But, on a lighter note, promoter is acting like a retail investor and we retail investor, in contrary, are behaving like what a promoter should do…
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Any investors presentation should be published before concall, but management of Sealmatic, firstly done a concall then one month after publish a investor presentation. In earlier concall, on corporate governance, they told that they will be among the top 5% of Indian listed companies. But in one concall they guided earning growth of 30% for fy24 and 60% for FY25. But in latest concall their memory was lost about this guidance. As a long term investor, we are invested here for your so called golden period which will starts from fy27. we don’t want short term price appreciation and short term profit growth, we want long term sustainable earning growth. we want more investment in project business even if short term profit is compromised but we don’t want excuse of low profit because of selling and distribution expenses. We are not bothered to capex like expenditure to be debited in profit and loss account. we want capital expenditure, research and development expenditure even if it is treated as revenue expenditure in profit and loss account. Because it is necessary for long term sustainable earning growth.
Disclosure:- invested.
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- Stock is trading at 3.45 times its book value
- Promoter holding has decreased over last quarter: -10.1%
- Company has a low return on equity of 1.14% over last 3 years.
- Company might be capitalizing the interest cost
what is that mean by the 4th point
Information is misleading.
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I had invested in Sealmatic from ~350 levels because of (a) what seems to be a decent market size, (b) promoter who is very experienced in the business, (c) transparency that they are not necessarily better than the big 3, but at par and what separates them is quick responsiveness and turnaround times that results in customer delight, and (d) sticky product offerings.
My concerns were (a) what seems to be a sub-par CFO, unable to clearly answer cash flow related queries on investor calls (b) the fact that they raised capital in IPO for working capital, and (c) negative cash flows - which are expected to turnaround in the “golden period” when maintenance revenues kick in from Fy 26-27 onwards.
Given the recent numbers, which are a little disappointing, surge in valuation, and incessant meaningless press releases, I have exited my position recently.
I will continue tracking the company to see if they are able to execute as planned and reinvest if they are, even if that means I would give up a portion of potential gains.
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Well, it depends. When a company does absolutely no concalls, press releases, etc we have a problem and when a company actually presents we also have a problem. Well I would not want a promoter that is not at all concerned about the share price as well. I want promoters that have a drive in them and I find that in Sealmatic.
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After this press release, I have lost my trust in this company.
The valuation looks much stretched now and risk-return is not in favour.
Why though? Nothing was misleading here or inaccurate. One could make the argument that the promoters are over doing it but no reason to lose trust in the company. You could only say that perhaps the management is interested in their share price which again I am not sure, If OnG does well in India, Sealmatic will actually do well!
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I understand your point on valuations but the fact that the shares have not risen much in a year gives confidence of a steady base around here unless results actually tur out very bad.
How you calculated the valuation is stretched and risk-return is not in favour?
As per my analysis, for valuation, firstly we have to segregate the loss on manufacturing of project related OEM. Because, as per management only OEM other than project related is profitable. In project related OEM, company is selling the product below the cost of manufacturing and it will be profitable only after the commencement of O&M business, which takes at least 3 years to start. As per management currently project business is 20% of the total revenue. But how much cash company is losing in project business we don’t know because it is not separately disclosed in financial statement.
Without knowing it how can we value the company on price to earning basis?
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I want to add few things here. These are my personal views and may be wrong.
Q1, Is Umar Balwa, managing Director of the company, is right person to talk about the production capacity, capacity expansion and revenue potential/guidance etc.
My answer is no, because he holds a Bachelor’s Degree in Economics & Commerce, from the Mumbai University but do not hold any engineering degree. He currently holds the position of Director of Global Operations for the Balwa Group, which includes the engineering company Sealmatic, food processing division Panetteria and the hospitality division of the group’s numerous projects. Balwa Group, founded in the year 1986 is a traditional family run business enterprise. Since its inception, the Group has been active in the fields of Hospitality, Real Estate, Engineering and Food Processing. The Group’s hospitality portfolio includes a varied range of business and leisure accommodation with 5 and 4 star rating. Fairfield Marriot, Radisson, Residency Sarovar Portico and Grand Blossom are the elite hospitality projects developed by the group. The Group’s realty division includes Techniplex, Resiplex, Indiplex etc which are high end commercial, residential and industrial units in the heart of Mumbai city.
So, technically he gives his service to Sealmatic India on part time basis.
Q2, Then, who is the right person?
My answer is executive Director and co-founder of Sealmatic, Mr. Hanif S Chaudhary.
Mr. Hanif was Assistant Vice President of Burgmann India Pvt. Ltd. for 18 years from 1993 to 2011 before co-founding Sealmatic. Before Burgmann he was Production Manager at A.K. Engineering, a Balwa group company, from1989 – 1993.
Hanif Chaudhary has formal education in the field of mechanical engineering. He has been extensively trained in Germany and Japan in the field of mechanical seals. He is the operational head of Sealmatic and responsible for planning, leading, organizing and quality conformation to international standards.
While Umar Balwa has formal education in the field of Economics & commerce. His experience of over 30 years in global business has earned him the position of international spokesperson for the Balwa group as well as for Sealmatic India. His personality is dynamic and more suited as a salesperson.
3, The foundation of Sealmatic is the idea of Mr. Hanif. Mr. Umar Balwa also confirms it. Mr. Balwa tells, one day Mr. Hanif came to him and made an unexpected suggestion to him. Why don’t we start a mechanical seal business? Mr. Balwa looked at him with a quizzical expression and answered, “Do you know what it takes to start a mechanical seal company?” Mr. Hanif said, “Yes.” Then Mr. Balwa asked him if he was willing to go through the grind and the pain of starting out again. Mr. Balwa pointed out that they were merely 22 when they started out in 1989 as opposed to their current age. They were both in their mid-forties and so he wondered aloud if our energy levels had abated. Even as I posed these rhetorical questions, I knew that Hanif Chaudhary and I didn’t really have any doubt in one another’s abilities. In reality, from that moment on, a new idea had begun to germinate in our minds.
Mr. Balwa also tell that, What prompted him to restart the painstaking process? It could probably be the strength and support of Hanif who has always stood like a rock besides him and given him the grit and determination to move forward against all odds. Hanif effortlessly and efficiently took over the entire operations on the production side and left him free to scour the world of international business.
My Conclusion: - don’t take the act of frequent media releases, announcement, and Earning guidance from Mr. Umar Balwa too seriously. We should treat him as a spokesperson of Sealmatic India. We should analyze the business and its progress instead of the word of the promoter.
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There is nothing like sure shot investment in stock market. Though we look for certainty, Warren Buffet said that certainty comes in market at a very high price. As we are discussing, and many of us are invested in such micro cap company, on the very definition of micro-cap investing, we are playing with uncertainty. It all boils down to “thinking in bets”. Let us have a look;
- March half year result was poor, and it resulted in some correction in stock price. I bet that future results shall be better.
- In last one year, the company has acquired numerous certifications, increased production capacity, started marketing aggressively, developed foreign connections… The effort is likely to be rewarded.
- On project side, the company has been able to grab a few prestigious orders.
- On market cycle front, capital goods industry is likely to do well in this phase of the market. Investment environment gives a tailwind to the sector.
- The company is serious about its foray into defence sector.
If these things happen, investors in the company may be rewarded handsomely.
If these things does not happen, i.e. investment environment worsens, market crashes, the company financials deteriorates- of course some losses will be there.
We all put our probabilities on both the scenarios and move further. Future will always be uncertain.
(Invested and Biased)
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I note your views but have a different take on this. The lack of engineering degree does not make the person a bad owner, there are multiple promoters in the market who have made it big with a commerce degree. Vedanta is the biggest example.
The fact that he is the owner and face of the company, it makes him responsible for the statements done by and on behalf of the company. Just because he is purpotedly seen as a part time “employee” it does not absolve him of the performance. A qtr of good performance and he will be hailed. In concalls he is the one doing all the talking.
The results were below average. He has gone on record to keep saying multiple times that becasue of some accounting standard the profit is lower. How is this restricted to only Sealmatic, the AS is same for all.
Sending a business update when they win an order makes sense but sending business updates on the TAM is ridiculous. The best thing is that the market got the stock to move 10%. In the final say the collective actions of the market decide the price but the actions of Mr. Balwa, in my view, clearly show that he is trying to manage the price.
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Just one clarification from my side.Where you found these words in my analysis. My view was only related to comparison between Mr. Balwa and Mr. Hanif. It was specific only to Sealmatic. Please don’t generalise this for other companies.
not getting personal here, you have mentioned that qualifications are commerce and economics, I was just trying to point out that this is irrelevant.
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Sealmatic has shared its annual report. There is nothing new in the report, in the sense that the company has been very prompt in reporting developments to Stock exchanges. One para I like-
“The business area of Defence and Nuclear is now well covered by achieving the certification of ISO 19443 (Nuclear) and the DGQA (Defence), it would be noteworthy to mention that Sealmatic was the second company in India to get the ISO 19443 certification and also to get the coveted DGQA certification for Defence through a very stringent process, having achieved both these certificates it has paved way for us to penetrate the coveted markets, which are long term, profitable and sustainable. We have established a team of engineers who will exclusively pursue this business in the Defence and Nuclear sector.”
There have also explained middle east and Russian opportunity. A good read.
Annual report of Sealmatic:
Sealmatic AR.pdf (6.1 MB)
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Disc: Invested
Sir, just show us the orders. …
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Yah, they have not declared any substantial order for quite sometime. Of course the management has shared investment opportunity in oil and gas sector, marine sector and nuclear energy sector.
We had elections in April-June 2024. Indian elections do delay large projects a bit. It looks like that the sealmatic management is fully geared to grap any opportunities, which come in their way.
Sealmatic has received a prestigious order from BHEL to supply mechanical seals to super critical thermal power plants. Value of the order has not been declared.
Good to see that work has started in infrastructure and order flow is starting.
a115744d-0be3-4016-8b18-98bfa059cf05.pdf (289.5 KB)
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