Midfield Industries - Review

[sunil]

Midfield Industries Ltd. (MIL) is amongst the few players in the organized segment of packaging industry catering to the growing demand for Industrial packaging consumables in India. They provide packaging consumables like high tensile steel strapping in various dimensions and strengths, Different
Seals for different applications, Collated Nails & Corner boards being used for general and the end of line packaging of goods by varied industries.

Strengths - Niche segment of industrial packaging +  Well established brand  'Mega Supreme' and 'Supreme' are established in the industry. Operational Contracts: one stop solution. Large clientele: strong customer retention

Manufacturing facilities at multiple locations within India & in Sharjah, UAE on being operational would place MIL in a better position to serve its clientele
more efficiently & economically.  The company is continuously trying out new initiatives to broad base its product portfolio. With foray into manufacture of Polyester strapping, PP strapping, VCI paper and stretch film they would be in a position to offer a varied range of products.

Risk Factors - Revenues are significantly dependent on sale of steel strapping ,  No long-term contracts with customers ,  Revenues are dependent upon meeting client specific requirements and largely on a case-to-case basis, Changes in client's preference from metal to plastic strapping


Compared to AMD, Bajaj Steel, Hitech Plastics - the IPO of Midfield is expensively priced based on P/E.

[sunil]

Here is what Motilal Oswal had to say about Midfield Industries Public Offering,

Between FY06 & FY10, MIL's revenues have grown at a 22% CAGR, from Rs. 398 mn to Rs. 877 mn. The EBITDA margin for company is in the range of 20% and the PAT margin has increased to 9% in FY10 from 4% in FY06. However, the company does not have a dividend history owing to the need of funding its significant expansion. Also, the cash conversion cycle remains a worry for the business going forward.

Although the company has a good growth potential both at the topline and margins, there seems to be little left on the table for the investor at the offer price. At the upper price band of Rs. 133, the stock will trade at 13.4x FY12 E EPS. A good strategy will be to invest in the stock from a two year perspective if it is available in the market after a correction of 20-25% from the offer price . In view of the stretched valuations, we recommend to AVOID subscribing to this issue.

[sunil]

SPA Securities Views on the iPO,

At the upper band of Rs 133, the stock is available at a P/E & P/BV multiple of 21.8x and 1.8x based on its FY10 EPS of Rs 6.1 and post issue BVPS at higher price band of Rs 73. The Company doesn't have any strict listed peers to compare with. However, the issue looks costly when compared to the broader industry average P/E of 9. We recommend ‘Neutral’ to the issue.