Cen­tury Enka Ltd

Money Times - - Bull’s Eye - By Pratit Nayan Pa­tel

(BSE Code: 500280) (CMP: Rs.269.8) (FV: Rs.10)

Com­pany Back­ground: In­cor­po­rated in 1965, Pune-based Cen­tury Enka Ltd (CEL) man­u­fac­tures syn­thetic yarn– Ny­lon Tyre Cord Fab­ric (NTCF) that find ap­pli­ca­tion in mak­ing bias tyres and Ny­lon Fil­a­ment Yarn (NFY) used in mak­ing sarees, du­pat­tas, dress ma­te­ri­als and ath­leisure among oth­ers. Plans are afoot to of­fer Polyester Tyre Cord Fab­ric (PTCF) as a re­in­force­ment ma­te­rial in ra­dial pas­sen­ger ve­hi­cle tyres. Its man­u­fac­tur­ing fa­cil­i­ties at Ra­jashree Na­gar in Bharuch (Gu­jarat) and at Bhosari in Pune are equipped with state-of-the-art man­u­fac­tur­ing tech­nol­ogy. With con­tin­u­ous in­no­va­tion, CEL has de­liv­ered new and high-qual­ity prod­ucts. Today, it has a strong pres­ence in both NTCF and NFY prod­ucts. It has 31,000 TPA man­u­fac­tur­ing ca­pac­ity of NTCF, which con­trib­utes 60% to its rev­enue and has 24% do­mes­tic mar­ket share. In the NFY seg­ment, it has 36,000 TPA man­u­fac­tur­ing ca­pac­ity, which con­trib­utes 40% to its rev­enue and has 19% do­mes­tic mar­ket share in the NFY seg­ment.

Fi­nan­cials: CEL’s eq­uity of Rs.21.85 crore is sup­ported by huge re­serves of around Rs.901.76 crore. The pro­mot­ers hold 25.25%, DIIs hold 7.31%, FPIs hold 2.87% while the in­vest­ing pub­lic holds 64.57% stake in the com­pany. CEL has re­duced its debt from Rs.155.87 crore to Rs.30.62 crore in the last five years, which is highly im­pres­sive. Its share book value works out to Rs.412.3 and its price:book value ra­tio stands at just 0.65x.

Per­for­mance Re­view: For FY18, CEL re­ported

PAT of Rs.70.09 crore on sales of Rs.1447.77 crore fetch­ing an EPS of Rs.32.08. For Q2FY19, it posted

56% higher sales of Rs.479.08 crore with 28% higher PAT of Rs.23.23 crore fetch­ing an EPS of Rs.10.6. For H1FY19, it re­ported 88% higher PAT of Rs.45.68 crore on 31% higher sales of Rs.884.95 crore fetch­ing an EPS of Rs.20.9.

This B.K. Birla group com­pany is a reg­u­lar div­i­dend-pay­ing com­pany and has paid 70% div­i­dend for FY18.

In­dus­try Over­view: Dur­ing FY18, the Gov­ern­ment of In­dia raised the cus­tom duty on NTCF im­ports from 10% to 20% and im­posed anti-dump­ing duty on ra­dial tyre im­ports, which re­sulted in de­mand sta­bil­ity for do­mes­tic NTCF pro­duc­ers. Apart from this, there ex­ist anti-dump­ing du­ties on NTCF im­ports from cer­tain coun­tries. But to cir­cum­vent the levy of anti-dump­ing duty, sig­nif­i­cant im­ports of NTCF from FTA (Free Trade Agree­ment) coun­tries with zero / con­ces­sional duty are be­ing made. This con­tin­ues to put pres­sure on the NTCF mar­gin. With higher dis­pos­able in­come with the mid­dle class and the ever-chang­ing fash­ion re­quire­ment of the young, NFY is wit­ness­ing steady growth by virtue of its feel and lus­tre qual­ity. While NFY con­tin­ues to en­joy pref­er­ence in sa­ree, du­patta and dress ma­te­ri­als, its sub­sti­tu­tion in silk and Vis­cose fil­a­ment yarn (VFY) pro­vides an op­por­tu­nity to boost con­sump­tion.

Con­clu­sion: CEL con­tin­ues to en­joy its lead­er­ship in NFY in terms of prod­uct range, qual­ity pa­ram­e­ters and by vol­umes. It wit­nessed full ca­pac­ity uti­liza­tion of NTCF at both its Pune and Bharuch plants. In or­der to con­sol­i­date its po­si­tion fur­ther in value-added seg­ments, it pro­poses to in­stall ad­di­tional Air Tex­tur­is­ing ca­pac­ity. Be­sides, it will also un­der­take con­ver­sion of ad­di­tional polyester spin­ning ma­chines into ny­lon spin­ning ma­chines to en­hance its pro­duc­tion ca­pac­ity. Apart from this capex, it con­tin­ues to di­ver­sify its prod­uct range by of­fer­ing dipped Polyester Tyre Cord Fab­ric. It is also ex­plor­ing pos­si­bil­i­ties of of­fer­ing dip­ping ser­vices for Rayon Tyre Cord Fab­ric. It also plans to fully in­te­grate its NTCF ca­pac­ity and will ap­proach the gov­ern­ment for its per­mis­sion. It has suc­cess­fully con­verted few of its polyester spin­ning ma­chines at Bharuch into ny­lon spin­ning ma­chines, which has en­hanced NFY ca­pac­i­ties by about 10,000 TPA. It hopes to en­hance its mar­ket share from 19% to 22%.

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