Reviews

In this edition, we have reviewed Vaibhav Global Ltd and Menon Bearings Ltd. We suggest our reader-investors to HOLD Vaibhav Global Ltd and Menon Bearings Ltd

We had recommended Vaibhav Global in Volume 37, Issue No. 06 dated Feb 14 to Feb 27, 2022 under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹452.65. We had recommended the stock on the basis of strong return ratio, good growth prospects, and near-term expansion plans. Vaibhav Enterprises was established in 1980. Later, in 1989, it was incorporated as Vaibhav Gems Limited in Jaipur. Vaibhav Global Limited (VGL) is a global retailer of electronic goods as well as a producer of fashion jewellery and accessories for daily living. 

Analysing the performance of the company during the recent quarter, its net sales for Q3FY23 was recorded at ₹723.66 crore as compared to ₹750.41 crore reported in the last quarter. The operating profit saw a decline and was recorded at ₹75.87 crore in Q3FY23 as against ₹85.60 crore in Q3FY22. The quarterly net profit for Q3FY23 stood at ₹39.18 crore, down from Q3FY22 net profit of ₹69.30 crore. On an annual basis, the figures showed an improvement in results. The net sales increased by 8.36 per cent to ₹2,752.43 crore in FY22 from ₹2,540.07 crore in FY21. The operating profit on the other hand slipped to ₹303.21 crore in FY22 from ₹387.93 crore in FY21. The net profit also showed a degrowth in FY22 and stood at ₹237.11 crore as compared to net profit of ₹271.75 crore reported in FY21. 

The company has a strong team of professional designers that, on an average,come up with more than 24,000 new designs annually. These new designs have an acceptance rate of around 60 per cent in the market. The business deals in 250+ gemstones, including rare ones. Also, it has the widest possible global sourcing. New gemstones contribute about 3-4 per cent of the group’s annual turnover. The company has in-house manufacturing with testing lab and CAD and CNC machines. The employees are trained at globally benchmarked institutes.

TJC (UK), which is a subsidiary of Vaibhav Global, has upgraded its channel position from 50th to 22nd in January 2022. The investment is now yielding positive results in terms of new customer acquisition on TV. The company has taken steps to optimise the cost and has achieved a saving of nearly ₹32.77 crore in the nine months of this financial year. The company also gives out a dividend pay-out of 20-30 per cent of its consolidated free cash flow. Hence, we recommend HOLD. 

We had recommended Menon Bearings in Volume 37, Issue No. 06 dated Feb 14 to Feb 27, 2022 under the ‘Low Price’ segment. The recommended price for the stock was ₹89.95. We had recommended the stock on the basis of huge growth potential, focus on cost reduction and good returns on capital employed. Menon Bearings produces key engine parts such as bearings, bushes and thrust washers for long-haul, heavy-duty diesel engines and multi-axle vehicles at two locations, and produces aluminium die cast parts at a third. Watching the quarterly performance on a consolidated basis, its net sales for Q3FY23 increased by 1.21 per cent to ₹49.65 crore from ₹49.06 crore reported for Q3FY22. 

It reported operating profit of ₹13.17 crore for Q3FY23, thus zooming upwards by 34.93 per cent compared to the operating profit of ₹9.76 crore posted for Q3FY22. The company’s net profit soared by 46.1 per cent in Q2FY23 to ₹ 7.75 crore compared to the net profit of ₹5.30 crore earned in Q3FY22. On the annual front, its net sales for FY22 increased by 32.14 per cent to ₹195.40 crore from ₹147.87 crore reported for FY21. It recorded operating profit of ₹42.69 crore for FY22, ascending by 18.82 per cent against operating profit of ₹35.93 crore posted for FY21.

On the same lines, its net profit jumped by 30.50 per cent to ₹24.53 crore in FY22 as compared to ₹18.80 crore recorded in FY21. Exports revenue for Menon Alkop, a division of Menon Bearings, stood at ₹15 crore, up by 73 per cent whereas, its revenue from the domestic market stood at ₹113 crore, showing a growth of nearly 20 per cent. Despite global challenges, the company’s long-standing relationship with customers has helped it increase the revenue and market share. Significant savings in cost due to in-house development of machines and tooling capabilities offer the company a competitive advantage over its peers. 

The company has developed a state-ofthe-art manufacturing facility strategically located in Kolhapur, Maharashtra, spread over an area of 26+ acres. It has embarked on a diversification of its product portfolio through the manufacturing of new products to cater to the automotive component segment i.e., eco-antifriction (asbestos-free) materials in the form of products like brake lining and brake shoes. Menon Bearings has planned a capex of ₹30 crore till FY25. Given such favourable growth plans, we recommend HOLD.