About Company: Established in
1965, Cenury Enka Limited (CEL) is part of B.K. Birla group of companies. CEL has two
manufacturing sites, located at Pune (Maharashtra) and Rajashree Nagar (Bharuch
- Gujrat). The unit at Rajashree Nagar site is known as Rajashree Polyfil. The Plant at Pune produces High Tenacity Nylon (Polyamide 6) and Polyester
Industrial Yarns and Greige Tyre Cord Fabrics among other products.
Century Enka's Yarns are used as reinforcing material in
tyres, conveyor belts, V-belts, hoses, ropes & cordage and broad &
narrow wovens.
Approx. 65% of revenue comes from tyre divisions and balance 35% coes from polyester filament yarn
Financials Of Company:
2016
|
2015
|
2014
|
2013
|
2012
|
|
Revenue
|
1,143.64
|
1,218.53
|
1,466.79
|
1,552.17
|
1,649.51
|
Other Income
|
3.89
|
7.02
|
12.36
|
12.15
|
18.23
|
Total Income
|
1,147.53
|
1,225.55
|
1,479.15
|
1,564.32
|
1,667.74
|
Expenditure
|
-1,008.98
|
-1,102.86
|
-1,288.11
|
-1,431.47
|
-1,568.24
|
Interest
|
-9.56
|
-17.32
|
-24.52
|
-29.46
|
-31.72
|
PBDT
|
128.99
|
105.37
|
166.52
|
103.39
|
67.78
|
Depreciation
|
-40.24
|
-42.75
|
-70.71
|
-71.91
|
-67.43
|
PBT
|
88.75
|
62.62
|
95.81
|
31.48
|
0.35
|
Tax
|
-29.29
|
-26.05
|
-32.88
|
-9.59
|
8.43
|
Net Profit
|
59.46
|
36.57
|
62.93
|
21.89
|
8.78
|
Equity
|
21.85
|
21.85
|
21.85
|
21.85
|
21.85
|
EPS
|
27.21
|
16.74
|
28.8
|
10.02
|
--
|
CEPS
|
45.63
|
36.3
|
61.16
|
42.93
|
34.88
|
OPM %
|
12.11
|
10.07
|
13.02
|
8.56
|
6.03
|
NPM %
|
5.2
|
3
|
4.29
|
1.41
|
0.53
|
Dividend
|
75%
|
60%
|
60%
|
60%
|
50%
|
Investment Positives:
- Consistent profit making and Dividend paying 50 YEAR OLD company
- Strong Reputed promoter : B.K.Birla
- Book value of Rs approx 340 (as on 31-3-2016) against CMP(27-6-2016) of Rs 221
- Reducing debt over last 5 years and company target to become debt free which would increase profitability and margins
- Implementation of GST in 2017 will benefit and product will become more competitive.
6. Available at PE
multiple of 8 on EPS OF 27 achieved in 2015-16.
Target
price:
Share is available
at CMP of Rs 221-223 at a PE multiple of 8 ,current price is at 0.7 to book
value. Reducing debt, increase in demand & WITH implementation of GST
Company is expected to do better in next 2-3 years. With 10% increase in
revenue and 10% improvement in margin company can deliver EPS of 32 next year
and if we apply a conservative forward PE multiple of 9-10 stock can easily
touch Rs 285-300.
Stock can be accumulated by long term
investors with 1-2 years horizon for decent returns from current levels.
Disclosure: I am personally holding
shares of the company.
Low promoter holding isn't that a concern?
ReplyDeleteHi Sandesh, There are many good companies which have low promoter equity.Yes it was a concern if it was any other small company.Majority of holding apart from promoter is of financial institutions local and Forieghn and HNIs.Public is holding approx. 34% and apart from that promoters are trying to pay off debt over the years which is a very positive sign by next year company is expected to become debt free and then I am sure with margin expansion the profitability and PE multiple will increase which should help stock price to go.
ReplyDeleteRegards
Mukesh Bhatia
NTCF is majorly used in bias tyres. As the industry is shifting from bias tyres to redial tyres, don't you think that the demand of NTCF will reduce in coming years. Century enka receives around 65% of their sales from NTCF. How do you see the company will grow in this environment? Do you see any other usage of NTCF in future.
ReplyDeleteHi Anup You have valid concern but if you look at the company's performance and plans it is expanding to manufacture nylon Filament Yarn(NFY)which has potential to grow in near future and same got reflected in company's financial performance and last year it saw a growth of 40%.As far as demand for NTCF is concerned it would not reduce in immediate future since heavy commercial vehicals and OTR segment is still dependent on Bias tyres(Cross ply)due to various factors such as lower cost,road conditions and load factors etc.The passanger car segment has already got converted to radial over the years and radial has almost 100% share in cars so that segment is already lost but major tyre market remains with commercial vehicles which has higher cost and turnaround(replacement) volume . I feelIt will take some more years(5-10 years) till we see impact of radials in commercial segment.In such ascenerio there is no immediate threat as far as company's performance is concern. It should continue improving financial performance by reducing debt and improving margins due to growth in NFY and NTCF segments as Indian economy is poised for increased growth .
ReplyDeleteThank you for your reply Mukesh. I just googled and found out that currently 40%-45 % of commercial vehicle's tyres are radial. If i assume that there will be 5% growth in total commericial vehicle tyres in the next 5 years and the ratio of radial tyre will increase from current level to 60%. So there will be low demand of NTCF. Also i think 2 wheeler tyres are all nylon. If again i assume that the current growth in 2 wheeler sales in the next 5 years will be in the range of 10%, will this compensate the requirement of NTCF? Kindly give your inputs.
ReplyDeleteAlso if you can share the logic, how GST will impact Century Enka.
ReplyDelete