at the Bangalore unit is being increased to 35,500 pieces per day from 10,500 pieces. In addition, the company is adding up
a 2,000 kg per day yarn dyeing facilities.
MLL sells its fabrics both in the domestic and global markets under the brand name 'Mudra', which commands a
premium. It intends to further strengthen its brand by investing in promotional and brand building activities such as
advertising, organizing conferences, participating in national and international events.
MLL is a preferred fabrics exporter to various overseas markets. Shirting fabrics and dress material are exported to USA,
Europe and the Middle East. It is now concentrating on developing export of shirting fabrics to other territories too.
During FY07, MLL registered 58% higher sales of Rs.163 cr. and posted 93% increased net profit of Rs.18 cr. yielding an
EPS of Rs.4.7 on its enhanced equity of Rs.36 cr. During Q3FY08, net profit went up by 77% to Rs.8.4 cr. For the first nine
months of FY08, although sales advanced by 74% to Rs.191.5 cr. net profit shot up by over 108% to Rs.23.4 cr.
Its equity capital is Rs.36 cr. and with reserves of Rs.111 cr., the book value of the share works out to Rs.41. The promoters
hold 55% in the equity capital, foreign holding is 3%, PCBs hold 9%, institutions/mutual funds hold 7% leaving 26% with
the investing public.
MLL is a multi-product, multi-fibre and multi-market player covering the entire textile value chain. With a target market
that is a diverse mix of the domestic market, institutional sales, garment export trade and exports ensures the spread of
risk with stability of earnings.
The garments business, which caters to the demands of domestic branded players, has begun to make a stronger
contribution. Its growth has come on the back of some capacity expansion, but indicates that orders are beginning to flow
into this segment.
More significant is the strong demand that is likely to flow in from branded apparel outfits and retailers such as Raymond
and Madura Garments, which are expanding their retail presence through their own outlets and multi-branded outlets
(MBO). They are likely to outsource more of their production to players such as MLL. The likes of Reliance Retail and
Bharti, too, are likely to be on the lookout for units that can produce private labels. Against such a backdrop, MLL's scale
and integrated facilities would be seen as an advantage.
The growing contribution from garments could lead to better margins and a higher return on capital. MLL hopes to
achieve a revenue mix of 50:50 for fabrics and garments by FY08.
MLL is likely to achieve sales of Rs.275 cr. and earn a net profit of Rs.35 cr., which would yield an EPS of Rs.9.7. After
expansion, sales are expected to touch Rs.500 cr. in FY09 with a net profit increasing to Rs.60 cr. EPS would work out to
Rs.16.7.
The MLL share is traded at Rs.38 at a P/E of 3.7 on its FY08 estimated EPS of Rs.9.7 and 2.2 on projected EPS of Rs.16.7 for
FY09 and is recommended with a target price of Rs.55 in the medium-term. The 52-week high/low of the share has been
Rs.115/33.
******
The share of Nelcast Ltd. (Code: 532684) (Rs.105) is available at a substantial discount of 60% of its IPO price of Rs.219 in
June 2007.
Promoted by P. Radhakrishna Reddy, who is the Chairman & MD, was established in 1985, Nelcast has since been a
significant and diligent participant in the ferrous casting industry producing superior quality castings for various
industries. It has shown an astounding growth rate of 140 times of its original size to reach its current capacity of 84,000
MT. It plans to double its capacity in about two years. Its corporate office is located in Chennai while the international
office is located in Illinois in USA.
It tapped the capital market in June 2007 with 43,50,000 shares priced at Rs.219 aggregating Rs.95.27 cr. for expansion and
working capital needs.
Its two manufacturing units are located in Gudur, Andhra Pradesh and Ponneri in Tamil Nadu. Both the units have a
locational advantage of proximity to the Chennai Port and being well-connected by rail and road.
It manufactures around 200 different castings in SG and grey iron, cylinder blocks, flywheels, flywheel housings,
housings, hubs, spring shackle, brackets, transmission case, axle housings and exhaust manifolds. Beginning as low as 0.5
kg, Nelcast offers parts upto 250 kgs and in
several grades of Grey & Ductile Iron.
It manufactures parts to be used in various
applications in automobiles such as the
engine, transmission, suspension, axle, brake
and steering. It caters to the tractor industry
for their requirement of various housings as
well as engine, transmission and axle
components. The other users are the railways
and the pipe fittings industries.
