters isn’t a great thing from minority shareholders’ views. They are taking some part of undervaluation away with this act.

**However, this also proves that stock is undervalued in the eyes of promoters. **

Disclosure- I hold.

Hi Ankit,

Did the management get back to you with answers to questions?

Regards,

Sunil

Hi Sunil,

The management did not get back to me with thequeries. Haven’t been tracking the company off late (wasn’t comfortable with the issue of share warrants by the company on a regular basis).

However, Donald, Ayush, Hitesh Bhai and Vinod MS had made a visit to their plant in September. They would be in a better position to give a view about the company.

Regards,

Ankit