Name :- Pokarna ltd
Current Market Price:-133
Had recommended to clients at 107 levels on 19th June, 2020
First Target: Rs. 250
Final Target: Rs. 500
Listed on NSE & BSE
Market Capitalization: Rs. 400 Crores
Allocation: 10 %
Promoter Holding: 57%
Conviction: Very High
Strong Balance Sheet, Very high margins, capacity expansion & very attractive valuations.
About the company:
Pokarna is one of the largest manufacturer of granite and engineered quartz stone slabs in India. The company’s move from a granites player to a high margin quartz manufacturer was supported by strong raw material integration and exclusive technological tie up with Breton Stone.
Pokarna’s exclusive technology contract with Breton Stone for India gives it an edge over other quartz slab producers in India as well as over quartz manufactured using Chinese technology.
The company has 15 captive mines with a colour palette of 75 plus Company source majority of raw materials from captive quarries, Company has rich source of some of most sought raw materials after colors. These ensure that company always has best quality of raw material at most affordable price. These help them to maintain their raw material and improve overall margins. Also Latest equipment are imported from the likes of Pellegrini, etc which ensures that they are operational at optimal cost.
Pokarna’s existing 6 lakh sq mt (LSM) capacity in Visakhapatnam operated at 100% utilisation in FY19. Due to this capacity constraint &robust demand for quartz company is setting up new a 7.8 LSM capacity quartz plant in Hyderabad that is expected to be commissioned any time soon in July 2020,The company has proposed | 330 crore capex for the project (| 250 crore debt and | 80 crore internal accruals)
This new capacity expansion will help company to boost topline as well as bottom line in a big way going forward the new capacity itself is 130% more then current capacity.
No overhang of regulatory issues:
On November 14, 2019, the USDOC increased preliminary CVD(import duty) on Pokarna from 4.32% to 83.79% after a US based stone manufacturer-Cambria Company submitted comments alleging significant ministerial errors in CVD determination.
The above talks of duty lead to near term Disruption and stock price collapsed as USA is one of the major markets for Pokarna .
The investigation by Commerce’s U.S. International Trade Administration (USITA), however, resulted in a anti-dumping rate designation of between 1.57% to 2.67%, based on the manufacturer, for India’s quartz surfaces.(Big positive)
The proposed tariffs on quartz surfaces from India are substantially below the tariff rates finally imposed on material from China, which range from 260% to more than 300% which is a big big positive for company like Pokarna.
Announcement by the company on 29th may 2020 to stock exchange as they received FINAL order from USITC: https://www.bseindia.com/corporates/anndet_new.aspx?newsid=b412f99e-8d4b-4658aad9-6e1a4593c9c3
Pokarna is all set to benefit in a big way going forward and one can expect big jump in revenues and profitability of the company.
Valuations:
For the current year FY20 Pokarna is expected to post Rev of Rs. 375 crore and PAT of 75-80 crore.
For FY20 We @ Dialwealth expect Company to post PAT of more then 100 crore and PAT of 150+ crore for financial year FY21-22
At CMP of 133 Mcap of Pokarna is just 400 crore & stock is trading at just 4 times current year earnings and 2.5 times One year forward.
Even if stock gets 7-8 times current year earnings stock will Double in next 6 to 12 months and it can be a big multibagger in next 2-3 years, historically company has traded at 10 times one year forward earnings.
Pokarna is a very good brand in USA and other European Countires that is the reason it enjoys very good margins also in India, IT has a long term tie up with companies like IKEA to supply materials
Pokarna has a neat and clean management team and company has a good history of paying dividend to minority shareholders.
Pokarna also has a very very small textile division which management is planning to sell it off.
All the negatives related to Duty are now over and with new capacity coming online pokarna is all set to return to its growth trajectory, also trade war and more than 300% tariff on china is another things working in favour of Pokarna.
WE HAVE SHARED FEW MORE UPDATES AND ANALYSIS OF Q4 NUMBERS WITH OUR CLIENTS.
TO RECEIVE TIMELY UPDATES & OUR DETAILED NOTES JOIN OUR TURBO PLAN.
TO JOIN TURBO PLAN WHATSAPP US YOUR NAME TO 9930441584.
I AM NOT A SEBI REGISTERED RESEARCH ANALYST AND MY VIEWS ARE BIASED PLEASE CONSULT YOUR FINANCIAL ADVISOR BEFORE INVESTING.
