Monday, December 14, 2015

Narmada Gelatine - Value buy?

The company was established in year 1961 and earlier it was known as Shaw Wallace Gelatines Ltd.

The average ROCE of the company over the last ten years is 24.71% and is higher at 30.77% in the last three years. The company has consistently paid dividends since 2006. The company has net current assets to the tune of INR 55 Crore and has investments to the tune of INR 27 Crore. So the company can be liquidated immediately for INR 82 Crore. The operating cash flow of the company was INR 6 Crore last year. The company did undergo financial stress during 2002-2005 and suspended dividend during the time.

75% of the company is owned by a promoter entity. 

At the current market price of INR 140, the company's market cap is INR 86 Crore which is just INR 4 Crore more than the liquidation value. The price earnings ratio is less than 7 at reasonable profit margin. Dividend yield is 2.46%. The company was also going to be acquired by Sterling Biotech in 2004 as given in article. A company trading below book value at net current assets cannot be a bad bargain.

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karna said...

Hello Chinmay,

Looks like a Value buy but the capacity expansion plans looks dim for next 3 to 5years
If the volume don't grow will it become a value trap?


Chinmay said...

Hi Karthik Raja,

The value investor does not think of event to unlock value. It only checks if current price is cheaper than intrinsic value. Both Narmada and International Travel are available at throwaway prices.

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