Mehabe score: 3 G Factor: 1 Piotski Score: 7 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 1 and Piotski score of 7.
Description
Sarla Performance Fibers incorporated in 1993 is engaged in the business of manufacturing specialized high tenacity yarns.
The yarn manufactured by it is used in the manufacturing of innerwear, narrow fabrics,
hosiery, sportswear etc.
Main Points
Manufacturing Presence:
SPFL has 2 yarn manufacturing units, 1 dyeing unit and 1 HT twisting unit in India.
All its units together form a vertically integrated plant from Spinning to the latest technology
for high bulk high stretch polyester and nylon muffs and thanks to in-house bonding and
kingspool winding which enables them to produce more than 250 different varieties of value added yarns.
During FY2020, SPFL increased its high tenacity twisting capacity in Dadra by additional 4800 tonnes/year at a project cost of 18.5 CrSite:SARLAPOLY
Market Cap:
Rs 320 cr
Price:
38.4
Trading pe:
16.8x
Book-value:
39.0/share
Div yield:
0.00 %
Earning yield:
10.10%
Face-value:
1.00/share
52week high:
41.65
52week low:
15.55
Technical Analysis
Stock trades at 38.4, above its 50dma 33.53. It also trades above its 200dma 27.01. The stock remains bullish on techicals
The 52 week high is at 41.65 and the 52week low is at 15.55
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
-Stock is trading at 0.98 times its book value
Weakness
– The company has delivered a poor sales growth of -0.07% over past five years.
– has a low return on equity of 8.65% for last 3 years.
-Earnings include an other income of Rs.17.38 Cr.
Competition
– The industry trades at a mean P/E of 13.6x. Sangam India trades at the industry’s max P/E of 83.98x. SARLAPOLY trades at a P/E of 16.8x
– Industry’s mean G-Factor is 4.3 while the mean Piotski score is 8.0. SARLAPOLY has a G-Factor of 1 and Piotski scoreof 7.
– Average 1 month return for industry is 20.5%. The max 1- month return was given by Deepak Spinners: a return of 40.16 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 91.38 cr compared to Rs 71.29 cr for period ended Mar 2020, a rise of 28.2%
Operating Profits reported at Rs 24.83 cr for period ended Mar 2021 vis-vis 9.06 for period ended Mar 2020 .
Operating Margins expanded 1446.4 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 1.17 compared to Rs 0.82 for previous quarter ended Dec 2020 and Rs 0.59 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 258.0 cr for period ended Mar 2021 vis-vis sales of Rs 311.0 cr for the period ended Mar 2020, a fall of 20.5%. The 3 year sales cagr stood at -5.3%.
Operating margins expanded to 22.0% for period ended Mar 2021 vis-vis 16.0% for period ended Mar 2020, expansion of 600.0 bps.
Net Profit reported at Rs 26.0 cr for period ended Mar 2021 vis-vis sales of Rs 29.0 cr for the period ended Mar 2020, falling 11.5%.
Company recorded a Net Profit CAGR of 2.7% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 10.0% compared to 9.0% over the last 3 Years. – The stock has given a return of 83% on a 1 Year basis vis-vis a return of -1% over the last 3 Years. – The compounded sales growth on a TTM bassis is -27% vis-vis a compounded sales growth of -1% over the last 3 Years. – The compounded profit growth on a TTM basis is -44% vis-vis a compounded profit growth of -5% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 0.02% vis-vis 0.02% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 44.87% vis-vis 44.87% for Dec 2020
Conclusion
– has reduced debt.
-Stock is trading at 0.98 times its book value – The company has delivered a poor sales growth of -0.07% over past five years.
– has a low return on equity of 8.65% for last 3 years.
-Earnings include an other income of Rs.17.38 Cr.
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 33.53 and is trading at 38.4 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
