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Voice is being offshored, software is being offshored, garments are being offshored, cars are being offshored…but printing solutions? No clue? Not surprising. No widely held printing solutions company has enhanced shareholder wealth in any significant way over the last decade. Result: low visibility.
That could well change with Repro India (BSE code 532687), one of India’s largest printing houses. Repro rides a robust sectoral argument:
• Growing demand for packaged products, magazines, newspapers, books and catalogues in India
• A CAGR of over 16.2% that is more than twice the GDP growth and eight times the global print industry growth
• Skilled labour at low cost
• The evolution of digital PDF workflows, e-mail and high-speed data transmission lines leading to multigeographic working
• The significant availability and demand of paper within the country
• A sustained growth in the global education segment especially in the UK and US on the one hand and Africa on the other (funded by international aid agencies), strengthening the export potential that is being leveraged through proximity to Europe over East or South-east Asian competitors So what is Repro’s competitive edge in this dynamic environment?
• An installed capacity to print 2.5 lakh books a day, one of the highest in India
• Integration from content management to pre-press to printing to logistics (the edge), positioning the company as value-added solutions provider
• Growing exports presence with a larger proportion of revenues being derived out of some of the largest publishers and corporates in the US, UK, Africa, Australia, Canada and India, estimated at around 250
• Emerging as the largest third-party print solutions provider from India This edge shows in the numbers:
• Top-line growth in four out of the past five quarters—Rs 32.97 crore at one end to Rs 36.48 crore in the third quarter of 2007-8
• A sharp improvement in earnings before interest, taxes, depreciation and amortisation (EBIDTA) margin from 15.84% in the second quarter of 2007-8 to 21.45% in the third quarter of 2007-8
• A sustained bottom-line growth in each of the past five quarters, touching Rs 4.05 crore in the third quarter of 2007-8 (equity Rs 10.48 crore)
Where does Repro go from here? Based on the retrospective trend, Repro should achieve revenues of Rs 160 crore for the current fiscal year and if the margins trend is anything to go by, the company should report a net profit of Rs 15 crore for 2007-8. The management indicates a 30% top-line growth for 2008-9; based on the profitability momentum, it should report a considerably higher margin for the coming financial year.
What does it mean for the value seeker? The fact that at around Rs 110, Repro could well be priced at a discounting of less than 8 for 2007-8 and less than 5 for 2008-9. Safe investment in troubled times.
Disclosure: The writer holds stock in Repro India
Mudar Patherya heads Trisys, an annual reports consultancy. His column identifies stocks that are not in the limelight. Reach him at mudar@trisyscom.com
