Shivalik Bimetal Controls Ltd (SBCL)

Stock Opportunities Untested - but worth a good look
6

Nice writeup @ankitgupta
Thanks for the addition @desaidhwanil

I went through the detailed write-up put forth by Ankit. I also did little bit of research on the internet regarding the same. Putting forth my views :

This looks like an exciting bread-and-butter product mix. One (bimetals) providing a steady state income., whereas the other (Shunt resistors) providing good future growth prospects & better margins.

What I liked :

  1. When it comes to manufacturing shunt resistors, Shivalik is the leader in the country & among top 10-15 in the world. There is not much competition on the national level in this segment. When it comes to the global market, there are Taiwanese, Chinese & Korean players too.
    In India, there is another Nagpur based company called Hi Tech Resistors, manufacturing low ohmic value shunt resistors. Although, their infrastructure does not seem as developed as that of Shivalik.
    Surprisingly, Shivalik does not appear highly ranked on the Google searches for low value shunt resistors.

  2. With a great amount of shift happening towards Electric Vehicles, Battery chargers will be in good requirement., hence the requirement of shunt resistors will surely see a uptick in the times to come.

  3. Good entry barrier : Not easy for another company to set up a plant. Apart from the money involved., technical expertise is needed. Also, it is difficult to set-up a plant without any firm commitment from a long-term prospective buyer.

Key Concerns :

  1. Lot of dependency on 1 customer : which is Vishay in this case.
    Even the model nos. of shunt resistor displayed on Shivalik’s website are similar to those of Vishay’s.
    There is some juggling done though in the model nos. by Shivalik : They have changed WSL (of Vishay) to SBA (of Shivalik). The rest numerics remaining the same.
    Vishay_power-metal-strip-shunts-current-shunts_pl0005-1801.pdf (1.6 MB)

  2. No direct supply or existing tie-up with any big automotive manufacturer. Good amount of money can be made by supplying to an automotive company directly rather than routing it through Vishay.
    I think., with other global manufacturers of shunt resistors in the space too., Vishay might be playing the dominant role in their relation with Shivalik.

  3. Hall Current Sensors can be the technological alternatives to shunt resistors in the future to come.
    They are basically non-contact type & offer great degree of ease in connecting on the battery charger board.
    In simple terms, connecting a wire carrying high value battery current is not an easy thing to do.
    You have to break it to connect a shunt resistor in between.
    Whereas in Hall Current sensors, it can just pass through the Sensor., without being cut.
    However, Hall current sensors are very costly at the present moment.

  4. Bimetals is good., & will see a steady demand. But, I see this segment providing stagnant growth or single digit growth in the near future.

  5. There is 1 associate company & 2 JV companies under the aegis of parent company. I personally remain cautious towards such an arrangement as it provides lot of flexibility to the promoters to have inter-party transactions & manipulate the financials in order to get the results they want it to be shown.

  6. Heavy remuneration : Mr. Sandhu & Mr. Ghumman seem to be eating a big pie of the cake. Their present annual remuneration would be Rs. 2 crore + Rs. 2 crore = Rs. 4 crore total. & whereas the company’s FY 17 consolidated PAT is only still Rs 8.79 crore.
    I find this a red-flag.

Disclosure : Not invested.

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