Mcnally Bharat ---- good company wrong promoters

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Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
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Printed Date: 21/Apr/2025 at 12:14pm

Topic: Mcnally Bharat ---- good company wrong promoters

Posted By: aloksahi1971
Subject: Mcnally Bharat ---- good company wrong promoters
Date Posted: 19/Nov/2009 at 4:33pm

McNally Bharat Engineering Co Ltd reported a sales growth of 81%, 92% and 161%, respectively, in the past three quarters. It is an engineering company that executes material-handling projects for power, steel, mineral and mining industries. The order book stood at Rs2,415 crore as on 31 March 2009. The company is also bidding for projects worth Rs4,075 crore. Despite the slowdown in steel and non-ferrous industries, operating profit growth is robust – 117%, 116% and 175%, respectively, in the past three quarters over the corresponding period last year. There are two major drawbacks of this stock. One, operating profit margin is a low 9% which means it has very little cushion; and two, the company is controlled by the BM Khaitan group (GP Birla group has a 24% stake) and neither of these two groups has a great record of creating shareholder value. That is probably why, despite its scorching growth, the stock is remarkably cheap. Its market-cap is 15 times its sales and 1.77 times its operating profit. McNally Bharat has signed an MoU with KHD Humboldt Wedag International GMBH and its subsidiaries in Germany, India and Hong Kong to acquire their engineering workshop in Cologne, Germany and their coal and mineral technology (CMT) business based in Germany, India, South Africa, Russia and China. Buy the stock at around Rs50.

This is moneylifes take on this company

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Replies:

Posted By: aloksahi1971
Date Posted: 19/Nov/2009 at 4:44pm

It has a low market cap. Huge order books. Cost of raw material will go down (if the theory of excess Iron production in China is true!)

It can grow @ 30 to 35% in the next 24 months and the present PE is 19

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Born To Golf forced to work.

Posted By: PKB2000
Date Posted: 19/Nov/2009 at 5:02pm

DISCLOSURE: I use to track this stock!!!

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I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso

Posted By: FutureBull
Date Posted: 19/Nov/2009 at 5:06pm

another disclosure: RJ is in the stock and many good FIs. it has got right fundamentals.. according to one report India will see >$50 Bn investment in metal and mining in times to come. this company would be direct beneficiary of that

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‘The market always does what it’s supposed to — BUT NEVER WHEN’.

Posted By: deveshkayal
Date Posted: 23/Nov/2009 at 9:33am

I hate companies raising capital through rights issue simply bcoz dilution happens at lower price.

Article in today's DNA says McNally targets 7000crs revenues by 2015. Such long term ambitions are hardly achieved by any company.

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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett

Posted By: praveen
Date Posted: 23/Nov/2009 at 11:03am

It competes with TRF & Elecon Engineering in the material-handling space

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Posted By: basant
Date Posted: 23/Nov/2009 at 11:17am

Originally posted by deveshkayal

I hate companies raising capital through rights issue simply bcoz dilution happens at lower price.

Article in today's DNA says McNally targets 7000crs revenues by 2015. Such long term ambitions are hardly achieved by any company.

Rights issue is the best way to dolute equity. Existing shareholders get chance to participate and for the ones who do not they can always sell their Rights forms.

I'd skip a company that makes a QIP to buy a company that makes a rights issue. That is because the price at which the rights are coming is irrelevant for an equity shareholder (from the holistic point of view). Higher the price good for the company but it is coming from the stockholder's pocket and lower the price bad for the company but then the stockholder is not been creamed and unlike those QIP fellows the Rights subscribers are in no hurry to flip or rather buy and dump!

One company that has almost always made a rights issue and up several hundred fold is Karur Vysya Bank!

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Posted By: Hitesh Shah
Date Posted: 23/Nov/2009 at 11:26am

Originally posted by basant

.....
One company that has almost always made a rights issue and up several hundred fold is Karur Vysya Bank!

But Basantji, they thought of it:

28-07-2009 Karur Vysya Bank Ltd has informed the Exchange that the Annual General Meeting of the Bank was held on July 27, 2009 and all the resolutions listed in the Agenda of the meeting were approved except the following: 1) Item No. 3 - Ordinary Business: Re-appointment Mr. M. K. Venkatesan who retires by rotation and seeking re-election. As the said Director has since expressed his unwillingness to get re-appointed. Board accepted the same dropped the said resolution. 2) Item No. 10 - Special Business: Proposal to issue shares through the mechanism of QIP in terms of SEBI guidelines to the extent of Rs. 500 Crores. Board has taken decision to defer the issue for now and hence the same was dropped from the listed agenda item.

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Posted By: arunshah2k
Date Posted: 24/Nov/2009 at 12:44pm

Quote from Prof. Bakshi's articles:

Once upon a time, not very long ago, Indian investors loved companies that liked to visit the capital markets regularly to raise equity capital. The mere announcement of prominent companies' plans to tap the markets in the near future was enough to make their stock prices zoom up. For, investors were eager to invest in companies that could dream up grand projects that required huge amounts of capital. The earnings of such companies, that were generated by pouring capital into capital-intensive projects were assigned high price-earnings ratios.

The pendulum has now swung the other way. Today, companies who visit the capital market are shunned by investors. The mere announcement of a company's plans to tap the market is enough for its stock price to plummet. Investors expect companies to finance their growth through internally generated funds. The term "earnings per share dilution" has become a dirty word in the Indian stockmarkets.

http://www.sanjaybakshi.net/Sanjay_Bakshi/Articles_files/Understanding_Dilution.HTM - Understanding Dilution

Originally posted by basant

Posted By: padmania
Date Posted: 26/Nov/2009 at 9:25pm

Is it OK to compare an engineering co with a bank.

Expect from the returns from an investors perspective I do not feel we can justify the comparison.

Posted By: sumit_sultania
Date Posted: 17/Dec/2009 at 12:58pm

they are again coming with rights issue..........

what is the motive?

Posted By: excel_monkey
Date Posted: 24/Jul/2010 at 3:18am

Impressive growth
Impressive order book
Impressive shareholders

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