GG Engineering Stock Analysis

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CMP: 62.50

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G G Engineering Limited (“GG” or the “Company”) is the most well-established players in Gensets & Reverse Vending Machine (RVM) industry in India.

A reverse vending machine is a device that accepts used beverage containers and returns money to the user. These machines are popular in places that have mandatory recycling laws or container deposit legislation. This is a growing industry in India at the back of changing regulation for solid waste management.

The Company operates through a 40,000 sq. ft. plant with latest Computer Aided Design (CAD) technology in Bharuch, Gujarat. The plant has an annual capacity of 1,800 units of Gensets and 3,300 units of RVMs and undertakes a range of activities like punching, forming, shearing, bending, fabrication, welding and assembly. The Company has a wide distribution network in Western India which includes – six distributors each in Gujarat and Maharashtra and six agencies in both states to service customers.

PRODUCT PORTFOLIO

GG Engineering offers gensets and RVMs in varying capacities and specifications.

  • RVMs (plastic bottle crushing machines) – under brand name ‘PETWASTE’
    • Wall mounted & hand press machines
    • Heavier machines with wheels
  • Diesel Generators – Extensive product range in enclosed industrial diesel generator sets is driven by Tata Motors’ engines, ranging from 20 KVA to 125 KVA (20 kW to 100 kW). Also supply spare parts for diesel gensets.
  • Industrial Components
    • Air Conditioning Components – Manufacture sheet metal air conditioning components with powder coating for Voltas. GG Engineering is the only approved vendor for Voltas’s Vadodara unit as the OEM outsources components for their AC range.
  • Industrial Engine
  • Marine engines
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I am particularly excited about this line of business:

  • Sanitizing Tunnel – The Company’s sanitizing tunnels/chambers can be used by hospitals, departmental stores, apartment buildings or any other facility to sanitize the entrants of the premises.
  • Touchless Hand Sanitizer Station including containers
  • Mask Vending Machine

STRONG CLIENTELE

  • Tata Motors – GG engineering is an approved generator and industrial/marine engine Original Equipment Manufacturer (OEM) for Tata Motors.- – GG-engineering-tata-motors-exchange-filing.pdf
  • For RVMs – Wild West Media Pvt. Ltd., Reliance Life Sciences, Ganesha Ecosphere Ltd.

Financial Performance

Particulars FY16 FY17 FY18 FY19 FY20
Revenue (In Rs. Cr.) 5.08 7.26 22.22 82.05 16.49
Growth 42.91% 206.06% 269.26% -79.90%
EBITDA (In Rs. Cr.) 0.29 0.29 1.60 3.65 0.79
EBITDA Margin 5.71% 3.99% 7.20% 4.45% 4.79%
EBIT (In Rs. Cr.) 0.09 0.20 1.50 3.46 0.58
EBIT Margin 1.77% 2.75% 6.75% 4.22% 3.52%
PBT (In Rs. Cr.) 0.03 0.06 1.44 3.28 0.06
PAT (In Rs. Cr.) 0.02 0.17 1.02 2.26 0.09
PAT Margin 0.39% 2.34% 4.59% 2.75% 0.55%
EPS (In Rs.) 0.02 0.16 0.99 2.19 0.09
EPS Growth Rate 750.00% 500.00% 121.57% -96.02%
Historic P/E (Closing Price of 31stMar) 73.69 29.11 18.87 353.98
Current P/E (TTM) 750.34
Shareholder funds (In Rs. Cr.) 3.09 3.26 7.66 13.19 14.84
Minority Interest (In Rs. Cr.) 0.00 0.00 0.00 0.00 0.00
Debt (In Rs. Cr.) 1.53 1.52 1.97 3.80 4.34
Cash (In Rs. Cr.) 0.14 0.07 0.15 1.15 0.29
Ratios
D/E 0.50 0.47 0.26 0.29 0.29
ROCE 6.28% 6.07% 16.61% 21.48% 4.12%
ROE 0.65% 5.21% 13.32% 17.13% 0.61%
Interest Coverage 1.61 1.07 5.93 10.43 1.46
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FY 2020 Result Impact – The Outbreak of pandemic CoVID-19 across the globe and in India has impacted Company’s operation by way of interruption in its core activities, supply chain and availability of Manpower. The Company resumed its partial operations by way of procuring orders through digital means of communication w.e.f. 4th May, 2020 and since then the operations are stabilizing.

Focus on New Product Launch

With a view to increase its product line, GG Engineering has commenced manufacturing of Automatic Sanitizer dispenser or Touchless Hand sanitizer and Sanitizing Tunnel (also known as Sanitizing Chamber). GG Engineering is a pure play in this space (i.e. the only listed company in this segment). Demand for this new line of product is growing rapidly and becoming permanent hospitals, department stores, apartment buildings etc. The product is 100% Made in India.

This line of product is available at different price range – from Rs. 75 (for 1 litre hand sanitizer bottle) to Rs. 35,000 (for a sanitization tunnel).

Other products launched by the Company for post lock-down operations includes automatic hand sanitizer touch-less, Automatic mask dispensing machine etc.

Strong Future Prospects of Reverse Vending Machines (RVMs)

Inspired by the Swachh Bharat Abhiyan, GG Engineering launched India’s first fully-automated and smart Reverse Vending Machines (RVMs) to enable environment-friendly disposal of plastic and other waste. The Company operates a diverse portfolio of Pet Bottle Crushing Machines. The Company aims to install RVMs at locations close to major sources of plastic waste generation such as railway stations, shopping malls, residential societies and other public places.

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The Company is focused to provide machines in various configurations and capacities suitable for different types of locations.

New Revenue Stream – RVM Installation with Ad Rights

The Company has received an order from Western Railways to install and operate 25 plastic bottles crushing machines (PBCMs) across 16 train stations in Mumbai divisions. The contract awards advertising rights to show/broadcast advertisements at the PBCM kiosks. Advertising revenues will become a key revenue stream going forward with more such PBCM installation projects with advertising rights expected to be executed.

The contract also awards full rights for Pet bottle waste collection, another source of income. A single machine can collect up to 1000 bottles or 25 kgs of waste.

Last updated: 2nd September, 2020

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Rajat Sharma
Founder - Sana Securities | SEBI Regd. Investment Advisor | New York Attorney | Tweets about Stocks, Personal Finance, Investing and Trading
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