Chaman Lal setia

Chaman Lal Setia Exports Ltd. (Chaman Lal Setia) operates as an exporter of long grained basmati rice. Its products include parboiled (converted/muzza) basmati rice, raw (polished) basmati rice, and basmati health rice. The company offers its products under Maharani and Begum Water Filter brand names.

The company is mainly into warehousing, processing and packing of rice. It offers its products in natural jute and cotton bags of different sizes. The products are also packed in recyclable poly pouch, nitrogen flushed to prevent infestations, and to preserve freshness and aroma. Chaman Lal Setia has presence in Canada, US, UAE, Singapore, Europe, New Zealand, Australia and South Africa. The company sells its rice under the brand name “Maharani”. The company is headquartered in Amritsar, Punjab, India.

Management didn’t seem a lot capable right now. Not very good shareholder letter. Company doesn’t know what to do with surplus cash how to reinvest it. It could have been a brand in making (has a small brand may be Maharani Rice anyone?) but I am not sure about that given the capability of the management. Although I have some investment into it just because of numbers/figures. Seemed good to me for expansion bucket. Looked a lot cheaper with huge potential of growth.

market cap: 408cr

current price : 78

dividend: 0.61%

book val: 25 (very good lot of cash so this much you will get if company liquidate right now)

P/E : 11 good enough (not a lot so good earning)

Last 4-5 years net profit:

11.98   18.24   19.50   37.25  so avg 20 crores

So income with profit is 20crore  growth is about more than 20% + dividend.

Not a bargain per say but okay. Peer comparison I did was with KRBL very costly stock I guess (for me it came out to be 6 times costlier).

Coming to other checklist item:

Huge amount of cash lying around: Yes

Total family owned business: Yes

No problem with balance sheet.

Very less salary given overall: Not even management, Not sure why

The company was in the business for long time without any good growth while the industry was performing well. They have lost lot of market share with the competitors only now they seem to be focused. Agricultural business is too much dependent on rainfall also. Raw materials cost. Due to premium category food are Basmati rice is not under regulation as common man food. But there is no edge on product as it can be replicated easily by any other new company. Brand and market share is the only deciding factor for winner.

Backward integration: Chaman Lal does not have an integrated power plant unlike its large competitors.
Forward integration: After de-husking the paddy, the company sells the by-products, bran and husk, in the open market. However, larger players process the by-product and sell value-added products like bran oil, de-oiled cakes, furfural and also use the product for power generation.

Looks good investment to me for couple of years at least. Company can have good return in upcoming years but I need to check for fall if any.

Youtube add:

I only see India Gate(by KRBL), Kohinoor(by the same company name), Dawat(by LT foods) etc in shops around me never Maharani Rice.

 

 

Management lacked aggression in the past

25 year old company 

Diabetic rice may be a game changer

Demand drive”


  • Lifestyle changes: With increasing Indian middle-class population, mall culture and
  • Increasing preference for basmati rice in export markets
  • Purchase of paddy at lower prices instead of purchasing semi-finished rice
  • Agri business is dependent on rainfall

Revenues primarily driven by higher realisations 

Only fear how is management?

How are they investing surplus cash?

 

R&D focus, product innovation can be game changer 

Focus on international markets and branding 

Saudi Arabia UAE etc

Doesn’t have big backward forward integration like reusing wate material for other purposes or big factories own power plant etc for backward integration like big competitors

My Checklists:

  1. Good business
  2. Future is not going to change this
  3. May have pricing power in future if succeeds in making brand
  4. Management so so
  5. I am more than okay with the gorwth
  6. No cash crunch
  7. Valuation

Final Verdict: Not for long term may be for 2 years. So no. Also Need to to comparative analysis with Khinoor foods, LT Foods, KRBL etc.

Disclaimer
I am very new to value investing and this is me taking random notes just for myself. Please don’t base any of your decision on these write-ups. That will be foolish.

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