top of page

Weekly Insights #16- Indian Toners; From Deep Value to Growth

The strongest framework for multibagger returns is finding an opportunity that goes from being deep value to a growth play.

And the reason why it works is that, deep value bets typically trade at extremely low multiple of single digits and are highly cash rich. Once the growth comes back, the earnings expansion is quite non-linear given that there is a clear operating leverage due to increased scale of business and on top of it, you have some major re-rating.

One such opportunity we came across recently was Indian Toners; given the very small size of the company & lack of liquidity, we could not recommend the same in our research service, but had shared research to our members on the Knowledge Base.

Following in an excerpt from our post written for members in Dec’22-


Indian Toners & Developers is a manufacturer of inks/toners for printers for the after-market segment. It is the largest player in the domestic market.

Indian Toners is a typical value bet wherein you have a slow/non-growth business that is highly profitable & cash rich available at a very cheap valuation of sub 10x multiple.

However, there has been an interesting development for the company. India has imposed an anti-dumping duty on black toner power from China, Malaysia and Taiwan for 5-years starting Aug’20.

This is big for the company given that the products are commoditized in nature with a matured market and thus sensitive to pricing. Anti-dumping duty allows domestic manufactures to compete better and thus this is a tailwind for the company.

Snippet from ARFY21-

Indian Toners has started growing at healthy double-digit rates on the back of this and as the overall market has come back post covid led lockdowns.

Considering this development, the company is expanding its capacity by 33% from 3600 MT to 4800MT in FY23; first capex after 2017.

With growth coming back, there is a good case for re-rating here as the company moves from non-growth to healthy growth. The stock is currently trading at ~9x its TTM Earnings. Based on new capacity expansion and improvement in profitability (reduced impact from cheap imports) we believe that the company can generate a PAT of ~30 crores in near term and could re-rate to mid-teens kind of multiples. So broadly a quick double from current levels.

Another interesting aspect of the company is that it is highly cash rich with ~85 crores of cash & investments (~40% of market cap). In FY21, the company used its cash to buyback a massive 17.56% of its total shares for Rs37 crores. We cannot rule out another such big buyback going ahead as well.


The company has reported strong growth of >25% since then with improvement in margins-

Company is now looking for further expansion of capacity from 4800MT as of Jan’23 to 5400MT by Jun’23; which takes the total capacity expansion (including FY23 expansion) to 50%.

In summary, setups of deep value company moving into growth phase is a rare but extremely good investment opportunity.

Note: This example has been shared only to highlight the framework, it is not a recommendation. Underlying stock is illiquid and thus has its own risks.

That’s it for this week, new insight coming up next week. So stayed tuned!


Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

“The securities quoted are for illustration only and are not recommendatory”

Stock specific investment disclosure:

Indian Toners- Invested. Traded in last 30 days. Not an active recommendation in Research Service.


Recent Posts

See All


A good read. The growth triggers are visible and well described. However, can you elaborate on possible anti-thesis pointers? Also, who are the competitors in listed space? What will happen if anti-dumping duty is removed. Any thoughts?

Surge Capital
Surge Capital
May 29, 2023
Replying to

This is more of a short term trade opportunity wherein one can look to benefit from the re-rating & growth acceleration phase. Anti-dumping is valid for few more years and post that there is always scope for further extension; but don't see why anyone would like to hold this business once the current acceleration phase is done with, coz the industry is a slow growth one.

Anti-Thesis would largely be on non-execution by the management in terms of grabbing the available opportunity. Till now they seem to be accelerating their plans to capture the opportunity.

Not sure about competitors here, its an industry tailwind and so everyone will benefit. Competitors were the Chinese companies.

bottom of page