The shares of this microcap company surged around 8 percent in Wednesday’s trading session after strong management guidance. On a YTD basis, the stock has delivered more than a 20 percent return to its shareholders.
Price Movement:
With a market capitalization of Rs. 605 crores, the shares of Sealmatic India Ltd started Wednesday’s trading session on a higher note at Rs. 634.90 compared to its previous close of Rs. 623.65. During the trading session, the shares hit a high of Rs. 680.05, gaining around 9 percent and are currently trading at Rs. 678 apiece.
What Happened:
The State-owned Bharat Petroleum Corporation plans to invest Rs 1.7 lakh crores over the next five years to grow its core oil refining and fuel marketing business as well as in ‘future big bets’ of petrochemicals and green energy.
For Sealmatic, a company specializing in rotary equipment for the oil and gas sector, BPCL’s investment presents significant growth opportunities.
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According to Samir Mullaji, who oversees the energy sector for Sealmatic, the announcement is promising for the company, which has already secured various orders in India and the Middle East.
As per the company’s filing, the investment from BPCL is expected to create a demand for mechanical seals, crucial components in rotary equipment. On a conservative estimate, every Rs. 8,000 crore of BPCL’s investment will generate a demand for approximately 225 API mechanical seals.
With BPCL’s total planned investment of Rs. 1.7 lakh crore, this translates to a potential requirement of 4,921 API mechanical seals by 2030. This projected demand presents a substantial business opportunity for Sealmatic, given the long operational life of these seals, which is around 30 years.
Additionally, Sealmatic aims to capture about 15 percent of this market, equating to approximately 750 API mechanical seals.
Overall, BPCL’s ambitious investment strategy not only aims to enhance its operational capabilities but also creates a favourable environment for suppliers like Sealmatic, positioning them to benefit from the growing needs of the energy sector in India.
Financials:
Looking at the company’s financial statements, the revenue decreased by 8 percent from Rs. 37.01 crores during H1FY24 to Rs. 34 crores in H2FY24. On the other hand, the net profits declined by 51 percent from Rs. 6.59 crores to Rs. 3.26 crores during the same period.
Monopoly:
Sealmatic is the only mechanical seal company in India that has received ISO 19443 accreditation for Nuclear Applications. It is India’s only domestic manufacturer or monopoly company in mechanical seal production.
Sealmatic India Limited, a prominent player in sealing technology, has been actively involved in the nuclear energy sector.
Sealmatic is currently undergoing certification, that will qualify them for critical business in nuclear power plants. Once certified, they will be the only mechanical seal company globally to hold this coveted certification and the second company in India after L&T.
Important Financial Ratios:
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 11.22 percent and a return on capital employed (RoCE) of 15.34 percent for the period spanning FY23-24.
Company Profile:
Headquartered in Maharashtra, Sealmatic India was incorporated in 2009. The manufactures mechanical seals, seal supply systems, pumps, valves, motors and high-precision mechanical engineering spares and assemblies.
Written By Vaibhav Patil
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