Update: Max Ventures & Industries Limited

Since my last post on Max Ventures & Industries Limited (MVIL), there has been a major development in the company. Also, the market cap of the company has risen from Rs. 379 Cr. to Rs. 662 Cr. In fact it went as high as Rs. 824 Cr. in the interim. So much so for the feel good factor. Lets move ahead.

They have got in a very capable joint venture partner in Toppan. Investment in MVIL by Toppan as compared to its enormous size is like a drop in the pond but given that they have chosen MVIL as a partner as opposed to any other Indian company (there are bigger players than MVIL in the market), says a lot about the man at helm, Mr. Analjit Singh. Why I like the deal. The dilution took place at a price much higher than the prevailing market price, thereby reducing the impact of dilution (in my view). Though most interesting part is that Toppan would act as a customer for MVIL. With Toppan now having a substantial stake in the speciality films business of MVIL, they have every reason to make sure that MVIL succeeds. Power of incentives at play. Thirdly, which is directly linked to the second point, MVIL speciality films business is under expansion which will lead to an increase in production capacity by about 60% in the next two years. Of course, if no one else will, Toppan is ready to buy it all from MVIL (what MVIL produces is a raw material for Toppan). I agree, that is an extreme case. I am sure MVIL will add other customers as well, both domestic and otherwise. There is a big per capita packaging material consumption gap between India and other developed countries as on date. This gap has to be filled in the next decade or so.

Considering the peak annual sales of Rs. 772 Cr., post expansion the expected sales would be around Rs. 1,235 Cr. Further, given that I expect net profit margins of around 5% (given that the management expects EBITDA margins to be around 12-13%) after full capacity post this expansion is in use, I arrive at an expected profit of Rs. 62 Cr. Considering a PE of 15, I expect the market capitalization to be around Rs. 930 Cr. in the next two years. That is about 18.50% CAGR in two years. I have not yet considered how other businesses would shape up during this time.

Some would argue that the computation seems to be too simplistic. Sure. It is. Sorry to disappoint 😉

Fundamental concern with MVIL is is the “key man risk”. Some things will always remain an unknown. Adequate diversification can guard against that.

3 thoughts on “Update: Max Ventures & Industries Limited

  1. Parasbhai

    Nice views, the other expenses are eating out the EBITA at curretly, which is negative and also the PAT.
    Now as per our vision if all goes well than we can have good upside in this from speciality film business and that is 50% (135/-) the targeted price on a conservative basis, We do not know how other business will play in future, I think if it comes down to 70 to 80 range than will be good opportunity to add further for a view of 3 to 5 yrs in short term.
    In a long term it will be good as other two verticles of education, real estate can be played well just anticipation as anjalit singh is there, it can give much higher price as well.

    Keep on posting other jewels like the same which are good and moat in long term holding.
    Thanks for your nice cooperation and feedback.
    I am invested in GATI, a failed brand but still holding as now i see some value will be created in this after FCCB issue, if you are tracking your valuable views are wellcomed to small investors like us.
    Regards,
    Haresh

  2. Thanks for your comment Haresh. Basically, I am just making an investment case out of the specialty business as on date. In around 2 years it will play out as per my understanding and we will also have some developments in other businesses post which we will be in a position to assess them. Regarding Gati, I have no idea sir 🙂

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