From bottle crowns to steel products, Manaksia has come a long way. The sheer diversity in offerings makes it immune to sectoral upheavals, if any

MANAKSIA has evolved from a bottle-caps and crowns manufacturer into a more diversified company over the years. After building its expertise in metal packaging industry, the company has branched out into manufacturing of steel and aluminium products. With operations in India, Africa and West Asia, the company is well-placed to take advantage of the growth in consumerism in emerging markets. Though the stock has underperformed the market over the past few months, given the company's expansion plans and restructuring initiatives, it currently offers value for long-term investors.

BUSINESS:

Manaksia earns revenue from manufacturing packaging products, value-added steel and aluminium products as well as mosquito repellent coils and vaporisers. Its packaging division contributes 12% to its overall business. Its clientele list includes Dabur India, Jyothy Laboratories, Eveready Industries, and McDowell Group, among others.

Manaksia's metal product division is the principal contributor to its revenues and profits. Its product offerings include aluminium alloy ingots, rolled sheets and coils, galvanised steel sheets and coils and colour-coated metal sheets. Manaksia's other business includes manufacturing of mosquito repellent coils under the brand Mortein and the production of paper.

GROWTH DRIVERS:

With diverse product offerings, the company is in a better position to withstand downturns. Its geographical spread enables it to capitalise on growth in construction, engineering, and transportation in emerging markets. This is visible from expansion in its balance sheet and steady cash flow over the years, which is expected to continue. The company has achieved vertical integration across a number of products, which has further resulted in lower manufacturing costs. Once the management's restructuring plans take shape, operating efficiencies are expected to improve even further.

FINANCIALS AND VALUATIONS:

Over the past three years, the company's consolidated net sales grew by 12% and net profit by 10% when compounded annually. Sales from its metal products division, which contributes about 80% to its topline, grew 11%. The management has efficiently used its strong cash flows to reduce its debt burden. With 75.77 crore cash on its books and a debt equity ratio of 0.3, the company has ample room for fund raising to support expansion plans. It gives a return-on-capital of 12% and a dividend yield of 2.94. During the four quarters ended December 2010, Manaksia

reported a sales growth of 15% over the same period a year ago. Unlike most pure play metal companies that suffered due to high input costs, Manaksia's operating profit was up 20% y-o-y. At 83, the stock trades at 4.1 times its 12-month trailing price-earnings ratio. Given its promising growth prospects, it looks attractive over a horizon of two years.