Thursday, 25 December 2014

VALUE PICK - SHILP GRAVURES LTD. - RARE GEM



About The Company
  Shilp Gravures Ltd established in 1993 is a leader in elector-mechanical engraving, with a market share of exceeding 40% for flexible packaging industry in India.
 The company is headed by the technocrat Patel's, Headquartered in Ahmedabad the company also has offices in Mumbai,Delhi & Chennai.
 
About Business
The company is engaged in the manufacturing of gravure cylinders which are used for roto-gravure printing, Roto-gravure printing is vastly used by flexible packaging sector.
It's also used in various applications beside flex packaging including pvc flooring, speciality coatings and etc.

The company also has a flexo plate processing unit equipped with DuPont Cyrel 2001P one of worlds finest digital plate processor producing plates of up to 42x60 inch / 106x152cm - The first to produce this size which is the largest available in South Asia.

The company uses technology provided by ESKO and AGFADOTRIX for pre-press that helps designing and creating rapid repeats of matching designs.

The company has strong 300+ clientele which includes giant companies/brands like "HUL, Britannia, Amul, Nestle, Cadbury, Tata Tea, Pepsi, Haldiram, Lehar Foods, Reliance, P&G, Colgate, ITC, Mcdowell's etc".

 The Ace Investor – Value Pick
(BSE:513709) SHILP GRAVURES LTD.
This company is the market leader and only directly listed player in this high-entry barrier industry.

Trading around Rs 43 with a market cap of under 30 crores.
Current P/E is around 6 considering the half yearly nos and promoter holding is strong at 59.91%.
Earnings have been stable, Though after FY12 the company has not shown any sharp increase in the top and bottom line but at the same time there was great growth reported by the company in the recession years which is a great factor when looking at any stock for long-term. The annual results summary is attached below.

Narration
Mar 05
Mar 06
Mar 07
Mar 08
Mar 09
Mar 10
Mar 11
Mar 12
Mar 13
Mar 14
Sales
20.49
24.58
26.18
35.33
38.28
48.80
49.99
57.44
54.44
53.90
Operating Profit
6.21
8.41
9.93
14.33
13.02
16.11
12.51
14.92
15.32
14.56
OPM
30.31%
34.21%
37.93%
40.56%
34.01%
33.01%
25.03%
25.97%
28.14%
27.01%
Other Income
0.32
0.14
0.12
0.13
0.32
0.10
0.78
0.26
0.39
0.49
EBIDT
6.53
8.55
10.05
14.46
13.34
16.21
13.29
15.18
15.71
15.05
Interest
1.01
0.89
1.03
1.11
2.31
2.56
2.31
2.01
1.87
2.25
Depreciation
3.12
3.23
3.28
3.96
4.42
5.74
6.32
5.79
6.22
6.46
Profit before tax
2.40
4.44
5.74
9.39
6.61
7.92
4.66
7.38
7.62
6.34
Tax
1.00
1.41
1.56
3.27
3.72
3.91
1.38
2.26
2.13
2.11
Net profit
1.40
3.03
2.93
5.88
1.46
5.12
3.34
5.27
5.49
4.23
Adjusted EPS in
2.30
4.97
4.80
9.64
2.39
8.39
5.48
8.64
9.00
6.93
Dividend Payout
68.57%
31.35%
31.40%
18.20%
34.93%
12.50%
19.16%
14.61%
14.03%
14.42%


The company as seen above is consistently paying dividend, Actually its paying dividend since FY 2002.

The packaged food industry is the 5th Largest sector in India. The Indian packaged food industry is worth $ 39.7 billion and is expected to more than double by 2025. India presently is ranked 5th in the world and 2nd in Asia and with per capita consumption of 24 kg per year the market is yet to boom and is only at the early stage. India is also the 4th largest market for beverages in Asia with a consumption of 22 bn litre of drinks (soft/hard).

With the new Food Safety & Standard Regulations focusing on the quality of packaging, It is set to boost the sales of reliable flexible packaging.

With the New Govt. at centre, Weakening inflation and Make In India plans there are hopes that soon there will be a rise in the disposable income among young Indians which will boost the sales of packaged foods.

  Recently the shares of packaging companies have witnessed great movement and still a lot of buying is going on at these higher levels (e.g. Mold Tek Packaging was trading in the 40s at FY14 end with an EPS of 8.03 the P/E was around 5.60 and now it has appreciated to 260 and trading at a P/E of 23) Similar is the case with TCPL Packaging and whole lot of other packaging sector stocks.

While packaging stocks are over the moon already India's largest and only listed player in it's packaging related industry "SHILP GRAVURES LTD" is trading at a P/E of under 6,
 Not to forget that SHILP's clientele includes one of India's largest FMCG player.
While gathering data, We found something common between MOLD-TEK Packaging, TCPL Packaging and SHILP GRAVURES LTD, That is Mr Anil Kumar Goel the seasoned value investor who got covered in the Business Standard and is often noticed along with Dolly Khanna in shareholding patterns of various companies, Mr Goel and his wife "Seema Goel" are holding 3.25% in SHILP, They also bought Mold-Tek in the past and booked extremely huge profits, Their success in value investing is not limited to the Packaging space they also have holding in many companies including "MM FORGINGS" and most of their holdings have shown capital multiplying returns. Mr & Mrs Goel have acquired the 3.25% stake in SHILP around 40-50 levels.

  With high entry barrier in the industry and being India's only listed player in this industry, SHILP is a compelling value pick, At current levels of 43 it is no where near where it should be trading at, Being a market leader and trading at a P/E of 6 does not make any sense and promoters have already noticed it, that's why they have increased their share holding by more than 1% (YOY) to 59.91%, If we even completly ignore the growth factor and assume that SHILP's topline will remain around 50s and the EPS will remain around 7 then also the stock deserves the valuation of 30 p/e because of the fact that it is the only directly listed company in this industry and is also the market leader, a 30 p/e will workout to a price of Rs 210 for the stock (388% price appreciation prospect) and if we consider the growth prospects already discussed above then it can give further returns.

Hope above inputs have made it clear that SHILP GRAVURES LTD is an excellent value pick and extremely undervalued rare gem.

Note: The volumes in SHILP are very thin and only those who are reading the blog live as soon as posted will get a chance to buy in the 40s, I personally will not mind buying this stock till the level of Rs 100 which leaves atleast 100% price appreciation prospect without over ambitious growth expectations, Though we always say one should not be chasing a stocks here we are clearly saying one can go for the chase.

58 comments:

  1. Those who missed enter on monday.. It might open at upper circuit on monday.

    ReplyDelete
  2. Hai ACE,
    It is excellent value pick up. This scrip has been undervalued and has the biggest potential sector. Your investigation and study is the excellent for small investors like us.

    I hope now this is under the radar of all real investors which will have bright future.

    with best regards

    ReplyDelete
  3. Regarding Mr. & Mrs. Goel share holding, in my view their entry price must have been below Rs. 30 as the share holding pattern as on Mar 14 shows that as on 31st March 2014 they both hold together 2 lacs shares. Correct me if i am wrong.

    ReplyDelete
    Replies
    1. No they bought a lot earlier.. In the 40-50 range.

      Delete
    2. it is a gem . going through its financiald data it is undervalued .buy for shortterm gain and a true multibagger in long term. excellent pick ace investor . Thanks for finding this gem for all of us .

      Delete
  4. brilliant call will grab it tomorrow

    ReplyDelete
  5. great report i think it is very undervalued, thanks ace for the gem

    LPC

    ReplyDelete
  6. Srigopal Telangana29 December 2014 at 08:36

    today upper circuit for sure small chance to accumulate today, anyways i will buy even if i get at 70.

    ReplyDelete
  7. SHILP GRAVURES 2014 EPS OF 6.88 AND CASH EPS OF 17.39 IS A GREAT NUMBER.

    ReplyDelete
  8. will buy at 56.30 if i get

    ReplyDelete
    Replies
    1. getting some today... any change in call on skm egg product and vidhi?

      Delete
  9. getting some today... any change in call on skm egg product and vidhi?

    ReplyDelete
  10. Buy Shilp Gravures Ltd today in cmp 53-56.30 range, good chance.

    ReplyDelete
  11. sir great move on shilp... i am buying today waiting for funds hope it does not hit circuit as i missed skm last time

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  12. 14% up great call ace sir

    ReplyDelete
    Replies
    1. this is a nothing move... Lot of potential in the stock.

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  13. new 52 week high today but all time high is 120+ in 2008 with almost same number of earnings if not 200 it should atleast hit that level

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  14. thanks ace for this gem, any call on astramicro?

    ReplyDelete
    Replies
    1. historically punter's bunny for budget... 18% promoter holding... I don't like it.

      Delete
  15. any call on mcdowell?

    ReplyDelete
    Replies
    1. I don't like the company & the stock even after the Diageo takeover.

      Delete
  16. sir reliance capital has set up bank with japanese company what do you see im pact on the price of stock?

    ReplyDelete
  17. thanks sir i purchased some on friday but want to buy more and not getting lower level to enter

    ReplyDelete
  18. I think it is your day so far ace...
    ybrant 10% up
    shilp gravures 15% up
    mindteck 7% up
    skm 3% up
    prime property 12% up
    ngl fine chem 2% up in upper circuit

    only vidhi and dynemic are flat today.

    ReplyDelete
    Replies
    1. Good stocks take time but make the move :)

      Delete
  19. huge rally coming up in shilp gravures

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  20. sir is shilp gravures still a buy at cmp of 53+

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  21. balance sheet is good for shilp gravures seriously undervalued but not much growth over the years it has been stagnant on the earnings front, do you see any pick up?

    ReplyDelete
  22. What your take on Vidhi at cmp? Do you expect a better entry price?

    ReplyDelete
    Replies
    1. It's consolidating, at current level its not a bad entry anyway.

      Delete
  23. sir what is your call on salzer electronics?

    ReplyDelete
    Replies
    1. i am positive on the company n stock.. holding some qty from double digits.

      Delete
  24. hi what is your comment on vishal retal , can I enter ybrant digital now ?

    ReplyDelete
    Replies
    1. v2 retail i don't like at all, ybrant yes, already blogged about it.

      Delete
  25. Shilp Gravures has dipped, Good opportunity to enter, Will provide a sharper and sustained rally.

    ReplyDelete
    Replies
    1. This dip is purely on the back of manipulators, Those who bought on friday for trading have sold their positions today... So now only genuine investors like us are on board.

      This blog is only for genuine investors and traders should stay away.

      Delete
    2. i am stuck sir pls help... already down 8% from my buy price sir

      Delete
    3. What is your problem buddy? Its a long-term pick, Not a short-term trading call.
      Please don't follow our blog if you are here for short-term gains.

      And note, Shilp is trading above reco. price so no timepass out here.

      Delete
  26. dear ace, should i wait for a dip to enter shilp gravures?

    ReplyDelete
    Replies
    1. Promoters have bought in the 40-50 range... They have increased their stake from 58.54% in FY13 to 59.91% currently.

      I think we are getting it at around 52-53 today which is just 3 Rs premium to the upper range of promoter buying, there is no use of waiting for a small dip and missing out on a big rally.

      Delete
  27. company is paying dividend since financial year 2001.

    ReplyDelete
  28. wish you happy new year 2015 sir......god blesh you........

    ReplyDelete
  29. Aceinvestor sir,

    Dont you think the products of shilip are more of one time investments for its clients. The growth aspects seems muted in that case. Moreover it is not directly involved with the packaging , and rerating chances are not strong.

    Kindly share ur views.

    ReplyDelete
    Replies
    1. After studying everything i have posted this, If you feel otherwise you can avoid this one!

      Delete
  30. hi Aceinvestor, please share your view on umang diaries and haryana leather chemicals for long term. thank sin advance.

    ReplyDelete
    Replies
    1. umang diaries is ordinary, trading at p/e of 17 while reserves are lesser than equity capital, the debt increasing and negative cash flows for FY14.

      haryana leather looks good, but no specific call on it.

      Delete
  31. Sir when you are coming up with new value pick?

    ReplyDelete
    Replies
    1. this friday after 3:20:PM we have a fresh value pick coming up!

      Delete
  32. sir im new to thz blog... ur old calls are still opened shall i enter at thz levels?

    ReplyDelete
  33. Dear Sir,

    Please share your view on

    Future Consumer EnterpriseBSE: 533400

    ReplyDelete
    Replies
    1. Constant loss making company, Not interested

      Delete