Swiss Glascoat Equipments Limited – It may not buy you a Swiss holiday but……………

Since 1992, Swiss Glascoat Ltd has been manufacturing a range of niche products both ready made [ for standard requirement ] and custom built [ for unique requirement ] sophisticated equipments and accessories of unique nature used by the global pharma and chemical industry. Swiss truly operates in areas that requires deployment of technological excellence and innovation. The barriers to entry are high – as one may have tons of money but it’s not easy to venture into areas that require you to take advantage of the unique properties of glass and steel, use advanced manufacturing facilities and latest technologies and manufacture products that require you to comply with global benchmarks for excellence in engineering.

Technocrat who manufactures niche products

Spearheaded by a talented technocrat, Mr.Sudhershan Amin, Swiss Glascoat has made its mark in the global market place for glass lined products within a pretty short span of 17 years when leaders in this field like GMM Pfaudler continue to master the trade since the last 125 years!

Swiss Glascoat manufactures an impressive array of Glasslined Reactors, Process Tanks, Evaporation Vessels, Distillation Columns, Mixers and Agitators, Heat Exchangers and Dryers, Blenders, Agitated Filters, Pipes, Valves and Fittings, and other paraphernalia used for critical industrial applications..

Customers of Swiss are Kings
The company caters to the ever growing global chemical and pharma business and its clients include Cipla, Wyeth, Cipla, Cadila, Max India, Hindustan Lever, Krebs Biochemicals, RCF, Atul, Dhanuka Pesticides etc.It also supplies its products to G.E.Plastics [ Netherland ], Saudi Formaldehyde Chemicals Co. Ltd, Koalkob of Germany. It also does business with BARC, Mumbai.

Financials

Swiss Glascoat has a market cap of Rs.24 crores – yes, Swiss is the tiny Lilliput that fights with 125 years seasoned global player like GMM Pfaudler. Swiss has an Equity base of Rs/5 crores, Debt Equity Ratio of 1.24 and Interest Cover of over 2.5 times.

The promoters stake in the company is 43.45 per cent. The company’s shares are traded on BSE [ Code 522215 ] and the market price was Rs.49.25/share as the closing bell thronged on Friday 30 July. And at the time of writing this the price has silently and swiftly risen by 4.16 per cent and is trading at Rs.51.30/share, up by Rs.2.05 over previous days close. The face value is Rs.10/=

The company’s Revenue and PAT during fiscal 2009-10 was Rs 45.49 crores and Rs.2.34 crores respectively. Corresponding figures for 2008-09 was Rs.42.38 crores and Rs.1.76 crores. Thus, revenues increased by merely 7.33 per cent but profits increased by 32.95 per cent.

Foresight

There are tremendous business opportunities in the booming global oil and energy business for companies like Swiss Glascoat. Just consider this: “GMM Pfaudler is very involved in the energy market with their Engineered Systems group. Among others, this group has designed systems to purify biodiesel and glycerin, and re-refine used motor oil.” Expect Swiss to do something similar and much more in the years to come..

Conclusion :

We need to remember that in the world of business and finance, it’s not easy to make money by venturing into niche areas which require unique talent and the relentless pursuit of technological excellence and innovation. And its not easy to compete with seasoned players like GMM Pfaudler.

Being in a niche segment supported by a very low market cap augurs well for the company in the sense that once analysts start tracking and talking about this company then even consistent and moderate spike in volumes can drive the price pretty high. Hence, it is difficult to foresee how high the price could go. The 52 week range was Rs.63-30 - 15. The EPS for fiscal 2009-10 was Rs. 4.69 and you can expect current years EPS t be around Rs.6.5 and if we consider a moderate PE of say 13, then going forward we should see the share trading at around Rs.85/share. Expect to generate a cool profit of 50 per cent plus in 6 to 12 months flat! But be quick to act lest the profits start thinning as the shares keep drifting northwards.

As I sign off, I’d like to assure you that though Swiss Glascoat may not buy you a Swiss holiday yet it will reward you fairly well enough to buy lots of Swiss chocolates for your fair lady and loved ones as the company has declared a dividend of 17 per cent for fiscal 2009-10. And continue rejoicing the sweetness of the scrip as you stay put and wait patiently even as Swiss Glacoat continues its northward journey reaching new peaks, not on the Alps but on the BSE!

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd