PRECISION WIRE INDIA LTD.
 
  

 

 

SHARETIPSINFO >>Research Reports >>PRECISION WIRE INDIA LTD (22-10-2009)

 

LISTING
CMP
Rs 65
52 WEEK HIGH/LOW
Rs 70/Rs 17
FACE VALUE
Rs 10
PE RATIO

5

AVERAGE VOLUME
5000
MARKETCAP
Rs 77.9 crore
P/BV
0.6

COMPANY OVERVIEW:
Precision Wire India was established in the year 1989 to manufacture Enamelled Copper Winding wires.
Company has current installed capacity of 25000 metric tons/ annum, it is further being increased. It has three manufacturing facilities located at Silvassa, Dadar Nagar Haveli and Palej.


PWIL wires are widely used in the following equipments:
Rotating Machine
Alternators
Hermetic motors
Power and distribution transformer
Control and power supply transformer
 Ballast
Auto electrical
Household appliances
Fans
Switchgears

PRODUCT MIX:

PRODUCT

SALES(In crore)

% of Total

Enamelled Copper Winding Wires

Rs 539.52 crores

85.8%

Other Raw Materials

Rs 49.55 crores

7.88%

Waste and scraps

Rs 36.7 crores

5.83%

Enamel

Rs 1.56 crores

0.24%

Wire Enamel

Rs 0.79 crores

0.12%

Other miscellaneous

Rs 0.53 crores

0.08%

Other sales

Rs 0.09 crores

0.01%

Bare copper wires

Rs 0.04 crores

0

INVESTMENT RATIONAL:
As the requirement for power generating equipments is increasing, company is expected to benefit from it.
Company has gone through the worst phase in FY09 and incurred losses in the last quarter of FY09. This was mainly due to the fluctuation in the prices of copper in the market. We expect the prices to stabilize and the worst is over for the company.
Company fortune is linked to the consumer durable and industrial equipment sector, as these sectors are doing well it will have positive impact on the company`s profitability.


Company has added CTC (Continuously transposed Conductor) into its portfolio. This segment is highly capital intensive and requires much trained work force. The demand for CTC is rising in the domestic and international market. We expect company to benefit significantly because of its first movers advantage.
Company debt equity ratio is very low at 0.4. This will help company in getting additional debt at the time of expansion.
Company also has agreement with Invex SPA of Italy, which is complementing existing portfolio by manufacturing high end wires used in power transformers.

RISK:
High volatility in the price of key raw material copper could be dent on the company`s profitability.
Any slowdown in the economy will be bad for the company`s fortune.
Industry is very much fragmented this is adding to the intense competition.

SHAREHOLDING PATTERN:

 

 

NO.OF SHARES

% OF TOTAL

PROMOTERS

6897283

 

59.65%

 

INSTITUTION

291843

 

2.52%

 

GENARAL PUBLIC

4374497

 

37.83%

 

GRAND TOTAL

11563623

 

100%

 

FINANCIAL:

 

 

31/03/06

31/03/07

31/03/08

31/03/09

TOTAL INCOME

340.06

586.31

574.97

536.94

EXPENDITURE

-306.92

-547.82

-534.86

-520.57

PBDITA

 

33.14

38.49

40.11

16.37

DEPRECIATION

-4.64

-7.51

-9

-10.32

PBIT

 

28.5

30.98

31.11

6.05

INTEREST

 

-1.51

-5.26

-4.63

-3.98

PBT

 

26.99

25.72

26.48

2.07

TAX

 

-8.19

-9.23

-9.23

-0.9

PAT

 

18.8

16.49

17.25

1.17

Key Highlights:
Total Income grew at rate of 16% over the last four years.
PBDITA grew till FY08 at 10% but suddenly in FY09 it fell from Rs 40 crore to Rs16 crore. The reason for the sudden fall is the erratic movement in the price of copper.
 Net Profit remained almost flat till FY08 at Rs 17.25 crore but it fell to Rs 1.17 crore in FY09 due to volatile raw material price, higher depreciation.


RATIOS:

 

 

31/03/06

31/03/07

31/03/08

31/03/09

EPS

 

16.34783

14.33913

15

1.017391

PBDITA MARGIN

9.745339

6.564787

6.976016

3.048758

NPM

 

5.528436

2.812505

3.000157

0.217901

INTEREST COVER

18.87417

5.889734

6.719222

1.520101

Key Highlights:
EPS remained flat at Rs 15 till FY08 but suddenly fell to Rs 1.01 in FY09 due to volatile raw material price.
PBDITA margin was at 6.9% in FY08 and it fell to 3% in FY09. This is attributed to increase in input cost.
NPM declined from 3% in FY08 to 0.2% in FY09 due to higher input cost and higher depreciation.
Interest cover declined to 1.5 in FY09. The decline was due to lower PBIT, interest outgo remained same.


COMPARISION OF Q1FY2009 WITH Q1FY2010:

 

 

Q1FY2009

%CHANGE

Q1FY2010

TOTAL INCOME

161.09

-21.40%

 

126.63

EXPENDITURE

-147.53

 

 

-113.71

PBDITA

13.56

-4.70%

 

12.92

DEPRECIATION

-2.52

 

 

-2.64

PBIT

 

11.04

 

 

10.28

INTEREST

 

-0.95

 

 

-0.98

PBT

 

10.09

 

 

9.3

TAX

 

-3.34

 

 

-3.22

PAT

 

6.75

-9.90%

 

6.08

Key Highlights:
Total Income dropped by 21.4%.
PBDITA declined by 4.7.
PAT declined by 9.9%.
We expect company’s worst is over and the decline in profitability has bottomed out at this level. Company is now again in a position to get back to its original position.

VALUATION AND OUTLOOK:
At CMP of Rs 65 PWIL is trading at 4.5X to its FY10E EPS. We value the company at 7X, looking at the historical PE commanded by the company. The fair value comes at Rs 105. So a good appreciation in the share price could be seen.
Outlook of the company is good looking at the pace of growth in the Indian economy. The thrust on the power sector by the government will benefit the company in medium term. Higher disposable income will allow the Indian consumer to buy more consumers durable item, which will also benefit the company fortune.

CONCLUSION:
Investors with 6 to 8 months investment horizon should take exposure on the counter. The risk reward ratio is favorable.

 

 

 

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