Analysis
Company Background:
Archidply Industries Ltd. (AIL) was incorporated in September 1995 under the name of ATP Silvi Products Ltd. and the name changed to present in March 2007.
AIL is engaged in manufacturing of comprehensive engineered wood panel products and decorative surfacing products.
AIL has manufacturing plants in Rudrapur and Mysore producing items including:
Plywood and block board with installed capacity of 1,28,00,000 sq. mtr
Plain and pre laminated particle board with installed capacity of 2,11,50,000 sq. mtr
Decorative veneers with installed capacity of 37,50,000 sq. mtr
Decorative laminates with installed capacity of 12, 00,000 sheets.
The company’s patrons includes both:
Government sector viz. BSNL, LIC, IDCO and Power Grid Corporation.
Private sector viz. ABN AMRO Bank, Citi Bank, Hotel Sheraton, Cisco Systems, Apollo Hospital Enterprises Ltd, SAIL, Airtel, ITC and Reliance Petroleum Ltd etc.
The company has a large distribution network and operates through 16 marketing offices and 61 distributors and stockists. As on March 31, 2008, they have a network of 586 authorized dealers who in turn supply to more than 2,000 sub dealers / retailers, giving a pan India presence for marketing of their products.
AIL products comply with quality standards of BIS and International standards of BS of UK, NEMA of USA and DIN of Germany. It has been awarded ISO 9001: 2000 for quality management systems in manufacturing and marketing of wood and agro based panel products.
Post issue shareholding of promoter and promoter group will reduce to 68.31% from existing 97.68%.
Objects of the issue:
Setting up a new manufacturing facility for Plain Particle Board (PPB), Pre Laminated Board (PLB) and decorative plywood at Chintamani in Karnataka
Setting up a new manufacturing capacity for Medium Density Fibreboard (MDF) at Rudrapur in Uttarakhand
Strengths:
The company’s Rudrapur manufacturing plant enjoys various tax benefits such as exemption from entry tax, lower rate of 1 % central sales tax, exemption from central excise duty for ten years from the financial year 06-07, exemption of 100% from income tax for first 5 years with effect from FY 06-07 and 30% for next 5 years helping AIL to provide goods at competitive rates.
The RONW has increased from 6.1% in FY 06 to 34.9% in FY 08 because of increase in PAT.
OPM has increased from 11.1% in FY 06 to 18.5% in FY 08 and NPM has also increased from 1.9% to 10.4% for the same period.
Debt-equity ratio has decreased from 1.83 in FY 06 to 1.26 in FY 08 due to increase net worth.
Weakness:
The BV per share has decreased from Rs. 45.10 in FY 06 to Rs. 27.9 in FY 08 owing to issuance of share capital by almost 5 times over a period of two years.
Financials:
Net sales increased from Rs. 48.23 crore in FY 06 to Rs. 147.21 crore in FY 08 on account of increase in the distributor and dealers network across India.
PAT of the company improved from Rs. 0.85 crore in FY 06 to Rs. 15.00 crore in FY 08 due to augmentation of capacity utilization at Rudrapur plant, Uttaranchal.
Interest coverage ratio has increased from 1.4 times in FY 06 to 3.2 times in FY 08 due to substantial increase in EBIT.
ROCE of the company has increased to 23.5% in FY 08 from 9.7% in FY 06.
EPS of the company as on March 08 is Rs. 9.7, whereas post issue EPS (based on PAT for March 2008) stands at Rs. 6.81.
Valuation:
The shares are being offered in the price band of Rs. 70/- to Rs. 80/. Post issue the P/E of the company comes out to 10.27 at the lower price band and 11.74 at the upper price band.
Peer Analysis: (For FY 2008)
COMPANY Net Sales
(Rs. Crore) NPM (%) P/E
(Times) EPS
(Rs.) BV per share (Rs.)
Archidply Industries Ltd. 143.54 10.40 10.27-11.74 9.70 27.90
Mangalam Timber Products Ltd. 60.09 7.19 7.81 2.44 12.58
Novopan Industries Ltd. 84.08 7.12 7.67 5.09 27.85
Zerodha (Trading Account)
RHP
