Century Enka Ltd.: Should you invest?

About the company: Century Enka Ltd.

1. Century Enka Ltd was founded in 1965 as a result of Mr. B.K. Birla’s (grandfather of Kumar Mangalam Birla) keen interest in collaborating with Enka International, which is part of AKZO Nobel of the Netherlands.
2. Century Enka manufactures industrial yarn, textile yarn, and fabric, including Nylon Filament Yarn (NFY) and Nylon Tyre Cord Fabric (NTCF).
3. Century Enka is India’s largest manufacturer of NFY and the second-largest manufacturer of NTCF.
4. In India, nylon yarn is marketed under the brand name ‘Enkalon.’

Headquarter	Maharashtra, India
Sector	Textile

Area of Operation:

• Century Enka manufactures a diverse range of High-quality Nylon Processed Yarns for a variety of applications.
• Nylon industrial yarns are used in a wide range of applications, such as fish-twines, conveyor belts, sports and activewear, intimate and foundation wear, and so on.
• They aspire to be a leading and dependable organization in the tire reinforcement and man-made textile yarn industries.
• Century Enka operates two manufacturing plants, one in Pune (Maharashtra) and the other in Bharuch (Gujarat).
• Century Enka has two consumers who account for 80% of its receivables, and the company receives payments from these parties on time.

MD & CEO	Mr. Suresh Sodani
Chairperson	Mrs. Rajashree Birla (mother of Kumar Mangalam Birla)

Board of Committees:

Subsidiaries	There is no subsidiary company/ network firm/ network entity.
Competitors	• Trident Ltd (Market cap of ₹ 26,830 Cr) • Indo Rama Synthetics (India) Ltd (Market Cap of ₹ 1,847 Cr) • Surat Textile Mills Ltd (Market cap of ₹ 314 Cr)

Shareholding Pattern:

• Birla Group Holdings Private Limited – 16.5%
• Century Textiles And Industries Ltd – 5.8%
• LIC of India – 4.82%
• Hitesh Ramji Javeri – 2.86%
• Harsha Hitesh Javeri – 2.38%

Industry Overview:

• The industry, however, is dominated by small unorganised players with weak financials and with players who opportunistically switch between nylon and polyester. The industry suffers from low margins because of intense competition amongst domestic players and competition from imports. Dependence on imports and volatility in raw material prices also impacts the margins. After the lockdowns were relaxed, pent-up demand and empty pipelines resulted in robust demand in H2 FY21. Like NTCF, lower imports due to shipping disturbances and revival in local demand in China gave NFY demand a renewed thrust in India.
• Within the synthetic yarn segment of the textile industry, Century Enka produces Nylon Tyre Cord Fabric (NTCF) for the tyre industry, High Tenacity Yarn (HTY) for technical textiles and Nylon Filament Yarn (NFY) for the apparel industry.

Profit and Loss Statement:

Consolidated P&L:

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21
Revenue	1,148	1,185	1,416	1,791	1,423	1,221
Expenses	1,014	1,003	1,305	1,641	1,330	1,102
Op. Profit	135	183	112	151	93	118
Profit before tax	88	140	109	119	86	92
Net Profit	59	91	70	77	96	71
EPS in Rs	27.05	41.63	32.08	35.05	43.72	32.46

Consolidated P&L:

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21	Growth (5 years)
Revenue from Operations	–	3%	19%	26%	-21%	-14%	2.89%
Expenses	–	-1%	30%	26%	-19%	-17%	3.74%
Operating Profit	–	36%	-39%	35%	-38%	27%	4.01%
Profit before tax	–	59%	-22%	9%	-28%	7%	5.07%
Net Profit	–	54%	-23%	10%	25%	-26%	7.96%
EPS in Rs	–	54%	-23%	9%	25%	-26%	7.84%

Key Pointers:

1. Expenses of the company majorly include 60% Material cost and 18% Manufacturing cost which fits into the average bracket in this industry.
2. Company has been reporting weak sales growth of just 2.89%
3. Due to the Covid pandemic the comapany has been suffering in the past 2years. 
4. It has been reporting poor profit growth in the past 5 years.
5. The company’s EPS is on the higher side compared to its peers.

Balance Sheet (In Crores):

Standalone Balance Sheet:

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21
Equity Capital	22	22	22	22	22	22
Reserves	756	833	879	933	1,008	1,062
Borrowings	70	53	47	38	23	13
Trade Payables	32	68	72	93	104	127
Total Liabilities	1,016	1,119	1,164	1,231	1,264	1,339
Fixed Assets	602	569	575	548	528	492
Investments	80	98	87	168	262	302
Other Assets	333	447	499	513	471	544
Cash Equivalents	6	4	25	7	6	60
Loans n Advances	19	17	41	74	68	51
Total Assets	1,016	1,119	1,164	1,231	1,264	1,339

Standalone Cash Flow:

	Mar-16	Mar-17	Mar-18	Mar-19	Mar-20	Mar-21
Cash from Operating Activity	192	61	56	122	142	109
Profit from operations	142	186	115	157	116	132
Inventory	56	-84	12	2	-15	41
Recievables	8	-33	-18	2	51	-85
Working capital changes	74	-79	-28	10	43	6
Direct taxes	-24	-47	-31	-44	-17	-29
Cash from Investing Activity	-83	-20	-8	-110	-104	-76
Fixed assets purchased	-22	-23	-51	-39	-28	-13
Investment Purchases	-64	-12	0	-77	-86	0
Investment Sold	2	7	13	0	0	44
Cash from Financing Activity	-108	-43	-28	-31	-38	-29
Interest Paid	-10	-6	-4	-4	-4	-2
Dividend Paid	-16	-20	-18	-18	-18	-17
Repayment of borrowings	-82	-17	-15	-18	-21	-9
Net Cash Flow	1	-2	20	-18	-1	4

Financial Ratios:

Stock Price:

1. Current Price	₹ 508.00
2. Market Cap	₹ 1,110 Cr
3. Yearly fluctuation	₹ 219 – 637

Ratios:

	P/E	ROCE	ROE	Op.Margin
Century Enka Ltd.	6.07	8.9%	6.88%	11.66%
Trident Ltd.	35.3	10.0%	10.50%	18.51%
Indo Rama Synthetics (India) Ltd.	6.3	11.5%	44.90%	5.62%
Surat Textile Mills Ltd.	113	13.4%	11.00%	10.66%

Disclaimer: This shouldn’t be construed as a stock recommendation, investors discretion is advised while investing.

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Team, MyGoalMySip.