BSE ID : 533001 NSE ID : SOMICONVEY
RECOMMENDED PRICE 51.55
PEAK FROM RECO 87.00 68.77%
CURRENT PRICE 11.30 78.08%
The industrial activities are likely to grow with impetus on make in India, infrastructure development and growing foreign investments. Going forward, we expect the company to post top‐line of Rs. 90 cr in FY20 with a net profit of Rs. 5.6 cr translating into an EPS of Rs. 4.8. Assigning a target multiple of 20x, we derive our target price of Rs. 95 showcasing an upside potential of 83% from current levels, with an investment horizon of 12‐18 months.
A wide range of benefits of conveyor belts would give a push to its usage, going forward: The conveyor belts are costeffective, enables efficient and quicker handling of material. It is not only less prone to accidents but also environmental friendly. These belts are quieter, adaptive and provide much flexibility while offering more space to the facilities. Moreover, the rising labour costs and labour‐related concerns, coupled with growing awareness amongst industrialists helps them consider automation & conveyorization. These features lead to efficiency and effectiveness and thereby, higher productivity.
Low utilizations & healthy margins makes the company a good candidate to gain from operating leverage: Somi Conveyor Beltings Ltd. (SCBL) is currently running at less than 50% of capacity utilizations in light of consistent expansions citing huge opportunity and tepid demand over the last couple of years. Nevertheless, the company has been able to maintain mid‐double digit profit margins which can definitely go higher once the demand returns. The recently added steel‐cords conveyor belts have much higher realizations and better profitability as compared to rubber/fabric belts. The rise in contribution from the steel belts to the top‐line would provide a boost to the profit margins. Further, the company has no capex plans in near future.
India to remain one of the fastest growing economy and to see huge industrial and consumption demand: India remains an attractive hub for foreign investments, particularly in the manufacturing sector. Several luxury automobile brands have already established and many other manufacturers are looking to establish their bases in the country. With implementation of GST, the tax system will make India a common market becoming a big draw for investors. With push towards developing industrial corridors and smart cities, alongwith campaigns like Make In India, the country would need a conducive environment for the industrial development and will promote advance practices in manufacturing.
The industrial activities are likely to grow with impetus on make in India, infrastructure development and growing foreign investments. An anticipated increase in mining output, cargo movement, growing consumption, and since automation is the key for efficiency and productivity, thereby, will benefit all the leading players in the industry. SCBL has managed to remain relatively resilient during the recent downturn on account of repetitive orders from the existing players owing to shorter life span of the product. The capacity utilizations are still substantially low and realizations are likely to go up going forward with the recent foray into steel cords conveyor belts. Going forward, we expect the company to post top‐line of Rs.90 cr in FY20 with a net profit of Rs.5.6 cr translating into an EPS of Rs.4.8. Assigning a target multiple of 20x, we derive our target price of Rs.95 showcasing an upside potential of 83% from current levels, with an investment horizon of 12‐18 months.
For full details click on attachment
Disclaimer: This report has been furnished to you for your general information only and should not be reproduced, re‐circulated, published in any media, website or otherwise, in any form or manner, in part or as a whole, without the express consent in writing of Sushil Financial Services Private Limited. This Research Report is meant solely for use by the original recipient to whom it is sent and is not for circulation. Any unauthorized use, disclosure or public dissemination or copying of information (either whole or partial) contained herein is prohibited. This Report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or construed to be neither advice/offer for the purpose of purchase or sale of any securities mentioned herein. Past performance is not a guide for future performance, future returns are not guaranteed. Opinions expressed herein are subject to change without notice. Investor should rely on information/data arising out of their own investigations. Investors are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investor may realize losses on any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by us to be reliable. Sushil Financial Services Private Limited or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information / opinions / views. None of the directors, employees, affiliates or representatives of company shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages/loss etc whatsoever from the information/opinions/views contained in this Report and investors are requested to use the information contained at their risk. We do not undertake to advise you as to any change of our views expressed in this Report. Sushil Financial Services Private Limited (SFSPL) and its connected companies, and their respective Directors, Officers and employees or their relative, may have a long or short position in the subject companies mentioned in the report and it may not be construed as potential conflict of interest with respect to any recommendation and related information and opinions. Reports based on technical and derivative analysis center on studying charts company’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamental analysis. SFPSL has different business segments/Divisions with independent research separated by Chinese walls catering to different set of customers having various objectives, risk profiles, investment horizon, etc. and therefore may at times have different contrary views on stocks sector and markets. Research Report may differ between SFSPL’s RAs on account of differences in research methodology, personal judgment and difference in time horizons for which recommendations are made. User should keep this risk in mind and not hold ‐ SFSPL, its employees and associates responsible for any losses, damages of any type whatsoever. This Report is not intended to be a complete statement or summary of the securities, market or developments referred to in this document. SFSPL or its affiliates or employees are under no obligation to update the information. SFSPL or its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. SFSPL or its affiliates and/or its employees may have financial interest in the subject companies. SFSPL or its affiliates and/or employees may have beneficial ownership of one per cent or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report. SFSPL or its associates or its Research Analyst have not received any compensation or other benefits from the subject companies or third party in connection with the research report. SFSPL/its Associates/ Research Analyst/ his Relatives may have any other material conflict of interest at the time of publication of the research report SFSPL/its Associates/ Research Analyst/ his Relatives have not managed or co‐managed public offering of securities, have not received compensation for investment banking or merchant banking or brokerage services, have not received any compensation for product or services other than investment banking or merchant banking or brokerage services from the subject companies in the last twelve months. There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities.