Sie sind auf Seite 1von 10

0

50
100
150
200
250
PennarIndustries Sensex
IndiaNivesh Research
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Pennar Industries Ltd.
Stock Idea
September 5, 2014
CMP : Rs.47
Rating : BUY
Target : Rs.81
Rating : NR
Target : NR
Current Previous
STOCK INFO
BSE 513228
NSE PENIND
Bloomberg PSL IN
Reuters PENN.NS
Sector Iron & Steel/Interm. Products
Face Value(Rs) 5
Equity Capital(Rs mn) 3,765
Mkt Cap(Rs mn) 3,551
52w H/L 50.6/18
3m Avg Daily Volume(BSE+NSE) 778,789
SHAREHOLDING PATTERN %
(as on 30th Jun. 2014)
Promoters 40.09
FIIs 20.01
DIIs 9.89
Public & Others 30.01
Source: BSE
STOCK PERFORMANCE (%) 1m 3m 12m
PENNAR IND. 23.78 24.44 119.44
SENSEX 5.30 9.19 45.88
PENNAR IND. v/s SENSEX
Source: Capitaline, IndiaNivesh Research
Source: Capitaline, IndiaNivesh Research
CMP as of Sep 4 2014. NR-Not Rated
Daljeet S. Kohli, Head of Research
Mobile: +91 77383 93371, 99205 94087
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in
Amar Mourya, Research Analyst
Tel: +91 22 66188836
amar.mourya@indianivesh.in
Rahul Koli, Research Associate
Mobile: +91 77383 93411
Tel: +91 22 66188833
rahul.koli@indianivesh.in
Pennar industries Ltd is one of the leading engineering company in India
manufacturing Cold Rolled Steel Strips, Precision Tubes, Cold Rolled Formed
Sections, Electro Static Precipitators, Profiles, Railway Wagons & Coach
components, Press Steel components and Road Safety Systems. Company is
diversifying itself from a steel manufacturer to a value added steel and pre-
engineered steel buildings manufacturer. The company is expanding its
manufacturing facilities to add new products to its portfolio and expand its bottom-
line.
We visited Pennar Industries & met the management to get handle on how the
fortunes of company are changing with expected economic recovery. The key
takeaways are as following:
All the businesses of the company are directly linked to overall macro-
economic recovery.
The company has immense operational leverage to take the benefit in almost
all of its businesses. Capacity in all segments is underutilized since last 4 years
due to lack of demand.
The good part is that the company does not have significant long term debt
(D/E Ratio of 0.40x). All the debt is working capital related. Hence even if
economic recovery is delayed due to whatsoever reason it will not hurt the
company too much. On the converse in case of faster recovery the company
can take the advantage very fast as it is ready with capacity.
Industrial components which cater to automotive & white goods industry is
likely to be front runner in terms of growth followed by Railways (part of
system/ projects segment) both banking on strong recovery in sight.
Other major growth driver for company will be Pre-Engineered Building
Systems (PEBS) where it is 4
th
largest player in the country. As the concept of
pre-engineered building products is catching up fast in India (anyone setting
up an industry now would look for early commissioning of plants, PEBS is
poised for abnormally strong growth).
For the stock performance, along with strong business fundamental; a
corporate action by the company on getting subsidiary (PEBS) separately listed
on exchanges could be the additional trigger.
However, prolonged delay in kick start of capex cycle is the major risk to our
estimates. Although changed political environment & many announcements
on support commitment by the government, we think this risk may be lower.
(We expect growth to come back at most the pace may not be as fast as many
participants are currently expecting).
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 2
Note: Financial numbers are for FY14, Amt is In Rs mn, margin means EBITDA margin Source: Company, IndiaNivesh Research
Manufacturing Locations:
Source: Company, IndiaNivesh Research
Structure of the Company:
The companys business is structured in 4 SBUs & 2 subsidiaries. The 4 SBUs are 1)
Steel Products 2)Tubes 3)Industrial Components and 4) Systems and Projects. The
2 subsidiaries are 1) Pre- Engineered Building Systems Ltd (PEBSL) and 2) Pennar
Enviro Ltd. (PEL). Company holds 74% and 51% in PEBSL and PEL respectively. The
details of each of these SBU are discussed in details in later part of this note.
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 3
38.3%
11.8%
5.2%
10.8%
32.5%
1.4%
FY14
Steel Products
Tubes
Industrial
Components
System and
Projects
Pre-Engineered
Building Systems
42.6%
8.7% 6.4%
16.7%
25.3%
0.3%
FY13
Steel Products
Tubes
Industrial Components
System and Projects
274
217
217
285
323
303
345 345
362
8.8%
7.0%
7.9%
5.3%
5.9%
4.8%
6.0%
4.0%
6.2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
50
100
150
200
250
300
350
400
Q
1
F
Y
1
3
Q
2
F
Y
1
3
Q
3
F
Y
1
3
Q
4
F
Y
1
3
Q
1
F
Y
1
4
Q
2
F
Y
1
4
Q
3
F
Y
1
4
Q
4
F
Y
1
4
Q
1
F
Y
1
5
Tubes Revenue (Rs Mn) EBITDA margin % (RHS)
Note: Contribution fig. is for FY14. Source: Company, IndiaNivesh Research
SBU Details
#1. Precision Tubes the High Growth Area
Tubes SBU manufactures (1) Electric Resistance Welded (ERW) pipes, (2) Cold Drawn
Welded (CDW) tubes, (3) Air Pre-heater (APH) tubes, and (4) Indian Boiler Regulations
(IBR) tubes.
This SBU caters to Automobile, Power, Manufacturing, Structural & General
Engineering and several others. The segment has major presence in Tamil Nadu,
Karnataka and Maharashtra. The key clients in this segment are Mahindra, Volvo-
Eicher commercial vehicles, Hyundai, TVS, Tata Motors, Ashok Leyland, Thermax,
BGR, Paharpur, Cethar, KCP, Forbes Marshall, JSW, LMW and Airco Fin. In FY15, the
management expect 20% revenue led by ~ 60% growth from CDW business (on
account of brown field expansion). Export is likely to contribute 5% to the overall
volume in FY15.
We have modelled ~35% CAGR in same time period for this segment.
Source: Company, IndiaNivesh Research
Tubes Segment Revenue and margin:
Source: Company, IndiaNivesh Research
Revenue Breakup (%):
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 4
Note: Contribution fig. is for FY14. Source: Company, IndiaNivesh Research
1,344 1,107
1,066
1,337
1,180
1,020
1,000
1,068
1,014
9.3%
7.7%
8.9%
6.0%
5.2%
6.6%
5.9%
5.0%
6.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
200
400
600
800
1,000
1,200
1,400
1,600
Q
1
F
Y
1
3
Q
2
F
Y
1
3
Q
3
F
Y
1
3
Q
4
F
Y
1
3
Q
1
F
Y
1
4
Q
2
F
Y
1
4
Q
3
F
Y
1
4
Q
4
F
Y
1
4
Q
1
F
Y
1
5
Steel Products Revenue (Rs Mn) EBITDA margin % (RHS)
#2. Steel Products Largest Revenue Contributor
The Steel Products SBU consists of Cold Rolled Steel Strips (CRSS) which includes
special steels, Cold Rolled Formed Sections (CRFS) used for building products,
infrastructure and auto profiles, road safety systems and sheet piles.
Currently, this is the largest SBU in terms of revenues (50%) and operates four plants.
The Steel Products SBU services some of the major customers in the industry such
as Lloyds Insulation Ltd, Alstom Projects India Ltd, Lanco Infratech India Ltd., FL
Smidth, Thermax, Johnson Lifts, Adani Power, VECV, L&T, Ashok Leyland and many
others.
We have assumed segment to report ~15% CAGR in same time period.
Source: Company, IndiaNivesh Research
Steel Products Segment Revenue and Margin:
#3. Industrial components
The business of Industrial components for Pennar consists of Hydraulic Cylinders,
Press Metal components for Automotive and White Goods. The addressable market
size of Industrial Components business is estimated to be over Rs 50 bn. The products
offered includes A/C compressor shells, 4 wheeler parts such as car seating system
assembly, parts for two wheelers such as disc brakes, and parts for heavy vehicle
filters.
Major clientele for this SBU includes some leading companies like Tecumseh
products, Emerson Climate Technologies, Endurance Technologies, India Nippon
Electricals, IFB Automotive Pvt. Ltd, Fleetguard Filters, Wabco India, Brakes India
etc.
South India contributes ~55% to this SBUs business, whereas rest ~45% comes
from West India.
We have built in ~78% CAGR in same time period in our estimates.
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 5
Note: Contribution fig. is for FY14.
Source: Company, IndiaNivesh Research
187
186 159
195
184
119
130
143
147
13.5%
18.4%
17.2%
7.2%
12.0%
12.8% 12.7%
14.6%
14.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
50
100
150
200
250
Q
1
F
Y
1
3
Q
2
F
Y
1
3
Q
3
F
Y
1
3
Q
4
F
Y
1
3
Q
1
F
Y
1
4
Q
2
F
Y
1
4
Q
3
F
Y
1
4
Q
4
F
Y
1
4
Q
1
F
Y
1
5
Industrial Components Revenue (Rs Mn) EBITDA margin % (RHS)
Note: Contribution fig. is for FY14.
Source: Company, IndiaNivesh Research
Source: Company, IndiaNivesh Research
Industrial Components Revenue and Margin:
#4. Systems and Project
Systems and Projects SBU includes three business segments 1) Solar module
mounting structure 2) Railway Wagons and Coaches and 3) Storage Solutions.
Company has ~35% market share in Solar business.
Companies main clients for solar includes L&T, Tata power solar, Navalakha, Lanco
Solar, ABB, Scneider Electric solaris.
In railway segment company mainly serves to Integral Coach Factory, Southern
railways, Texmaco, Besco.
We expect segment to report ~12% CAGR in same time period.
383
469
568
487
236
258
363
342
162
13.6%
14.8%
11.7%
13.1%
8.1%
11.7%
10.3%
12.1%
18.9%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
100
200
300
400
500
600
Q
1
F
Y
1
3
Q
2
F
Y
1
3
Q
3
F
Y
1
3
Q
4
F
Y
1
3
Q
1
F
Y
1
4
Q
2
F
Y
1
4
Q
3
F
Y
1
4
Q
4
F
Y
1
4
Q
1
F
Y
1
5
Systems and Projects Revenue (Rs Mn) EBITDA margin % (RHS)
Source: Company, IndiaNivesh Research
Systems and Projects Revenue and Margin:
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 6
14
16 15
19
22
104
72 6.0%
7.8%
8.1%
7.1%
6.0%
1.6%
3.1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0
20
40
60
80
100
120
Q
1
F
Y
1
3
Q
2
F
Y
1
3
Q
3
F
Y
1
3
Q
4
F
Y
1
3
Q
1
F
Y
1
4
Q
2
F
Y
1
4
Q
3
F
Y
1
4
Q
4
F
Y
1
4
Q
1
F
Y
1
5
Pennar Enviro Revenue (Rs Mn) EBITDA margin % (RHS)
673
626
700
883
712
700
979
1,223
1,013
11.8%
11.8%
10.2%
14.4%
8.8%
9.0%
8.8%
12.9%
8.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
200
400
600
800
1,000
1,200
1,400
Q
1
F
Y
1
3
Q
2
F
Y
1
3
Q
3
F
Y
1
3
Q
4
F
Y
1
3
Q
1
F
Y
1
4
Q
2
F
Y
1
4
Q
3
F
Y
1
4
Q
4
F
Y
1
4
Q
1
F
Y
1
5
Pre-engineered building systems Revenue (Rs Mn) EBITDA margin % (RHS)
Subsidiary Details
Pre-Engineered Building Systems (PEBS)Possibility of Value Unlocking
Pennar Engineered Building Systems Ltd is a subsidiary of Pennar Industries Ltd. PEBSL provides
design, manufacture, supply and installation of custom designed metal buildings, Building
components and structural steels. PEBSL also provides structural EPC solutions for solar power
plants.
Some of the prominent clients that the company have worked with include Ultratech Cements,
L&T, HCC, P&G, Godrej, Dr Reddys Lab, ABB, JSW, Scheneider Electric, Reliance Infocom, ACC,
Volvo etc.
Private equity firm Zephyr Peacock acquired a significant minority (26%) stack in PEBSL in FY13
with an investment of Rs 500 mn; valuing the company at Rs ~2,000 mn. To achieve high growth in
business; PEBSL has aggressive growth plans in international emerging markets, solar infrastructure,
high rise commercial buildings and cold form building systems.
PEBS top-line has grown at ~21.2% CAGR between FY12A-14A from Rs 2,459 mn to Rs 3,614 mn.
Given that PEBS business has attained significant scale, we are of view, that there exists scope for
the company to get listed, thereby unlocking value for the existing shareholders.
We have assumed segment to report ~40% CAGR in same time period.
Source: Company, IndiaNivesh Research
Pre-engineered Building Systems Revenue and margin:
Pennar Enviro Ltd (PEL)High growth business
Pennar Enviro Ltd became subsidiary of Pennar Industries Ltd with effect from 30
th
Nov-2012,
wherein Pennar Industries holds 51% stake. PEL operates in the field of fuel additives, water
treatment chemicals and EPC service for water treatment projects. Company has technical
collaboration with Tech Universal of UK and Total of France.
We expect segment to report ~41% CAGR in same time period.
PEL Revenue and Margin:
Source: Company, IndiaNivesh Research
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 7
0
5,000
10,000
15,000
20,000
25,000
FY11 FY12 FY13 FY14 FY15e FY16e
Net sales (Rs Mn)
12.5
11.4
9.8
8.1
10.0
10.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
FY11 FY12 FY13 FY14 FY15e FY16e
A
x
i
s

T
i
t
l
e
EBITDA Margin %
Financial Overview
Forecast revenues CAGR of 37% over FY14-16E
We expect revenue growth to pick-up from negative 6.1% CAGR during FY12-14 to
positive 37% CAGR during FY14A-16E. Revenues are likely to grow 47% Y/Y to Rs.16.4
bn in FY15E and Rs.20.7 bn (+27.0% YoY) in FY16E, respectively. In Q1FY15, the
company delivered 8.0% revenue growth to Rs.3,164 mn. Huge uptake in revenues
is possible on the back of robust order book from its existing clients as well as
emerging opportunities from new deal wins in their PEBS segment. Prolonged delays
in economic recovery could lead to revenue shortfall, given that the growth of PEBS
segment is very much linked to Industrial capex.
Source: Company, IndiaNivesh Research
Revenue growth trajectory continues
Expect a EBITDA CAGR of 55% over FY14A -16E
We estimate EBITDA margins to expand by 200 bps Y/Y to 10.0% in FY15E (vs. 170bps
Y/Y decline in FY14), as Pennar would gain from operating levers, on the back of
industrial capex revival and higher plant utilization rates. Catch-up in the growth
momentum of their currently slow moving steel products and tubes segment bodes
well from margin expansion perspective. We forecast EBITDA CAGR of 55% during
FY14A-FY16E (reflecting EBITDA margins of 10% and 10.5% for FY15E and FY16E,
respectively).
Source: Company, IndiaNivesh Research
Chart: Expect Uptake in EBITDA Margin
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 8
Expect Net Profit CAGR of 102%...
On back of strong EBITDA CAGR; we expect net profit CAGR to be at 102% during FY14A-
16E. We have modelled tax rate of ~33.5% for FY15E-FY16E. Accordingly, we estimate EPS
of Rs 5.4 and Rs 8.1 for FY15E and FY16E respectively.
Y E March (Rs m) FY11 FY12 FY13 FY14 FY15e FY16e
Net sales 12,515 12,638 11,563 11,133 16,366 20,784
Y/Y Ch % NM 1.0 8.5 3.7 47.0 27.0
EBITDA 1,568 1,447 1,135 898 1,637 2,182
Y/Y Ch % NM (7.7) (21.6) (20.9) 82.2 33.3
EBITDA Margin % 12.5 11.4 9.8 8.1 10.0 10.5
Adj. PAT (APAT) 739 620 419 260 713 1,063
Y/Y Ch % 5.9 4.9 3.6 2.3 4.4 5.1
Adj.EPS (Rs) 5.3 4.4 3.0 2.0 5.4 8.1
Source: Company, IndiaNivesh Research
Consolidated Financials Statement
Income Statement
Y E March (Rs m) FY11 FY12 FY13 FY14 FY15e FY16e
Net sal es 12,515 12,638 11,563 11,133 16,366 20,784
Y/Y Ch % NM 1.0 8.5 3.7 47.0 27.0
COGS 10,004 10,228 9,502 9,322 13,420 16,939
SG&A 943 963 926 913 1,309 1,663
EBITDA 1,568 1,447 1,135 898 1,637 2,182
Y/Y Ch % NM 7.7 21.6 20.9 82.2 33.3
EBITDA Margin % 12.5 11.4 9.8 8.1 10.0 10.5
Interest 243 309 313 265 265 265
Deprecai ti on 132 170 180 188 217 235
EBIT 1,193 968 642 445 1,155 1,682
EBIT Margin % 9.5 7.7 5.5 4.0 7.1 8.1
Other Income (Inc Forex) 27 38 48 37 - -
Extra Ordi nary Exps/(Income) - - - - - -
PBT 1,220 1,006 690 482 1,155 1,682
Tax 464 359 234 174 387 564
Effective tax rate % 38.0 35.7 33.9 36.2 33.5 33.5
Reported PAT 756 647 456 308 768 1,119
Y/Y Ch % NM 14.4 29.5 32.6 149.6 45.7
Mi nori ty & Excepti onal 17 27 38 48 55 56
Adj. PAT (APAT) 739 620 419 260 713 1,063
RPAT Margin % 5.9 4.9 3.6 2.3 4.4 5.1
Y/Y Ch % NM 16.1 32.5 38.0 174.6 49.1
Source:Company filings; IndiaNivesh Research
Balance Sheet
Y E March (Rs m) FY11 FY12 FY13 FY14 FY15e FY16e
Share Capi tal 698 698 698 658 658 658
Reserves & Surplus 1,991 2,443 2,781 3,107 3,679 4,572
Net Worth 2,689 3,141 3,479 3,765 4,337 5,230
Mi nori ty 83 110 245 365 420 476
Long-term + ST l oans 1687 1741 1632 1497 1497 1497
Others 17 22 37 47 47 47
Total Liabilities 4,476 5,014 5,392 5,673 6,301 7,250
Gross Bl ock 3,521 4,089 4,352 4,829 5,229 5,629
Less Depreci ati on 1,420 1,615 1,835 2,023 2,241 2,476
Net Block 2,102 2,474 2,517 2,806 2,989 3,153
Intangi bl e 0 0 0 0 0 0
Investments 0 0 33 255 255 255
Defered tax (net) -118 -147 -148 -187 -187 -187
Current Assets 3,542 4,436 4,986 5,262 5,286 7,191
Sundry Debtors 1,659 2,096 2,333 2,498 2,242 2,847
Cash & Bank Balance 169 196 411 191 206 336
Loans & advances 234 530 584 686 818 1,039
Inventori es 1,481 1,614 1,658 1,888 2,020 2,969
Current Liabilities 588 1,111 1,096 1,170 897 1,708
Provisi ons 461 639 900 1,293 1,146 1,455
Net Current Assets 2,493 2,687 2,990 2,799 3,244 4,028
Total assets 4,476 5,014 5,392 5,673 6,301 7,250
Source:Company filings; IndiaNivesh Research
Cash Flow
Y E March (Rs m) FY11 FY12 FY13 FY14 FY15e FY16e
Operai ng Profi t 1,436 1,277 954 710 1,419 1,947
Depreci ati on 132 170 180 188 217 235
Interest Exp -243 -309 -313 -265 -265 -265
Changes i n Worki ng Capi tal -2,189 -133 -73 21 -430 -654
Cash Flow After Chang in WCapital -864 1,005 749 654 942 1,264
Tax -464 -359 -234 -174 -387 -564
Others 27 38 48 37 0 0
Cash flow from operations -1,301 684 564 517 555 700
Capi tal expendi ture (net) -2,233 -543 -257 -699 -400 -400
Free Cash Flow -3,534 142 307 -183 155 300
Other i ncome 0 0 0 0 0 0
Investments 0 0 0 0 0 0
Cash flow from investments -2,233 -543 -257 -699 -400 -400
Long-Term Debt (Decrease) Increase 1,687 53 -109 -135 0 0
Di vi dend pai d (i ncl tax) -178 -106 -142 0 -140 -170
Share Issue / Repurchase & Others 2194 -61 159 98 0 0
Cash flow from Financing 3,703 -114 -92 -37 -140 -170
Net change in cash 169 27 215 -220 15 130
Cash at the beginning of the year 0 169 196 411 191 206
Cash at the end of the year 169 196 411 191 206 336
Source:Company filings; IndiaNivesh Research
Key Ratios
Y E March FY11 FY12 FY13 FY14 FY15e FY16e
Adj.EPS (Rs) 5.3 4.4 3.0 2.0 5.4 8.1
Cash EPS (Rs) 6.2 5.7 4.3 3.4 7.1 9.9
DPS (Rs) 1.3 0.8 1.0 0.1 0.2 0.4
BVPS 19.3 22.5 24.9 28.6 33.0 39.7
ROCE % 32.8 26.2 18.7 13.5 24.3 28.9
ROE % 27.5 19.7 12.0 6.9 16.4 20.3
ROIC % 12.5 10.2 5.1 4.6 9.1 12.3
EBITDA Margi n % 12.5 11.4 9.8 8.1 10.0 10.5
PER (x) 9.0x 10.7x 15.8x 24.1x 8.8x 5.9x
P/BV (x) 2.5x 2.1x 1.9x 1.7x 1.4x 1.2x
P/CEPS (x) 7.6x 8.4x 11.1x 14.0x 6.7x 4.8x
EV/EBITDA (x) 2.3x 2.3x 3.3x 3.9x 4.6x 3.4x
Di vi dend Yi el d % 2.7 1.6 2.1 0.2 0.4 0.8
m cap/sales (x) 0.2x 0.1x 0.2x 0.2x 0.4x 0.3x
net debt/equi ty (x) 0.6x 0.5x 0.4x 0.3x 0.3x 0.2x
net debt/ebitda (x) 1.0x 1.1x 1.1x 1.5x 0.8x 0.5x
Debtors (Days) 48 60 73 81 50 50
Creditors (Days) 17 32 34 38 20 30
Inventory (Days) 43 47 52 62 45 52
Cash Conversion Cycl e (Days) 74 75 91 105 75 72
Source:Company filings; IndiaNivesh Research
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 9

0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
J
u
l
-
0
3
D
e
c
-
0
3
M
a
y
-
0
4
O
c
t
-
0
4
M
a
r
-
0
5
A
u
g
-
0
5
J
a
n
-
0
6
J
u
n
-
0
6
N
o
v
-
0
6
A
p
r
-
0
7
S
e
p
-
0
7
F
e
b
-
0
8
J
u
l
-
0
8
D
e
c
-
0
8
M
a
y
-
0
9
O
c
t
-
0
9
M
a
r
-
1
0
A
u
g
-
1
0
J
a
n
-
1
1
J
u
n
-
1
1
N
o
v
-
1
1
A
p
r
-
1
2
S
e
p
-
1
2
F
e
b
-
1
3
J
u
l
-
1
3
D
e
c
-
1
3
M
a
y
-
1
4
Close -Unit Curr 5.0 X 10.0 X 15.0 X 20.0 X 25.0 X
Valuation:
At CMP of Rs.47 (CMP as of Sep 4 2014), Pennar Industries is trading at P/E multiple
of 8.8x FY15E and 5.9x FY16E earnings estimate, which is well below 14.3x - three
year historical average. Average ROE for the company is past 3 year has been 12.9%.
In FY15E and FY16E, the ROE of the company is likely to improve to 16.4% and
20.3% respectively on back of increased capacity utilization and margin expansion.
We value this company at conservative PE multiple of 10x to FY16E EPS (Rs. 8.1),
which gives the target price of Rs 81. Seeing 70% upside potential on stock from
current price, we recommend BUY on Pennar Industries.
Source: Company, IndiaNivesh Research
PE Band Chart
IndiaNivesh Research Pennar Industries Ltd|Stock Idea
Stock Idea (contd...)
September 5, 2014 | 10
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV. IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Disclaimer:
The projections and the forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant
uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which
the projections are forecasts were based will not materialize or will vary significantly from actual results and such variations will likely increase over the period of
time. All the projections and forecasts described in this report have been prepared solely by authors of this report independently. All the forecasts were not
prepared with a view towards compliance with published guidelines or generally accepted accounting principles.
This report is for information purpose only and this document / material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or
subscribe to any securities, and neither this document nor anything contained therein shall form the basis of or be relied upon in connection with any contract or
commitment whatsoever. This document does not solicit any action based on material contained herein. It is for the general information of the clients of INSPL.
Though disseminated to the clients simultaneously, not all clients may receive this report at the same time. It does not constitute a personal recommendation or
take into account the particular investment objective, financial situation or needs of individual clients. Persons who may receive this document should consider and
independently evaluate whether it is suitable for its/ his/ her / their particular circumstances and if necessary seek professional / financial advice. Any such person
shall be responsible for conducting his / her/ its/ their own investigation and analysis of the information contained or referred to in this document and of evaluating
the merits and risks involved in securities forming the subject matter of this document. The price and value of the investment referred to in this document / material
and income from them may go up as well as down, and investors may realize profit / loss on their investments. Past performance is not a guide for future performance.
Actual results may differ materially from those set forth in the projection. Forward-looking statements are not predictions and may be subjected to change without
notice. INSPL accepts no liabilities for any loss or damage of any kind arising out of use of this report.
This report / document has been prepared by INSPL based upon the information available to the public and sources believed to be reliable. Though utmost care has
been taken to ensure its accuracy, no representation or warranty, express or implied is made that it is accurate. INSPL has reviewed this report and, in so far as it
includes current and historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter;
Trading position of Clients/Company Associates may be different from the recommendation given in this report at any point of time. This information is subject to
change without any prior notice. INSPL reserves the right to make modifications and alternations to this statement as may be required from time to time. Nevertheless,
INSPL is committed to providing independent and transparent recommendations to its clients, and would be happy to provide information in response to specific
client queries.
Disclosure of Interest Statement
1. Analyst ownership of the stock No
2. Clients/Company Associates ownership of the stock Yes
3. Broking relationship with company covered No
4. Investment Banking relationship with company covered No
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.
Tel: (022) 66188800 / Fax: (022) 66188899
e-mail: research@indianivesh.in | Website: www.indianivesh.in
Home
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.