Investment Memo: SGIL

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Our Rating: HOLD

Mehabe score: 5
G Factor: 4
Piotski Score: 7
The stock has a rating 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 4 and Piotski score of 7.

Description

Synergy Green Industries is engaged in the business of Windmill Parts and Other CI & SGI Castings.
Site: SGIL
Main Symbol: SGIL

Price Chart

Technical Analysis

• Stock trades at 193.0, above its 50dma 183.03. It also trades above its 200dma 149.26. The stock remains bullish on techicals
• The 52 week high is at 244.00 and the 52week low is at 80.85

Price Chart

P/E Chart

Sales and Margin

Strengths

–

Weakness

– Stock is trading at 8.14 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
– has a low return on equity of 10.78% for last 3 years.
-‘s cost of borrowing seems high

Competition

– The industry trades at a mean P/E of 19.9x. Sona BLW Precis. trades at the industry’s max P/E of 136.81x. SGIL trades at a P/E of 124.0x
– Industry’s mean G-Factor is 2.8 while the mean Piotski score is 7.0. SGIL has a G-Factor of 4 and Piotski scoreof 7.
– Average 1 month return for industry is 0.5%. The max 1- month return was given by Electrost.Cast.: a return of 16.25 %

Quarterly Results

• Sales for period ended Dec 2021 is Rs 70.57 cr compared to Rs 63.5 cr for period ended Dec 2020, a rise of 11.1% .

vis-vis 8.98 for period ended Dec 2020 .

• Operating Margins contracted -794.9 bps for period ended Dec 2021 vis-vis Dec 2020.
• Company reported operating profit of Rs 4.37 cr for period ended Dec 2021 and operating profit margin at 6.2 % for same period.
• The EPS for quarter ended Dec 2021 is Rs -0.76 compared to Rs 0.28 for previous quarter ended Sep 2021 and Rs 1.78 for Dec 2020.

Profit & Loss Statement

Profit&Loss Comments

• Company reported sales of Rs 274.0 cr for period ended TTM vis-vis sales of Rs 198.0 cr for the period ended Mar 2021, a healthy growth of 27.7%. The 3 year sales cagr stood at 18.4%.
• Operating margins shrank to 8.0% for period ended TTM vis-vis 12.0% for period ended Mar 2021, contraction of 400.0 bps.
• Net Profit reported at Rs 2.0 cr for period ended TTM vis-vis sales of Rs 4.0 cr for the period ended Mar 2021, falling 100.0%.
• Company reported a poor Net Profit CAGR of -26.3% over the last 3 years

Balance Sheet Statement

Cash Flow Statement

Cash Flow comments

• CashFlow from operating activities was positive.

Sales Growth

Profit Growth Statement

Profit Growth Statement

Stock Price CAGR

Return of Equity

General Comments

– The stock has given a return of 85% on a 1 Year basis vis-vis a return of 32% over the last 3 Years.
– The compounded sales growth on a TTM bassis is -4% vis-vis a compounded sales growth of 25% over the last 3 Years.
– The compounded profit growth on a TTM basis is 12% vis-vis a compounded profit growth of -8% over the last 3 Years.

Ratios

Shareholding Pattern

– FII shareholding has remained largely constant. The Dec 2021 fii holding stood at 9.88% vis-vis 9.88% for Sep 2021
– Public shareholding has remained largely constant. The Dec 2021 public holding stood at 14.12% vis-vis 14.12% for Sep 2021

Conclusion

– – Stock is trading at 8.14 times its book value
-Though the company is reporting repeated profits, it is not paying out dividend
– has low interest coverage ratio.
– has a low return on equity of 10.78% for last 3 years.
-‘s cost of borrowing seems high

• The business fundamentals of the stock remain stable. Stronger near term results will build interest in the stock. We suggest to wait for a upturn in business performance.
• Technically, the stock remains above its 50 DMA 183.03 and is trading at 193.0, thus bullish price action wise.
• Thus, overall we retain a HOLD on the stock.

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