Recommendation from Miscellaneous Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

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INTERNATIONAL CONVEYORS. : MAKING GOOD OF ITS NICHE PRESENCE

HERE IS WHY
✓Strong financial position
✓High barriers to entry
✓Robust exports sales

International Conveyors Limited (ICL) is the only listed company of India engaged in manufacturing and marketing of polyvinyl chloride (PVC) conveyor belting that primarily finds application in the mining sector. The company’s core business segment is conveyor belting, which contributes about 95 per cent. It is also engaged in other segments like wind energy and trading goods. Be it coal mining, potash, phosphate or other minerals, these mines are heavily dependent on conveyor belting. It is critical for bulk transportation of goods. ICL has been in the business for more than four decades now and has two fully integrated manufacturing facilities.

The company reported net sales of₹ 169.3 crore in FY21 compared to₹ 98.7 crore in FY20. That is a growth of nearly 71.5 per cent. Almost 80 per cent of its revenues are generated through exports. FY21 witnessed high order inflow through exports. The EBIDTA stood at₹ 29 crore in FY21 as against₹ 14.9 crore in the previous year. That is a growth of over 94.6 per cent. Also, the PAT saw good growth of 159 per cent with an increase from₹ 6.4 crore to₹ 16.6 crore from FY20 to FY21 respectively.

The liquidity position of the company improved significantly as the cash flows from operating activities increased from₹ 3.3 crore in FY20 to₹ 49.3 crore in FY21 by almost 15 times.

In Q3FY22, revenue grew by 44.12 per cent YoY to₹ 63.86 crore from₹ 44.31 crore in Q3FY21. On a sequential basis, the top-line was up by 24.05 per cent. Long-standing relationships with clients have been one of ICL’s strengths. Higher rate of repeat orders has helped the company achieve stronger sales. PBIDT exclusive of other income was reported at₹ 7.19 crore, down by 31.06 per cent as corresponding margin was reported at 11.26 per cent, contracting by 1,228 basis points YoY. PAT was reported at₹ 7.96 crore, down by 13.85 per cent from₹ 9.24 crore in the same quarter for the previous fiscal year.

The PAT margin stood at 12.46 per cent in Q3FY22, contracting from 20.85 per cent in Q3FY21. Looking at a couple of returns ratios, the ROE stands at 12.1 per cent and the ROCE at 14.1 per cent. The stock is trading near the price-toearnings multiple of 30. It has manageable amount of debt in its books as the debt-to-equity ratio stands at 0.3 times. In the past couple of years, the promoter holding has increased from 49.74 per cent in September 2020 to 65.97 per cent in March 2022. Some of the company’s domestic clients include the likes of Coal India, Tata Steel and Shree Cements while its marquee international client base consists of Rosebud, BeltTech, Mosaic and Nutrien, among others.

The sector in which company operates has high barriers for entry which augurs really well for ICL. Long gestation period, dual regulatory approvals and depth of customer engagement make it difficult for new competitors to enter the same business. In the wind energy segment it has five windmills that contributed₹ 2.6 crore to overall revenues. Notably, ICL produces twice the green energy that it consumes. To capitalise future growth opportunities, ICL is focused on penetrating new markets such as the Australian coal mines. It also aims to strengthen its presence in the South Africa market. By virtue of all these factors, we recommend our reader-investors to BUY this low-priced scrip.

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