[ Comment too short ]
Strong Brick: Without discussing the business, financials, management, future prospects, positives and negatives of the company you should not expect anyone to reply to your query. It has been repeatedly told by the admin about how to discuss a new stock idea. I think it is high time that we take strict action against members who break the rule.
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Ankit - there was an issue with my computer and the subject line went by error when I pressed enter.This was unintentional.
Full details are still under preparation and will be shared within a day or 2.
TIL Cmp 370
http://www.screener.in/company/?q=505196&con=1
The company is an amalgam of several Infra-related businesses and is ideally poised to gain from the new governmentâs emphasis on infrastructure.
It has the following 3 divisions:-
1.The Material Handling Solutions division of TIL is engaged in manufacture and marketing of a comprehensive range of material handling equipment and lifting solutions.
The division uses world class associations such as Grove Worldwide USA, Manitowoc Crane Group- USA, Paceco Corp- USA [a part of Mitsui Engineering and Shipbuilding-Japan], FAMAK-SA Poland. The recent partnerships include NACCO Materials Handling Group, Inc. [NMHG] - a part of NACCO Industries Inc-USA and Astec INC-USA.TILâs plant at Kolkata is the only purpose built mobile crane manufacturing facility in India.
2.TIL is the exclusive dealer for Caterpillar
products in North and East India, Bhutan and Nepal under Tractors India Pvt
Limited [TIPL] - a wholly owned subsidiary of TIL Limited.
3.TIL offers service solutions like Maintenance and Repair Contract [MARC],
Component Rebuild Center [CRC] and Schedule Oil Analysis [SOS] as well as the
global concept of providing Equipment on Rent for construction, mining and
power applications.
FUNDAMENTALS
Shareholding pattern: Promoters hold 51.69% with no pledging.
Following data is taken from Screener.in:-
|
Year |
Mar-09 |
Mar-10 |
Mar-11 |
Mar-12 |
Mar-13 |
Mar-14 |
|
|
|
|
|
|
|
|
|
Sales |
1038.4 |
1055.4 |
1376.1 |
1377.7 |
1173.7 |
1312.6 |
|
Operating Profit |
97.6 |
119.92 |
127.5 |
70.88 |
81.7 |
106.3 |
|
OPM |
9.40% |
11.36% |
9.27% |
5.14% |
6.96% |
8.10% |
|
Other Income |
10.76 |
5.89 |
5.12 |
12.94 |
11.08 |
10.9 |
|
EBIDT |
108.36 |
125.81 |
132.62 |
83.82 |
92.78 |
117.2 |
|
Interest |
27.18 |
19.56 |
24.52 |
38.39 |
56.88 |
71.07 |
|
Depreciation |
16.55 |
19.35 |
20.69 |
21.5 |
27.73 |
31.46 |
|
Profit before tax |
64.62 |
86.9 |
87.4 |
23.93 |
8.17 |
14.67 |
|
Tax |
20.58 |
31.83 |
29.86 |
8.59 |
3.86 |
4.74 |
|
Net profit |
44.72 |
59.53 |
60.19 |
15.34 |
4.31 |
9.93 |
|
Adjusted EPS |
44.72 |
59.53 |
60.19 |
15.34 |
4.31 |
9.93 |
EQUITY IS 10.3 CRORES AND AT AROUND CMP OF 370, MARKET CAP CLOSE TO 381 CRORES. There has been negligible dilution of equity since last many years.
Latest dividend declared is Rs 1.5 per share.
This company has been a victim of the sluggish environment that has been prevailing in the country.
Link to the latest annual report is here:
http://www.tilindia.in/pdf/TIL_Annual_Report2013-14.pdf
POSITIVES;
* Long-standing relationships with clients.
* Company last year acquired the expanded Caterpillar Mining equipment distribution and support businesswhich is expected to help them
* Nice and clean management- have not heard any negative about them
* Company has recently launched a retail product PIXEF 15 ton mobile crane which as per the company has a large market and the company intends to make large quantities on production line concept.
* Company has started export of components from its state-of-the âart Kharagpur factory
* Caters to most heavy equipment for mining, construction and road-building sectors which are likely to benefit from the policies of the current government.
* Market cap of Rs 370 crores is very less as compared to annual sales of about 1300 cr.
NEGATIVES;
* Heavy debt due to expansion done in the past. Long term borrowings as on 31 March 2014 stand at 199.2 crores.
* The performance is very sensitive to economy; if the economy takes time to recover, the company will bleed.The profits in the last qtr were only about Rs 1 crore.
Extremely high beta stock for terrific roller coster ride ups and down. It was part of high cyclical wave during last bull.
Price on 11-1-2003 was around 10
Price on 11-1-2008 was 760 giving 760x return in 5 years.
)—
Price on 2-11-2010 was arround 700
Price on 2-11-2013 was arround 100 destructing 85% wealth in 3 years.
)—
Except for last TTM result, TIL delivered poor growth, performance. Debt level is also high.
It is not investment story, it’s speculative story.
Yes it can deliver Multibagger return but may also ruin peace of life.
Kunal
Very well said Kunal.
It seems to me as well that TIL does particularly well when the economy is doing well. 76 times growth in share price in 5 years is not an ordinary event.
A bet on TIL is basically a bet on economy. If the economy recovers TIL would grow handsomely.
On the other hand if the economy stagnates, TIL does not do anything but erode shareholder wealth.
But at this point of time the indications are more towards recovery of Indian economy.
The sectors which TIL caters to, which are mining, construction, roads are exactly the sectors on which the current govt has focus and are expected to recover.
The question then is how much time more when we can see a change on the ground realities in these sectors rather than just having good sentiments alone and how much ahead is the current price of TIL factoring the change.
The next question is how does TIL compare with Sanghvi movers with which it competes in cranes.While TIL manufactures the cranes, Sanghvi imports them.
I think Sanghvi Movers are better known for management pedigree. They have posted decent numbers hence Institutional interest is more towards Sanghvi M.
Another difference between Sanghvi and TIL I think is that Sanghvi is lately concentrating on cranes of more than 100 MT whereas TIL makes cranes of not more than 75 MT currently.
Also unlike sanghvi which only imports cranes, TIL. Is into export of components to Grove which through Coles Crane owns slightly less than 20 % shares in TIL and is classified as promoter holding along with that of the Indian promoters, the Mazumdar family who own the balance 35%.
It must be said however that so far exports are a small part of the business.As per the Annual Report for FY 2014, the total exports were only 15.7 crores last year but could increase in the future depending upon the orders received.
Grove is a part of Manitowoc group which is one of the world’s biggest crane manufacturers having its own proprietary technology.In 2007 Manitowoc purchased Shirke the india based Tower crane manufacturer under licence from Potain which was acquired by Manitowoc.
Copied from Manitowoc website … Self explanatory about higher capacity Cranes…
"Grove mobile cranes, including all-terrain, truck-mounted, rough-terrain and industrial cranes - ranging in lifting capacities from 12 t to 450 t manufactured in Pennsylvania, U.S.; Germany; and Italy are also available in India through its dealer TIL.
Also available in India are Manitowoc crawler cranes, made at Manitowocâs factory in Wisconsin, U.S. Manitowocâs crawler cranes ranging in lifting capacities from 73 t to 2,300 t are sold through its dealer TIL throughout India."
Just FYI…
Thanks Aveek.
Another thing I was not clear about was the conflict of interest between Til and Shirke which was acquired by Manitowoc in India in 2007.However it seems that they have settled on a synergistic relationship with TIL being the distributor of tower cranes for North and East India for Potain India Pvt Ltd( the former Shirke).
@ Strong Brick
Frankly I have no idea about your question as not interested in TIL for now… Invested last year when quoting at about Rs. 125 (heavy discount sale!!) and it was purchased after a very brief analyses and sold off around Rs. 275/- – Rs. 300/- … At that time these cursory reviews were made and hence shared.
Infrastructure sector is still in deep quagmire … AR '14 of TIL puts it clearly. Not much is happening on the ground as yet.
Their main business is now CAT dealership (Rs. 1000 Cr. rev vs. Rs. 300 Cr. standalone)… And in any great dealership business like CAT, upside is dependent on larger economy and marketing / servicing skill. In MH segment I feel TATA HITACHI and L&T has much bigger basket of portfolio and deeper engagement with customers.
These are my subjective opinions so should be considered accordingly.
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All - please find below the link to hdfc securities research note on TIL
http://ww.hdfcsecurities.com/Research/ResearchDetails.aspx?report_id=3008734
Co.Represented by Aloke Banerjee, CFO. Key Highlights by Capital Mkt;
As per the management, things are moving very slowly at ground level. There is hardly any activity in construction and mining and road business.The company is carrying new road construction equipment of about Rs 20 crore, for which there are no buyer at present. Also for some cranes and equipment whose buyers exist, they are delaying the delivery for one or the other reasons.
Construction mining business stood at around Rs 344 crore in H1 FY’15 as compared to about Rs 489 crore in H1 FY’14. PBT stood at Rs 11.9 crore for this segment as compared to Rs 3.9 crore for H1 FY’14. Higher PBT is due to new products and sale from Bucyrus range of products.The underground mining equipment business did well in H1 FY’15 and this business although new one, will contribute about Rs 40-45 crore of turnover in FY’15.
Bucyrus range of new products helped the company to earn profits of around Rs 10.50 crore in Q2 FY’15 which was not present in Q2 FY’14. Management is optimistic about this business going forward as well.Power systems business reported topline of about Rs 98 crore as compared to about Rs 135 crore for H1FY’14. The segment reported a loss of about Rs 30 lakhs for H1 FY’15 as compared to profit of about Rs 20 lakh for H1FY’14.
The Material Handling System business all together will strike a turnover of about Rs 200 crore. The EPS business should also clock some around Rs 165 crore worth of business. However, this EPS business is a challenge for the company as HI FY’15 is around Rs 45 crore.Overall, the new plant is hurting the profits in terms of higher depreciation and interest costs. The new EPS plant would require a turnover of about Rs 300 crore to break even and would be doing a turnover of about Rs 165 crore this year.
Management does not expect any major recovery to happen in infrastructure segment atleast before FY 2016-17. It will take some time before infrastructure segment moves on and investments happen in this segment.
TIL up on very high volumes today.Can anyone please comment on the reason, if known.
Girish Gulati has entered this stock that too with good 1.83% stake worth 10 crores
Girish Gulati has previous trackrecord of multibaggers like Avanti feeds, Patel logistics and Freshtrop fruit
Please read below link to find out what makes TIL. A great company
Con Call Key Highlights by Capital Mkt
The new Kharagpur plant which is into manufacturing road construction equipments be it asphalt plants, crushers, screeners etc reported a turnover of about Rs 98 crore for FY’15. However, loss from this plant stood at Rs 55 crore as compared to Rs 25 crore in FY’14. The new plant is hurting the profits in terms of higher depreciation and interest costs. The plant needs a turnover of around Rs 300 crore to break even.
There is no activity happening in road construction equipment business. In past 18 months, there was not even 1 single contract of hot mix asphalt plant in India. This is despite the fact that brown field road activities in terms of roads being re built and re-layered and asphalt plants play a significant role in this business. The fact is contractors’ balance sheet are stretched and most of them are under CDR. Banks have clearly indicated that they are not going to fund any cost overrun projects nor to these contractors, unless new equity is being brought and cleaning up of balance sheet activities go on.
So while management expects some activities in road construction business to start in H2 FY’16, there is not much clarity at this moment.The caterpillar side of business, particularly the underground mining business doing reasonably well and has performed well in FY’15. It generated a turnover of around Rs 85 crore in FY’15 with PBT of about Rs 33 crore. This is against a PBT of Rs 3 crore in FY’14.
In underground mining Coal India and Tata Steel are biggest customers of the company. Going forward, surface mining will get reduced and underground mining will be given more thrust.Overall, caterpillar side business reported net sales of around Rs 1146 crore in FY’15 as compared to Rs 1010 in FY’14. PBT stood at Rs 54 crore as compared to around Rs 12 crore in FY’14.
The Old plant which manufactures cranes is also doing well with turnover of around Rs 250 crore and PAT of around Rs 33 crore. The company has plans to export these cranes to newer markets in FY’16.
Debtors and inventory built up has increased at the overall company level. This is largely due to company carrying inventory of prototypes and equipments which the contractors had informed. However due to liquidity conditions and present market conditions these inventory are not getting picked up.
Overall, management expects the performance of the company to improve and to be better in FY’16 compared to FY’15. As things have been virtually status quo and standstill at ground as far as road and construction equipment business is concerned in FY’15. Management has indicated that by the end of Q1 FY’16, some concrete directions and numbers can be talked about.Underground mining business should continue to do very well in FY’16 and further down in FY’17 given more clarity will emerge from Auctions and further leasing.As per the management April-June’15 quarter is also a difficult quarter, as nothing much has changed compared to Q4 FY’15.As on Mar’15, the company has order book of around Rs 160 crore comprises of orders from Material Handling division of Rs 78 crore, Power systems of Rs 25 crore, Mining equipment of Rs 45 crore and rest from others.
Interview of Sumit Mazumder, CMD at ETNOW . Check the link;
http://economictimes.indiatimes.com/opinion/interviews/exciting-times-for-tractors-india-as-coal-sector-reforms-play-out-sumit-mazumder-cmd/articleshow/47639710.cms
A Very Intriguing Case of TIL
(This note is being written in detail keeping many new learners in mind. Seasoned investors may find it long winding)
Please review the annual accounts of TIL dated 31st March 2015.
The point no 9 of the notes attached to Consolidated Balance Sheet reads as
“During the year the Indian subsidiary has issued and allotted 1500000 (Fifteen Lakhs) 9% Optionally Convertible Preference Shares (OCPS) at Rs. 10/- each, of which Rs. 1/- was called up”
TIL has only one Indian Subsidiary that is Tractors India Private Limited (TIPL) which holds the distributor license for North and East India for Caterpillar and out of Rs. 1400 Cr. consolidated revenue of TIL, TIPL generates Rs. 1000 Cr. revenue. Also, last year standalone loss was Rs. 28.62 crores vs. consolidated profit of Rs. 4.72 crores. So, it can be surmised (in absence of AR 2015) that 60% revenue and most of the profit were generated in the subsidiary company.TIPL.
Also, reasonable growth of revenue and profit is expected from this subsidiary in coming years as Caterpillar after purchase of Buchyrus in 2011, would be a formidable player in the full spectrum mining equipment solution both for under and over ground mining. .
So, in simple words, TIPL issued 15 lakhs OCPS at par and out of that issue, company received 10% i.e. Rs. 15 Lakhs as called up portion for a Rs. 1000 Cr. profit making company. I checked from TIPL return on MCA site that the issue was made on 28th July 2014 and it was indeed issued at par and was not issued to any strategic or institutional investor. And company was silent on whether any valuation of the shares were done at the time of issuance.
Till the day of issuance of OCPS, TIL held 100% equity in TPIL through 4500000 (Forty Five Lakhs) shares and the value of this acquisition as per their 2014 AR is about Rs. 95 crores. So, while creating the subsidiary, TIL issued shares of TIPL @ Rs. 210/- per share approximately.
If 15 lakh shares are issued at Rs. 10/- then it is 33% dilution and post money equity valuation of the company is just Rs. 6 Crores. If the OCPS is converted, TIL would have 75% equity in TIPL. How can a company with Rs. 1000 crore revenue can dilute 33% of equity at par value when they themselves subscribed it at Rs. 210 few years back. Did the company lost 98% of value in the intervening period? Even though their were strain on Working Capital and company faced tight liquidity condition, but can the valuation be so low? Moreover, company apparently didn’t get any financial benefit out of it as it got only Rs. 15 lakhs out of this transaction till March 2015.
During the last one year, share price of the company never gone below Rs. 120/- and on the day of issuance of OCPS, the shares of TIL were traded in the range of Rs. 400/-. Keeping in mind the large size of existing business, good opportunities ahead, strong backup from Caterpillar, I have unable to understand the rationale of this OCPS issuance and straightaway diluting 25% equity just for Rs. 1.50 Crores when prevalent market price was at least 25 times more (assuming rest of value attributed to other businesses).
If the company needed emergency capital keeping these OCPS as collateral, I feel there were many options available to them than this huge dilution … Promoters could have pledged shares for example.
Also, the company didn’t file this information with September 2014 Balance sheet filing even though issue was made on 28th July 2014 and only reported it on 31st march 2015 without providing any further details on this significant development. What are the rules of SEBI for share issue in subsidiary? Especially when the subsidiary has very very significant impact on whole company?
Company did respond to my e-mail telling that under confidentiality obligation they can’t divulge any detail at this juncture about this transaction.
What may be the possible reasons? If anyone has any inkling may please share.
As per my understanding, if these OCPS are converted into equity the existing minority shareholders would get seriously affected in a very negative way. And what can stop the OCPS holder from converting these preference shares?
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