Dear Sameer, As you correctly highlighted resumption of operations in manufacturing locations and warehouses is a positive.
What is your opinion on how the demand situation would pan out post the COVID-19 situation from consumer and OEM perspective. I have spoken to some of my clients in diverse industries such as textiles and automotive OEM’s and they have indicated revenues for 2020-21 to be lower by 40-50% in relation to 2019-20. With respect to Sirca, what is your estimate on revenues and consequent profitability for 2020-21.
Given the uncertainty of revenues for 2020-21, i would prefer to wait for 2-3 quarters before initiating a position in Sirca. Strongly feel that the share price will have a correction in the near term.
I have made two points in my comment and i presume you have an objection to the second point made regarding my expectation of further correction in share price.
Point 1 - The reason i prefer to wait for 2-3 quarters before initiating a position in SIRCA is because of my personal risk appetite of understanding the impact of COVID 19 entirely before making an investment call. I might lose the initial 40%-50% of gains of not investing today with that uncertainty at this price range, but that is a personal choice on risk-reward playoff.
Point 2 - My comment on further correction is due to the following:
a) The impact of COVID 19 could be more severe than what the market is expecting. Companies will take longer to come back to their status quo and we will have a better sense on the same during the management concall of Q4 2020. If the same is not reassuring, we could have a further correction in prices.
b) The Feb price of the share factored in benefits of the manufacturing operations to contribute seamlessly from Q4 of 2019-20. In essence, two things have to go right for this company for the share price to move up - the impact of a negative event (COVID) has to be less severe than what market is expecting and impact of positive event (manufacturing operations integration) similar or better than expectations. Treading on caution, i feel pessimistic on the same and hence my expectation of a further correction.
I could be wrong and the prices could move up from current levels, but this is just my expectation.
With regards to today’s disclosure to NSE, the company has resumed manufacturing operations at both their Indian plants with reduced capacity. Positive to note this development.
Interesting to see the launch of high end product “Hygiene Plus” for antibacterial properties for surface of furniture and flooring, for which they have received great response.
We all are aware, COVID 19 has really pushed everybody into the world of masks and hand sanitizers to contain the spread of virus. With this issue and awareness in the people’s minds, i think Sirca has rightly launched an innovative high end product “Hygiene plus” in Indian market recently, which should see good response from the customers who intend to keep their interior surfaces germ free.
Company claims that the painted surfaces will remain antibacterial for the entire life cycle of the furniture or flooring.
Have anyone used their products. Whats your feedback?
I could find 100s of wood coating products on Indiamart (incl. Nerolac wood coatings) but none are from Sirca. I cant find any of the Sirca products there.
As the MD said in the youtube video a month ago, they are exploring altogether different product, I expect few more in line.
Thank good they are not into retail, I expect a descent performance from this
SIRCA PAINTS INDIA FORAYS INTO HAND CLEANSER AND SURFACE DISINFECTANTS
The company plans to principally cater to the demand of sanitisation in its own distribution channel, with no major marketing and sales efforts. Additionally, the principal focus is to sell products in larger packing for commercial enterprises, non-retail customers, and to cater to our OEM clientele.
Does it not look like a big diversification from what they are primarily about to an almost non-related sector. I have not read deeply about this company but just seems a bit strange on the face of it.
My first thoughts were the same but the management has clarified that with the manufacturing of cleanser and surface disinfectants, there is no major cost/capex/expenses that are associated exclusively to the above products so I don’t think its diworsification per se.
I don’t think so…Sirca is just making use of the current opportunity and the need for health and hygiene products in the fight against COVID.
Have a look at Asian Paints, they are producing Hand sanitizers. Have a look at Berger paints, they too are producing hand sanitizers. Have a look at all liquor manufacturers, they are producing sanitizers. JSW group have started producing hand sanitizers…Is that not diversification from what they are primarily about?
I Yes I read about it after your post. Interesting although I am not sure whether they will be doing it for an indefinite period of time or only till markets come back to normal.
Sirca Paints Factory seems caught serious fire; the one they had raised IPO money for. Possible inventory damage as well. Looks like a big one. Lower circuit?
