HIGHLIGHTS
- The company’s quarterly revenue increased by 8.54% compared to last year’s period, reaching ₹123.35 crore. The company’s quarterly net profit also grew by 20.84% to ₹11.81 crore, while the sector’s average net profit growth was 5.22%.
- Despite sector-wide challenges, the company’s annual revenue increased by 2.7% last year, reaching ₹424.85 crore. This growth is particularly significant as the average revenue growth for its sector decreased by 6.73% during the same period.
- Mallcom has been growing at 28.27% since its listing on the NSE in February 2022.
- The company’s price-to-earnings (P/E) ratio of 26.38 is attractively lower than the sector’s average of 62.89.
INDUSTRY OUTLOOK
The global Personal Protective Equipment (PPE) market is projected to increase from USD 62 billion in 2022, with an expected annual growth rate of 2-3% moving forward. The heightened need for respiratory equipment in mining, emergency response, military, law enforcement, healthcare, and fire departments drives this growth. Additionally, the rise in workplace hand injuries and the expansion of manufacturing units and construction projects in India contribute to the market’s growth. Investments from international companies are also enhancing the PPE market in India.
North America currently dominates the PPE market. Advances in technology and evolving consumer preferences have led to improved manufacturing techniques and higher-quality products, including multifunctional protective clothing. Key companies in the Indian PPE market include Mallcom India Ltd, Liberty Shoes Ltd, 3M India Ltd, Bata India Ltd, Acknit Industries Ltd, and Honeywell International India Pvt. Ltd. Protective clothing is the second-largest product segment. However, it’s the protective footwear segment that’s really stepping up, holding a significant market share and anticipated to grow at a rate of 6.8% due to increased demand resulting from workplace fatalities. Employers’ growing awareness of the need to protect employees from foot injuries is also driving growth in this segment.
Today, Mallcom India Ltd has expanded to become one of India’s leading manufacturers and distributors of Personal Protective Equipment (PPE) products, with over 90% of its orders coming from repeat customers.
BUSINESS DESCRIPTION
Mallcom India Ltd was established in 1983 by Mr. Ajay Mall as a small leather gloves manufacturer based in Kolkata, India.
Mallcom is a comprehensive personal protective equipment (PPE) provider, offering a wide range of full-body protection products. It is one of the few companies with in-house expertise in various raw materials, including textiles, leather, rubber, and plastic. With over three decades of experience, Mallcom has not just accumulated time, but developed extensive knowledge and skills in producing a diverse array of products such as safety helmets, face masks, leather gloves, textile gloves, nitrile gloves, safety apparel, rainwear, and safety shoes. The company also provides a range of products under its brand, including eyewear, ear protection equipment, latex gloves, neoprene gloves, and harnesses.
Mallcom provides diverse work wear, from lightweight options to heavy-duty industrial attire. The company also produces winter gear, uniforms, and corporate casual wear. These protective garments are widely used in hospitality, healthcare, and general industrial applications. They feature unique fabrics that protect wearers in extreme conditions, including heat, fire, and severe cold.
Mallcom, an ISO-certified and government-registered trading house
with 13 production facilities across India and in-house test labs. The
company has achieved significant cost savings and margin expansions
through strategic backward integration, a testament to its business
acumen. As one of India’s largest PPE exporters, Mallcom supplies its
products to over 55 countries across six continents.
FINANCIAL PERFORMANCE
Mallcom’s financial performance over the previous years is summarized in the table.
Q4 sales rose 27%, with quarterly net profits surging 71%. The company’s branded sales rose to 41% in FY24 from 36% in FY23, driven by increased demand in India, the Middle East, and Southeast Asia, with slower growth in Europe. The garment manufacturing unit was fully integrated into a new facility in Chandipur, West Bengal, offering extensive infrastructure, space, and higher manufacturing capacity, which improved productivity. Additionally, previous supply chain issues for raw materials were resolved, contributing to higher turnover and productivity in Q4 FY24.
The EBITDA for the quarter stood at around INR 17 crores with a margin of 13.48%, while the net profit was approximately INR 12 crores with a PAT margin of 9.64%. For the financial year ending 2024, the company’s operating revenue reached around INR 420 crores, showing a year-on-year growth of nearly 3%. Although the annual EBITDA was around INR 58 crores, reflecting a slight decline of 1%, the EBITDA margin remained at 13.72%. The decrease in EBITDA for FY24 is attributed to increased operating and marketing costs to enhance branding efforts and expenses related to shifting and consolidating the garment manufacturing facility.
This year, the company’s operating cash flow is lower primarily due to increased working capital requirements. This includes higher inventory and accounts receivable, which are typical at the end of the year. The company acknowledges this and views it as reflecting its current growth targets and operational needs.
If we look at the ratios, the company’s Debt to Equity Ratio of 0.39 indicates a healthy financial position, with assets primarily financed through equity. Its Return on Equity (ROE) for the last financial year was 15.29%, which falls within the normal range of 10% to 20%. The Interest Coverage Ratio is 14.56, well above the threshold of 1.5, demonstrating that the company can comfortably meet its interest payments with its earnings (EBIT). Additionally, there are no promoter pledges, which provides additional assurance to investors.
CURRENT DEVELOPMENTS AND FUTURE EXPECTATIONS
Financials – The company achieved its highest consolidated quarterly turnover of INR 119.9 Crores, up from INR 93.3 Crores in the previous quarter and INR 113.8 Crores in the same quarter of the last year, reflecting a quarterly growth of 28% and an annual growth of 9%. In FY 2024, the garment manufacturing unit at Bantala was fully relocated and integrated into the new Ghatakpukur, West Bengal facility, which boasts more extensive infrastructure, increased space, and higher manufacturing capacity, leading to enhanced productivity.
The Greenfield project at Sanand-II Gujarat for Protech workwear is on schedule, with the first phase expected to be completed by July 2024, after an investment of INR 38 Crores, with an additional INR 40 Crores to be invested. In the first quarter of FY 2025, the company commenced the second phase of expansion at Ghatakpukur, West Bengal, establishing a new unit for manufacturing industrial safety shoes with a floor area of 50,000 sq. ft. and further capital expenditure of INR 20 Crores. This project is expected to be operational by the third quarter of FY 2025. Throughout FY 2024, the company maintained a long-term rating of “A” with a stable outlook from ICRA. It retained its “three-star export house” and “ARO” status conferred by the Ministry of Commerce and Finance, respectively.
Business and Future Expectations – The company expects around 15% growth next year and is well-prepared to achieve this. The market distribution will likely remain similar, with branded products maintaining their share in India. A slight increase in white-label products is anticipated to recover from this year’s underperformance. Margins are expected to stay consistent with this year, as new product launches are planned for the latter half of the year.
The company has strategically allocated a minimum of INR 60 crores for CAPEX in FY25, in addition to the INR 38 crores spent this year, totaling around INR 100 crores. They expect to see the full benefits of this investment and optimal asset utilization soon. The CAPEX aims to prepare the infrastructure to meet future demand and achieve its target of INR 1000 crores by FY28. Additionally, as a 40-year-old company, Mallcom needed to replace and consolidate its assets. The recent and ongoing CAPEX addresses both replacement and future growth needs, supporting a projected minimum growth of 15% for the next year.
Recent events –
The company declared a final dividend of Rs 3.00 per share on 4th Sept 2023. At a CMP of Rs. 1421.85, Mallcom (India) Ltd.’s dividend yield is 0.21%
In FY23, the company signed an MOU with the Gujarat Government to invest Rs.108 crores. They were allocated a 50,000 sq. meter land parcel from GIDC at Sanand II as part of this agreement.
In FY23, the company invested an additional INR 12.5 crores to buy out its joint venture partner in MSPL, making it a wholly-owned subsidiary. The company has introduced new products, including cut-resistant seamless nitrile gloves with Dyneema fibre, sports safety shoes, polyurethane rainwear and lightweight safety helmets.
Strengths –
- Mallcom is currently hovering around the new 52-week high.
- It has gained more than 20% in a month, which is phenomenal and massive.
- Book Value per Share has been consistently improving in the last two years.
- FII has increased its shareholding in Mallcom (India) Ltd. in the past three quarters.
- We have an extremely strong base of clientele, including giants like Indian Oil, Ansell, Nestle, ITC Ltd, Titan, CEAT, Royal Enfield, etc.
CONCLUSION
Mallcom Ltd has established itself as a leading manufacturer and distributor of Personal Protective Equipment (PPE) in India, demonstrating robust growth and expansion. With a solid commitment to quality and innovation, the company offers a comprehensive range of products, including advanced safety gloves, footwear, and helmets. Mallcom’s strategic investments in infrastructure and technology and solid financial performance highlight its resilience and forward-thinking approach. The company’s dedication to meeting global standards and its expanding international presence underscore its reputation as a reliable and progressive player in the PPE industry. Mallcom Ltd’s consistent growth, product innovation, and strategic vision make it a standout company.
