Swiss Glascoat Equipments - Can The Hopes In New Sector Deliver?

Sorry for posting my new study in a weekday, but I won't be available on this weekend for a complete write up of this post. Hence decided to go ahead today. However, I will be replying to the queries if any.

Swiss Glascoat Equipments Ltd. (SGEL) is based in western part of India, specializes in design and manufacturing of Carbon Steel Glass Lined Equipment viz. Reactors, Receivers / Storage Tanks, Driers, Filters, Columns, Agitators, Valves, Pipes & Fittings.
Swiss Glascoat Equipments caters to requirement of leading Pharmaceutical / API, Specialty Chemicals, Dies / Colors, Agro Chemicals, Food Processing and allied Industries.
Experience spanning two decades, a portfolio comprising over 8,000 glass-lined equipment and as pioneers of many customised processes, Glascoat is well-recognised for excellence in glass-lining industry.

The Company's glasscoat product range consists of both ready-made and custom-built equipment. Apart from names mentioned above, the company's other products include Glass Lined Flush Bottom Outlet Valve, Bellows-Sealed Valve, Glass Lined Diaphragm Valve, Flanged Pipe, Flanged Elbows 90, Flanged Crosses, Reducing Flanges and Flanged T- Pieces with reduced connection.
The core element of the Glass line industry lies in the technology for manufacturing of glass frit and its applications.
Swiss Glascoat Equipments has established itself as an One-Point-Solution-Provider for glass-line products of any type, size, output plus a complete range of accessories.
More details related to products of the company is shared in the video below.

This has led to company attracting plenty of big companies in pharma, speciality chemical and agro sector.

Some of the major clients of the company are:
1) Aurobindo Pharma
2) Divis Lab
3) Glenmark Pharma
4) Themis Medicare
5) Shasun Pharma
6) Sanofi
7) Atul
8) BASF
9) SRF
10) Bayer CropScience
and many more.......................

In a way, we can conclude that success of these companies will indirectly lead to success of Swiss Glascoat Equipments. Most of the names mentioned here, are already big players and are likely to continue posting good growth going ahead, which enhances my confidence in this company and its growth.

A Virtual Tour Video Of The Company:



Talking about risk and other details, according to my study, there are 3 main players in this industry, with GMM Pfaudler, being the only listed company other than Swiss Glascoat Equipments. However, as per annual reports, it is seen that 2 more companies have entered this business, which is likely to challenge the company and might affect their profitability. Lack of expertise in manpower is also one of the negatives. Apart from that, rising inflation over last few years, was also a worry, along with rising fuel and electricity charges.
This is one part of challenge which seems to be neutralizing as this year, we have seen a good dip in inflation as well as fuel cost.

Talking about the numbers, it has remained flat over past few years, but things are expected to change now, as the company is gaining popularity among the big names in pharma, chemicals and agro space. The compounded sales growth and compounded profit growth i.e. CAGR for past 5 years has been 12% and 15% respectively, which is moderate.
Results in FY'14 were not that attractive when compared with FY'13, as sales and profit remained flat for the entire year, but there are some positives this year.
So far, for the first six months ended Sept 14, the company has reported 39% growth in sales and 33% growth in net profit. The debt levels reduced to half in FY'14 when compared with FY'13, though it has increased slightly in first six months of this year. The debt to equity ratio is below 1, which is also good. The cash flow of the company at operating level has always remained positive in last 10 years, which signifies the excellent operational efficiency of the company. The dividend payout so far has been excellent and the average payout ratio has remained around 28% which is very good for such a small company.
Speaking about its comparison with GMM Pfaudler, the largest listed player, in terms of market cap, GMM Pfaudler is trading at 7 times the value of Swiss Glascoat. Swiss Glascoat is trading at market cap of close to 50 Cr, where as GMM Pfaudler is trading at around 350 Cr, though one has to also consider the fact that GMM Pfaudler has a more stable fundamentals than Swiss Glascoat at present.
The challenge for the company now is to fight this battle and keep growing bigger, and probably challenge GMM Pfaudler one day.
On the basis of FY'14 earning, where company reported 7.61 EPS for the full year, it is currently trading at a P/E ratio of 13. However, for the first six months this year, the EPS stands at 4.26, and the company looks promising to kiss levels around 9 for the full year this time, which will make the P/E come down to 11 at current market price.

Note:
Looking at overall data, I like the company, their prospectus, and their numerical data so far in terms of quarterly results and balance sheet. However as always, the decision to invest in company or not, is up to the reader to decide, and the author doesn't take any liability for the same.
Off-late, we have seen plenty of volatility in markets, which has scared many small investors. For them, I will reply once again, that it is very difficult for me to comment on short term movements of specific stocks, as I believe in long term investments for good returns.
If there is any negative news flow related to any company discussed over here, even that will be shared with all readers. So, all the updates will be given, but that just has to be used as reference by all readers, and make their own decision based on their belief.

Happy Investing!!!!!