Hello Sir,

Hope you are doing well.

I have been screening for stocks wherein Promoter holding has increased and in the process came across Sportking India Ltd.

The name looked interesting and I thought it will have something to do with sports; however, the company is engaged in the production of yarns.

While the business sounds boring, what’s interesting is that the stock is down from 1,800 odd levels recorded in Oct’21 to 800 odd levels currently. The company has expanded the yarns capacity by 35% and doesn’t foresee major CAPEX over the next 18-24 months. Also, the margins currently are the lowest in the last 8-10 years.

Below, we have shared interesting insights from the Q2 FY 24 con-call of Sportking India to understand the current situation and the outlook for the company.

 

Before that, if you ever find a good stock in an ignored sector with promoter buying from market and increasing his stake, you should sit up and study the company in greater detail…something good might be brewing.

We recently released our new stock recommendation for Alpha/Alpha + members based on the same framework – for details click HERE

 

Sportking India – Insights from Q2 FY 24 con-call of the company

– About Company

  • Sportking India Limited was incorporated in the year 1989 by late Shri Raj Avasthi
  • Company diversified its activities with the installation of 6,000 spindles in Punjab for manufacturing of synthetic yarns in 1993
  • As a value addition exercise, the company commissioned in the year 2000, a dye house for dyeing of synthetic cotton fibre yarn
  • Over the last 30 years, the company has gradually enhanced its capacity to now almost 3,79,000 spindles as of now
  • We at Sportking have 3 state-of-the-art manufacturing facilities in Punjab, with the benefit of our capability being concentrated at a single location
  • We also undertook a solar rooftop project. Of the planned 25 megawatt, more than 22 megawatts have already been operationalized with the remaining coming online within next month
  • Our product portfolio involves 100% cotton yarns, polyester cotton blended yarns, dyed yarns, acrylic yarns, as well as some fancy yarns
  • We have a substantial presence in export markets with countries such as Bangladesh, Europe and China being our prime destination

– Performance details

  • In Q1, cotton yarn prices were around INR 297 and the average cotton price was around INR 178
  • In Q2, the cotton fibre prices were almost around INR 176 and the cotton yarn prices was INR 282
  • The Q2 capacity utilization was almost 96% (on 3,20,000 spindles)
  • The volumes in cotton yarn were 12,100 tons and in polyester cotton yarn around 7,000 tons and in total around 20,740 tons as compared to 18,455 tons in Q1
  • In Q2, exports share was around 52%

– Industry scenario

  • The demand has been very challenging for last six months and continues to remain so
  • Exports have had some bump up for last six months, initially led by Chinese demand and recently demand from Bangladesh
  • Domestic demand has been very, very tepid for the last four and five months
  • Synthetic and blended yarns have been particularly bad for last quarter as it’s mostly dependent on domestic market which has been very bleak for last three months
  • Pipelines are getting empty but retailers don’t seem to be in any hurry to fill them up
  • The cost side is very supportive. After a long hiatus of almost 18 months, cotton prices have come down very sharply to a level of 56,000 per candy
  • Indian spinning mills will definitely benefit the most when the demand comes back, as competing countries are grappling with various challenges

– Savings from Solar Power plant

  • 22 MW is operational, not two. Only three is left
  • Average saving is around 17-18 crores to be precise in today’s power price

– CAPEX

  • Capex cycle is over for this round. For next 18 months we don’t have anything in plan

– Guidance

  • Top line is something I think we’ll be able to manage. We are pretty confident of keeping up with the run rate of the quantity produced
  • Margins is something which is up in the air right now and we expect to at least maintain what we have given in last quarter and may be slightly go better than that
  • We expect to cut our costs by at least 100 basis points in the next six months with all the activities we are doing

(End)

 

Disclaimer: This is not a recommendation to buy/sell Sportking India. The securities quoted are for illustration only and are not recommendatory.

 

Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/

 

SEBI Research Analyst Registration No. INH100001690
Research Analyst Details

Name: Ekansh Mittal     Email Id: [email protected]    Ph: +91 727 5050062

Details of Associate: Not Applicable

Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

Disclaimer: http://www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to investors on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690

Address – 7, Panch Ratan, 7/128, Swaroop Nagar, Kanpur – 208002, Contact No. – +91-7275050062

Compliance Officer – Mr. Ekansh Mittal, +91-9818866676, ekansh@katalystwealth.com

Grievance Redressal – Mittal Consulting, grievances@katalystwealth.com, +91-9818866676, +91-7275050062

“Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors”.

“Investment in securities market are subject to market risks. Read all the related documents carefully before investing.”

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision

This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.

We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.

Disclaimer: You can access it here – LINK

Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – No

Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No

Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No

Whether it or its associates have received any compensation from the subject company in the past twelve months – No

Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No

Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No

Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No

Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No

Whether the research analyst has served as an officer, director or employee of the subject company – No

Whether the research analyst or research entity has been engaged in market making activity for the subject company – No