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Thursday, September 09, 2010

Manugraph Limited: Market Leader: Value Buy!!

Manugraph India Limited (MIL)
CMP: 50.10
Market Cap 152.84Cr
Reserves: 241.31Cr
Sales March 2010: 219.77Cr
ROCE: 7.01%
Gross Profit March 2010:
Website: http://www.manugraph.com/

Established in the year 1972 by its founder Mr. S. M. Shah, Manugraph India Ltd., is India’s largest manufacturer of web offset presses. It is the first Indian company to have achieved a breakthrough in exporting “Made in India” printing machines to advanced countries such as Germany, France, UK & USA as early as in 1994-95. Over the years, Manugraph has emerged as a thriving, nimble, printing machinery manufacturing enterprise, because of its ability to adapt itself rapidly to meet the challenges of a competitive economy and its commitment to be a supplier of choice by delighting customers with its excellent services and cutting edge technology. Manugraph believes that the key to maintaining a sustained success is choosing the right technologies and applying them to build cost-effective quality machines. Constant modernization and employment of state-of-the-art technology has enabled Manugraph to stay ahead in the industry, always.

In Nov 2006 Manugraph acquired 100% stake in the US-based press manufacturing firm Dauphin Graphic Machines Inc. (DGM). With this acquisition, Manugraph is now No.1 Single width, Single circumference press manufacturing company in the world!

Conclusion: Manugraph is experiencing the pains of decreasing worldwide print media due to the onslaught of Internet and the convergence of Information and Communication Technologies and recent buyout of DGM. However company with 50% reduction in sales for March 2010 still has positive Operating cash flows for the past 10 consecutive years.. which is a clear indication of a very focused management. It is also consolidating its position in the worldwide market which bodes well for its future.

The concern area is the convergence of ICT. India and developing countries are the growth area for Manugraph while Europe and US would be a stable high margin business for Manugraph.

I would suggest accumulation on a SIP (Systematic Investment Plan) investment for long term, 2+ years with target price of 100-150 per share.

Please find link to the latest  annual report March 2010


Anonymous said...

The overseas acquisition was a folly. It tells the management is not aware of global industry trends in their domain. The 50% drop in sales has resulted in 70% drop in profitability. It is not certain how long they will take to come out of the mess. The sales can continue to drop and that can impact profits further. Once the darling of small cap world (proce 300 plus in 2005-06) this stock is now a dog. Just reinforces my belief and humbleness in ensuring 'margin of safety' when buying stocks especially small and mid cap and then keeping a close eye on fundamentals.

What'sUp Prahalad said...


Acquisitions will always take time to digest.. look at Jaguar Land Rover (JLR) and Tata Motors in a tough market.. There is always hope and technologically as well as from an experience point of view promoters are well entrenched in their business.. I would look for opportunities to enter this script..
Company has positive cash flows even in this bad situation (50% drop in topline) which means the promoters know their business well..

=happy investing

Anonymous said...

Hi Whatsupji,

Could you please share your take on Manugraph as on today. What you feel could be the upside for Manugraph. Would it move like Jayant to 1000+?

What'sUp Prahalad said...

Anonymous ji,
in April 2006 Manugraph was quoting @ 300+ levels.. reporting 60Cr net profit..
I'm sure manugraph can easily reach 10x from CMP: 47/- if the profits rise to similar levels..

provided the manugraph management is willing... The key is multigraphmachinery.com which is the marketing parent of manugraph india.

PN: I do have investments in manugraph please do your own deep dive before investing..
This blog is for reviewing the though process behind my investment decisions..

=happy investing