Recommendation from Engineering - Industrial Equipments Sector

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

INTERNATIONAL CONVEYORS : RETAINING THE MOMENTUM

HERE IS WHY
✓Increasing demand for conveyor belts
✓Impressive global market share
✓Upgraded engineering facilities

To move items from one location to another, a conveyor belt system is practically necessary for every end user business, including those in such sectors as automotive, airports, retail, industrial, poultry and dairy, and food and beverage. The global conveyor belt market was around USD 4 billion in 2023 and will increase at 4.1 per cent CAGR to a total valuation of USD 6 billion by 2033. The increasing adoption of belt conveyor systems in industries such as automotive, aviation, logistics, food and beverages and retail is a major factor driving the demand for conveyor belts.

The conveyor belt market is expected to grow faster throughout the forecast period due to expansion in the industrial sector in fast-growing economies such as India, China, and others. Taking all this into account, our low price scrip for this issue is International Conveyors Ltd., a company that manufactures and markets solid woven fabric reinforced PVCimpregnated and PVC-covered fireretardant, anti-static conveyor belting. With a 45 per cent share of the Indian PVC mine conveyor belt market. 

It also produces and exports PVC belts to the US, Canada, South Africa and Australia. ICL has developed PVC conveyor belting to meet US MSHA (Mine Safety and Health Administration), CAN CSA (Canadian Standards Association), Test Safe Australia and SABS (South African Bureau of Standards) requirements. The company is a leading global manufacturer of solid woven belting, offering a wide range of conveyors, tying and doubling machines, and carcass-making machines. With a 2,400 mm beam width, it has one of the widest beaming machines in the world.

The engineering capabilities ensure timely manufacturing, focusing on customer satisfaction. The company has long-term contracts with approved suppliers and customers for order visibility and repeat orders. It also manufactures tailor-made products to meet country and customer specifications and aims to increase its manufacturing share to 25 per cent by 2025, focusing on technology development to increase efficiency and productivity. In Q2FY24, on a consolidated basis, the net sales of the company were flat at ₹42.76 crore as compared to ₹42.66 crore in the previous quarter of the same year. 

On a YoY basis, the net sales fell by 35.21 per cent. The PBIDT excluding other income increased by 56.95 per cent to ₹9.48 crore as compared to ₹6.04 crore in the previous quarter of the same year while on a YoY basis, it increased by 12.72 per cent. The net profit of the company increased by 217.17 per cent to ₹22.90 crore as compared to ₹7.22 crore in the same quarter of the previous year and sequentially increased by 62.30 per cent. The net profit margin increased by 2,047 bps on a QoQ basis and increased by 4,211 bps on a YoY basis and stood at 53.55 per cent.

At TTM, International Conveyors is trading at a PE of 11 times, which is lower than its three-year median PE of 22.4 times. The company has maintained a three-year ROE and ROCE of 11.3 per cent and 14.6 per cent, respectively. It has a three-year compounded sales and profit growth of 30 per cent and 50 per cent, respectively. The company has a debt-toequity ratio of 0.47 times and an interest coverage ratio of 10 times. Meanwhile, to reiterate, the demand for conveyor systems is poised to grow in tune with the increase in global manufacturing activity and this bodes well for the company. Considering all these factors, we recommend BUY.