CMP: Rs.88.70
Face Value: Rs.10
BSE Code: 515093
Book Value: Rs.100.57
EPS: Rs.15.33Dividend: 20%
Equity Capital: Rs.8.95 Cr
Market Cap: Rs.79.36 Cr
Sector: Mining, Minerals, Marble & Granite
Performance: Market Out-performer
Stop Loss: Rs.83.5 & Rs.72.5
Exit Stop Loss: Rs.64
Target: Rs.300-Rs.500 in 600—800 days
Introduction: Madhav Marbles & Granite now Madhav Granite & Realty Ltd. (MGRL) has now diversified into fast growing realty sector to match the growth momentum of the new age sunshine industries. It is India’s third largest manufacturer and exporter of granite tiles and slabs. Madhav Marbles and Granites Limited was incorporated as a Public Limited Company in 1990 to set up modern processing plants for marble and granite tiles and slabs. It was promoted by Mr. Rajsingh Dungarpur, J H Dashora, R K Bapna and Ms. Lata Mangeshkar. A plant for producing marble tiles was set in Udaipur in the state of Rajasthan in 1992 and a similar plant for granite tiles was set up near Salem in the state of Tamilnadu. Thus both the plants are located near sources of raw material.The granite plant is a 100% export oriented unit and exports almost all its production to many countries including U.S.A., Germany, Holland, U.K., Australia and South Africa. The marble plant, though not a 100% export oriented unit, exports almost its entire production to various countries, prominent ones being Italy, Spain, Japan, Germany, Holland and U.S.A. Both tiles and slabs are processed in Udaipur and the company operates marble quarries in Keshariaji near Udaipur , famous all over the world for its Green Marble, and also exports marble blocks to Italy, Spain and China. Madhav Marbles and Granites Limited is a member of the Marble Institute of America.
Shareholding Pattern: The promoters hold 40.2 % while the general public holds 59.8%. Among the public holding United India Insurance Company Ltd holds 4.03 %, JM Financial Services Pvt Ltd holds 1.12 %, Emkay Fincap Ltd holdsw 1.07% and LRS Portfolio & Advisory Services Pvt Ltd holds 1.64 %. While the above three are new entrants, which took position of the shares of the company LRS Portfolio holding has remained constant Y-O-Y.
Financials: For Fy07, the net sales of the company were Rs.88.76 Cr against Rs.75.3 Cr in the same period previous year. The net profit during the period was Rs.13.6 as against Rs.15.3 Cr due to higher interest outgo and depreciation. This gave an astounding EPS of Rs.15.21 against Rs.17.1. The Board of Directors had recommended a Dividend of 20% (Rs 2.00 per share) for the year ended March 31,2007.For Q2FY08, the net sales were almost flat at Rs.21.8 Cr against Rs.25.7 Cr, Q-o-Q. The net profit during the period was Rs.4.9 Cr against Rs.6.2 Cr. But the most scintillating part is that the operating profit margins increased to 33.92% from 29.35%.Another point which is worth noting is that it derives around 55% revenue from the Granite Slabs, 30% from granite tiles, 10% from marbles and the rest 5% comes from power and other activities.
Triggers:
1. To cash on the construction boom, the company has diversified into the realty business comprising Urban Infrastructure, Township, Housing and construction development projects. To fund these plans it, Madhav Marbles & Granites Ltd has have approved and accorded their consent to the Board of Directors for the Issuance of GDRs / ADRs / FCCBs / or any other securities convertible into equity shares (through Depository Receipt Mechanism) up to an amount not exceeding an aggregate of US$ 15 Million.
2. MGRL had undertaken expansion of its granite processing capacity, which was completed during March, 2006 and the benefits of enhanced capacity are being realized from the financial year 2006-07. MGRL is has also replaced the existing tile finishing line with a new finishing and designing line from Pedrini of Italy at a cost of Rs.6.5 Cr. MGRL also plans to install some more wind turbines for captive/commercial purpose.
3. MGRL has now diversified into the realty business (as mentioned earlier) comprising urban infrastructure, township and housing & construction projects. For this, MGRL has entered into the high end, niche realty projects in the key realty markets of Rajasthan and has formed three project specific special purpose vehicles (SPVs) in partnership with leading realty developers of North India.
4. Its realty foray shares strong synergies with MGRL’s existing business as it possesses strong domain knowledge in the use high-end premium granite and marble tiles and slabs to construct exclusive realty interiors and give properties a distinct edge.
5. The construction & realty sector accounts for nearly 78% of India's GDP and is emerging as one of the key growth segments in the economy whose contribution is likely to increase in coming years. In recent years, the government of India's focus and sustained increased budgetary allocation for infrastructure development in India has resulted in or is expected to result in several large infrastructure projects in the region.
6. With the thrust on infrastructure and construction industry, the prospects for MGRL’s business appear bright. Based on current rate of growth, MGRL is expected to post an EPS Rs.25-Rs.30 in FY08 and further to Rs.40 in FY09, when the effects of the realty business start yielding results.
7. Both its granite and marble division are doing excellently well. With the rupee stabilizing at the current rate, it s exports are again looking attractive.
8. Another vital point which makes it even more attractive for investment is that it was promoted by Mr. Rajsingh Dungarpur & Ms. Lata Mangeshkar.
Conclusion: Considering all the factors mentioned above it has been found that the scrip of Madhab Marbles and Realty Ltd is highly undervalued at the CMP of Rs.88.7 and would soon go for re-rating. Risk taking investors should buy this scrip at the CMP for some decent appreciation within the next 6 to 8 months time frame.