NILKAMAL LTD - REPEAT

  

Nilkamal and Wimplast are two companies I recommended earlier on same day.( Old Link HERE ) Recommended price was Rs.202 for Wimplast and Rs.264 for Nilkamal.But now ,Wimplast turned as a 4 bagger which is currently trading above Rs.800 where Nilkamal is still around the recommended price. This week let us look into the reasons for this under performance by Nilkamal which is almost 10 times bigger than Wimplast by turnover.

                                                                             The brand ‘ Nilkamal’ is familiar to everyone and it is the world’s largest  moulded furniture maker and Asia's largest plastic processor.Company operating through five different divisions viz – Moulded Furniture,Material Handling,Mattress,@home, and Home ideas.Its manufacturing facilities are strategically located at each zones of our country .Company own seven factories in India and one in Sri Lanka. Under the moulded furniture division ,company manufacturing plastic moulded chairs , sofas ,ready to assemble furniture ..etc .Its material handling division selling crates, pallets, Pallet Trucks ,Stackers, Forklifts ..etc. Company is the market leader in each of these products.

    

    

 What  went against managements expectation was the performance of @home division.This division comprises 19 large format retail stores with an average size of 16,000 sq.ft. per store.Even after spending close to Rs.100 Cr for this division ,performance of this division was not up to the mark for a long time.Performance of this division affected company’s over all profitability and its share price.Now management took a decision to control spending for this division and concentrate in other core businesses.It is planning to spend Rs.50 Cr to start two manufacturing facilities for mattresses in next three years.At present company owns two  mattress manufacturing facilities located at Bangalore and Kolkatta . Management is confident to achieve over Rs.100 Cr turnover from this division alone in this financial year (2014-14) itself. Mattress division is comparatively high margin one for the company .After a long wait , company’s @home division also came to profitability in previous financial year (2013-14) .In all other divisions company having enough capacity and hence not expecting substantial spending for capacity addition in near future . This situation will help the company to improve its cash flow and debt reduction going forward. Nilkamal Bito Storage Systems  ( Link HERE) , the joint venture company with BITO Langertechnic of Germany also reported profit in latest FY .Combro Nilkamal Pvt Ltd is another joint venture with US based Cambro Manufacturing Company ( Company Profile HERE)  .This joint venture company is operating in the field of commercial food service & hospitality segment which also reported good performance in FY 2013-14 

 

All together ,this is the changing time in Nilkamal with management’s prudent decisions.Promoters holding about 63 % stake in this company and not a single share pledged..Company reported substantial improvement in its profitability in latest March quarter. For the full year ,Company reported a consolidated top line of Rs.1752 Cr and a net profit of Rs 48 Cr . EPS for the year is Rs.32 .Company also declared a dividend of Rs.4 per share . Company’s book value is close to Rs.300 and currently trading even below this @ Rs.288. Considering the steps taken by the management in recent times to improve its performance ,recommending this stock again as a BUY for long term investors.Stock is suitable to include even in the core mid cap portfolio . Stock listed in both exchanges.

Link to Company Website HERE 

 

Disc: It is safe to assume that I have vested interest in Nilkamal