SOLITAIRE MACHINE TOOLS LTD
DATE: 28/04/2018
  • COMPANY NAME : SOLITAIRE MACHINE TOOLS LTD
  • Description :

     

    Recommendation - Buy

    Hold for 1 years

    Target: 135 Rs.

     

    • CMP: 91 Rs
    • BSE Code: 522152
    • NSE- NA
    • Market Capital: 41.3 Cr.
    • Face Value: 10
    • 52 Week Low / High: 34.1/93.9
    • Book Value: 25.85
    • Price/Book Value: 3.52
    • Promoter Share Pledge – Nil
    • TTM EPS – 3.95
    • P/E – 22.95
    • Industry P/E – 35.95

     

    Before knowing details about company Solitaire Machine, better to know some basic details about centerless grinding as company is a leading manufacturer of Precision Centerless Grinders.

     

    What is centerless grinding?

     

    • Centerless grinding is the process of removing material from the outside diameter of a work piece using an abrasive wheel. In its simplest form, a centerless grinder consists of the machine base, grinding wheel, regulating wheel and work blade. With centerless grinding, the work piece is not mechanically held to drive the part.
    • The work piece is located on its outside diameter and supported by the work blade which is between the regulating wheel and the grinding wheel. The regulating wheel drives the part and the grinding wheel removes the material.
    • There are two main types of centerless grinding: throughfeed grinding and infeed grinding.

     

    Benefits of centerless grinding:

    Tight tolerances

    Excellent surface finish

    Excellent roundness

    Excellent straightness

    Less stock compared to between-center grinding

    Little work deflection (allows for grinding of long parts)

    Ease of automation

    Lower cycle times

     

    • Parts that can be processed by centerless grinding machines include axles, balls, bearings, bolts, bushings, camshafts, carbide rods, compressor shafts, copy rollers, cylinders, drills, gear shafts and hubs, injector needles, injector plungers and bodies, isolators, motor shafts, needles, pins, piston pins, pivots, rotors, shafts, small crankshafts, spools, tubes, valve lifters, valve pistons and valve stems.
    • Centerless grinding is used in a number of industries such as automotive, aviation, aerospace, bearing, consumer products, glass, medical and tool and die

     

    Part – 1 Company’s Information:

    • The company was incorporated on 24th May 1967 as ACE Tools Pvt. Limited and shared manufacturing of holding tools like collets, chuncks etc. for drills, taps, reamers cutters etc. in collaboration with ACE tools USA. The company changed its name to Solitaire Machine Tools Pvt. Ltd. on May 2, 1986. It converted into public on April 2, 1992.
    • Solitaire Machine Tools Limited is a leading manufacturer of Precision Centerless Grinders, incorporated in the year 1987.
    • Solitaire Machine Tools Limited designs, manufactures, and sells precision centerless grinders in India.
    • It also offers CNC products, including precision servo infeed attachments, servo drives for regulating wheels, two axis CNC grinding wheel dressers, and diamond roll dressers for grinding wheels, as well as two, three, four, and five axis CNC grinder controls.
    • The company also provides remanufacturing and CNC retrofitting services for grinders.
    • Its products are used in various industries, such as automobile, automobile ancillary, textiles machinery, steel, bearing, etc.
    • The company also exports its products to Australia, New Zealand, Turkey, Italy, the United Kingdom, and the United States.
    • Solitaire has been working as an exclusive Licensee of CINCINNATI MILACRON, USA to manufacture Precision Centerless Grinders in two primary sizes with wheel widths of 200 mm (80) and 250 mm (100).
    • Solitaire has entered into a Licensing arrangement with BOCCA & MALANDRONE SUNEBO S.p.A, ITALY, and developed Bocca line of CNC Centerless Grinders with wheel widths from 200 mm to 500 mm.
    • Soltaire Machine Tools Ltd. is now a CRISIL Verified company

     

    Part – 2 Company’s Manufacturing Details:

     

    • SMTL operates from its registered office in Mumbai.
    • It has two manufacturing units in Vadodara, Gujarat (India). Over the years, Solitaire has developed a niche market for itself for catering to the demand of Centerless Grinders.
    • SMTL produced its first Centerless Grinder in 1988.
    • In the years since, the plant has produced over 675 Centerless grinders.

     

    Facilities

    • The plants are equipped with a full range of manufacturing machines required for the production of machine tools.
    • The plants are divided into several key areas: The Heavy machining area, Precision grinding area, Scrapping and Assembly, Paint Room, Quality Control.

    Solitaire Machine Tools Ltd. produces mainly three types of Centerless Grinding Machines:

    1. Solitaire No.1 Precision Centerless Grinder (4” Grinder with wheel width of 100 mm)

    These grinders are designed and manufactured according to international standards and are made for mass production of small components like pins, bushes, needles, medical implements, crank pins, pistons, motor shafts and cutting tools.

    1. Solitaire No.2 Precision Centerless Grinder (8” and 10” Grinder with wheel width of 200 mm and 250 mm)

    These offer precision, simplicity in operation, reliability, rigidity & cost efficiency and are designed to be a workhorse for the long haul. Solitaire Centerless Grinders are manufactured to international standards with technology from Cincinnati Milacron, USA.

    1. Solitaire No.3 Precision Centerless Grinder (20” Grinder with wheel width of 500 mm)

    The grinders are offered with advanced CNC versions utilizing Siemens Controls and supporting from 1 to 7 axes of controls. Optionally, SMTL also designs customized loading / unloading systems for complete automation of the grinding process.

    • During the year 2016-2017, Company went a step further to extend use of Renewable Energy by installing Solar Power system at Chhani plant.
    • The plant capacity is 45 KW, about 50 % of allowed sanctioned load as per the norms of Gujarat Government. During the six-month period from October to March, average monthly saving was 5,500 units of Power, equivalent of Rs. 49,500 / month. This is also equivalent of saving close to 250 trees / year. Besides, the rent collected by allowing use of Gorwa plant roof for solar power generation was Rs. 2.69 Lacs.

     

    Part – 3 Company’s Products and Exports Details

     

     

    • The company also exports its products to Australia, New Zealand, Turkey, Italy, the United Kingdom, and the United States.

     

     

    Part – 4 Company’s Clients Details

     

     

     

    Part – 5 Company’s Products Use Details

     

     

     

    Part – 6 Company’s - Shareholding Pattern:

     

     

    Part – 7 Company’s – Dividend History:

     

     

     

    Part – 8 Financial Focus:

     

    Focus on - Financial Results March 2017:

     

     

    • The Company recorded highest ever revenue of Rs.1834.06 Lacs917% Up).
    • The net profit of Rs. 140 Lacs, was up by 29 % from previous year.
    • The EPS went to Rs. 3.09 against previous year of Rs. 2.40.

     

    FOREIGN EXCHANGE EARNING AND OUTGO:

     

    • Foreign exchange earnings of the company during the year 2016-2017 were Rs. 667.10 Lacs (Previous Year Rs. 608.05 Lacs) while outgoings were Rs. 32.35 Lacs (Previous Year Rs. 2.82 Lacs).
    • The company increased sales by 17 % and Export share was almost 40 %.
    • During the year Machines / Spares were sold in Australia, New Zealand, Turkey, Italy, UK and USA.
    • The single order from Turkey was for over 2 Crores from a new customer.

     

    Focus on - Financial Results December quarter 2017:

    • For the quarter ended 31-12-2017, the company has reported a Standalone sales of Rs 5.16 Crore, up 21.31 % from last quarter Sales of Rs 4.25 Crore and up 35.71 % from last year same quarter Sales of Rs 3.80 Crore
    • Company has reported net profit after tax of Rs .85 Crore in latest quarter.

     

     

    Investment Rational:

    1. Debt free company
    2. Available at low P/E 22 compare to Industry P/E – 35.9
    3. Robust top line 3 years growth > 20%
    4. Robust bottom line 3 years growth > 50%
    5. Constant Dividend payout company
    6. Robust growth in products Export
    7. Suspecting robust growth in various industries, such as automobile, automobile ancillary, textiles machinery, steel, bearing, etc. which boost up the demand of centerless grinding. Hence growth in top line and bottom line growth can be seen in future.
    8. Having healthy order book and more orders are under negotiation
    9. The good monsoon could mean boom in Vehicle production and expected growth in Machine Tools production
    10. The new Thrust on Aerospace and Defense manufacturing would call for Precision grinders and company already become part of AeroDef group of our Association, IMTMA. These industries have large potential and we should see benefit in next 3 to 5 years.
    11. During the year, Company worked with a German group to design grinder to their specifications. With joint effort, the grinder was perfected to European standards and was delivered to their plant in India. The group has presence in over 60 countries and is targeting to use our grinders for their worldwide requirements in years to come.

     

    Recommendation:

    • Stock CMP is 91 Rs. and stock is trading at P/E 22 & TTM EPS 3.95, based on all above investment points, stock may touch 135 Rs. Within 1 years’ time horizon and 200 Rs within 3 years’ time horizon.

     

     

     

    Please note:

    • Note: The articles are not research reports but assimilation of information available on public domain and it should not be treated as a research report. Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations” Disclosure: It is safe to assume that I might have the discussed companies in my portfolio and hence my point of view can be biased. Readers should consult registered consultants before making any investments.

     

Lights