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Wonder, Wealth & Abundance

This is the multibagger I was talking about | Photoquip

with 17 comments

Ladies and Gentlemen,
 
I am thrilled to have located a bargain for myself and screened one potentially for some of you, and I am extremely ecstatic to present this before you . Very glad that I sullied my hands and dug deeper into it finally. Name of this enchanting mermerising beauty is Photoquip Ltd. As of today I know of no research report that has been written on this company, nor will be one written for next couple of months atleast. Time to briskly over take slow elephatine walk and institutional apathy to non dividend paying/small cap stocks ! Its current price is 35 Rs and its a buy till 100 Rs with current financials.
 

Let me explain how I missed this diamond. I have to admit that I am extremely allergic to tech stocks, IT companies, any sophisticated and futuristic technologies. Predicting winners are way too hard in small caps due to creative destruction . Big players can chug along and are easy to predict like Wipro, Infosys and suchlike . That was the reason I could not pick Symphony Comfort Systems early on at 25 Rs levels , and picked only @ 125 coz of word SYSTEMS, its now changed its name though to just Symphony Ltd. I also missed Dhanuka Agritech for same reasons early on in rally, TECH in name and I gave a pass.
 
Photoquip stuck in my stock screener several times earlier and after cognising them as a technology intensive company I gave them a skip. Recently I tried probing deeper into it and noticed that they are sitting on black gold. Company is worth its weight in Gold.
 
Photoquip owns most powerful brand for digital flashlights in world for sales in India and exports to its Swiss owner which sells across the globe. The brand is Elinchrom. It would be an understatement to say that Elinchrom is to digital flashlights as Tag Heuer/Omega to watches or Ferrari to Cars. There are only a handful of other brands like Bowens , Alienbees, Profoto and Hensels at the summit of photographic flashlight pinnacle which come close in some aspects of photographic flash equipment . Photoquip have long term relationship with Elinchrom since 1984. It would be rather germane to say Elinchrom is to flashlights what Bugatti or Lamborghini is to Cars or Rolex to watches, Rolex too is a Swiss brand like Elinchrom.
 
India is ready for luxury flashlights and currently dominated by unorganised sector and ersatz imitations will be on their way out with advent of our schools churning out more professional photographers, new magazine genre, more TV and fashion events. In top end segment Elinchrom has 85% of market share in India and a lions size share globally too. They do have entry level equipment for masses too.
 
Another venture of Photoquip which is promising is Digital Photo printing thorugh its SNAPZ brand of digital lab. I have not visited India extensively recently but notice this trend very much in western countries where I have visited, Europe, States and APAC too (NZ) 
 
As Indian market matures, more of Elinchrom’s products will be added to repertoire and add to Photoquip’s winning streak.
 
Photoquip is a very well managed company extending beyond Elinchrom brand also, it will take advantage of its unparalleled nationwide franchise network in this niche. I believe promoters have pledged their shares only to load on more shares from open market over the past 4+ years and will take it all the way to 75% maximum permissible limit by SEBI. Needless to say company has very bright prospects ahead.
 
I have had the privilege to speak with few people in this field including Mahesh Nair and Vivek Divekar from Photoquip. I have dug up many discussion forums across the world in Europe and the US to get an opinion of ace photographers alive. They vouch for Elinchrom brand and my heart would race.
 

I have to add that products are same as TTK Prestige pressure cooker, as in they last 10-20 years depending on use. Quarterly results can be erratic but story has not even begun. Upgrade cycle of professional photographers and rise in standards will see this going places.  
 
You’re buying a Rolex quality company. Time is on your side in more than one way ! Relax and get a snoring sleep, I know I will, sprinkled with day dreams. I believe we need not worry every quarter, we’ll retire rich if we hold it. Quarterly performance may be chequered. However, we’ll keep tab on competition and management. While I do not fall in love with stocks, for once I have, pinch me please and wake me up.
 
While I clearly see doubling of revenues for Globus Spirits, same cannot be said with equivalent certainty for this luxury brand for short term. This is a multi year long term story. I may or may not own shares of this after a year or two and may stop tracking, but its an auto pilot stock. Don’t ask me valuations please, look at Timex Ltd’s valuation on BSE and in my humble (or perhaps not) opinion, Timex is a decent brand in watches but its a disgrace to Rolex if we compare them. While I dislike getting into expensive stocks like Titan Industries, Shoppers Stop, Zydus Wellness etc that stay pricey. I harbour no doubts that Photoquip is dirt cheap for what its worth, it can become a fairly expensive stock and stay like that. Point isn’t whether we will profit from it or not, but how much profit ! Lets wait before its discovered and whether we ride all the way to it being costly. My premise for buying is – Indian story for Photoquip has hardly begun, exponential growth phase is bound to kick in sometime soon. Secondly, brands are key, valuations will follow.
 

Warren Buffet bought sports magazine many years ago, knowing that for some folks life is not business, wealth, or day job, but its biking, for those buffs motorcyle is meaning of life. If you have found a business where you can increase price by 2% above inflation every year, without capital investment, you have found a wonderful business as in See’s Candy. I strongly correlate professional photography with motorcyle magazine analogy.

Any feedback from your photographer friends on this blog is highly appreciated.
 

Have a profitable investment.
 
Some sales numbers in context again not to be interpreted with quarterly bias. Trading and manufacturing activity affect margins. In 2009 there was 1 crore
of other income as well.
 
 Revenues(Rs Crores) Profit after Tax (Rs Crores)
2003 15 0.17
2004 17 0.21
2005 15 0.27
2006 13 0.79
2007 26 1.5
2008 27 1.5
2009 36 6.0
2010 46 4.0
 

Websites

http://www.elinchrom.com/

http://www.photoquip.com/

Good Luck
 

Disclosure: I have bought it between 32-35 levels yesterday and today and have vested interest. Please do your own due diligence before buying. Sold part of Simran Farms into Photoquip. I will be adding more over coming weeks irrespective of direction in price.

Written by amitdipsite

September 17, 2010 at 10:35 am

Posted in Uncategorized

17 Responses

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  1. Sir, It was a really nice writeup and I believe what you say and so I will not be researching further.

    Kindly keep on posting such wonderful multibaggers as I am a regular visitor of your lovely blog.

    Jaimin

    September 17, 2010 at 1:42 pm

  2. Thanks man… Looks like in the crazy Dalal Street, you seems to be a person knowing what you are speaking…

    Keep up the good work and may God bless you with all types of wealth…🙂

    Abhay

    September 17, 2010 at 3:07 pm

  3. Dear Jaimin and Abhay,

    Many thanks for your wishes. Please do your diligence too before buying.

    My belief is that certainty of price performance may not be immediate but there is peace of mind.

    TTK Presige, Hawkins Cooker, Relaxo Footwear are nice brands but their sales have only doubled or two and a half times, whereas Photoquip's topline has more than tripled between 2006 and 2010.

    I would like to request you to find out from your friends, friends friend who are in Photography business or even a photo studio near your place about this brand, I will be very thankful for any feedback.

    Kind regards

    Amit

    Multibagger

    September 17, 2010 at 8:36 pm

  4. Another update is that Elinchrom's wireless system was around for 4 long years before the competition could bring out similar product.

    They are ahead of curve in every facet. No other system allows till date to interface through iPad or iPhone, best brand, best management, best technolgy cubed.

    Anonymous

    September 18, 2010 at 12:41 am

  5. I read this on their website too at this link

    http://elinchrom.com/news.php?id=37

    YES, ELINCHROM MADE IT.. FOR YOU🙂

    We all use already so many different REMOTE CONTROLS for this and that. So, why not use, what many people use every day for many applications… and what they always carry around anyway..

    Just use your iPhone, iPad or iPod touch to control your Elinchrom RX flash lights.

    How is this possible?? How does it work??

    * Very easy… sorry, we don't write more at this stage, because not only you read this.. we like to give our respected competition the chance to find out themselves. The EL-Skyport system idea lasted at least approximately 4 years, before other companies picked up this great idea..

    Multibagger

    September 18, 2010 at 7:28 am

  6. Looks promising. Wanted to know more about their sales mix? how much they make from manufacturing, how much form domestic sales? Was googling for recent annual report but didn't find any. Let me know in case you were successful finding one.

    MG

    September 18, 2010 at 11:32 am

  7. Hi Amit,

    Thanks for provding us with a virtually unknown player in an upcoming sector.
    Will surely dig into it.

    Regards,
    Vikas

    Vikas

    September 18, 2010 at 12:12 pm

  8. Dear MG,

    I do not have latest AR yet, as per my conversation with company 100% is self manufactured. Whilst I do not know domestic sales vs exports breakup.

    ARs can be downloaded from this website:

    http://www.reportjunction.com

    Dear Vikas,

    Do keep me posted with any feedback you get from photographers/photo studios.

    Regards

    Amit

    Multibagger

    September 18, 2010 at 7:37 pm

  9. hello , i follow ur bolog today.
    can u say me whor is Manoj Arora?
    last 16 and 15 th sept. there r blogdeal bye him in photouip.

    Anonymous

    September 19, 2010 at 7:26 pm

  10. Hi Anonymous,

    I dont know any Manoj Arora.

    Amit

    Multibagger

    September 19, 2010 at 9:08 pm

  11. plz say me can i buy now at around 39?

    Anonymous

    September 20, 2010 at 4:04 am

  12. Hello Mr.Multibagger,

    In Elinchrom's website, Photoquip is said as a distributor for its products in India. So isnt it a front for Elinchrom in India? Also, the company's exports seems to be picking up and RM/sales has gone down drastically. Any update on that front? Can we assume it is sustainable?

    Anonymous

    September 24, 2010 at 12:41 pm

  13. Thanks buddy, after reading your write up, i have already started investing in photoquip.

    Anonymous

    September 24, 2010 at 2:17 pm

  14. My comment on moneycontrol message board:

    Hi Pradeep,

    I too am invested on this counter for long term. I have written extensively on my bllog about this. I believe if photoquip sticks to just Elinchrom, not gitzo, klik, manfrotto, snapz, or any new line of business then this can be not only 1000 Rs but 3000 Rs. Here is the logic:

    India has huge wedding photography market. Photographers are producing junk and crap on mass scale. Compare wedding photos of India vs West, pick any link from my bllog. Presently only 1000 indian photographers/photo studios are buying elinchrom gear per year i.e. 1000 * 1 lacs Rs per gear = 10 crore Rs. That time isn`t far when annualy 10,000 photographers will buy this gear when living standards improve, customers demand, better qualified photogs from professional institutes realize importance of softbox, better gear than DIY home made gear. Presently only flash is used in Indian marriages for still photography, this is set to change with use of softbox and light shapers, especially when customers realise how horrible the quality difference is between east and west.

    So, I have tried to prove that demand in India will increase ten times domestically from 10 crore to 100 crores over next few years.Its a fantastic business where you can increase price by 2-4% each year above inflation. Profits of the company may be upto 20-50 crores in 5 years, translating to 40-100 Rs EPS

    Regards

    Amit

    Multibagger

    October 20, 2010 at 7:29 pm

  15. Hi

    This is an interesting find. I was just doing a preliminary scan through the companys financials. The margins at which Photoquip is operating is meagre(about 10%) compared to the luxury brands. The whole purpose of luxury items is that they will be high quality products, not everyone buys them and the margins are high. I am still to read the AR, but would like to understand why the margins and the ROE is low. Any answers would be helpful

    Robin Thomas

    November 4, 2010 at 7:21 am

  16. Hi Robin Thomas,

    While I broadly agree with this general perception, business world is very fluid. Companies need to change strategies. Elinchrom has started kit for beginners and intermediate level.

    Two examples of premium brands:

    Louis Vuitton: Not in a very changeful industry, very established, very premium, Luxury leather goods, stars like Bono from U2 as ambassadors all that. Its living on 10-12% net profit margin for last 10 years.

    Bugatti: Most expensive car in world. Became sick profit wise many times in past and was bought over by various companies. In 1998 Volkswagen bought it.

    Broncolor is most expensive in studio lighting: If a Professional Photographer needs just three items (they actually use dozens)

    1. Battery aka Powerpack to provide portable power
    2. Flash light
    3. Reflector to mount flashlight and provide soft light

    It would cost 23,000 US $ to buy these three articles from Broncolor but around 8000 $ from Elinchrom.

    http://www.adorama.com/BCB3348600.html

    $9724.00

    Plus you need the ringflash: http://www.adorama.com/BCB3246100.html

    $2945.

    Plus a pack to run it,http://www.adorama.com/BCB3104300.html

    $11,137.

    =
    $23,806

    ———————————-

    Margin's: My idea is to avoid analysis paralysis. There are 250+ cooker companies in India, Hawkins used to live on 2-4% net profit margins between 2006 – 2008, now its a 30 bagger since then with profits margins over 12%.

    When Photoquip CEO says, “we have biggest backlog of orders anytime in our life and we are unable to supply and meet demand”… investment becomes a no brainer IMO.

    Multibagger

    November 4, 2010 at 8:07 am

  17. i saw on bse website they r making net profit of 5 odd crores on equity of 4.8, that means roe is more than 100 , but i dont have figures of r/s, correct me if i m wrong

    zulfiqar

    July 26, 2011 at 7:20 am


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