Thursday, June 15, 2017

IST Ltd - Value Buy?

IST Ltd is an automotive parts supplier started in 1977. It supplies parts to many companies in and outside of India. Company also has a subsidiary Gurgaon Infospace which has set up an IT SEZ and most of the revenue of the company comes from the subsidiary.

Financials
The average ROCE of the company over the last 10 years is 23% while it is at 31% for the last 3 years. The company's main business of auto parts is not making any money. The biggest income is rent received from IT companies in their SEZ. Based on the latest financial results, the company has non-current assets worth INR 354 Crore, the net current assets are around INR 33 Crore and fixed assets are worth INR 139 Crore. So the company can be easily liquidated for INR 500 Crore+.

Business
The biggest revenue source of the company is rent(lease) from SEZ to the tune of INR 75 Crore while the expenses are nil so all of this goes to the bottom line of the company. The company is getting some tax benefits so not paying full 35%+ taxes.

Shareholding
The promoters hold 74.99% in the company but not paying any dividends.

Valuations
At the current market price of INR 1105, the company's total valuation is INR 650 Crore. The book value of the company is around INR 762 and the EPS is INR 140 so P/E is less than 8. Except for the lack of dividend, the company doesn't look very expensive.

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2 comments:

Karthikraja K said...

Hi, Dont you consider Promoter integrity and shareholder friendliness during your stock selection? IST ltd did not provide any dividend?
What is your exit strategy?
Also, Modison did not grow last few years. how it is fitting into value category. pl enlighten.

thx

Chinmay said...

Hi Karthik,

When I invest, I don't look at the exit strategy. Many of the stocks have given exit after many years of stagnant prices in the past. This include Dynemic Products which I bought at 23 first, going down to 14 and then today trading at 130. Similarly Sun TV remained in the range of 260 to 350 for almost 4 years before shooting and going to 800+ today.

Regarding modison metals, it is also a long term investment. I will put a post on it for valuation soon.

Many a times I had been wrong and had to average down. One such stock is Divi's lab which I started buying at 1000, then 785, then 635 and then finally at 545 to average value of 660 and current price is very near to that.

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