Market Cap < 100 Cr | Undiscovered, Unknown Stock Idea | Expertise in Manufacturing Elevator Doors & Cabins | ROCE/ROE ~ 17 | Promoter Holding - 75% | Dividend Paying | 5Y Sales Growth : 50%
Micro-Cap Stock Idea of July'21 (Mentoring Program) : Aaron Industries Ltd (NSE-BE: AARON) - Report made PUBLIC today.
Note: Aaron Industries stock idea was published in July 2021 @ 95rs per share (CMP 136) to all our PAID subscribers of Mentoring Program where we identify 10 best-in-class micro-cap multibagger stocks from micro cap segment in a year. Today we are making this report public for the benefit of all those clients who wish to join us. To join WhatsApp to +91 9354179604 (Sanjay Gupta)
Below write-up & report was shared in July 2021…
🏆🏆🏆 Market Cap < 100 Cr | Undiscovered, Unknown Stock Idea | Expertise in Manufacturing Elevator Doors & Cabins | ROCE/ROE ~ 17 | Promoter Holding - 75% | Dividend Paying | 5Y Sales Growth : 50% | 5Y Profit Growth : 117% | Trusted, Efficient, Committed & Visionary Management.
Imp Note: Aaron Industries is a high priced stock idea trading at PE (FY22) of ~30 Vs Industry PE of 26. Unfortunately in the current market condition it is very difficult to find quality undervalued stocks. So, we decided not to compromise on quality of business, quality of management, growth in earnings & longevity of quality & growth. But Yes, we have compromised on "higher price" because over a longer period of time it does not matter much & the market usually pays for a company’s long-term fundamentals.
✅ ARE YOU LOOKING FOR REAL WEALTH CREATORS? THEN BET ON NICHE/FOCUSED BUSINESSES (In this case it's - ELEVATOR DOORS & CABINS)
📌 To summarize our next micro-cap multibagger (100x) stock idea, the company, management and the industry...
a) Small in Size - M Cap Below 100Cr | Good ROCE/ROE | Healthy Promoter Holding | Dividend Paying | 5Y Sales Growth ~ Excellent | 5Y Profit Growth ~ Exceptional.
b) Medium in Experience - Business group started 5 decades back; 2nd generation father & his 3rd generation two sons started this niche business 8 years back.
c) Large in Aspiration - Niche focused business, Capex done, Phase-1 started producing results, Phase-2 will commence.
d) Extra-large in Market Potential - It is operating in a multi-billion dollar industry. Rapid urbanization and vertical growth of cities are being considered major reasons for the growth of this industry.
✅ TRUSTED, EFFICIENT, COMMITTED & VISIONARY MANAGEMENT BACKED BY LEGACY OF MOTI GROUP.
- MOTI group started its operations more than five decades ago. Mr. Amar Chinubhai Doshi (eldest son of Mr. Chinubhai Doshi founder of MOTI Group) started a new venture named as "Aaron Industries" in the year 2013 for manufacturing and trading of Elevator products and other elevator parts.
- Mr. Amar Chinubhai Doshi and his two sons Mr. Karan Amar Doshi & Mr. Monish Amarbhai Doshi look after this business.
- Within a short span, Aaron has changed the elevator market by developing a large variety of Elevator Cabins and Auto door Systems, with designs that the industry has seldom seen.
- Aaron Industries Ltd is engaged in manufacturing various electronic equipment like Distribution boxes, Busbar chambers, Loom switch, cable tray, building hardware material such as Z perline and slotted channel.
- Company has already made more than Rs. 7 Cr. investments in a new line of business (backward integration) of manufacturing, processing, polishing, coating, buffing, designing, etching, finishing of all kinds of metals, metal products and stainless steel.
- This unit is the backward integration of Aaron's primary product portfolio i.e. Elevator Doors and Cabins. Commissioning of this unit is a strategic decision to strengthen the supply-side of the core products i.e. elevator doors and cabins.
- Apart from elevators, stainless sheets are used in a variety of industries such as food storage, architectural & construction, appliances and many more.
✅ EXPECT GOOD Q1FY22 RESULTS DUE IN NEXT 45 DAYS
📌 Why do we think that Q1FY22 is going to be great for this company?
- They have started manufacturing of Stainless Steel Press Plates for High-Pressure Laminate (HPL) from Apr '21 at the company’s Kosamba plant in Surat.
- They have announced the launch of its new product i.e. Etch Designer Sheet on May 8, 2021.
- With the new steel polishing segment, there would be a reduction in logistics cost, procurement cost, and execution time; thus Increases in Revenues + Reduction in cost.
- The company has improved its collection efficiency; Debtor days have reduced to 25 days in FY21 from 42 days in FY20.
- Backward integration helps in cost reduction that can be witnessed through rising Operating Margins ~ 18-20%
- Q1FY22 - Sales Expected around 8-10Cr; OPM ~ 18-20% ; Net Profit around 1-1.2 Cr ; EPS ~ 1-1.2
- FY22 - Sales Expected around 32-40Cr; OPM ~ 18-20% ; Net Profit around 4-4.4 Cr ; EPS ~ 4-4.4
- Considering FY22 EPS of 3-4 also, stock is trading at PE of 25-30 which is reasonably priced at forward earnings.
✅ GET ONBOARD BEFORE WELL KNOWN NAMES APPEAR IN THE SHAREHOLDING
- Strong Promoters holding of 74.97% shows that promoters are having high skin in the game.
- Shareholding of HNI investors (those having greater than 10K shares -OR- more than Rs 10 Lacs worth of this share as of today's price) has increased from 6.71% in Sep'18 to 12.59% in Mar'21. It means strong hands are cornering this stock.
- At the same time, shareholding of Retail investors (those having less than 10K shares -OR- less than Rs 10 Lacs worth of this share as of today's price) has come down from 13.80% in Sep'18 to 10% in Mar'21. It means weak hands are exiting from this stock.
📌 India is the second-largest elevator market in the world after China, with more than 50,000 elevators being sold every year. Rapid urbanization and vertical growth of cities are being considered major reasons for the growth of this industry. It is likely to get even stronger in the near future, with the focus on initiatives like Housing for All, development of smart cities and new infrastructure projects.
🎙️🎙️🎙 Company has expanded its business and entered into a new segment of steel polishing, which means "Expansion + Backward Integration". It helped in cost reduction that can be witnessed through a rise in Operating Margins. Company is investing heavily into its business and along with a high rate of return, that has resulted in a sizable growth in its earnings.💪💪💪
