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1,500% growth in 10 years; For this debt-free smallcap, bull run is still on

Crucibles, used for melting and holding molten metal, have strengthened investors’ portfolios over the past 10 years. With a robust annualised growth in various aspects, smallcap company Morganite CrucibleBSE 0.09 % (India) has seen its stock surge 1,487 per cent to Rs 1,178 till July 14, 2017 from Rs 74.25 on the same day in 2007.

The increase in the company’s share price showed an investment of Rs 1 lakh in this stock 10 years back would have become over Rs 15 lakh today.

In comparison, BSE benchmark Sensex has advanced nearly 110 per cent in last 10 years. The 30-share index surged to 32,020 on July 14, 2017 from 15,289 on July 17, 2007.

Market experts are still bullish on the stock.

Morganite Crucible (MCL) has a strong financial track record with an annualised revenue, operating profit and net profit growth of 15.70 per cent, 21.30 per cent and 30.20 per cent, respectively, over FY07-17.

This is in addition to the average return on equity (RoE), return on capital employed (RoCE) and return on capital invested capital (RoIC) of 15.60 per cent, 21.30 per cent and 34.70 per cent, respectively.

MCL is a debt-free company and has average cash flow yield of around 4.1 per cent.

Brokerage estimated around 15 per cent topline growth for the company over FY17-19E. “We have a ‘buy’ recommendation on the stock with a target price of Rs 1,370,” the brokerage said in a research note.

The company is engaged in manufacture of crucible, crucible accessories, foundry consumables and allied products. MCL is a subsidiary company of the UK-based Morgan Advance Material Company (previously known as Morgan Crucible Company).

MCL is a major manufacturer of silicon carbide and clay graphite crucibles, which are used primarily as consumables in manufacture of non-ferro alloys. These non-ferro alloys are consumed by a variety of industries like auto, industrial machinery, sanitary, electrical equipment, railways with the auto segment consuming maximum around 32 per cent of total castings.

In tyre production, they are used for manufacturing companies, production of castings is likely to gain significant traction,” ICICIdirect said.

Analysts say growth in casting production has moved hand-in-hand with growth in the auto segment.

Over FY07-16, when the auto sector grew 9 per cent CAGR, production of non-ferrous castings grew 9.1 per cent CAGR.

MCL is a prominent player in this segment and has been able to grow revenues 2 times over the same period at 17.4 per cent CAGR. “Going forward, , we envisage auto volume growth at 9-10 per cent CAGR in FY17-19E. This will help MCL post accelerated revenue growth over FY17-19E,” ICICIdirect said.

In an annual report, MCL said, “Increasing awareness and adoption of crucibles in non-ferrous induction melting will accelerate demand of our cylindrical crucibles. Few initiatives taken by company in the recent past will show significant revenue growth in over 3 to 5 years.”