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Thursday, June 29, 2017

Bemco Hydraulic: Hidden Gem

BEMCO Hydraulic
Market Cap: 40.59Cr
Year Ended March 2017
Sales: 42.53Cr
Net Profit: 3.62Cr (includes: 2.82Cr Exceptional item)

Bemco Hydraulic was incorporated in 1957. It is now a premier producer of Hydraulic press equipments.
BEMCO, originally an Engineering Craftsman's shop in the late thirties has risen to be a premier manufactures of Portable re-railing equipment, Light weight re-railing equipment, Hydraulic Re-railing equipments, Re-railing Systems, Hydraulic press, Wheel fitting press, Straightening press. Our Portable Rerailing Equipment is designed for re-railing cars and locomotives. The light weight of the rerailing equipment makes it a useful tool in solving re-railing problems safely.
BEMCO now has a well planned and adequately equipped manufacturing setup where every infrastructure is available to design, develop and produce a mega range of Hydraulic press and Light weight Portable re-railing Equipments.BEMCO, by collaborating with Vogel of Germany and Towler Brothers of U.K manufactured the first ever indigenously produced Hydraulic press.
 Re-railing and rescue Equipment catalogue

BEMCO major clients are:
1. Indian Railways, 2. BHEL, 3. BEML, 4. ESCORTS, 5. NFC(Nuclear Fuel Complex), 6. BARC(Bhabha Atomic Research Center), 7. HMT, 8.Ministry of Defense, 9. Kirloskar, 10.FORCE Motors, 11.Siemens, 12.ABB, 13.AMCO, 14.Ashok Leyland, 15.BFW(Bharat Fritz Werner), 16. L&T, 17.CA, 18.Denso, 19.Eicher, 20.FAG, 21.TIMKEN, 22.GRSE, 23. Hero Group, 24.HCL, 25.Honda, 26.Indo Nippon Electricals, 27.Atlas Cycles, 28. Jai Parabolic Springs, 29.Kalyani Group, 30. Lemken, 31. KEC International, 32.Whirlpool, 33. KSB, 34.Lucas TVS, 35. Brakes India, 36. Avon cycles, 37. Mahindra, 38. MICO, 39.NBC Bearings, 40. New Holland, 41.NRB Bearings, 42. Indian Ordinance Factories, 43.Panasonic, 44.Piaggio, 45.Rane (Madras), 46.Rane, 47.RSB Group, 48. Salem Steel, 49.Sintex industries, 50.Sona Steerings, 51.SRF, 52.SUNFAB, 53.Sundram Fastner, 54.Suzuki, 55.TELCO, 56.TAFF, 57.Toyota, 58.TTK Prestige, 59.TVS, 60.Vespa, 61. Vikram Sarabhai Space Center, 62.Voltas, 63.Bharat Forge, 64.Wheels India, 65.ZF India.

Bemco Total Issued Equity Capital:  5.39Cr out of which Equity Capital: 2.19Cr, Preferential Equity:3.20Cr
Bemco Hydraulics has Preferential capital which is being given 11% interest..
March 2013 Equity Capital: 1.45Cr, Preferential Capital:3.38Cr
March 2014 Equity Capital: 1.79Cr, Preferential Capital:3.20Cr
March 2016 Equity Capital: 2.19Cr, Preferential Capital:3.20Cr

the Equity capital is increasing while the Preferential capital is reducing.. which is an indication of better days for equity shareholders.

Latest Year ending March 2017 Results.
Stand alone profits have an exceptional item 2.8Cr which is writeback of "Deferred Payment Liabilities"

Also if you see the Reserves
March 2016: -87.27Lakhs
March 2017: +ve3789.92Lakhs (37.89Cr)

Property Plant and Equipment:
March 2016: 697.52 lakhs (6.9Cr)
March 2017: 4212.35lakhs (42.12Cr)

So looks like the books are being cleaned/strengthened.. so that the company has respectable assets and earnings, liabilities (preferential capital) is being reduced.. I would say its all due to BASEL-III guidelines..
Companies can no longer get access to capital if they do not have a strong balance sheet or income/profits.

Also with AADHAR being linked with PAN .. fictitious PAN/individual investors on paper is a thing of the past..shareholders have to be identified.. and hence stock prices will reflect true value..

Market Cap:40.59Cr
March 2017  Total Shareholder funds: 43.29Cr
which means Book Value is higher than CMP..??? EPS with exceptional income @ 16.99
giving a PE of  11, Book Value of 197.6

Another interesting observation is demat shares
Public shareholding: 5,53,430 share out of which only 3,52,700 shares are in demat form (63% available for trading)  ie Free float is: 3,52,700 x 185.6 = 6.5Cr

If you look at the detailed public shareholding.. actual demat shares with public (shareholders with shareholding less than 2 lakh (20,000 shares)) is just 82,659 shares ie 82.659 x 185.6 = 1.53Cr Free Float

Conclusion: Bemco Hydraulic is a well established name in  its line of business.. Hydraulics is required in heavy industry as well as in Shopfloor automation.(robotics). company has also started manufacturing low power consumption hydraulic systems which would be used in automation activites in the industry. With make in India and involvement in Railway, space, defence and heavy industry I expect topline to improve. Management is also converting its preferential capital into Equity which means management expects equity to do well in the future... its a good long term buy.. Hidden Gem.


Karthikraja K said...

Pneumatic is preferred in Industrial Automation for its precision, less messy and easy to maintain. Wherever there are heavy weight like railway coaches & cars, then Hydraulics are preferred. L&T hydraulics blinking for their business.
I think it is better to watch the Sales growth for few quarters. But by the time, it may not be hidden gem. it could be shining star.

Kindly share your views on Business side. thank you.

Multibagger Stock Recomendation Provider said...
This comment has been removed by the author.
kishor said...

your current views about bajaj hindustan prahalad ji

saket kumar said...

Really good analysis, I am big fan of your's stock choice. I will dig deeper and try to find more from my side. waiting for next post with more information as you have capability to dig deeper and find hidden Gem with value. Cheers!!!