Skip to main content

Indian Toners


Indian Toners is in the business of manufacturing toners and developers for laser printers, photocopiers, and digital machines.

The company obtained the status of an ‘Export House’ in the previous year, which brings with it export benefits and the like.  It is also diversifying and expanding its product range through a pilot plant, which appears to have met good market success in the prior year.

The company reported stable performance over the last five years – reporting about 10cr of operating profits on revenues of 63cr in the last financial year.  It operated with a net cash position of about 4cr in the last financial year.

The company’s strategy appears to be to build its brand image by providing quality products at reasonable prices in an industry where customers are implacably cost-conscious.

The generic product is a commodity with multiple suppliers providing intense competition including clandestine importing of cheap toners.

The business is exposed to increases in oil prices and international freight costs.  The company has limited pricing power in passing on these costs to customers as a result of the factors discussed above.

It is also somewhat unique in that it exports practically 100% of its production while importing about 97% of its requirements.  Being a net exporter, it is exposed to a strengthening INR.  However, volatile exchange rates (as witnessed over the last year) are bound to make business relatively more difficult for this company than others.

Management haven’t paid any dividend in the past preferring instead to reinvest in the business (at modest rates of return) and pay down debt.  Now that debt is fully repaid, it will be interesting to view management action – whether it will pay out a reasonable portion of its earnings or reinvest in sub-par opportunities.

Comments

Post a Comment

Popular posts from this blog

Under The Radar: India’s Small-Cap Equities (Part Three)

In February of this year, we summarised the valuation parameters of the BSE Small-cap Index in India (now the S&P BSE Small Cap Index) - following on from an earlier report we wrote in December, 2011 - and drew certain conclusions. We would like to update the valuation scenario with the data today, review those conclusions, and form new ones based on the available information. The small-cap index closed today (17 th December, 2013) at 6,150.65 with an indicated price to book value of 1.04. The closing value as on February, 2013 was 7,006.73 representing a decline of over 12% as of today. The current index value masks a greater fall of over 27% to a low of 5,085.56 in August, 2013. This represents an unsatisfactory overall performance for those who invested in small caps at the beginning of the year. In our earlier report, we made two assumptions towards the end of our report to form a conclusion as to prices then:          ...
Post a Comment
Read more

On The Radar: India's Small-Cap Equities (Concluded)

We have been running a series of articles titled ‘Under The Radar: India’s Small-Cap Equities’ beginning in December 2011 - and followed up twice - with the last article in December 2013. We would like to conclude this series after updating the small-cap index level and returns, comparing it to our expectations ex-ante, and analysing the current scenario.  Following this, we have also outlined where we may take this blog in the future. The small-cap index closed at 11,087.07 on December 31 st , 2014.  This compares to a level of 6,150.65 in our last article – resulting in an advance of over 80% to date. This is a handsome absolute return by any standard, particularly compared to Indian government bonds, which yielded around 8-9% for the period.  This justifies the conclusion at the end of our previous article that “small-caps in India offer among the most attractive bargains during any time since 2006 and certainly in the entire Indian stock market today...
1 comment
Read more

Nelcast

Nelcast manufactures iron castings for use in the automotive industry. The company plans to expand into supplying to manufacturers of earth moving equipment and trailers.  It also intends to focus on exports and supplying to OEMs. The company reported declining operating profit margins on moderately growing revenues – reporting about 30cr of operating profits on revenues of about 500cr in the last financial year.  It operated with a moderate net debt load. The business is dependent on the fortunes of the auto industry, which is cyclical.  Moreover, it faces stiff competition from players in the unorganised sector and new foundries that have come up.  It is exposed to metal price rises and a strengthening INR since it’s a net exporter.
Post a Comment
Read more