Rishi Techtex...Niche player (With Strong Leadership)

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Company: Rishi Techtex ltd (BSE code: 523021)

Industry: Containers & Packaging


Investment Horizon: Holding for 3 years (This can generate a consistent return over the investment horizon)

Recommendation: At CMP of Rs.69 is trading at a 11% discount from 52 week High . Allocate not more than 2-3% of your portfolio.

About the Company:

Rishi Techtex Ltd, a well-established operating for last 20 years & having plants at Daman & Dadra (180 kms from Mumbai). The company manufacturers PP/HD Woven fabrics & sacks under Woven Division & Shading Nets under Knitted Division

Woven Division: -
It is one of Pioneer in Woven Sack Industry supplying to various Blue Chip Company in India to cater the packing requirement in Cement, Petrochemical & other Industries. In the Woven Division, it has capacity to process about 5000 MT per annum.

Knitted Division:
As a part of Diversification six years back, the company started its new initiative for “Plastics in Agriculture & Technical Textiles” by setting up the Knitted fabrics Division. Today it is the leading company in India for Shade & Protection nets with 50% share of Indian market. The company has a reputed Brand “KrishiNet” & excellent dealer network channel for its sales. Basically the products are used in Agriculture, Nursery, Horticulture, Building & Construction, Decoration markets etc. Apart from that, the Company exports its products to UK, Middle East, Central America, Portugal, Africa, Australia and New Zealand



Other Uses
Interior Decoration
Laundry Bags for hotels/homes.
Curtains for windows for home/Office etc.
Partition for Home/offices/playground.
Pallet wrapping
Fruit Collection


Pros:

  • The company has recently awarded under the QC 100 Total Quality Management Model, Quality Crown in the Gold category by BUSINESS INITIATIVE DIRECTIONS, SPAIN towards commitments for Quality
  • The Revenues are grown 20% CAGR from past 3 years after Mr. Abhishek Patel took over as a chairman (2012). We believe that the management has a strong vision to be one of the top manufacturer/supplier of Knitted division in the world with the weapons of innovation and R&D
  • Indian Technical textile market size is Rs.30,000 cr which is 1/10th of entire textile market and it is expected to grow at a CAGR of 20% by 2020 and Technical textiles will be the most beneficial sector from Make in India programme
  • With 100% FDI being allowed in the Technical Textile segment in India, most global players have set up base in India
  • Management is finding the opportunities to explore into multiple segment use Defence tech, Sport tech, Indu-tech, Home tech.
  • In the current year we achieved 95% plant capacity and we will keep on increasing efficiency on a regular basis.
  • Total Installed Capacity
    •                                                  2015-16         2014-15
  • Knitted (1800MTPA)                        1662 MT        1325 MT
  • Woven (4200 MTPA)                        3733 MT        3124 MT
  • The Client base of the company includes Asian Paints, Kansai Paints, JK White Cement, Birla White, East coast Industries, Jain Irrigation
  • Shareholders approved issue and allotment of 869000 warrants convertible into equity shares at 17/- per share to Promoters and Promoter group of the Company. Out of which 276000 warrants were converted into shares and were allotted to Mr. Abhishek Patel, Managing Director of the Company
  • Company has a market share of 50% in Agri nets


Cons:
  • Currently it is trading at a P/E of 20
  • Promoter holding is low at 32%
  • Volatility in the cost of raw materials
  • Liquidity Concern (Trading volume in BSE is 10k-15k)


Financial Highlights:
  • The Revenues of the company grown at a CAGR of 20.2% from past 3 years
  • Net profit for the company grown at a CAGR of 25% from past 3 years
  • Debt to Equity ratio Stood at 0.57
  • Return on Capital Employed is at 28%
  • Market Cap of the Company is too low at 52 Crores and the Equity base is also low at 58 lakhs
  • Margins have improved to 9% from 7.5%
  • Exports include 20%
  • CARE ratings have increased their rating to BB from BB-

Narration
2012
2013
2014
2015
2016
2017
Sales
              35.84
                35.53
              43.31
              48.46
              61.69
              59.41
Expenses
              32.61
                33.93
              39.38
              44.29
              57.01
              53.93
Op Profit
                 3.23
                  1.60
                 3.93
                 4.17
                 4.68
                 5.48
OPM
                 9.01
                  4.50
                 9.07
                 8.61
                 7.59
                 9.22
Net profit
                 1.05
                (0.96)
                 1.27
                 1.32
                 1.75
                 2.39
EPS
                 1.90
                (1.74)
                 2.30
                 2.39
                 3.02
                 3.23
PE
                 3.10
                (5.29)
                 2.90
                 3.21
                 5.65
              21.65
Price
                 5.90
                  9.20
                 6.68
                 7.68
              17.06
              70.00

Management:
  • Abhishek Patel - Managing Director since 2012
  • Pranav Jayantilal - Patel Director since 2001
  • Arvind Nopany - Director since 2002
  • Sheela Ayyar - Director since 2015


Rating:
  • Fundamental Rating: 75
  • Technical Rating: 71
  • Overall rating: 73

 Valuation:
With the investment horizon given, considering all the inputs of estimates the valuations are at Rs.235

Valuations are made at 18X projected FY 20 EPS

The Concern in the company is the growth aspect and the valuations have been made based on that

(The valuations are calculated on the basis of financial inputs/estimates but investors are required to invest based on the business potential and business risks too) 

Source: 
Company Website
ANNUAL REPORT FY 16


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