Recommendation from Commercial Services & Supplies 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.

Linc Ltd : EXPANDING INTO HIGH-GROWTH ADJACENT CATEGORIES

HERE IS WHY
✓ Actively targeting broader stationery market
✓ Operating leverage driving EBITDA margin expansion
✓ Compelling valuation relative to the industry

The global writing instruments market, valued at USD 22.5 billion in 2022, is projected to reach USD 32.9 billion by 2032, growing at a CAGR of 3.9 per cent, with AsiaPacific contributing 57 per cent to the growth from 2024-2028. Pens dominate the writing instrument market, holding a 33.8 per cent share, particularly in the student segment. In India, the writing and creative instruments industry was valued at USD 96.8 billion in FY22-23 and is expected to grow to USD 140-145 billion by FY27-28 at a CAGR of 7.7-8.4 per cent. The Indian pen market, comprising 65 per cent of the writing instruments segment, is set to grow to ₹6,200-6,500 crore by FY27-28. The sector’s growth is driven by a large youth population, rising literacy, and initiatives like Sarva Shiksha aimed at achieving full literacy by 2025.

Incorporated in 1976, Linc Ltd is one of India’s oldest and largest writing instrument manufacturers, offering pens, pencils, and stationery under brands like Linc, Pentonic, Uni, and Deli. With two ISO-certified plants in Kolkata and Umbergaon, it produces 25 lakh units daily. Linc has a strong distribution network of 2.41 lakh+ retailers and exports to over 40 countries. In FY25, it sold 7,106 lakh pens, held over 8 per cent market share, and exports contributed 19.5 per cent of its sales.

Linc is experiencing strong growth driven by its flagship Pentonic brand, which saw its contribution rise from 25.5 per cent in FY22 to 35.6 per cent in FY25. Q4 FY25 operating income grew 9.3 per cent YoY, supported by expanding e-commerce and modern trade channels. The company’s EBITDA margins are improving, reflecting operating leverage and premium product mix. Linc is strategically expanding beyond pens into markers, highlighters, and pencils, aiming to grow its Total Addressable Market (TAM) from ₹6,640 crore to ₹38,500 crore. Geographic expansion is underway, with West and South India now contributing 37 per cent of revenue.

Linc’s strategic JV with Mitsubishi Pencil Company to manufacture Uni products in Gujarat is a key long-term growth lever, with a ₹200 crore revenue target by FY30 and 25 per cent output planned for exports. With a strong brand, wide distribution, presence in 40+ countries, and a robust balance sheet (negative net debt), Linc is well-positioned to capture market share in both domestic and global stationery markets.

In Q4 FY25, Linc Ltd reported a robust financial performance with operating income rising 9.3 per cent year-over-year (YoY) to ₹153.93 crore. Operating EBITDA grew 14.8 per cent to ₹19.24 crore, and the EBITDA margin expanded 60 bps to 12.5 per cent, indicating premium product mix and improved operating efficiency. While gross profit increased 5.9 per cent to ₹48.49 crore, the gross margin declined 102 bps to 31.5 per cent. PAT rose 4.8 per cent YoY to ₹12.11 crore, with a PAT margin of 7.8 per cent.

Linc Ltd’s stock trades at a Price to Earnings (P/E) ratio of 22.80x, significantly below the industry average of 48.7x and lower than its 5-year median of 27.6x, presenting a decent valuation opportunity. Over the past three years, the company has delivered a CAGR of 14.4 per cent in total income and 69.5 per cent in profits. Return ratios remained strong in Q4 FY25 with an ROE of 17.1 per cent and ROCE of 21.3 per cent. Given its compelling valuation and improving product mix, we recommend a BUY on Linc.