Chamanlal Setia Exports - best effort DD

This is an attempt to create a due diligence post that examines a company from various aspects, and attempts to capture the investment worthiness of the company over time, not just at time of writing. This particular post/comment will initially draw up a blueprint to analyse the company, and will be supplemented with more follow up comments until breadth+depth is achieved. Let's start with analysis of the financial statements. Quarterly results for the past 36 months have been decent. Given the sector the company is operating in (rice), high OPM is not expected, and it shows. Nevertheless, OPM is consistent across time. Given the manner in which company has to procure rice, age it, before selling it to end-users, you could expect a company to slip up on demand forecasting or inventory procurement. But that has not been the case with this company for several quarters. If anything, it shows good execution capabilities of company management. It also demonstrates that despite rice being a commodity, there is scope for a well-run company to eke out a profit. Note, that consistency analysis needs to be done over 60/120 months, to account for cyclicality. It's possible that 36 month analysis is insufficient to deduce whether the business does well irrespective of the phase of the cycle it is in. Sales growth has been positive over 5 and 10 years. Cyclicality is evident, with single digit % growth reported in some years. Balance sheet is strong, with reserves growing faster than debt over years. Cash conversion cycle is on the higher side at roughly 180 days. This is expected given the need to age rice. But, it also implies this is not a true-blue FMCG company that tends to have a negative cash conversion cycle. ROCE Is high with the figure being 20%+ over most years, dipping to 19% on occasion. Shareholding pattern - promoters mostly hold the stock at roughly 73%. Management quality - TBD Valuation - available between 5-10 PE which is expected for this industry.