I’ve initiated this tread for discussion on POLYSPIN EXPORTS, a microcap company. Sharing the initial readings I’ve done about the company. And it is not in anyways a idea pitch. Just to seek views of experienced and well read members in the forum.
Started in 1972 to make HDPE/PP bags, POLYSPIN commenced full fledged FIBC plants in 1996. Over the years, POLYSPIN has developed an integrated facility for FIBC production with periodical upgradation and innovation. 100% EOU located in Rajapalayam in Tamil Nadu, it is well connected by road, rail and air. It is 2 hours drive from Madurai airport as well as Tuticorin sea port. Madurai is just one hour’s flight from Chennai International Airport.
Market research analysts predict that the flexible intermediate bulk container (FIBC) market will grow steadily during the next four years and the constantly increasing demand from diverse sectors including food and horticulture due to the increase in production and trade of horticulture products and in the chemical and fertilizer sectors. Since the company’s products i.e., FIBC bags are mostly exported to U.S and Europe markets, the indications in the global growth forecast will strengthen the company’s growth as well. Sustained growth will certainly result in a better profitability in the near future. There was a remarkable increase in the production of FIBC bags during FY18, from 72,39,476 Kgs to 90,68,342 Kgs and the sales had increased from 74,76,099 Kgs., to 91,32,972 Kgs an increase of 22.16%. The prospect for the current year is promising.
• Correction in stock price post the fire accident in Q1FY19
• Adjusting for the one-off fire accident related expenses, Co., would’ve posted Rs4.5cr PBT compared to Rs0.8cr in Q1FY18 and Rs7.8cr in full FY18
• Monthly production run rate increased from 600t in FY17 to 750t in FY18, which is expected to improve to 825-850 t in FY19 and 950t in FY20
• Being 100% EOU the company is expected to benefit from depreciating INR
- Without much of capex till the production runrate reaches 950t/month, the cashflow will be used to repay debt
Key risks: (1) FIBC is like garment business, Co., has to add more labours to achieve growth. (2) Polypropylene is the key raw material, which moves with crude price fluctuations (3) Given the scale of operations there is high dependence on the promoter to steer the company
PS: Have investment holding in the stock