SRF

SRF - I have no clue why they named the company this acronym. If I ask you guys to not read further or use google and try to guess the business of this company, what would that be!! (Plz post ur answers :))

It is difficult and this ambiguity makes the stock very interesting. I have always been attracted to stocks that have weird names like Manappuram, Muthoot, Shree Ganesh and So on. The economic reason is that such stocks stay out of the media radar and creat comfortable value arbitrages.

Introdcution
SRF has been started by Mr.Shri Ram and Dr.Bharat Ram - the promoters of Lady Shri Ram College in Delhi. The family has a legacy of 100 years and SRF is a proud recipient of Deming prize for quality.The company is primarily in the business of Chemical Intermediates - Chemicals, Technical Textiles, Engg Plastics and packaging Films - how boring ( but bloody profitable).

Company has its plants in 4 countries and exports to 75 countries. It did Rs.3672 cr in FY 11.

Investment Thesis

• The company is as close to a market monopoly as you can get in a commoditized business - It is Global No 2 in belting fabrics (conveyor belts), global No 2 in Nylon Tyre Fabrics, domestic No 1 in Tyre Cord, domestic No 1 in refrigerants, domestic No 1 in nets and tarpaulins and domestic no 2 in films.
• Sales CAGR = 27%, EBITDA CAGR = 58% and NP CAGR = 73%
• The company has a D/E = 0.6
• Company has been constantly researching (0.88% of Sales) to innovate. Presently holds patent for HFC 32 and has 12 more patents filed.

This image summarises how this company touches our lives every day

Valuation

The company is available at PE of 3.5 and a dividend yield of 4.9. Take a good look at this business. I will soon post my comments on the Valuation.