Narmada Gelatines Ltd., formerly known as Shaw Wallace Gelatines was incorporated on 13Jan1961 as Leiner-Knit Gelatin Company. In 1978, the original promoter P Leiner & Sons fully divested in favour of Shah Wallace & Company and the name was changed to the Shaw Wallance Gelatines. In 1994-95, the company made a breakthrough in exports of gelatine of pharmaceutical grade to developed countries, and edible grade to Japan and the Netherlands.
Company’s manufacturing plant is located at Jabalpur, Madhya Pradesh. The company has pioneered the manufacturing of Ossein and Gelatine in India and is today a front-runner in India’s Gelatine Industry. Narmada has successfully applied sophisticated technology to ensure quality at each stage of its manufacturing process and its products meet international quality standards. The company is having a Government recognized in house R&D facility and it is having a dominant position in the domestic market. The company supplies its Gelatine products to industries like Pharmaceutical, Edible and Food, Cosmetics, Photographic, Industrial etc.
About Business :
The company is one of the leaders in manufacturing of Gelatine in India, company also manufactures Ossein(Bone), Bone Meal Products and Animal Feed Grade – Di Calcium Phosphate which are chemicals of industrial grade.
Gelatine is virtually indispensable in the Medical and Pharmaceutical field and is specifically processed for extensive use in hard capsules, soft capsules, micro capsules, tablets and other coating applications. Narmada Gelatine’s main production is in Pharmaceutical with range expanding to edible food grade gelatine, industrial manufacture of several coated and bonded abrasives.
Nearly 80% of Narmada’s revenues come from supplying to Pharmaceutical Industry which in itself is expected to grow at nearly 14% CAGR for next 5 years. This gives good revenue visibility for Narmada if it is able to maintain its market share in the Gelatine Industry.
Narmada Galantine’s profit has grown at a CAGR of around 20% and sales have grown at a CAGR of around 13% during the last 4years. The company is the most consistent performer among its peers. There are 5 listed gelatin companies:- Sterling Biotech, C J Gelatine, India Gelatine, Nitta Gelatine, and Narmada Gelatines. Except Narmada, all other players have fluctuating earnings during the last 4 years. Only Narmada has shown consistent and increasing earnings and dividend pay-outs.
Gelatine is mainly used in Pharma and food sectors. In Pharma Sector, a major portion of gelatine is used for manufacturing the outer cover of capsules. Food and Pharma grade gelatine consists about 60 % of the total gelatine consumption of the world. As Pharma and food sectors are recession free, the demand of Gelatine is not affected by any market downturn
Year over year, Narmada Gelatines Limited has seen net income shrink from 162.6M INR to 155.0M INR despite relatively flat revenues. A key factor has been an increase in the percentage of sales devoted to the cost of goods sold from 69.99% to 72.43%.These businesses cannot be judged by ROC & ROE.. they are steady but rock solid performers.
Thus,I think Narmada gelatine is a potential multibagger stock at this level due to steady and predictable business (main consumers pharma and food which is not impacted by recession), very attractive valuation, strong balance sheet, high promoter holding, good dividend yield, and bright future prospect in earning growth. Hence, one may buy NARMADA GELATINES LTD (NGL) at CMP of 147 for longterm. The stock is listed in BSE only.
Disclaimer: I do not hold this stock but planning to enter at various price points. It is advisable to do your thorough research before investing.
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