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Thursday, January 13, 2011

Murli Industries – appears cheap but is risky

Murli Industries Limited based in Nagpur company was initially functioning as Murli Agro Products which was rechristened as Murli Industries Limited in 1991. The company operates 5 divisions as under :

CEMENT
The company has one operating plant at Chandrapur(MS) with cement Production capacity of 8300 MTPD. Murli is planning to set up additional 3 plants as unde

  • Rajasthan - 10,000 TPD
  • Gujarat - 10,000 TPD
  • Karnataka - 10,000 TPD

PAPER

In this segment, the company manufactures Duplex Boards which are sold to leading FMCG, harmaceuticals, Textile industries etc.

SOLVENT

Under this segment , the company manufactures Soya Refined Oil, Soya De-oil cake and Soya Acid Oil.

POWER

The company believes in self –reliance and hence set up a 16 MW Power Plant for its Paper UUnit and has also installed 3 x 16.5 MW Power Plant for its Naranda cement unit.

PULP
Murli has a paper unit with a capacity to manufacture paper to the tune of 150 MT per day.

The Promotors holding is 54.59 per cent. Institutional holding is just 0.74 per cent.

The company generated total Revenues of Rs.571 crores and PAT of Rs.37.6 crores in FY10. In Q2FY11 the company generated revenues of Rs. 132 crores and PAT of just Rs.2.73 crores as compared to Q2FY10 topline of Rs.68 and bottom line of Rs.10 crores respectively.

A low PAT Margings hovering around 8 per cent coupled with a high Debt Equity ratio of 3.69 and Interest Cover of 2.08. Further, its Inventory holding period has shot up from 175 days in FY09 to 204 The 52 week range was Rs.118.90/48.50. The stock is currently quoting at Rs.49.60 that’s close to its 52 week low.


The company has a Marketcap of just Rs.266.4 crores and is available at a PE of just 7.54. So though the valuations appear to be cheap backed by a diversified product range, considering the high Debt Equity ratio and low profit margins, it’s a bit too risky to take a call on this scrip despite a decent Dividend Yield of 4.03.


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

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