Shilp Gravures Ltd - 47.00 Rs

Led by a team of four technocrats, Shilp Gravures Ltd (SGL) was established in 1993 as the first and only electronic engraving house in India. Today it is undisputed leader in electro-mechanical engraving, with a substantial market share of around 40% for flexible packaging industry in India. Electronic engraving is fully computerized process involving high-end machinery, prepress software and computers and hence has an edge over chemically etched engraving process in terms of quality and mileage. In simple terms company manufactures electronically gravure/engraved cylinders which are eventually used for rotogravure printing. Rotogravure printing has various advantages than other printing process and is vastly used by flexible packaging sector as a wide range of substrates such as polyethylene, polypropylene, polyester, BOPP, aluminium foil etc can be printed in the gravure press. Besides this gravure technology also finds application in other industries like PVC flooring, decorative laminates, electrical fittings, automobile spares, gel pens, artificial leather, gift wrapper, for special coating etc.

SGL’s plant at Rakanpur near Ahmedabad features the best technologies and equipment in the field with engravers from Ohio-USA, copper plating plant from Cograph-Switzerland, polish master from Daetwyler-Switzerland, proof press from JM Heaford-UK, high-end pre-press shop from ArtPro & Esko Graphics-Belgium. From the modest beginning with just 15 cylinders per day in 1995, SGL has continually and preemptively enhanced its capacity to 150 cylinders. Importantly, company has a 300-strong client list which includes India's most reputed names like HLL, Britannia, Amul, Nestle, Cadburys, Tata Tea, Pepsi Foods, Haldiram, P&G, Reliance, ITC, Colgate, Mcdowells etc thereby having a pan India presence. It also exports to the Middle East, African and South East Asian countries. However for FY07 its capacity utilization was around 60% leaving ample scope for volume growth in immediate future. Packaging & printing industry are doing extremely well, as major FMCG companies have increased spending on packaging and advertisement. Secondly, there is swift change in consumption pattern of converters, resulting in an increased use of electronic cylinders. Hence to cater the rising demand company is planning to increase its installed capacity to 200 cylinders per day in near future. Apart from this, company also generates some income thru wind energy.

Financially as well as fundamentally, SGL is on a strong footing. For FY07 its sales grew marginally by 6% to 26 cr but PBT increased by 25% to 5.75 cr. However due to extra ordinary item and provisions to the tune of 1.25 cr, the net profit remained flat at 2.90 cr thereby registering an EPS of 5 Rs on equity of 6.15 cr. Incidentally, company has an un-interrupted track record of dividend payment for more than a decade. For FY07 it maintained the dividend payment at 18%. Recently, company came out with encouraging nos for the June qtr. Sales jumped up 40% to 8.55 cr whereas PBT almost doubled to 2.55 cr on back of higher operating margin. It recorded an impressive OPM of 44% for the quarter. Assuming it to register 38% OPM for entire FY08 it may clock a turnover of 35 cr and PAT of 5.25 cr. This works out to an EPS of 9 Rs on current equity. Hence investors are advised to buy at current levels as share price can appreciate 50% in a year’s time.