KECL (Kirloskar
Electric): A MULTI BAGGER STOCK TO STUDY!
(BUY/SELL/HOLD/MULTIBAGGER/OUTPERFORMER/OUTLOOK _ Be and
Make)
Kirloskar Electric Company Ltd
(KECL) is engaged in manufacturing electrical equipment’s like AC / DC motors,
generators, transformers, switch gears etc., for the past 6 decades. Very
reputed brand in electrical equipment in India.
Pro's:
1. Management tries to reduce the debt by selling the land and already sold it's main office and its debt also reduced.
1. Management tries to reduce the debt by selling the land and already sold it's main office and its debt also reduced.
2. The recent JV seems to be the game changer for the
company as EV space is one of the biggest opportunity for the next decade.
3. Management trying to improve the margins even though
there is a lot of competition.
4. Numbers won't give a picture due to losses.
Cons:
1. Company delivered poor growth in last five years.
2. Promoters pledge is very high.
3. There are on going delays in
the bank facilities due to the continuing liquidity issues faced by KECL.
4. The company continued to make
cash losses of Rs. 66.19 crore and Rs.54.67 crore in FY18 and 9MFY19
respectively due to poor performance by DG sets and transformers division
associated with heavy competition in the electrical equipment industry. Due to
cash losses in past 3 years eroded the company’s net worth significantly to
negative Rs. 103.5 Cr. However, company has order book position of Rs. 285.15
Cr as on Mar 13, 2019 which is expected to bring in the cash flows to the
company upon execution.
4. Earlier, KECL’s German
Subsidiary (Lloyd Dynamowerke GmbH & Co.KG *LDW+)’s bankruptcy and
impairment of investment had adversely affected the operations of the company
in FY15.
5. CARE given rating of
"D" to KECL for its long term and short-term debt papers.
What is interesting?
1. Firstly, the company has a
huge land bank, worth well over the debt in hand which the company is looking
to offload to pare the debt. This could make the company profitable.
2. Company had the 6 odd
manufacturing facilities across the country.
3. Most interesting part is EV
space. The EV boom taking traction and a very few companies are capable of
manufacturing key parts for EV like three phase motors, transformers, switch
gear etc., Company already supplied its motors to M&M electric car E20.
4. Kirloskar Electric
Company has entered into a joint venture agreement with Electrodrive
Powertrain Solutions Private Limited for design, development, sales and supply
of electric motors to be used for all types of electric vehicles.
5. The products which proposed
Joint Venture will sell and supply will be manufactured solely by Kirloskar
Electric Company, the necessary product information, data required for the
manufacturing process shall be provided by Joint Venture to the Kirloskar
Electric Company.
6. Tata tigor electric car is
designed and developed by electrodrive powertrain and Ratan TATA too invested
in this company. There are near about 10,000 cars ordered and likely to be
dispatched in the upcoming financial year.
Be
and Make's observations:
As learning from the sources, EV
market is likely to be a big theme for next decade. Kirloskar electric is one
of such company which is set to benefit from the EV boom. Company is at
all-time low (CMP: 9.5/- on 23.12.19) and one having an aim of one decade can
study this stock. If you are a short to medium term view don't look in to it.
As it is posting continuous losses its numbers cannot be studied or analysed at
present hence I am not going too much in to the present numbers. It is going to
be a turnaround stock and likely to give good top and bottom line numbers in
the upcoming years.
With thanks
Advance wishes
Be and Make
http://stockstowin.blogspot.com
FOR DETAILED REPORT IN PDF: KECL KIRLOSKAR ELECTRIC BEANDMAKE
Note: The above article is not a research report but it is a information as available on public domain and it should not be treated as a research report. It is just a study which I/we observed and recording them as a dairy of mine/us.
Note: The above article is not a research report but it is a information as available on public domain and it should not be treated as a research report. It is just a study which I/we observed and recording them as a dairy of mine/us.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations
2014 and as per clarifications provided by SEBI: “Any person who makes
recommendation or offers an opinion concerning securities or public offers only
through public media is not required to obtain registration as research analyst
under RA Regulations”
Disclosure: It is safe
to assume that i/we might have positions in my/our portfolio and hence my/our
point of view can be biased. Readers should consult their financial advisory
before any investments as above information is only for to study a stock only
and it is not an investment advice.
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