Shilp Gravures Ltd
(BSE Code: 513709) (CMP: Rs.122.10) (FV: Rs.10) By Pratit Nayan Patel
Company Background: Incorporated in 1989, Ahmedabad based Shilp Gravures Ltd (SGL) manufactures and sells engraved copper rollers. It operates through two segments: Engraved Copper Roller and Wind Mill. It offers gravure cylinders as well as flexo plate processing, base shell, pre-press and embossing products for use in flexible packaging, anilox rollers, PVC (polyvinyl chloride) flooring, decorative laminates, speciality coatings, artificial leather, gift wrappers, security and transfer printing, fine text, label, ceramic anilox roller, embossing and flexo colage applications. It also generates energy through wind mills.
Financials: SGL has an equity capital of Rs.6.15 crore supported by reserves of Rs.53.53 crore. Its debt:equity ratio has declined from 0.77 to 0.37 in the last six years. The promoters hold 60.52% of the equity capital, which leaves 39.48% stake with the investing public. With a share book value of Rs.76.17, its P/BV ratio works out to just 1.60x.
Performance Review: For FY18, SGL reported PAT of
Rs.7 crore on sales of Rs.69.04 crore and an EPS of Rs.11.38. During Q1FY19, it reported 35% higher PAT of Rs.3.41 crore on higher sales of Rs.19.6 crore and an
EPS of Rs.5.54. It paid 15% dividend for FY18.
Industry Overview: Gravure is an advanced, high-tech printing process that has employed a complete digital environment.
It operates the fastest printing presses in the world and holds a prominent place in the printing industry with its efficient, long run, high speed and consistently high-quality printing method. Gravure is used for labels, cartons, packaging, gift-wrap, wall and floor coverings and a variety of precision coating applications.
In the current uncertain economic scenario, the gravure market is striving to maintain margins and market share while focusing on technological advances to drive growth. However, gravure plays an important role in flexible packaging. The rising urban trend and brand consciousness in India has improved the prospects of the gravure industry led by higher demand for sophisticated packaging. The flexible packaging industry is growing rapidly since flexible packaging is more cost-effective and easy to handle with better protection. Further, the government’s decision to permit 100% FDI in multi-brand retail is also expected to support the sector.
With development across consumer and industrial markets, improvement in manufacturing practices and continued technological innovations, the packaging market is evolving. Ease of packaging has made flexible packaging a perfect
alternative for display and branding of retail goods. Backed by investments in technology and industry equipment, the industry is expected to enjoy a high growth rate in the coming years.
Conclusion: At the CMP, the stock trades at a P/E of just 9.5x and is available at 32% discount to its 52-week high of Rs.180 recorded in October 2017. Based on its performance parameters, the stock looks quite attractive at the current level. Investors can accumulate the stock with a stop loss of Rs.105 for a price target of Rs.180-200 in the next 12-15 months. The stock’s 52-week high/low is Rs.180/103. Its market cap stands at Rs.75.09 crore.