PAE LTD.
 
  

 

SHARETIPSINFO >>Research Reports >>PAE LTD (10-May-2010)

 

LISTING
CMP
Rs 47
DIV/YIELD

3%

FACE VALUE
Rs 10
PE RATIO

10.5

52 WEEK HIGH/LOW
Rs 57/Rs 16   
MARKETCAP
Rs 47 crore

COMPANY OVERVIEW:
PAE has small beginning in the year 1950 as a small distributor of auto electrical component. It is now distributor and service agent for world leaders such as GE, Carter, Prestolite, Autolite, and Magneti Marelli. In 2003 it ventured into non automotive businesses such as industrial batteries and power solution.
PAE sells batteries in the aftermarket and caters to requirements for all vehicle types ranging from commercial vehicle to passenger cars and two wheelers. It market automotive batteries of ‘Exide’ in Kerala and ‘Chloride’ brand in the rest of India.

Solar Power Business:
Company has also forayed into solar power business. It is into solar Photovoltaic (PV) business of Copper Indium diSelenide (CIGS) thin films technology. The solar panels are manufactured at production facility in West Bengal.
CIGS does not use Silicon as the active Photovoltaic (PV) semiconductor and therefore does not suffer from raw material supply crunch.
CIGS also keeps the input cost at low.

Advantage to PAE over other Players in Solar Business:
PV system requires a combination of charger and batteries for storing the electricity and inverter to run AC load. PAE happens to be one stop shop for solar powered application.


PRODUCT MIX:         


Product

Sales(In crores)

% of Total Sales

Lead Acid Batteries

Rs 187.77

78.2%

Other Auto Components

Rs 35.51

14.78%

Digital Power Gain System

Rs 16.83

7%

INVESTMENT RATIONAL:
Automobile industry is doing better the company is expected to robust business as it distributes automobile batteries across the country.
Company is expected to get orders in the non automotive segments. It supplies power back-up devices to IT companies, Banking, Residential and Railways.
Company has also forayed into Photovoltaic manufacturing business; the very solar business segment is expected to show robust growth.
Government is promoting green energy will benefit the company.
At current market price dividend yield is 3.02%.

RISK:
Any down turn in automobile industry will impact company’s core business.
Slow down in the economic activity will hit the sales.
Rising input cost will hit the margin.

SHAREHOLDING PATTERN:

 

NO. OF SHARE

% OF TOTAL

PROMOTERS

4775527

 

50.17%

INSTITUTION

93700

 

0.98%

GENERAL PUBLIC

4650373

 

48.85%

GRAND TOTAL

9519600

 

100.00%

FINANCIAL:

 

 

31/03/06

31/03/07

31/03/08

31/03/09

TOTAL INCOME

135.97

167.04

231.92

250.82

EXPENDITURE

-133.41

-160.71

-220.91

-239.51

PBDITA

 

2.56

6.33

11.01

11.31

DEPRECIATION

-0.27

-0.37

-0.81

-0.92

PBIT

 

2.29

5.96

10.2

10.39

INTEREST

 

-0.8

-1.13

-1.44

-1.94

PBT

 

1.49

4.83

8.76

8.45

TAX

 

-0.23

-1.58

-2.78

-3.09

PAT

 

1.26

3.25

5.98

5.36

*Extra Ordinary Item is excluded from the calculation.

Key Highlights:
Total Income grew at CAGR of 22.4% in the last four years.
PBDITA grew at CAGR of 63.2% in the last four years.
PAT grew at CAGR of 61.5% in the last four years.

RATIOS:

 

31/03/06

31/03/07

31/03/08

31/03/09

EPS

1.32358502

3.414009

6.28177655

5.630489

PBDITA MARGIN

1.88276826

3.789511

4.74732666

4.50921

NPM

0.926675

1.945642

2.57847534

2.136991

INTEREST COVER

2.8625

5.274336

7.08333333

5.35567

Key Highlights:
EPS has grown at CAGR of 61%.
PBDITA margin has improved from 1.88% in FY06 to 4.5% in FY09.
NPM improved from 0.9% in FY06 to 2.13% in FY09.
Interest cover has in increased from 2.8 in FY06 to 5.35 in FY09.


COMPARISION OF Q3FY2010 WITH Q32FY2009:

 

 

Q3FY09

% CHANGE

Q3FY10

TOTAL INCOME

63.16

-24.55668144

47.65

EXPENDITURE

-59.82

 

-45.7

PBDITA

 

3.34

-41.61676647

1.95

DEPRECIATION

-0.22

 

-0.22

PBIT

 

3.12

 

1.73

INTEREST

 

-0.6

 

-0.26

PBT

 

2.52

 

1.47

TAX

 

-0.9

 

-0.49

PAT

 

1.62

-39.50617284

0.98

Key Highlights:
Total Income in Q3FY10 declined by 24.5% on YoY basis.
PBDITA in Q3FY10 declined by 41.6% on YoY basis.
PAT in Q3FY10 declined by 39.5% on YoY basis.

VALUATION &OUTLOOK:
At current market price of Rs 47, it is trading at 10.6X to FY10E EPS. The industry average is around is around 30X. Even if we value the company at discount to industry average PE at 20X, the fair valuation of the company comes at around Rs 92.
The outlook of the industry remains intact. The diversified portfolio of the company will keep the risk at bay. Company is into marketing, so it derive good margin on sales. The foray into solar business will help the company leap forward as the sector is poised for rapid growth.

CONCLUSION:
Investors with 8-12 month of investment horizon should take position in the stock. The risk reward ratio is very favorable.

 

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