Although a small company, Modison Metals has outperformed the BSE Sensex by a wide margin in 2012 so far. The company’s specialised skills and client relationships have bestowed it with a monopolistic status in its niche business. Whether it can leverage the same and take the next jump is what needs to be seen.
Modison Metals is India’s leading manufacturer of electrical contacts, which are specially made tipping points that make and break electrical current in switches that are used in households as well as industries. It is the only company in the world to manufacture contact components for low-, medium- and high-voltage switchgears.
Electrical contacts are the most critical part in switchgear and are exposed to very high levels of temperature every time connecting or disconnecting the electrical current. That’s the reason the contacts have to be made of specialised silver and copper alloys for low voltage and copper and tungsten for high voltage. Modison Metals’ key strength lies in making these specialised alloys as well as machining them in line with clients’ designs. The company counts all the leading switchgear manufacturers such as Crompton Greaves, ABB, Alstom, L&T, Schneider, Siemens and Anchor as its clients.
With a view to maintain quality in its finished product, the company has backward-integrated in silver refining. Silver constitutes nearly 80% of its annual raw material bill while the rest is made up by copper and tungsten. Typically, the company consumes 1.2-1.5 tonne of silver every month.
High voltage contacts make around 30-35% of total turnover while the remaining 70% is the low-and-medium-voltage segment. Nearly half of the high-voltage contacts business is derived from exports while just 6-7% of low-value contacts are exported.
Being the leader in its segment, it enjoys a partner-like treatment from its big-sized clients, particularly when it comes to developing new products. Similarly, some of its clients book silver costs upfront, thereby reducing the working capital cycle. The company is able to pass on fluctuations in raw material prices to its customers, periodically enabling it to sustain margins.
MML’s net profit has more than doubled in the past three years to . 16 crore in FY12 from . 7.4 crore in FY09, which was in line with its topline growth. The operating profit margin in the period has remained around 20%, with 10% of the net profit margin. The company is almost debt-free and has consistently paid dividends for the past eight years.
The company is a natural beneficiary of India’s growing investments in the power sector — be it generation or transmission and distribution. It is now planning to tap export markets more aggressively, particularly for the high-voltage segment. The company plans to spend nearly . 30 crore in FY13 to expand and modernise its existing facilities. Its ability to scale up the business from hereon will prove a key catalyst in its future valuations.
Modison Metals is India’s leading manufacturer of electrical contacts, which are specially made tipping points that make and break electrical current in switches that are used in households as well as industries. It is the only company in the world to manufacture contact components for low-, medium- and high-voltage switchgears.
Electrical contacts are the most critical part in switchgear and are exposed to very high levels of temperature every time connecting or disconnecting the electrical current. That’s the reason the contacts have to be made of specialised silver and copper alloys for low voltage and copper and tungsten for high voltage. Modison Metals’ key strength lies in making these specialised alloys as well as machining them in line with clients’ designs. The company counts all the leading switchgear manufacturers such as Crompton Greaves, ABB, Alstom, L&T, Schneider, Siemens and Anchor as its clients.
With a view to maintain quality in its finished product, the company has backward-integrated in silver refining. Silver constitutes nearly 80% of its annual raw material bill while the rest is made up by copper and tungsten. Typically, the company consumes 1.2-1.5 tonne of silver every month.
High voltage contacts make around 30-35% of total turnover while the remaining 70% is the low-and-medium-voltage segment. Nearly half of the high-voltage contacts business is derived from exports while just 6-7% of low-value contacts are exported.
Being the leader in its segment, it enjoys a partner-like treatment from its big-sized clients, particularly when it comes to developing new products. Similarly, some of its clients book silver costs upfront, thereby reducing the working capital cycle. The company is able to pass on fluctuations in raw material prices to its customers, periodically enabling it to sustain margins.
MML’s net profit has more than doubled in the past three years to . 16 crore in FY12 from . 7.4 crore in FY09, which was in line with its topline growth. The operating profit margin in the period has remained around 20%, with 10% of the net profit margin. The company is almost debt-free and has consistently paid dividends for the past eight years.
The company is a natural beneficiary of India’s growing investments in the power sector — be it generation or transmission and distribution. It is now planning to tap export markets more aggressively, particularly for the high-voltage segment. The company plans to spend nearly . 30 crore in FY13 to expand and modernise its existing facilities. Its ability to scale up the business from hereon will prove a key catalyst in its future valuations.
No comments:
Post a Comment