Nitin Spinners - Spinning the Threads of Growth

CMP  113.60

Nitin Spinners is one of the leading producers of  cotton yarn ranging from Ne 6 to Ne 80 in single, multifold slub, compact, core spun, elitwist yarns and knitted fabrics of single jersey, rib, interlock fabric, lycra blended fabrics and other possible structures. 

The company has started its production facilities with 384 rotors in 1993. It has gone for regular expansion and  today with the combined installed capacity of nearly 223056 spindles & 3000 rotors, manufacturing 50000 tons of yarn and threads per annum, the company has carved a niche for itself on the textile map of the country. Later company has gone for value added products with forward integration and established Knit Fabric Division with 63 Knitting machines, having production capacity of 9,000 tons of fabric per annum,  top quality fabric is already making its presence felt in the global textile industry. The company exports about 56% of its production to more than 50 countries across all the continents.

Integrated manufacturing plant is located at Hamirgarh, District Bhilwara (Rajasthan) equipped with latest technology machineries and coal-based captive power plant of 10.50 MW. The company has all quality certifications as per International Standards like ISO 9001:2015, Environment and Energy Management System Certifications ISO 14000 & ISO 50001, OSHAS and SA 8000. It is also certified by OEKO TEX Class I, GOTS, OCS for Organic Cotton, BCI certification for Better Cotton Initiative, SUPIMA Certified, Cotton USA and Government of India recognized Export House

Products Portfolio 

Yarns

The company produces a wide range of cotton yarns ranging from Ne 5 to Ne 24 in Open-end and Ne 10 to Ne 80 in Ring-spun yarns, with single and multi-fold types. It also produces value added yarns like Slub, Compact, Core Spun, Organic and BCI/TBC certified yarns and yarns manufactured from Supima and Giza cotton.

Knitted Fabrics

The quality Yarns is used to manufacture top quality grey fabrics which is consumed by the global apparel industry.  knitted fabric division is equipped to knit various type of structures to meet varied demands of customers for different end applications.

Product Applications

Company's products are used for multiple applications such as high value apparels, terry towels, all types of knitted garments, denims, furnishing fabric, sheetings, medical and industrial fabrics, mattress stickings, tea bags etc.

Market and Clients

The Company has marquee clients across the European, US and Asian Pacific countries and the domestic market as well. The company caters to textile companies like Arvind, Raymonds, Alok, Bhaskar, Nandan, RSWM etc. About 56 per cent of the production goes to more than 50 countries across the globe including the US, Latin America, Middle East, Far East, European Union, Africa etc

Investment Rationale 

New capacity expansion will drive the top line growth because company has more than tripled its spindle count in the past 3 years from ~77,000 spindles to 223,000 currently. Recent expansion of spinning capacity in compact spindles will further enable the company to produce superfine premium yarns for high-value apparels and finishing fabrics. Company plans to move further into value -added products, which includes dyed and melange yarns. Company is enjoying economies of scale by having one of the largest spinning capacities at a single location and large diversified product range catering to varied customer needs.

Company is using state of the art latest technology from world renowned machinery manufacturers. All plants are updated with latest technological developments and supported by experienced professionals. Well equipped lab to monitor quality and develop new product for customers. 

Raw cotton is major cost component in spinning business and cost is expected to remain stable in future. Company is strategically located in the cotton growing belt giving logistics and cost advantages. Steady domestic consumption along with high average sales realization wil help to domestic manufacturers.

Company’s facilities are centrally located provides added advantage of lower logistics cost along with economies of scale. Existing projects enjoy benefits of interest subsidy under TUFS and interest subsidy & electricity duty benefits under RIPS.

Experienced promoters have excellent capabilities and vision to grow small spinning unit into  worldwide recognized company as the industry leaders for spun yarns. 

Now business sentiments has started improving from Q3 after getting impacted due to implementation of  GST in Q2. The Indian apparel market is expected to grow at a CAGR of 10 -15%, on back of various growth drivers like Increase in per capita income, large youth population, Increase in aspirational buying, Increase in urbanisation, Increased standards of living in the rural areas and Increased penetration of online retailers. Export demand is picking up for India made cotton products. 

Company is consistently increasing its focus on domestic market and gradually reducing its exposure from exports market.  Going forward company planning to move up the value chain by increasing share of fabrics to further drive margins. The gradual improvement in domestic demand will result in better realization of yarn products.

Indian textile industry has lot advantages due to availability of a wide variety of cotton fibre, fast growing synthetics-fibre industry, wide range of cotton/spun yarn, presence across the value chain, trained manpower and all these factors  presents an enormous growth potential for Indian textile and apparel sector.

The domestic fibre consumption of less than three kg, is one of the lowest globally. Increasing population, favourable demographics, rising per capita income, affordability and global trend awareness will further drive the domestic growth. As a result, the fibre consumption is expected to grow from the present levels of 9 Million tons to above 14 Million tons by 2020.

In 2017 company has successfully implemented expansion project of Rs. 290 Crores and to reduce the debt, company has successfully raised additional equity capital of Rs 108 crores through QIP in November 2017 and allocated 93,85,765 equity shares to major mutual fund companies @ Rs 115 per share

Aditya Birla Sun Life Small and Midcap Fund =  21,73,913

L&T Emerging Business Fund = 25,29,236

IDFC Sterling Equity Fund = 16,30,000

Edelweiss Tokio Life Insurance = 8,69,000


Company has Issued 10,00,290  preferential equity shares to promoters @  Rs 120.50 per share in December 2017.

http://www.bseindia.com/xml-data/corpfiling/AttachHis/0f7d86df-85b9-48e4-8256-373c5c8d2ac4.pdf


http://www.bseindia.com/xml-data/corpfiling/AttachHis/440534b2-cb09-404d-b1cf-ae5bf3f57cc9.pdf

There will be significant reduction in debt due fund raised through QIP & preferential issue. The company will able to show better earning and better financial leverage for future expansion project.

Further company plans to put up Integrated Textiles Units as a greenfield project.  The proposed project will have facilities from spinning to processing, value-added segment to manufacture blended cotton yarns, melange yarn, dyed yarns, dyed and finished knitted fabrics and a new category in finished woven fabrics in cotton and its blends. The company has already purchased about 50 acres of land around 70 Kms from existing site and the same has been converted for Industrial use. For further details refer below link


http://www.bseindia.com/xml-data/corpfiling/AttachHis/5ae0af96-42f6-4486-996b-e6976e7be567.pdf

Conclusion

The Textile Industry plays a significant role in the Indian economy. It  constitutes 20% of industrial production, contributes around 10% to the export revenues and 20% to the employment in the industrial sector. This shows India’s potential to emerge as a global manufacturing hub  for textile and clothing. The domestic market also offers significant growth opportunities for Indian textile industry. 

Nitin Spinners has delivered industry-leading growth in past  and it will continue to outperform its peers in the future. Nitin Spinners is aggressively expanding its capacities to capitalise on the expected high future demand in textile sector. 


Nitin Spinners stock at cmp Rs 114 is very good investment opportunity for both short  term and long term ( 1 year to 4 years ). It can be bought + / - 10% from cmp with 10 -20% of portfolio allocation.

DEEPAK NITRITE LIMITED

CMP = 213

Deepak Nitrite is a leading manufacturer of organic, inorganic, fine and speciality chemicals with more than hundred products across three broad categories. It caters to Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile, Detergents, Fine & Specialty Chemicals etc. Company  have five manufacturing facilities at Nandesari and Dahej in Gujarat, Roha and Taloja in Maharashtra, and at Hyderabad in Andhra Pradesh. Fully integrated infrastructure equipped to manage a product right from design to despatch lends Deepak Nitrite a strong competitive advantage, company produces complete value chains, right from feedstock to finished product within the organisation.

Deepak Nitrite is adopting the principles of responsible chemistry and stands among 18 Indian companies to be accredited with Responsible Care certification - towards global environment, safety and health management.

Deepak Nitrite currently operates its businesses with three main SBUs namely Basic Chemicals,  Performance Product segment and Fine & speciality chemicals

Investment Rationale

Deepak Nitrite is setting up country’s largest phenol-acetone project at Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) in Dahej, Gujarat. This greenfield mega expansion project is under construction since last 3 years and costing ₹1,400-crore  through its wholly owned subsidiary Deepak Phenolics. The project is very near to completion of final stage and expected to start the commercial production within next 2 -3 months.

Below video link is helpful to understand the huge potential of this mega project.

https://www.youtube.com/watch?v=4q5PmUSVMFs

The phenol-acetone project will achieve 70% capacity utilization by next year (FY18-19) and 85-90% by FY19-20 to generate around 4500 crores annual revenue from new plant.

Below guidelines are given by company’s Promoter and Chairman & Managing Director Deepak Mehta stated that the company will explore more downstream products from phenol.

“We are setting up the country’s largest phenol-acetone plant at Dahej PCPIR with capacity of about 200,000 tonnes per annum. Once this project is commissioned, it will trigger a lot of new opportunities for Deepak.

“We are also looking to explore more downstream products from phenol. We have set an ambitious target of $1 billion turnover in the next three to four years," Mehta told BusinessLine.

http://www.thehindubusinessline.com/companies/deepak-nitrite-eyes-1-b-revenues-in-3-years/article9869314.ece

Company is sourcing best  phenol plant technology from Kellog Brown & Root International and technology for curmene is has been sourced from UOP Honeywell. EPC work for the plant has been done by Thyssenkrupp. It will be one of the best cost effective and efficient plant in the world. Company has added the cumene capacity which is feedstock for manufacturing phenol and acetone. It will further help to improve the profit margins.

India is importing 80% of Phenols and Acetone from other countries to meet the overall demand and Deepak Nitrite is building the plant to meet at least 60% of overall demand. Phenol demand  is expected to remain strong for longer period and entire capacity of Deepak Nitrate will get absorbed in domestic market.  

http://vibrantgujarat.com/writereaddata/images/pdf/project-profiles/Manufacturing-of-Phenol-Acetone.pdf

Phenol is used in the manufacture of a large range of commercial products. It is consumed in laminates, automobile, foundry, paints, rubber, surfactants, pharma, agro-chemicals, infrastructure products, epoxy resins, polycarbonates, phenolic resins industry etc. Acetone is predominantly used in the production of pharmaceuticals, paints, adhesives and thinners, etc. Thus both phenol and acetone have very wide range of application in almost every industry and it is giving clear visibility for very long term revenue generation for the company.

Deepak Nitrite has market leadership position in most of its products like Xylidines, Cumidines, Oximes, Colour Intermediates, Sodium Nitrite, Nitrate & Nitro Toluenes in the India and among top 3 global supplier for Cumidines and Oximes

Deepak Nitrite has  increased its focus on adding high value products catering to pharma, rubber, colourants and imaging products, paper products and other industries. Moving higher in the value chain to improve its profitability in long term.

Diversified product portfolio  gives stability and strength because it covers several industries  like Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile, Detergents, Fine & Specialty Chemicals.

Over the years company has built enduring relationships with leading global companies with strong distribution network across the globe with footprints in over 30 countries. 

Its strong R&D focus has led to in-house development of new product applications and understanding customer preferences resulting in having strong customer base consisting of some of the largest chemical companies in the world, including BASF, Syngenta Global, Bayer Cropscience, HMEL, Monsanto, Clariant, SF chem, Lonza, IOC, Reliance,  Essar, EASTMAN, saltigo etc.

Conclusion 

Deepak Nitrate is growing at decent pace with existing product portfolio and generating  revenue around 1500 crore and profit more than 100 crores. But upcoming phenol and acetone mega plant is going to bring huge turnaround  in topline and  bottom line in coming quarters. 

Company is continuously maintaining its market leadership position in several products and now further addition of phenol and acetone. It is because of exceptional foreseeing ability of management to capture the opportunities for those chemicals where stable demand and supply gaps exist for longer period and scope of  adding high value products.

Deepak Nitrate stock at cmp Rs 213 is very good  investment opportunity for short term and long term ( 1 year - 4 years). It can be bought + / - 10% from cmp with 10 -20% of portfolio allocation.

Gati Limited

CMP = 128

Gati Limited is a pioneer in the express distribution, supply chain solutions, e-commerce & cold chain logistics. Gati has transformed the logistic industry in India with many a path breaking revolutionary initiatives that paved the way to an organized logistic industry. Gati started operations in 1989 as a door-to-door cargo company, a division of Transport Corporation of India (TCI).  It became a separate company in 1994. Over the years company has grown its extensive network across India providing deliveries to 19000 pincodes, covering 672 out of 676 districts in India by using different modes of transports ie. Road, Rail, Air & Sea. It also offers specialized logistics services and it is currently among the top  players in the E-commerce logistics business. It has a strong market presence in the Asia Pacific region and SAARC countries with offices in China, Singapore, Hong Kong, Thailand, and Nepal.

https://www.youtube.com/watch?v=Pot9krQzF7k

Gati is an end-to-end logistics solutions provider with following business structure.

E-Commerce Logistics and Fulfilment Services

http://www.gaticonnect.com/

Gati E-connect is the e-Commerce Logistic Solutions vertical of Gati Ltd. It is first integrated e-Commerce logistic solutions provider in India. Gati's e - Commerce solutions come with the expertise to achieve complex needs in managing customised  e-tailing logistics solutions. Leveraging its extensive express logistic  network, strong e-fulfilment capabilities and innovative supply chain technologies. Gati’s e-Commerce logistics has built a capacity to deliver more than 80,000 packages per day.

https://www.youtube.com/watch?v=zKtJkQrRZ_s

Quick facts 

• Pan-India presence to deliver to a wide customer base
• Delivery  capability  to  handle  shipments  ranging  from  0.5kg  to 1 ton
• IT and Automation Solutions
• Dedicated Customer Care Center
•  ‘One Ship Model’ setup for end-to-end delivery 
• Door step delivery backed by blend of bikers, drivers and franchises growing regularly.
• Capability to handle large volume with greater operational efficiencies and flexibility.

Express Logistics

http://www.gati.com/

Express distribution is time sensitive movement of commercial packages on door-to-door delivery concept and Gati is a pioneer in developing this concept in India more than 25 years back. This division of Gati is the most preferred Express Distribution and Supply Chain Solutions provider because of its ability to handle every distribution need of its customer. An intrinsic network that spans the length and breadth of India Gati-KWE has a reach of more than 99% of the districts in India. A large fleet of more than 5000 vehicles and an assured space across 32 airline sectors ensures that all couriers,  cargo and shipments are delivered in time at the right place. 

Express distribution division of GATI has over 5000 clients from industry sectors such as Pharma, FMCG, Engineering, Auto ancillary, Textiles & IT hardware. Express distribution division has a combined fleet of 5000 vehicles and a warehousing capacity of 3.3 mn. sq. ft.

https://www.youtube.com/watch?v=RyOliosedmg

Quick facts 

• Unmatched multi-model network
• Door pickup & Door delivery
• Well-developed  network and  optimised route planning system
• Operates in 32 airline sectorsExpertise in handling high value shipments & perishable goods
• 24/7/365 service level monitoring system 
• Online tracking, sms and e-mail updates of shipments in transit

Cold Chain Logistics

http://gatikausar.com/

Gati Kausar is a subsidiary and cold-chain arm of Gati Limited. It is the longest established cold-chain company in India, with 30 years of expertise in the cold-chain distribution business. Gati Kausar offers customised solutions for temperature sensitive shipments including consumer foods, pharmaceuticals, retail and agri-food sectors.

Gati Kausar innovative cold-chain transportation solution, strengthened by cutting edge technology,and a vast fleet of refrigerated vehicles equipped with advanced climate-control systems ensures that perishable products are delivered in a fresh, healthy and potent state to retailers and end consumers.

The state of  art modern refrigerated units, established reefer network, temperature controlled vehicles, IT infrastructure and experienced team helps them offer the right solution for every customer need.

Quick facts 

• ISO 9001:2008 and FSSAI certified company.
• HACCP procedures for safety and prevention of contamination.
• State-of-the-art modern refrigerated units from France and USA  Containers with insulation to withstand the harsh India climate zones.
• Tamper-proof  vehicles  to  mitigate  pilferage  risk  Unmatched  Infrastructure and Network.
• Fleet  comprising  of  close  to  180  refrigerated  vehicles  load  capacity from 1.3 tonnes to 24 tonnes, temperature range from +25 o C to -25 o C.
• Transporting  approximately  2,00,000  tonnes  annually unmatched network, covered over 300 districts in India.
• IT  capabilities,  Modern  Vehicle  Tracking  System,  Data  loggers  to  monitor in-transit conditions throughout the journey.
• In  house  capabilities,  In-house  dedicated  solutions  team,  reefer trucking team and refrigeration team In-house workshop, with inventory of approximately 3000 SKUs.             

Investment Rationales

Long outstanding FCCB issue with Goldman Sachs is recently resolved . It has enabled the company to expand its business activities like strategic investment, demerger, fund raising and business expansion without any restriction.  It has also resulted significant decline in debt.

Gati maintains its the market leadership position in express distribution in the non documents market with ~19% market share. The logistics industry in India is expected to grow at CAGR of 16 -20 % in the coming years.

Gati with its widespread reach and warehousing capabilities is well  positioned to seize these opportunities rising due to implementation of GST 

Gati is fully integrated multi-modal logistics player with a comprehensive pan-India network, it is clear beneficiary of business shift from unorganised to organised players after the implementation of GST from last quarter.

The demand for warehousing is expected to grow at an annual rate of 10 % and  Gati with its widespread reach and warehousing capabilities is well positioned to seize these opportunities.

Gati has fleet size of 5,000 trucks , 200 reefer trucks, 76 warehouses and over 6,000 trained work force with a widespread network managed by multi-modal capabilities, technology supported expertise makes Gati the most prefered one-stop solutions provider for all logistic requirements from warehousing, freight forwarding, supply chain solutions, temperature controlled solutions, B2C couriers and fulfilment  centres.

Gati has partnership with major global player Kintetsu World Express for express distribution business & supply chain solutions and with Kauser for cold-chain  distribution and solution. It give world wide access in business and related technology.

Gati Kausar has immense potential for growth opportunities rising  in the agri, food and pharma sector.

Conclusion 

Gati is ready to capture  the strong opportunity unfolding in the Indian logistics landscape because this sector will remain backbone of every development rising due to GST,  e-commerce, infra, housing and in agri sector. 

In the past stock was unable to participate any market rally due to pending FCCB issue. The issue was settled in last quarter but that time most of the transport and logistic stocks came under pressure due to initial hiccups while implementation of GST. Now transport and logistic will pickup the growth momentum and it will remain the main beneficiary. Gati at cmp Rs 111 is providing decent investment opportunity ( 1 year -  4 years) for short as well as for long term. It can be bought +/ - 10% from cmp.