Compounding when you do just one thing right
Excellence in Old Economy Industries: Example of Sustainable Growth and playing to one’s strengths
We are big fans of the Motilal Oswal ad showcasing the power of focus over time.
Today, we highlight a lesser-known company – a paper manufacturer that thrives on commitment to excellence. Exploring its story, we find lessons in corporate governance, capital allocation, and vision.
Corporate Governance:
The company sets ethical standards with transparent practices and fair treatment of shareholders. Its straightforward business approach shines in a complex era. Consistent expansions highlight its agility.
Prudent Capital Allocation:
The company's uniqueness lies in its forward-looking nature. Upcoming investments could reshape its trajectory. Plans to increase production capacity by 50% and an acquisition for 10-20% additional capacity show dedication to growth.
Numbers:
These figures reveal its financial strength. A planned 60-70% capacity increase from internal resources underscores its foundation.
Past Decade Performance:
Looking at their financial performance over the years:
Sales grew 2.5 times, profits surged 20 times, margins doubled in a decade. The company has a history of dividends for 10+ years.
Facing Inflection Points:
Recent expansion plans, a 70% capacity increase which is funded by accruals, and strong management enhance its position. A decade of focused core business and solid balance sheet add to its appeal.
Product Diversity and Integration:
It’s varied products cater to diverse needs. Integrated operations and self-reliance in pulp enhance efficiency.
Sustainability:
With 70% energy from renewables, the company reduces its footprint. Initiatives like Tree Farming showcase responsible practices.
Future Outlook:
The stock surged tenfold in 15 years, signalling growth. A projected three to fourfold growth in 5-10 years, despite risks, makes it an attractive investment.
Conclusion:
Beyond a typical old economy venture, this company represents resilience, strategy, and sustainable expansion. Amid glamorous industries, it shines as an example. With focus on governance, capital, and growth, it's a promising long-term investment. It embodies the adage of hidden opportunities.
We want to emphasise that this communication should not be misconstrued as a recommendation, as we are not SEBI RIAs. It is crucial for readers to conduct their own due diligence and exercise caution.
Therefore, we urge all readers to approach this opportunity with prudence and carefully consider the potential risks involved. While the prospects appear promising, it is essential to maintain a cautious approach and stay informed of the inherent dynamics of the industry.
Happy to chat and discuss these in detail
About Us -
Govind Shorewala - Entrepreneur (Mining, Textiles) & Investor (Private & Public Markets) → Reach out at: govind.shorewala@gmail.com
Aaroah Mittal - Early Stage VC → Reach out at: aaroah.m@people-group.com