Valson Industries Ltd (Listed in BSE only)
BSE CODE 530459
Annual Sales 102 crores
Market Cap 25.78 crores
Reserves 19 crores
Book Value 38
Current Price 32
OPM 6% approx
Dividend Payout - Rs 1 per share
Business Operations: The company is one of the leading manufacturers of Polyester Texturised Dyed Yarn and Processors of Cotton and other Fancy yarns with Customers having diverse uses. Quality Products and Services has been the top most priority and after continuous research and efforts, the company has ventured into the dyeing of various qualities of yarns. The Company today has wide range of Polyester Dyed Yarn with a strong market acceptance and niche position for exclusive shades and grades. After the continuous efforts and research this year the company has focus on producing and marketing it’s value added products i.e. dyed yarns compare to white yarn and it has also focus on denier wise costing / profitability which will result into the best product mix to sell season wise so that the company always gets the better profitability. The company has done the consolidation and shifted its all plant and machinery to Silli units from the small units situated at D & NH which result into the saving on manpower cost, power cost, administration cost and other miscellaneous cost
Opportunities: The biggest growth opportunity for the textile industry arises from the changed global scenario of quota free business environment. Valson Industries Limited has already grabbed the opportunity and is rapidly growing in the huge domestic and export market. India’s strong performance and growth in the textiles sector is aided by several key advantages that the country enjoys, in terms of easy availability of labour and material, large market demand, presence of supporting industries and supporting policy initiatives from the government.
Threats: Along with the opportunity that the quota free regime offers, there lies the threat of stiff global competition which indirectly would result in price pressure. Indian textile exporters are facing stiff competition and they lack policy and labour law reforms. But the Company through its quality production competes well with other players in this sector.
Salary and Age of Key Managerial personnel
Mr. Kunal Mutreja CEO 12 Lacs (son of Suresh Mutreja CEO)
Mr Suresh Mutreja MD 32 Lacs (father of Varun (CFO) Age - 60 years old (B.Com)
Mr Varun Mutreja CFO 12 Lacs (son of Mr. Suresh Mutreja) Age - 34 years old (MBA finance / Export/ Finance/ Marketing)
Dividend Company has been maintaining a healthy dividend payout of 28.22%
Other Info The company is making every effort to reduce cost and increase the overall efficiency, which will result increase in overall profitability of the Company. The company is expecting growth in the measurable terms turnover and profit due to expansion of production capacities and expecting to do good Export turnover in future (page number 9 of annual report)
There have been reduction in Depreciation and some growth in Net Profit before tax
What is your opinion about this company ? I already have stake in this and willing to increase.
Please read the guideline before starting thread on valuepickr. The last portion giving your great ideas may be true but not relevant. This is not a forum which is looking at multiplying money in short period of time.
Please let me know your view on same
Thanks for your suggestion but multiplying money in short term has not been advised by me. Let me mention that it takes time for such tiny stocks to become a multibaggar and high risk is also always associated with such stocks
As suggested by @dd1474, request to adhere to the rules of the forum. Please outline your thesis with more clarity, your post seems to be very generic. Also request you to delete the section which talks about your hypothetical track record - it has no bearing on the topic and is most likely to mislead investors.
Opportunities section looks too generic and applicable to any textile(correct me if I am wrong) firm.
Is there a USP for Valson?
Where is the MOAT ? Why will this company rise and how hundreds of other Dye makers wont be able to compete with it. Also an OPM of just 6% and it can be a multibagger, how ? . Also there are hundreds of companies on stock market stuck in low margin business, high promoter stake ( because no one wants to be part of a bad business) but that does not make them worthy of a buy. As buffet says, when the Tide is out you know ,who was swimming naked.
Thread starter should make his case strong by presenting facts and data. Mentioning earlier successes (I am not disputing them) only creates bias in the mind of reader. The basis works like this - Since thread starter has done so very well in the past therefore he will do well this time around.
We know from day-to-day life (empirical evidence) that this does not work this way.
1. Does company has any expansion plan?
2. How will revenues grow in future?
I have removed the controvertial lines about my past track record. Although it was 100% legit and my failures were also mentioned.
Now coming back to the stock. What i liked about Valson is basically some numbers:-
- Low market cap (25 cr) and high sales numbers (100 cr).
- Cash dividends. (May be a sign that promoters are Not greedy atleast)
- Stock price has not moved much wildly and PE ratio is also very low in bull market.
- Technically it seems to be in uptrend
- Promoters are not drawing high salaries.
- It seems to be a family business but not joint family type business. (Just father, mother and two sons are involved)
- Promoters have raised the stake in september 2016 and total holding is around 61%
- Yes topline growth is stagnant but just a little spark can launch the rocket.
- As per annual report they are trying to bring more revenue and profitabilty growth.
- Cash flow is also in sync with net profits. (I am not a master of analysing cash flow statements though, so please check yourself)
- Read somewhere that they are exploring foreign markets.
- OPM is low of 6% but it is rising midly.
- Peers like sarla performance and vardhman textiles are working on higher margins (20-25%). Stock will multiply if company manages to catch even half of those type of margins.
I accept that there is no uniqueness in this company business but still i think it is undervalued and can create wealth in coming years. I have a habit of betting on flaws that can be bettered in future. I dont see any serious issue with the company. One should keep low exposure as its a risky bet and has liquidity issues.
Please give your opinions.
Also request you to remove the word multibagger wherever you have mentioned it including the title of the topic. Unwary investors could potentially be attracted to that word and jump in without doing due diligence just because of that word. It is not a good practice to describe any stock as a multibagger. Only in hindsight one will know that so why lead investors?
Valson industries ltd has also acquired lease land from MIDC ( Maharastra Industrial Development Corporation Ltd) in Amravati Indutrial Area, Andheri during the end of calender year 2016.
Stock has already given 600-700 % returns since 2014 and still seems undervalued.
Debt levels have also gone down from its peak of Rs. 17.48 Cr in 2013.
Just had a conversation with company’s CFO and came to know that they have capex plans and are expecting double turnover after commencement of Amaravati Project (Spinning and Dyeing). They were just waiting for the GST implementation and effect of same in Textile Industry.
Currently the Company is optimistic to achieve the targeted sales i.e. more than 100 crores, the only constraint the effect of GST in textile market for the current quarter i.e. July to September 2017. Apart from the growth in top lines company is doing constant efforts to keep growth in bottom lines also.
Net sales for the year 2015-2016 were Rs. 9162.69 Lacs as compared to Rs. 10627.19 Lacs in 2014-15. The net sales have come down mainly due to the drastic reduction in raw-materials price by almost 20 to 25% and also due to loss of production around 5 to 7% had occured due to consolidation i.e. transfers of its machinery from obsolete units to existing unit which took almost 2 months. The same has been recovered in the year 2017-2018.
Further, Company has capex plan of about 40- 50 cr and have acquired land of about 80000 sq meters in Amaravati. This will complete in 4 years and bring about 300 cr yearly revenues. In short term they will work on top line and margin expansion. Result of new project will start appearing in the books after 2020.
50 cr will not be invested together but in installments. These funds will come through equity and bank loan.
This is all I came to know from the management.
Getting 300 cr revenue after 3 years for a stock available at Rs 25 cr Mcap is not bad.
NICE ANALYSIS RISK TO REWARD LOOKS GREAT IF EVERY PROBABILITY WORKS WELL
It seems like the magic is working.
Promoter is also constantly raising the stake
The company to me seems to be very pedestrian. It operates in an industry which works on water thin margins. To add to the discomfort, the business involves a high component of cash transactions.
The management too is none too great. Family owned business with very little or no professionals involved.
Have held shares in the past. Have been fortunate to get an even exit after about 5-6 years despite getting a 1:1 bonus.
IMHO a sure avoid !!!