As promised, here I am, with a brand new stock discussion.
And before I begin, let me remind about the disclaimer that this is purely a discussion, not a recommendation. Stocks are volatile by nature, exercise your own judgement to invest in them. Use only surplus money as there are chances of permanent capital loss in micro caps.
So let’s delve into the stock of this week called Bansal Roofing Products Ltd.
For those of you, who like, here is the Annual report, and for other’s let start the discussion in our specified format.
What does it do?
Products : Pre-engineered buildings, roof sheets, ventilation and roofing accessories.
Products are mainly related to infra construction, especially needed for setting up new project or construction activity.
Sales and Profit growth: Phenomenal
Last 10 years performance:
Notice stagnant growth period during 2015-2016 and 2019-2021, but increase in profit margin during the same period. Optimisation during those periods are visible.
Pledging: Zero!
Debt: Increased from nil to ~6 crs in last three years, but obvious for the small growing companies with expansion plan. Also its rated ‘MSE 1’ by CRISIL.
Dividend: nil since last two years, inline with capital requirements.
What’s the trigger?
Apart from the obvious infrastructure cycle play, here are some other key triggers.
Quality of clients :
Quality of product standard :
Capacity expansion:
The company has acquired a Land (Unit 2) measuring 300,000 Sq. ft. and constructed shed of 60,000 sq. ft. in first phase of expansion thereby increasing its production capacity of manufacturing Pre-Engineered Building from 200MT to 600 MT per month. The company further intends to construct 120,000 sq. ft. in coming years, thus to reach production capacity of 2000 MT per month.
Risk?
The obvious risk of investing in micro-cap stocks is loss of capital with the economic downturn risk, which is not in our control. Let’s see few others…
There was a significant jump in stock price during 2021 to 2022 period and almost flat growth since beginning of 2022. The reason for that is the movement of stock from SME platform to main board.
Also, company issued bonus shares in July 2021 (3:1, before moving from SME platform to main board) and that has increased the liquidity on the counter. Ideally, post bonus, the share prices remain stagnant for couples of years. So it may remain stagnant for few more months.
Also, the Company’s operations require substantial amount of raw materials and the same are exposed to volatility and fluctuations in prices and availability. Competition from the unorganised sector with questionable standards and high transportation costs are also one of the concerns in the construction industry.
Hope you enjoyed the discussion, will try to bring other stock in coming weeks. Till then, keep investing.