This article provides a fundamental analysis of Shilp Gravures Ltd and Natural Capsules Ltd.
In order to benefit the maximum from this article, an investor should focus more on the process of analysis instead of looking for good or bad aspects of the company. She should learn the interpretation of different types of data and transactions and pay attention to the parts of annual reports etc used to get the information. This will help her in improving her stock analysis skills.
Shilp Gravures Ltd Research Report by Reader
Q: Dear Vijay sir, I was looking for undervalued stocks in the industrial machinery sector and came across Shilp Gravures Ltd. I feel this is an undervalued stock on the below rationale:
- P/E is 6.70 in comparison to industry P/E of 38.60.
- Debt/equity ratio is 0.38 which is very good and
- P/s ratio 0.53.
- promoter holdings have increased
- cash from operating activities is enough to meet the expenditure which i think is one more positive.
I am looking at it for an investment horizon of 3-4yrs whats your views sir ??
Dr Vijay Malik’s Response
Thanks for writing to me!
Financial Analysis of Shilp Gravures Ltd:
Sales of Shilp Gravures Ltd have been languishing for last 5-7 years and profitability has been falling. OPM has seen a decline from 41% in FY2008 to 27% in FY2014, which is a cause of concern. NPM has been maintained at almost stable levels, as the company has been able to reduce its interest costs because of debt reduction.
Further advised reading: How to do Business Analysis of Pharmaceutical Companies
Debt reduction has been possible as Shilp Gravures Ltd has been able to convert its profits into cash and collect it from customers in time. It is evident from the comparison of cumulative CFO and PAT over the last 10 years and falling receivables days. These are good signs about the operating performance of Shilp Gravures Ltd.
However, Shilp Gravures Ltd is no longer using its plants and machinery as efficiently as it used to do earlier, which is evident from its falling fixed asset turnover ratio.
The market also has not rewarded it with any enthusiasm. For the cumulative retained earnings of INR 30 cr. over the last 10 years (2005-14) its market capitalization has increased by only INR 13 cr. These are not the desirable signs of a good investment.
Overall, there seems to be nothing spectacular about the performance of Shilp Gravures Ltd. Whether it would be able to remarkably improve its performance in the next 3-4 years? I am not certain. I believe that an investor can find many other promising opportunities in the current markets.
Read: 3 Simple Ways to assess the Margin of Safety in a Stock
You may take guidance on the criteria described in the article: Final Checklist for Buying Stocks for selecting stocks for investments.
Regards,
Natural Capsules Ltd Research Report by Reader
Q: Natural Capsules Ltd is a debt-free company and has a P/E ratio of 7.06. I do not have much knowledge of the pharma sector so sir would you please help me out with the analysis so that in future I can approach it in a better way the Pharma sector companies. Thanks in advance with regards.
Dr Vijay Malik’s Response
Thanks for writing to me!
Financial Analysis of Natural Capsules Ltd:
Natural Capsules Ltd has shown good sales growth over the past many years. However, this sales growth seems to have come at the cost of profitability, as both OPM & NPM for Natural Capsules Ltd have witnessed deterioration since FY2008-09.
Further advised reading: How to do Business Analysis of Pharmaceutical Companies
Natural Capsules Ltd has not been able to keep its operating efficiency at stable levels. On the contrary, operating efficiency has been declining over the years, as indicated by increasing receivables days and declining inventory turnover ratio.
These are not the desirable features of any company in any industry.
The stock market also seems to have recognized that the sales growth of Natural Capsules Ltd is not backed by equally strong business performance. Its market capitalization has increased by only INR 24 cr. against retained profits of about INR 33 cr. over the last 10 years (2005-14).
Overall, it seems that Natural Capsules Ltd needs to improve its operating efficiency and profitability to create wealth for its shareholders.
Read: 3 Simple Ways to assess the Margin of Safety in a Stock
These are my views about Shilp Gravures Ltd and Natural Capsules Ltd. However, you should do your own analysis before making any investment-related decision about any company.
You may use the following steps to analyse the company: “How to do Detailed Analysis of a Company“
If you wish to learn more about analyzing companies operating in industries, which are, new to you, then I suggest you read the article:
How to Analyse Companies in Industries New to You
Hope it helps!
Regards,
Readers’ Queries about Shilp Gravures Ltd
How to interpret if retained earnings do not lead to an increase in market capitalization
Sir, as we see retained earnings of Shilp Gravures Limited are ₹30 cr and the market cap has just risen by ₹13 cr over the last 10 years. Doesn’t it make the stock more attractive by Graham’s standards?
Sales have not risen that much as the company is part of the capital goods industry in which the capex from industry seems to be cyclical and the next phase of growth might be good.
Author’s Response:
Thanks for writing to me!
There are different ways of interpreting the financial data and different investors take different decisions based on the same data.
I do not like to invest in companies that show deteriorating operating performance, however, there would always be another person at the opposite end of the trade whenever someone sells or buys a share.
If you believe that the numbers present a good opportunity, you should take your investment decision accordingly.
Regards,
Dr Vijay Malik
P.S.
- Subscribe to Dr Vijay Malik’s Recommended Stocks: Click here
- Mumbai “Peaceful Investing” Workshop, July 27, 2025: Register here
- To learn stock investing through videos, you may subscribe to the Peaceful Investing – Workshop Videos
- 25% savings on buying our Stock Analysis Excel Template and all ebooks together: Analysis Package: Excel Template + All eBooks (25% savings)
- To download our customized Stock Analysis Excel Template for analysing companies: Stock Analysis Excel
- Learn about our stock analysis approach in the e-book: “Peaceful Investing – A Simple Guide to Hassle-free Stock Investing”
- To learn how to do business analysis of companies: e-book: Business Analysis Guide
- To pre-register/express interest in a “Peaceful Investing” workshop in your city: Click here
Disclaimer
Registration status with SEBI:
I am registered with SEBI as a research analyst.
Details of financial interest in the Subject Company:
I do not own stocks of the companies mentioned above in my portfolio at the date of writing this article.
