Mallcom India Ltd., is a Government of India recognized Trading House engaged in the manufacture, export and distribution of a wide range of Personal Protective Equipment (PPE) since 1983. Mallcom produces numerous product categories covering head to toe such as helmets, face masks, garments, rainwear, leather gloves, nitrile gloves, and shoes. To provide a one-stop solution, Mallcom also deals in eyewear, ear protection, disposable synthetic gloves, and harness.
The PPE market in India is currently in nascent stage due to lack of awareness about workforce health and safety.
According to recent reports of the Govt of India the PPE mkt is expected to grow steadily during next 4 years and may post a growth of 14% CAGR. However the revenue growth will depend upon industrial production and construction activity which is the largest purchaser of PPE equipments. Globally too PPE demand is growing at 6% CAGR. So there is continuous growth in demand of PPE products in India and abroad too. Mallcom has dual advantage of being an export house and also caters to local industrial demand.
Mallcom has witnessed a robust growth in 2018-19 and has started focusing on margin improvement apart from growth.
Key positive factors
1. Consistent H2(19-20) performance already achieved revenue of 176 crores with net profit of
8.66crores
2. ROE > 15
3. Market cap only 120crores against revenue of more than 300 crores
4. Low equity majority holding with promoters(73.8%) another 20% with single HNI investor
5. At CMP of Rs190 available at PE multiple of 7.2 cheap valuation
6. Consistent dividend paying company last year dividend 20%
7. No pledged shares and almost debt free
8. Single organized supplier for complete PPE product range.
| Year | 2020(E) | 2019 | 2018 | 2017 | 2016 |
| Revenue | 315 | 300.73 | 245.6 | 256.62 | 274.86 |
| Other Income | 0.25 | 0.21 | 3.51 | 1.03 | 0.18 |
| Total Income | 315.25 | 300.94 | 249.11 | 257.65 | 275.04 |
| Expenditure | -287 | -274.53 | -229.82 | -239.22 | -256.65 |
| Interest | -4 | -3.91 | -4.13 | -3.3 | -2.22 |
| PBDT | 28.25 | 26.42 | 19.29 | 18.43 | 16.18 |
| Depreciation | -4.8 | -4.67 | -4.28 | -4.36 | -4.26 |
| PBT | 23.45 | 21.74 | 15.01 | 14.07 | 11.92 |
| Tax | -6 | -7.66 | -5.16 | -4.78 | -4.28 |
| Net Profit | 17.45 | 14.08 | 9.86 | 9.3 | 7.63 |
| Equity | 6.24 | 6.24 | 6.24 | 6.24 | 6.24 |
| EPS | 27.96 | 22.57 | 15.84 | 14.89 | 12.23 |
| OPM % | 8.96% | 8.78 | 7.85 | 7.18 | 6.69 |
| NPM % | 5.55 | 4.68 | 4.01 | 3.62 | 2.78 |
Risk factors :
1. Very illiquid stock so high qty of shares become difficult to off load
2. Recession in industrial output and increase in raw material cost could affect the profitability
due to lower profit margins.
Investment Rational:
Technically Stock after making low of 185 is looking to go up.
Fundamentally strong company available at cheap valuation at PE multiple of approx 7.YTD H2 results are good and second half is expected to be satisfactory. Improvement in margin could result in better EPS for FY 19-20.
Expecting EPS of 27-28 a PE multiple of 10 can take this stock to 280 or higher .Investors may buy small qty with a target of 280.
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