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Key Investment Highlights:
- Nilkamal is the No.1 player in the moulded furniture business with a 38% market share and is 2.5-3x bigger than the No.2 player. The moulded furniture business contributes 38% to the total revenue.
- In 2005, Nilkamal has made a successful foray into furniture retailing business through its @home retail ventures. It currently operates 17 stores across 11 cities covering an aggregate carpet area of 268,831 sq.ft.
- The company plans to enter Monolithic construction business where it senses huge opportunity as usage of plastics instead of metals is expected to reduce the construction cost by 30%. Nilkamal does not need a capex for this business. Margins are more than 15%. Sintex, CCC, Man Infra are some of the players.
- Way2wealth is comfortable with Nilkamal’s Debt:Equity ratio of 0.83x which has reduced from 1.54x in FY08. With major capex already undertaken in the last few years and no major capex planned for the ensuing years, strong cash accruals and improvement in its working capital is expected going forward.
Valuation: At CMP of Rs265, the stock is trading at a P/E multiple of 6.8 times its FY11 earnings which is lower than its peers like Time Technoplast and Supreme Industries. Nilkamal's sound financial structure and improving operating performance (reducing working capital, increasing sales from @home) along with a dividend paying history makes Nilkamal a good investment bet.
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