Before reading the story, Let us see how many of us can answer below Generic questions
- How many of us know the manufactures of fasteners when wearing Bata, Relaxo or Liberty footwear (chappals or shoes) ?
- How many of us know seat belt manufactures of Indigo or Jet airways ?
- Who is doing the private labeling business of textiles companies such as Leefong?
- Have you ever tried to identify the manufactures of Hook & Loop fasteners for our Army dresses or orthopedic neck wear band?
Let us try to answer for some of the Investor questions now
- Do we have any company whose products are used across the industries, yet the valuation is very much reachable in this bull market ?
- Is there any such company + partnership with world No1 player in its operations so as to drive the future growth ?
- Can i identify such company when its market cap is 1/5th of sales ?
- Can i get such a company in single digit forward PE of 6-7 ?
Sky Industries Ltd (SIL) has been in the business of narrow fabrics for more than 20 years specifically in Hook & Loop manufacturing, in fact SIL is the largest player of Premium Hook and Loop Tape Fastener (Velcro) in India. Company enjoys its leadership position by Velcro brand association with Bata, Relaxo & Liberty footwear manufactures currently. These technical textile products are used mostly in all the industries such as Footwear, Orthopaedic, Aviation, Home furnishing, Food packaging, Automobile, engineering, Medical accessories and sports etc.
One of the main reasons which attracted me to this company other than its leadership position in India is its recent association with APLIX. APLIX is a world leader providing hook and loop fastening solutions for over 50 years and operates six plants in the U.S, France, Brazil and China and sales offices around the world with revenues of 205million euros. One can access here (http://ift.tt/2rduktd) to see the Aplix global network.
Manufacturing Units & Capacity: SIL is having three plants located at Pawne, Bhiwandi and Daman as follows. The Company started with 11 Needle Looms with a capacity of 1 million mtrs per month. Today, the Company has a capacity of nearly 10 million mtrs per month spread over three locations & current capacity utilization stands at 60-70% across these 3 plants.
Sky Magic: Sky Magic FR is our fire retardant hooks and loop tape fastener. It is nylon hook and loop which is chemically treated to slow the material burn speed.
Sky SAT is that it provides an alternative to nails, screws and staples and the adhesion is strong and reliable. Easy to use and saves time during application.
Sky Printee is a unique product offered to fulfill your branding need. It comes with customized print options on hook tape to avoid any duplication of your product in the market.
Sky Net: A noted use of hook & loop tape fasteners is to secure anti-mosquito netting or insect screens to window frames. SIL proactively built on this idea and pioneered a top quality, premium fibre glass insect screen – SkyNet Insect Shield. It is the best of world class technology brought to secure from all kind of diseases caused by mosquitoes and other insects.
Velvet: SIL manufacture premium quality velvet ribbons under the brand name Skelvet. Skelvet is largely preferred in upholstery, home furnishings, garments, home décor, gifting material, soft toys etc. Skelvet touches the lives of people as a fashion and comfort statement and is already gaining symbol in the fashion industry.
EASY-LOCK by APLIX® is a hook-to-hook closure made from food-grade, heat-sealable polyethylene material. Hooks engage on multiple levels making it easy to open and re-close. Unlike other systems, precise alignment is not required for sealing and its resistance to particulates keeps freshness locked in.
Sky Industries Limited is the official marketing partner for Aplix Inc. In partnership with automotive OEM’s and tier one suppliers, APLIX develops and produces specific hook & loop fastening systems to meet the performance requirements of automotive interiors as well, which can cover huge untapped market potential in Indian auto sector. This alone can boost the sales, profits to greater heights for Sky Industries.
Clients List: Sky caters to more than 800 customers across the country and various industry segments viz Footwear, Defence, Garments, Orthopedic, Automobiles, etc.
- Operating in a sector where company products are used across multiple industries.
- Association with world major Aplix.
- Establishment of brands (Sky Net, Sky Printee, Easy Lock, Sky Magic etc…) to capture the market share.
- Good financial ratios , ROE of 10, ROCE of 15, Expected EPS of 5 in 2018
- Reduction in Debt-Equity ratio from 1.5 to less than 0.5 in current year.
- Good client base across industries.
- Promoter self-allotment of 6, 30,000 warrants in December 2016.
- Market capitalization at 11 cr is 1/5th of current annual sales of 51cr.
- Capacity Expansion : The Company’s new proposed plant is expected to be a state of art plant with latest and more efficient technology, and catering to a market of nearly 20 million mtrs per month by next year.
Disclosure: I hold investment in this stock.
Note: This stock is currently trading in PCA(Periodic-call-auction) segment, where trade cycle will happen as follows.
Order Placement : 9.30 to 10, 10.30 to 11, 11.30 to 12, 12.30 to 1, 1.30 to 2, 2.30 to 3
Trade Matching & Order Execution : 10.15, 11.15, 12.15, 1.15, 2.15, 3.15
Registration Status with SEBI: I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. As per the clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”.
May 14, 2017 at 11:53AM