Skip to content

June 5, 2013

Narmada Gelatines – Multibagger Analysis

by Futurecaps Advisor

In this post we would like to analyze Narmada Gelatines Ltd. a small cap company as a potential multibagger.

image

Website: http://www.narmadagelatines.com/

About: Narmada Gelatines Ltd. (Erstwhile Shaw Wallace Gelatines Ltd) was set up in 1961. The company is strategically located in the Central Indian State of Madhya Pradesh and has convenient access to its main and essential inputs of crushed bones, acid, lime and good quality water.

Narmada Gelatines Ltd., has pioneered the manufacture of ossein and gelatin in India and is today a frontrunner in India’s Gelatine Industry meeting exacting standards of various users worldwide.

Let us analyze the traditional style of check list.

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage  Company is into Gelatines business which is dominating in domestic market.  The company should be able to sustain future competitions & growth in future. image
Future Growth Drivers Company is showing steady increase in Sales & Profits, but an average growth. image
Conservative Debt (long term debt < 3 Net Profit) Total Liabilities of the company is around 26 crores.  The latest Net Profit is 15 Cores & hence less than 3 times of Net Profit.  The company can easily close the liabilities in 2 years. image
Return on Equity must be Above Average ROE latest is 18%, which is above our average of 15%. image
Low CAPEX required to maintain current operations Not so attractive. image
Management is holding / buying the stock Promoter Holding is around 75%, which shows a good confidence from them in the company. image
Price is Under Valued (< intrinsic value) Considering the growth aspects Intrinsic Value is higher than current market price, plus the company is trading below book value. image
Stock Price is consolidating Yes image

Additional Futurecaps Checklist

PE, PB Ratio Current PE Ratio is 3.4, but the trailing PE would be around 2.  PB Ratio is already 50% discount & attractive so. image
Cash Flow Positive Positive image
Paying Dividends, Tax Dividend Yield is around 3.5% which is attractive. 
Company is paying taxes.
image
EPS Growth Rate EPS Growth Rate is positive ranging from 10% to 30%. image
Expected Gain in 10 Years Considering 20% growth, power of compounding, recognition as mid cap, we can say, the price should double every 3 to 4 years.  So 10 times growth in price we can expect. image
Power of Brand Company was set up  in 1961, Member of Jumbo Group which is into Restaurant businesses. image
Corporate Governance, Reputation of Leaders Overall seems to be good. image

 Result

Futurecaps thinks the company has multibagger properties.

 Allocation

As the company is small cap & not a very aggressive player, we prefer only 1/3 of normal allocation.

Disclaimer

Futurecaps recommends 20 to 25 multibaggers per year, we recommend a 25% to 50% allocation of your savings in equity.  The stocks recommended here are gone through Analysts of several years experience in stock market.  Although they were successful in predicting future multibaggers, the overall stock market is a risky game.  So we recommend the reader to put his/her own thoughts & invest wisely.

Read more from Multibaggers

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: