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Saturday, October 15, 2011

Is IFB Industries a Multibagger in Making?

IFB Industries Limited originally known as Indian Fine Blanks Limited started their operations in India during 1974 in collaboration with Hienrich Schmid AG of Switzerland. IFB Industries Limited engages in the manufacture and sale of home appliances and fine blanking components primarily in India.

The Engineering divisions are located at Kolkata & Bangalore. The Bangalore unit, apart from Fine Blanked components, manufactures motors for White goods as well as Automotive applications.

Its home appliance products include washing machines, microwave ovens, domestic and commercial dish washers, dryers, kitchen appliances, and commercial laundry products. The company’s fine blanking components comprise cushion plates for seat recliners; tongue for seat belt assembly; door latches; gate assembly for gear transmission; gear shift selectors, gear shift interlocks, and gear shifters for transmission; rotor segments for aircrafts; plate valves for compressors; and face comp drives, gears, cam plate assemblies, and sprockets for two wheeler.

Company drives its 85% of the revenue from home appliances and rest 15% comes from fine blanking components. The Company is continuously expanding its capacity of fine blanking division in the past two years and will be doing so in the near future. The Company has a well known companies in clientele list which includes Ford, Hyundai, Maruti, etc.

IFB Industries was declared a sick unit due to pile up of debt by the company in year 2001. The change in the management and change in the attitude made this firm a debt free company by 2009. The company is slowly emerging as a major appliance company with 13.9% market share which is increased from 10.25% two years ago.

The company has a market capitalization of 415 Crore and currently trading at mcap/sales ratio of 0.70x. The Company is a debt free company since last two years. The Company maintain ROCE of 30% in the last three years and has a EBITDA margin of over 10%. The promoters have holding of 71.5% which shows their confidence in the company. The operating cash flow of the company is been continuously positive in last five years and has increased nearly 3 times in last 3 years.

The top line and bottom line of the company has nearly doubled in last five years. The company is growing slowly and creating a niche of its own in kitchen appliances segment. Currently, the company is trading at P/E of 8 compared to another kitchen appliances company TTK prestige trading at PE of 35x. The Company is small, and become more efficient in operations compared to previous years, IFB Industries is all set to be benefitted from domestic retail growth in coming years and seems to be good medium to long term bet.

Note: The stocks discussed in Saral Gyan website through posts are not a part of "Hidden Gems", "Value Picks" and "Wealth-Builder" issue which we recommend to our paid subscribers only. These are just stock specific views by Saral Gyan Team; one must do the due diligence before doing any investment based on our recommendation.