Part-2

This part covers the period  2012 and 2013. 

2012

Let us assume the date today is 15th September, 2012. Its been one year since our investment in Acrysil and we plan to review it. 

The sales have grown by 14% and the Return on Capital has fallen from 15% to 10%.  The fall in return on capital does not seem worrisome as this is due to rise in raw material cost, the company in the past has shown pricing power over every three years.

This year there was grow in both domestic and export market. Currently, the company has more than 2,20,000 pieces of capacity which can further enhance its growth. The company plans to enhance its growth by introducing new models and further increasing capacity.

Share Price

Source: in.tradingview.com

The price has risen by 41% while the earnings have fallen by 40% resulting in expansion Pe from 8 to 14. It seems slowly the Mr. Market has started to realise the value of the domestic business.

 At this point of time, considering the initial investment we will do nothing. You may have a different viewpoint on this and we would love to know why.

2013

Let us assume today is 30^th September, 2013. We review our investment made in Acrysil two years ago.

This year the growth in sales has been 26% while the Return on capital is back to 16-17% levels.   It seems the effects of economies of scale have started to kick in.

Slowly exports is becoming smaller portion of the company and the sales in domestic market seems to have pick up. The company is even showing some pricing power with increase in prices with diversifying product profile.

Another thing to particularly note is the fall in number of outlets, though increase in the sales per outlet, shows strong distribution and maturation of stores. This will be a critical variable to track in future.

Though the management of the company seems to be a bit aggressive, some positive ability of the management is clearly evidenced through protection of earning power done with backward integration of the raw material reducing dependency on imports.

Since most of the expansion phase is completed (capacity of 275000 pieces per annum), it will be important to see what the company does in future. Leverage also needs to be in check. 

Share Price

The price has risen by almost 100% while the earnings have doubled resulting in PE contraction from 14 to 10.  The current interest rates are around 8.8% levels.

Still there are high chances for rerating of the company. At this point of time we may slightly add. You may have a different viewpoint and we would love to know what you would have done.

Purpose

The purpose of these case studies is to practice such cases and help all of us develop patterns to take similar decisions in future and avoid mistakes of both omission/comission. Its like practice before the main match. We may have made some mistakes or you may not agree with us. However, we would love to know why you think so or what you may have done differently? So that we may all learn together.  

You  may visit screener.in, main annual reports and in.tradingview.com for prices. These resources are really helpful.

Before Going further it would be better if you Analyse the case or do the valuation or allocation according to your own Method. That way it may help you to do better with the case further and sharpen your mind for future.

Pick Parts of the case study and use it as it may be helpful to you.

May we all learn and progress together. 

What Happened?

We will cover the next phase from 2014-2020 in part 3. Please click on 3 on the bottom of the page.