Siddhika Coating Limited- A Paint Company

Siddhika Coating Limited
Listed on NSE Emerge, lot size 2000

Siddhika Coating Limited is India’s largest texture paint contract company in single brand segment. Siddhika is marketing & application partner for SK Kaken Ltd. Japan, having its headquarter based in New Delhi and more than 10 branches all over India including Mumbai, Bengaluru, Hyderabad & Kolkata. Its association with SKK is for more than 18 years. SKK is reputed name worldwide in the business of Architectural Coatings, Supplies & Applications.
The company is managing more than 5 million sq. ft. of contract work annually with SKK Products. Their clientele includes most of the prominent architects & developers along with many major institutions, IT Companies, Business Park Developers, and Hospitality Leaders. They provide their services to almost all segments- commercial, residential, institution, factory and even individual houses. They claim that almost 70% of our business comes only from repeat clients year on year. They target to double the quantum of work in the next 3 years with expansions on territorial grounds and product portfolio.
Product portfolio is available in this brochure:-
Siddhika Brochure.pdf (2.9 MB)

Key Takeaway from Financials:

  1. The company has been profitable throughout, in good and bad times.

  2. The company touches a topline of almost 30 crores and profit of 3.8 crores in 2020, before covid.

  3. The operations were disturbed in covid times, leading to drop in topline; nevertheless the company remained profitable.

  4. In normal times, the company is showing a profit before tax margin, upward of 10%.

  5. The company has been paying dividends. In 2021, it paid Rs. 2 per share, and in 2022 it paid Rs. 2.4 per share dividend.

  6. In H1, 2023 the company has declared a topline of 14 crores and net profit of 1.35 crores and eps of Rs. 4.37. Thus, with slightly better H2, we can expect an annualised eps of Rs. 10 in FY 2023.
    The company has an equity base of 3.1 crores. Thus, at Rs. 135 current market price, the market cap is around 40 crores. Taking current year sales at 30 crores, and eps of Rs. 10; the valuation looks very attractive- merely 1.3 times sales and at a p/e of 13.5. Based on past dividend payouts, we can expect Rs. 4 dividend, leading to a more than 3% yield.
    Combined with the management goal of doubling sales in 3 years, we have a very attractive growth share at a very reasonable price.
    Basis of Investment:
    There is only one basis of investment in the company- it is fast growing small company, which is growing without much debt infusion and with decent profitability. If such growth continues for a few more years, it can prove to be a decent investment.
    -Investment in nano caps can lead to 100% capital loss.
    -We dont know the SKK plans for India going into future.

Disclosure- Invested


It is basically dealership of SKK. The product offering is modest at best. PEG ratio is (-)3.58 and a volume under 10000. Under these conditions, I wonder if its good for us.

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Very True. They import their product and sell them, and in that sense, they are basically a dealership. However, they add value by application. The other aspect is the process- most of the MNC paint companies enter India through dealerships only. Sirca Paints was also a dealer till a couple of years ago. However, we don’t know SKK’s plans and strategy in India.
PEG ratio is appearing negative because of covid disruptions. Management believes that volume can grow double in 3 years, and based on that I believe that they can grow at the rate of 24%.
Yes, the volume is less as it is normal in SME listed stocks.

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Looks like some accumulation is going on in the counter. The counter is in the upper circuit for the last many days, whatever sell quantity comes is being absorbed.

It has crossed 200 today, but still there is not much volume.

@rk1771, yes no volumes and highly illiquid stock. Hence prone to operator manipulation. Predominantely its a trading company (95% revenues), but commanding expensive valuations (PE 40).

I don’t think it is a trading company- it is a paint application company. Thus, they don’t import and sell paints, they import and apply. As they apply the products their margin is good. They did have fall in topline during covid, but now they have recovered their topline too, this year I estimate that it may touch 30 crores. Their profitability has always been good, and it may touch 12% this year. They have done well in H1-2023, and declared Eps of Rs. 4.37 in H1. Going by the past trends of better results in H2, we can expect an annualized eps of Rs. 10 in the current year.
These figures command trust as in the last 2 years, dividend payout has been in the 40-50% range. Even on a 30-35% dividend payout this year, we may expect a dividend payout of more than Rs. 3 this year. Thus on a current year earning, its p/e is around 20, and the dividend yield of 1.5%; not bad.
The real issue which needs to be examined is scalability- can it scale? We have no history of any paint application company in India. On a global scale there are a few reputed paint application companies- Sherwin Williams which command lofty valuation and market cap. Can we have such companies in India. It may be noted that even established paint companies like Asian Paints have started taking application work.
Today the company has a topline of 30 crores. Certainly, it can touch a topline of 100 crores or 200 crores going forward, that scalability is always there. Can it go further? If it can go further, in my view it is a gem.

No volumes. For the last few trading sessions, I see just 1-2 lots being bought to take the price higher in upper circuit daily.

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Yah, hardly 1-2 lot is being traded. But I have felt that the moment a sell lot is offered, it is grabbed on whatever prices it is offered. However, whoever is accumulating wishes to keep the prices lower and buy orders are placed closer to LC.
Today appears different. For the first time I am seeing open buy orders on UC. Le us see if some sellers emerge.